-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AsubVeviqa9riSfhfvzw69S+eZMqM2+E/vKRVQDdNp4lck8V9vUlDR+8A2LusDTS WpwT9wXPWu9LYL5wUOwIgg== 0000950135-98-004818.txt : 19980817 0000950135-98-004818.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950135-98-004818 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 29 FILED AS OF DATE: 19980814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAFELITE GLASS CORP CENTRAL INDEX KEY: 0001033671 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AUTOMOTIVE REPAIR, SERVICES & PARKING [7500] IRS NUMBER: 133386709 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-21949 FILM NUMBER: 98691749 BUSINESS ADDRESS: STREET 1: 1105 SCHROCK RD CITY: COLUMBUS STATE: OH ZIP: 43229 MAIL ADDRESS: STREET 1: 1105 SCHROCK RD CITY: COLUMBUS STATE: OH ZIP: 43229 FILER: COMPANY DATA: COMPANY CONFORMED NAME: USA GLAS INC CENTRAL INDEX KEY: 0001068256 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 363711715 STATE OF INCORPORATION: IL FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-21949-01 FILM NUMBER: 98691750 BUSINESS ADDRESS: STREET 1: 1105 SCHROCK ROAD CITY: COLUMBUS STATE: OH ZIP: 43229 BUSINESS PHONE: 6148423325 MAIL ADDRESS: STREET 1: 1105 SCHROCK ROAD CITY: COLUMBUS STATE: OH ZIP: 43229 FILER: COMPANY DATA: COMPANY CONFORMED NAME: US AUTO GLASS CENTERS INC CENTRAL INDEX KEY: 0001068257 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 362828900 STATE OF INCORPORATION: IL FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-21949-02 FILM NUMBER: 98691751 BUSINESS ADDRESS: STREET 1: 1105 SCHROCK ROAD CITY: COLUMBUS STATE: OH ZIP: 43229 BUSINESS PHONE: 6148423325 MAIL ADDRESS: STREET 1: 1105 SCHROCK ROAD CITY: COLUMBUS STATE: OH ZIP: 43229 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARCOMP SERVICES INC CENTRAL INDEX KEY: 0001068258 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 363737847 STATE OF INCORPORATION: IL FILING VALUES: FORM TYPE: S-4/A SEC ACT: SEC FILE NUMBER: 333-21949-03 FILM NUMBER: 98691752 BUSINESS ADDRESS: STREET 1: 1105 SCHROCK ROAD CITY: COLUMBUS STATE: OH ZIP: 43229 BUSINESS PHONE: 6148423325 MAIL ADDRESS: STREET 1: 1105 SCHROCK ROAD CITY: COLUMBUS STATE: OH ZIP: 43229 S-4/A 1 SAFELITE GLASS, INC. 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 14, 1998. REGISTRATION NO. 333-21949 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 2 TO FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ SAFELITE GLASS CORP. (Exact name of registrant as specified in its charter) DELAWARE (State or other jurisdiction of incorporation) 7536 (Primary Standard Industrial Classification Code Number) 13-3386709 (IRS Employer Identification No.) 1105 SCHROCK ROAD, COLUMBUS, OHIO 43229 (614) 842-3000 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) SEE TABLE OF ADDITIONAL REGISTRANTS ------------------------ JOHN F. BARLOW CHIEF EXECUTIVE OFFICER SAFELITE GLASS CORP. 1105 SCHROCK ROAD COLUMBUS, OHIO 43229 (614) 842-3000 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------ WITH COPY TO: CHARLES W. ROBINS, ESQ. HUTCHINS, WHEELER & DITTMAR A PROFESSIONAL CORPORATION 101 FEDERAL STREET BOSTON, MASSACHUSETTS 02110 (617) 951-6600 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [ ] ------------------------ CALCULATION OF REGISTRATION FEE - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
PROPOSED PROPOSED AMOUNT MAXIMUM MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER NOTE OFFERING PRICE FEE - -------------------------------------------------------------------------------------------------------------------------- 9 7/8 Series B Senior Subordinated Notes Due 2006..... $100,000,000 $1,000 $100,000,000 $30,303 - -------------------------------------------------------------------------------------------------------------------------- Guarantee of 9 7/8 Series B Senior Subordinated Notes $100,000,000 (1) (1) (1) Due 2006............................................
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (1) No additional consideration will be paid by the purchasers of the Senior Subordinated Notes for the Guarantee. Pursuant to Rule 457(n), no separate fee is payable in respect of the Guarantee. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 TABLE OF ADDITIONAL REGISTRANTS
STATE OR OTHER JURISDICTION OF PRIMARY STANDARD EXACT NAME OF REGISTRANT INCORPORATION OR CLASSIFICATION I.R.S. EMPLOYER AS SPECIFIED IN ITS CHARTER ORGANIZATION CODE IDENTIFICATION NO. --------------------------- -------------------- -------------------- -------------------- U.S.A. Glas, Inc.(1)........................ Illinois 7536 36-3711715 U.S. Auto Glass Centers, Inc.(1)............ Illinois 7536 36-2828900 CarComp Services Inc.(1).................... Illinois 7536 36-3737847
- --------------- (1) The address, including zip code, and telephone number, including area code, of the Additional Registrant's principal executive offices is 1105 Schrock Road, Columbus, Ohio 43229, (614) 842-3000. 3 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS REGISTRATION STATEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED AUGUST 14, 1998 PROSPECTUS $100,000,000 SAFELITE LOGO OFFER TO EXCHANGE $1,000 IN PRINCIPAL AMOUNT OF 9 7/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2006 FOR EACH $1,000 IN PRINCIPAL AMOUNT OF OUTSTANDING 9 7/8% SENIOR SUBORDINATED NOTES DUE 2006 Safelite Glass Corp. (the "Company") hereby offers to exchange (the "Exchange Offer") up to $100,000,000 in aggregate principal amount of its 9 7/8% Series B Senior Subordinated Notes due 2006 (the "Exchange Notes") for $100,000,000 in aggregate principal amount of its outstanding 9 7/8% Senior Subordinated Notes due 2006 (the "Initial Notes"; and together with the Exchange Notes, the "Notes"). The terms of the Exchange Notes are substantially identical in all respects (including principal amount, interest rate and maturity) to the terms of the Initial Notes for which they may be exchanged pursuant to this offer, except that the Exchange Notes are freely transferable by holders thereof (except as provided in the next paragraph below) and are issued without any covenant upon the Company regarding registration. The Exchange Notes will be issued under the indenture governing the Initial Notes, as amended by the First Supplemental Indenture dated as of December 12, 1997 and the Second Supplemental Indenture dated as of December 18, 1997. For a complete description of the terms of the Exchange Notes, see "Description of the Exchange Notes." There will be no cash proceeds to the Company from this offer. The Initial Notes and the Exchange Notes are unsecured obligations of the Company. The Exchange Notes will be guaranteed on a senior subordinated basis, jointly and severally (the "Guarantees"), by the Company's subsidiaries (the "Subsidiary Guarantors"). The Guarantees are an unconditional obligation of the Subsidiary Guarantors. The Initial Notes were originally issued and sold on December 20, 1996 in a transaction not registered under the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon the exemption provided in Section 4(2) of the Securities Act. Accordingly, the Initial Notes may not be reoffered, resold or otherwise pledged, hypothecated or transferred in the United States unless so registered or unless an applicable exemption from the registration requirements of the Securities Act is available. Based upon interpretations by the Staff of the Securities and Exchange Commission issued to third parties, the Company believes that Exchange Notes issued pursuant to the Exchange Offer in exchange for Initial Notes may be offered for sale, resold and otherwise transferred by holders thereof (other than any holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement with any person to participate in the distribution of such Exchange Notes. Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal (as defined herein) states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Exchange Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." The Initial Notes and the Exchange Notes constitute new issues of securities with no established trading market. Any Initial Notes not tendered and accepted in the Exchange Offer will remain outstanding. To the extent that Initial Notes are tendered and accepted in the Exchange Offer, a holder's ability to sell untendered and tendered but unaccepted Initial Notes could be adversely affected. Following consummation of the Exchange Offer, the holders of Initial Notes will continue to be subject to the existing restrictions on transfer thereof and the Company will have no further obligation to such holders to provide for the registration under the Securities Act of the Initial Notes held by them. No assurance can be given as to the liquidity of the trading market for either the Initial Notes or the Exchange Notes. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Initial Notes being tendered for exchange. The Exchange Offer will expire at 5:00 p.m., New York City time, on , 1998, unless extended (the "Expiration Date"). The date of acceptance for exchange for the Initial Notes (the "Exchange Date") will be the first business day following the Expiration Date. Initial Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date; otherwise such tenders are irrevocable. Interest on the Exchange Notes shall accrue from the last June 15 or December 15 (an "Interest Payment Date") on which interest was paid on the Initial Notes so surrendered. SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR A DESCRIPTION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE DATE OF THIS PROSPECTUS IS , 1998 4 AVAILABLE INFORMATION The Company has filed with the Commission a Registration Statement on Form S-4 (the "Registration Statement," which term shall include all amendments, exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the rules and regulations promulgated thereunder, covering the Exchange Notes being offered hereby. This Prospectus does not contain all the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission and to which reference is hereby made. Statements made in this Prospectus as to the contents of any contract, agreement or other document are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified by such reference. For further information with respect to the Company and the Notes, reference is made to the Registration Statement. A copy of the Registration Statement can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth St., N.W., Washington, D.C. 20549, and at the Regional Offices of the Commission at 7 World Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street Suite 1400, Chicago, Illinois 60661-2511. Copies of such materials can be obtained from the public reference facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The Commission maintains a Web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Commission. The address of such site is http://www.sec.gov. The Company intends, and is required by the terms of the Indenture dated as of December 20, 1996, among the Company, SGC Franchising Corp. (a former subsidiary of the Company) and Fleet National Bank, as trustee, as amended by the First Supplemental Indenture dated as of December 12, 1997, between the Company and State Street Bank and Trust Company, as successor trustee to Fleet National Bank (the "Trustee"), and the Second Supplemental Indenture dated as of December 18, 1997, among the Company, the Subsidiary Guarantors and the Trustee, under which the Notes are issued, to furnish the holders of the Notes with annual reports containing financial statements audited by its independent certified public accountants and with quarterly reports containing unaudited financial statements for each of the first three quarters of each fiscal year. ------------------------ NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. ------------------------ UNTIL , ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS. 2 5 PROSPECTUS SUMMARY The following summary is qualified by, and should be read in conjunction with, the more detailed information, risk factors and financial statements, including the related notes, appearing elsewhere in this Prospectus. Unless otherwise referred to herein or the context otherwise requires, references to "Safelite" and the "Company" shall mean Safelite Glass Corp., a Delaware corporation and its consolidated subsidiaries. Unless otherwise referred to herein or the context otherwise requires, references to "Vistar" shall mean Vistar, Inc., an Illinois corporation, and its consolidated subsidiaries. Unless otherwise indicated, all references to fiscal years up to and including 1997 in this Prospectus are to the fiscal years ending on the Saturday closest to December 31 of each year. Unless otherwise stated, all references to market share data in this Prospectus are estimates made by the Company's management based on Company and industry data and are expressed in units, except with respect to insurance customer segment data which is expressed in dollar volume. Unless the context otherwise requires, references to the "Exchange Offer" refer to the offer to exchange the Exchange Notes for the Initial Notes. THE COMPANY COMPANY OVERVIEW Safelite is the largest provider of automotive glass replacement and repair services in the United States. The Company installed approximately 1.7 million replacement units in 1997 for insurance companies, commercial fleet leasing and rental car companies, car dealerships and body shops, government agencies and individual consumers. The Company provides these installation services through its service centers, mobile vans, centralized telephone/dispatch centers and its network of independent automotive glass replacement and repair providers. The Company has targeted its marketing efforts principally towards auto insurance companies which management believes, through their policyholders, directly or indirectly influence approximately 70% of the selections of automotive glass replacement providers. The Company has developed fully integrated claims processing solutions for auto insurance companies which reduce their glass loss expenses and total administrative costs and provide a higher level of customer service to their policyholders. Management believes that this outsourcing capability, coupled with the convenience of nationwide coverage, consistently high quality service and low costs, has provided the Company with a significant competitive advantage in the insurance segment of the market. Since 1993, the Company's management believes that it has significantly increased its leading market share in this segment, resulting in improved financial performance as demonstrated by compounded annual growth in sales through 1997 of 10% to $483.3 million. During the same period, operating income improved from an operating loss of $6.4 million in 1993 to $25.8 million of operating income in 1997. Adjusted EBITDA (as defined) for the same period grew from $22.0 million to $49.6 million, a compounded annual growth rate of 22%. Sales, operating income and adjusted EBITDA for the three months ended April 4, 1998 were $213.8 million, $4.9 million and $18.2 million, respectively. See "Summary Historical and Pro Forma Financial Information." On December 19, 1997, Safelite completed a merger with Vistar whereby Vistar was merged with and into the Company, with the Company as the surviving corporation (the "Vistar Merger"). The Vistar Merger was accounted for as a purchase. Accordingly, the operations of Vistar are included in the Company's financial statements from December 19, 1997 forward. Prior to the Vistar Merger, Vistar was the second largest provider of automotive glass replacement and repair services in the United States. Vistar was created on February 29, 1996 by the merger of Windshields America Inc., a wholly owned subsidiary of Belron (USA) BV (together with its affiliates hereinafter referred to as "Belron"), and Globe Glass and Mirror Company. Vistar installed or repaired approximately 1.6 million units in its fiscal year ended March 31, 1997 for insurance companies, commercial fleet leasing and rental car companies, car dealerships and body shops, government agencies and individual consumers. Vistar provided these installation services through its 356 service centers and approximately 1,000 mobile vans and its network of independent automotive glass replacement and repair providers. Vistar net sales and operating income were $413.5 and $8.8 million, respectively, for its fiscal year ended March 31, 1997 and $339.5 million 3 6 and a loss of $8.2 million, respectively, for the nine months ended December 19, 1997. See "Transactions -- The Vistar Transactions." At April 4, 1998, the combined companies had two manufacturing facilities, 74 warehouses, 47 centralized telephone/dispatch centers, approximately 2,000 mobile vans and 809 service center locations across the United States. The automotive glass replacement and repair industry in 1997 was a $3.0 billion market, representing the installation of approximately 12.5 million replacement units. The replacement and repair of automotive glass is driven by the incidence of breakage. Over the past 10 years, management estimates that total industry sales have grown at approximately 4% per year, primarily as a result of growth in the aggregate number of vehicles on the road, increases in the number of miles driven and increases in the price of replacement automotive glass. This price increase principally reflects the increased size and design complexity of automotive glass. Such growth has been fairly consistent year to year, with some variations resulting primarily from fluctuations in weather conditions. The automotive glass replacement and repair industry is highly fragmented with approximately 20,000 competitors. Safelite is the industry leader with an estimated overall market share of approximately 23% and the leading market share in the insurance segment of the market. Since the early 1990s, the industry has been consolidating as evidenced by an increase in market share for the top three industry participants from an estimated 24% in 1992 to an estimated 35% in 1997 and a decline in market share for small "mom and pop" providers from an estimated 70% to an estimated 55% during the same period. Management expects this consolidation to continue as insurance companies and large fleet lessors require nationwide coverage and consistent service while seeking to reduce costs by outsourcing their automotive glass claims. For insurance companies, automotive glass repair and replacement claims represent a disproportionate administrative burden. Management estimates such claims account for less than 6% of the dollar value of all auto claims paid but over 30% of the total number of auto claims processed. COMPETITIVE STRENGTHS Industry Leadership and Nationwide Coverage. Safelite is the largest competitor in the highly fragmented automotive glass replacement and repair industry. The Company operates service centers in all of the top 100 Metropolitan Statistical Areas ("MSAs") in the United States. Through its nationwide network, the Company can directly serve 70% of the cars and light trucks in the United States and, through its authorized independent replacement and repair providers, achieves over 90% coverage. Safelite has the largest number of service center locations and the largest network of independent automotive glass replacement and repair providers in the United States. Management believes that the Company's leadership position and breadth of geographic coverage is a significant competitive advantage in working with insurance companies, commercial fleet lessors and other large customers which increasingly demand consistent quality in both claims processing and automotive glass repair and replacement services on a nationwide basis. Strong, Established Relationships with Major Insurance Companies. Safelite has successfully established strong relationships with the nation's major auto insurance companies, and management believes it has more program relationships with these companies than any of its competitors. The top 30 auto insurers influence approximately 55% of all repairs and replacements in the United States. Safelite has entered into Total Customer Solution ("TCS") arrangements with approximately 25 of those insurers including Farmers Insurance Group, United Services Automobile Association, Prudential Insurance Company of America, and Safeco Corporation. Under a TCS arrangement, Safelite typically serves as one of a few recommended automotive glass replacement providers for an insurance company and provides a range of additional claims management services including computerized referral management, policyholder call management, electronic auditing and billing services and management reporting. Of Safelite's approximately 45 TCS arrangements, those with Allstate, Nationwide Mutual Insurance Company, GEICO, Liberty Mutual Insurance Company, Travelers Group, CNA Insurance Group, Metropolitan Property and Casualty Insurance Company and National General Insurance are also Master Provider ("MP") relation- 4 7 ships. Under an MP program, Safelite acts as the administrator of an insurance company's automotive glass claims. TCS and MP programs significantly lower the processing costs and loss expenses for the insurance companies, provide more consistent and rapid service for policyholders, and increase Safelite's volume with each insurance account. In addition, the Company has entered into TCS arrangements with major fleet and rental car companies including GE Capital Fleet Services, PHH Vehicle Management Services Corporation, USL Capital Fleet Services, Hertz Corporation and Budget Rent-A-Car Systems, Inc. Of these arrangements, those with PHH Vehicle Management and USL Capital Fleet are also MP relationships. By entering into these arrangements with insurance, fleet and rental car companies, Safelite has substantially increased its volume with these accounts and enhanced its base of recurring revenues. Low Cost Provider. Safelite has a total cost advantage compared to its competitors as a result of its manufacturing facilities, its productivity incentive programs, the efficiency of its nationwide distribution network and the critical mass of its centralized customer service, claims processing and information network. Management believes the Vistar Merger, coupled with the worldwide industry experience of Belron, the partial owner of Safelite, will significantly enhance the overall cost advantage Safelite enjoyed prior to the Vistar Merger. Safelite is the only full-scale vertically integrated automotive glass replacement company in the U.S. The Company produces approximately 65% of its windshield needs at its two manufacturing plants in Enfield, North Carolina and Wichita, Kansas. Safelite produces only high-volume windshield models, manufacturing 550 of the total 2,800 active windshield parts available in the industry. Safelite determines which windshield models to produce by assessing the sales trends and estimating future windshield demand after a new automobile model has been on the market for approximately one year. The Company then designs selected windshield models through a process of reverse engineering. The Company uses a three tiered distribution system to better serve its customers and minimize its inventory levels. Two central distribution facilities are located at the Company's manufacturing facilities in Enfield, North Carolina and Wichita, Kansas. These central distribution facilities send inventory to the Company's 74 regional warehouses (27 free-standing warehouses and 47 co-located with the Company's Central Telephone Units). These facilities can then quickly and accurately stock the service centers and vans in their local markets on an as-needed basis. Every Safelite employee participates in some form of incentive compensation plan which rewards productivity and/or profitability of the Company. The Company's management estimates that its performance incentive program has increased productivity of its installation associates from 2.5 installations per day in 1991 to 4.0 per day in 1997 (while the industry averaged an estimated 3.0 installations per day and Vistar's installation associates averaged approximately 3.2 installations per day). As a result of the significant economies of scale in its manufacturing, information systems, distribution and installation infrastructure, management believes it has the capacity to add incremental contracts and units at relatively low marginal cost. Sophisticated Information Systems. The Company's information systems allow Safelite to handle all aspects of an insured automotive glass claim effectively and cost efficiently, from the initial phone call placed by the insured policyholder to the automatic billing of an insurance company. Through Safelite's fully integrated network ("SAFENET(TM)"), the Company can provide full service to the policyholder by electronically accessing the insurance company's database, verifying the policyholder's coverage status, scheduling the glass installation, checking relevant inventories, ordering delivery (when necessary) of automotive glass to a Safelite service center, repairing or replacing the glass, electronically billing the insurance company and, if applicable, paying the service providers. The insurance company's role is limited to funding the claim payment and updating its policy files. In addition to providing an integrated delivery system, SAFENET(TM) also provides management and Safelite's customers with valuable information. This "real time" data allows Safelite to track and monitor important statistics including customer satisfaction, length of call and speed of installation. Safelite uses this data to improve its customer service and provide comprehensive monthly management reports for its large insurance customers. These reports include information to which the insurance companies otherwise do not have access, including 5 8 statistics on number of claims, price per claim and percent of repairs versus replacement. Safelite believes it is the only company in the industry currently providing such reports. STRATEGIES FOR GROWTH Expand and Enhance Relationships with Insurance Companies. The Company's principal business strategy is to increase its share in the segment of the automotive glass replacement and repair market influenced by insurance companies by expanding the breadth and depth of its existing relationships. The Company currently provides its replacement and repair services to the policyholders of virtually every major automotive insurance company in the U.S. The Company focuses its marketing and sales strategy on adding new insurance relationships and increasing its share of business with its existing insurance clients. Management believes that as it processes greater proportions of an insurance company's replacement and repair claims, it can continue to reduce related loss expenses and administrative costs for the insurance company, while improving policyholder satisfaction through faster, more reliable and consistent installation service. The Company continually strives to enhance the value it provides to insurance company clients while improving profitability through increased market share. Recent examples include (i) implementation of a Repair First Network to help improve repair performance, (ii) development of on-line call center scheduling capability for faster, more efficient policyholder service and (iii) creation of a SmartPay process under which insurance companies pay only "reasonable and customary" prices for glass claims serviced by non-program providers. Expand Nationwide Coverage. Following the elimination of duplicative service center locations resulting from the Vistar Merger, the Company plans to continue expanding the breadth and depth of its nationwide network by selectively acquiring regional automotive glass replacement and repair businesses and opening new service center locations. The Company believes that it can enhance its sales and results through the integration of well-targeted acquisitions into Safelite's nationwide network. In addition, the Company expects to open 5 to 10 additional service centers annually to complement its existing network. Provide Additional Outsourcing Services to Insurance and Fleet Companies. Management believes that Safelite can leverage its existing customer relationships and claims processing infrastructure to provide additional outsourcing services to insurance and fleet companies for items such as pre-insurance vehicle inspection, towing referral, post-collision rental car referral, after hours loss reporting and residential glass claims processing. These services are characterized by significant administrative burdens, high processing costs and low dollar loss values like the automotive glass replacement and repair service that the Company otherwise provides to insurance and fleet companies efficiently and cost-effectively. The Company is evaluating plans to offer these services as a natural extension of its core automotive glass business. The Company maintains its executive headquarters at 1105 Schrock Road, Columbus, Ohio 43229, telephone (614) 842-3000. SUMMARY OF THE TRANSACTIONS THE THL TRANSACTIONS Prior to December 20, 1996, the Company was a subsidiary of LSNWY Corp. ("LSNWY"), and an indirect subsidiary of Lear Siegler Holdings Corp. ("Lear Siegler"). Pursuant to a Recapitalization Agreement and a Plan of Merger and Stock Purchase Agreement (the "Agreement") dated November 8, 1996, the Company completed a series of related transactions on December 20, 1996 (collectively, the "THL Transactions"), whereby Thomas H. Lee Equity Fund III, L.P., certain affiliates of Thomas H. Lee Company and certain other investors (collectively, "THL"), acquired for $58.7 million, approximately 6 9 88% of the Company's voting stock and, for approximately $58.2 million, all of the outstanding shares of the Company's 8% Cumulative Preferred Stock. Certain existing stockholders, including management of the Company, retained ownership of approximately 12% of the Company's voting stock. The Agreement also provided for Safelite's acquisition (through a newly formed subsidiary) of substantially all of the outstanding common stock of Lear Siegler, its former parent. See "Transactions -- The THL Transactions." SALE OF LEAR SIEGLER On September 12, 1997, the Company sold all of the issued and outstanding shares of the capital stock (the "Lear Siegler Stock") of Lear Siegler to BPLSI Investment Company, a Delaware corporation (the "Purchaser") owned by James F. Matthews, the former President of Lear Siegler. The purchase price for the Lear Siegler Stock was $100,000 in cash and a Promissory Note delivered by the Purchaser to the Company. The operations of Lear Siegler, a former industrial conglomerate whose subsidiaries manufactured a range of products, were never an integral part of the Company's automotive glass replacement and repair business. The Company believes that the sale of Lear Siegler has enabled the Company to focus on its core business. See "Transactions -- Sale of Lear Siegler." THE CONSENT SOLICITATION On November 28, 1997, the Company commenced a solicitation of consents (the "Consent Solicitation"), from the holders of the Initial Notes, to certain amendments to the Indenture (the "Indenture Amendments") to be effected through execution of a First Supplemental Indenture. The purpose of the Indenture Amendments was, among other things, to permit the Company to make the Distribution (as defined below) and increase the amount of its senior bank indebtedness in connection with the Distribution and, thereafter, in connection with the operation of the combined companies following the merger of Vistar with and into the Company, as contemplated by the Merger Agreement entered into on October 10, 1997 between the Company and Vistar (the "Vistar Merger Agreement"). See "-- The Vistar Merger." On December 12, 1997, the Company successfully completed the Consent Solicitation, having received the requisite consents to the Indenture Amendments from the holders of the Initial Notes. Upon consummation of the Distribution, the Company made consent payments aggregating $5.0 million ($50.00 for each $1,000.00 principal amount of Initial Notes then outstanding). THE VISTAR TRANSACTIONS On December 19, 1997, the Company completed the Vistar Merger with the Company as the surviving corporation. Prior to the Vistar Merger, the Company declared and paid a dividend on its outstanding shares of Class A Common Stock in the aggregate amount of approximately $67.2 million and declared and paid a dividend on its outstanding shares of 8% Cumulative Preferred Stock equal to the accrued and unpaid dividends thereon in the aggregate amount of approximately $4.8 million (collectively, the "Dividend"), and redeemed all outstanding shares of its 8% Cumulative Preferred Stock at an aggregate redemption price of $58.2 million (the "Redemption" and, together with the Dividend, the "Distribution"). Subsequent to the Distribution and prior to consummation of the Vistar Merger, the Company effected a 1 for 3 reverse stock split (the "Stock Split") of its Class A Common Stock, which was reclassified as Class A Voting Common Stock, and reclassified its authorized class of Class B Common Stock as Class B Non-Voting Stock, and declared and paid a dividend on each share of Class A Voting Stock outstanding after the Stock Split in the form of two shares of Class B Non-Voting Stock. The Company also authorized the creation of a new series of preferred stock, designated as Non-Voting 8% Preferred Stock ("Non-Voting Preferred Stock"). The aggregate consideration received by the holders of Vistar's outstanding capital stock (the "Vistar Shareholders") in the Vistar Merger consisted of 1,690,101 shares of Class A Voting Stock, 6,959,771 shares of Class B Non-Voting Stock, 40,000 shares of Non-Voting Preferred Stock ($40 million 7 10 aggregate liquidation preference) and $65 million cash (collectively, the "Merger Consideration"). As a result of the Vistar Merger, the holders of the Company's outstanding capital stock immediately prior to the Vistar Merger (the "Safelite Shareholders") retained ownership of 50.5% of the outstanding Class A Voting Stock and became the owners of approximately 33% of the outstanding Class B Non-Voting Stock (including shares subject to exercisable options to acquire Class B Non-Voting Stock) and the Vistar Shareholders became the owners of 49.5% of the outstanding Class A Voting Stock, approximately 67% of the outstanding Class B Non-Voting Stock and 100% of the outstanding Non-Voting Preferred Stock. In connection with the consummation of the Vistar Merger and related transactions (the "Vistar Transactions"), the Company refinanced its then existing credit facilities (the "1996 Credit Facilities"). The new credit facilities (the "Bank Credit Agreement") consist of (a) a term loan facility in an aggregate principal amount of $350.0 million (the "Term Loan Facility") and (b) a revolving credit facility providing for revolving loans to the Company and the issuance of letters of credit for the account of the Company in an aggregate principal amount (including the aggregate stated amount of letters of credit and the aggregate reimbursement and other obligations in respect thereof) at any time not to exceed $100.0 million (the "Revolving Credit Facility" and, together with the Term Loan Facility, the "Senior Credit Facilities"). See "Description of Other Indebtedness." The Indenture provides that the Company must cause any Restricted Subsidiary that guarantees the Company's indebtedness under the Bank Credit Agreement to execute and deliver a supplemental indenture pursuant to which such Restricted Subsidiary shall agree to be bound by the Indenture as a Subsidiary Guarantor. Immediately prior to the Vistar Merger, the Company had no subsidiaries. Upon consummation of the Vistar Merger, the Company had three Restricted Subsidiaries, each of which has guaranteed payment of the Company's indebtedness under the Bank Credit Agreement and, as a Subsidiary Guarantor, has executed and delivered the Second Supplemental Indenture dated as of December 18, 1997. THE EXCHANGE OFFER The Exchange Offer............ The Company is offering to exchange up to $100,000,000 aggregate principal amount of 9 7/8% Series B Senior Subordinated Notes due 2006 for $100,000,000 aggregate principal amount of its outstanding 9 7/8% Senior Subordinated Notes due 2006. The terms of the Exchange Notes are substantially identical in all respects (including principal amount, interest rate and maturity) to the terms of the Initial Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferable by holders thereof (except as provided herein -- see "The Exchange Offer -- Terms of the Exchange" and "-- Terms and Conditions of the Letter of Transmittal"), and are not subject to any covenant regarding registration under the Securities Act. The Exchange Notes will be issued under the Indenture governing the Initial Notes as amended by the First Supplemental Indenture dated December 12, 1997 and the Second Supplemental Indenture dated as of December 18, 1997 (the "Indenture"). Interest Payments............. Interest on the Exchange Notes shall accrue from June 15, 1998 or from the last Interest Payment Date on which interest was paid on the Initial Notes so surrendered. Minimum Condition............. The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Initial Notes being tendered for exchange. Expiration Date............... The Exchange Offer will expire at 5:00 p.m., New York time, on , 1998, unless extended. 8 11 Exchange Date................. The date of acceptance for exchange of the Initial Notes will be the first business day following the Expiration Date. Conditions of the Exchange Offer......................... The obligation of the Company to consummate the Exchange Offer is subject to certain conditions. See "The Exchange Offer -- Conditions to the Exchange Offer." The Company reserves the right to terminate or amend the Exchange Offer at any time prior to the Expiration Date upon the occurrence of any such condition. Withdrawal Rights............. Tenders may be withdrawn at any time prior to the Expiration Date. Otherwise, all tenders are irrevocable. Any Initial Notes not accepted for any reason will be returned without expense to the tendering holders thereof as promptly as practicable after the expiration or termination of the Exchange Offer. Procedures for Tendering Initial Notes................. See "The Exchange Offer -- How to Tender." Federal Income Tax Consequences.................. The exchange of Initial Notes for Exchange Notes should be treated as a "non-event" for Federal income tax purposes. See "Income Tax Considerations." Effects on Holders of Initial Notes......................... As a result of the making of, and upon acceptance for exchange of all validly tendered Initial Notes pursuant to the terms of, this Exchange Offer, the Company will have fulfilled a covenant contained in the terms of the Initial Notes and the Exchange and Registration Rights Agreement as amended (the "Exchange and Registration Rights Agreement") dated December 20, 1996 between the Company, Chase Securities Inc., BT Securities Corporation and Smith Barney Inc. (collectively, the "Initial Purchasers") and, accordingly, the Company will have no further obligations to pay an increased rate of interest on the Initial Notes pursuant to the terms of the Exchange and Registration Rights Agreement, the Initial Notes or the Indenture. The holders of the Initial Notes will have no further registration rights under the Exchange and Registration Rights Agreement with respect to the Initial Notes. Holders of the Initial Notes who do not tender their Notes in the Exchange Offer will continue to hold such Initial Notes and their rights under such Initial Notes will not be altered, except for any such rights under the Exchange and Registration Rights Agreement, which by their terms terminate or cease to have further effectiveness as a result of the making of, and the acceptance for exchange of all validly tendered Initial Notes pursuant to, the Exchange Offer. All untendered and tendered but unaccepted Initial Notes will continue to be subject to the restrictions on transfer provided for in the Initial Notes and in the Indenture. To the extent that Initial Notes are tendered and accepted in the Exchange Offer, the trading market for untendered Initial Notes could be adversely affected. 9 12 TERMS OF THE EXCHANGE NOTES Terms capitalized but not defined below have the meanings ascribed to them in "Description of Exchange Notes." Issuer........................ Safelite Glass Corp. Securities Offered............ $100 million aggregate principal amount of 9 7/8% Series B Senior Subordinated Notes due 2006. Maturity...................... December 15, 2006. Interest Payment Dates........ June 15 and December 15, commencing June 15, 1997. Sinking Fund.................. None. Optional Redemption........... The Exchange Notes are redeemable in whole or in part, at the option of the Company on or after December 15, 2001, at the redemption prices set forth herein plus accrued and unpaid interest, if any, to the date of redemption. In addition, prior to December 15, 1999, the Company, at its option, may redeem up to $35 million of the aggregate principal amount of the Notes originally issued with the net cash proceeds of one or more Equity Offerings, at a redemption price equal to 109.875% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of redemption; provided that at least $65 million of the original principal amount of Notes remains outstanding after any such redemption. Change of Control............. Upon a Change of Control Triggering Event, the Company will be required to make an offer to repurchase the Notes at a price equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of repurchase. There can be no assurance that the Company would have the financial resources necessary to repurchase the Notes upon a Change of Control Triggering Event. The occurrence of certain of the events which would constitute a Change of Control Triggering Event would constitute a default under the Bank Credit Agreement. As of April 4, 1998, the aggregate indebtedness that would have become due upon the occurrence of a Change of Control Triggering Event under the Indenture and a default under the Bank Credit Agreement was $491.2 million. Ranking....................... The Exchange Notes will be general unsecured obligations of the Company and will be subordinated in right of payment to all existing and future Senior Indebtedness of the Company. The Exchange Notes will rank pari passu with any future Senior Subordinated Indebtedness of the Company and will rank senior to all future subordinated indebtedness of the Company. The Guarantees will be general unsecured senior subordinated obligations of the Subsidiary Guarantors and will be subordinated in right of payment to all existing and future Guarantor Senior Indebtedness, including the guarantees of the Subsidiary Guarantors under the Bank Credit Agreement. The Guarantees will rank pari passu with any future senior subordinated indebtedness of the Subsidiary Guarantors and only Indebtedness which is Guarantor Senior Indebtedness will rank senior in right of 10 13 payment to the Guarantee of the Subsidiary Guarantors. The Exchange Notes and the Guarantees will also be effectively subordinated to all secured indebtedness of either the Company or any of its subsidiaries (including indebtedness under the Bank Credit Agreement) to the extent of the value of the assets securing such indebtedness. As of April 4, 1998, the Company had approximately $403.6 million of Senior Indebtedness (excluding $17.6 million in outstanding letters of credit). The Indenture permits the Company to incur indebtedness in addition to the Notes and the Term Loan Facility of up to approximately $73.7 million (including the Revolving Credit Facility) and certain other indebtedness as described in the definition of "Permitted Indebtedness," as well as an additional amount pursuant to a fixed charge coverage ratio test that as of April 4, 1998, would not permit the incurrence of any additional indebtedness. See "Description of Notes -- Limitation on Incurrence of Additional Indebtedness." The Indenture permits all of such additional indebtedness to be Senior Indebtedness or Secured Indebtedness. The Senior Indebtedness under the Senior Credit Facilities will be Secured Indebtedness. See "Description of Other Indebtedness." Restrictive Covenants......... The Indenture contains certain covenants that limit the ability of the Company and certain of its subsidiaries to, among other things, incur additional indebtedness, pay dividends or make certain other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, incur indebtedness that is subordinate in right of payment to any Senior Indebtedness and senior in right of payment to the Notes, incur liens, impose restrictions on the ability of a subsidiary to pay dividends or make certain payments to the Company and its subsidiaries, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the assets of the Company. The Indenture permits the Company to incur substantial additional indebtedness under certain circumstances. However, all of these limitations and prohibitions are subject to a number of important qualifications and exceptions. See "Ranking" above. Guarantees.................... The Indenture provides that any Restricted Subsidiary of the Company which guarantees the Company's indebtedness under the Bank Credit Agreement will guarantee the Notes on an unsecured senior subordinated basis. Each of the Subsidiary Guarantors has guaranteed the Company's indebtedness under the Bank Credit Agreement and, pursuant to the Second Supplemental Indenture, dated as of December 18, 1997, each of the Subsidiary Guarantors has unconditionally guaranteed, on a senior subordinated basis, jointly and severally, the Notes. Absence of a Public Market for the Notes..................... The Exchange Notes are new securities and there is currently no established market for the Exchange Notes. The Exchange Notes will generally be freely transferable (subject to the restrictions discussed elsewhere herein) but will be new securities for 11 14 which there will not initially be a market. Accordingly, there can be no assurance as to the development or liquidity of any market for the Exchange Notes. The Exchange Notes have been designated for trading in the PORTAL market. The Initial Purchasers have advised the Company that they currently intend to make a market in the Exchange Notes. However, the Initial Purchasers are not obligated to do so, and any market making with respect to the Exchange Notes may be discontinued at any time without notice. The Company does not intend to apply for a listing of the Exchange Notes on any securities exchange or on any automated dealer quotation system. RISK FACTORS Prospective investors should carefully consider all of the information set forth in this Prospectus and, in particular, should evaluate the specific factors set forth under "Risk Factors" for risks involved with an investment in the Exchange Notes. 12 15 SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION The following Summary Historical and Pro Forma Financial Information sets forth financial data of Safelite for each of the five fiscal years during the period ended January 3, 1998 and for the three months ended March 29, 1997 and April 4, 1998. The statement of operations data set forth below with respect to fiscal years ended December 30, 1995, December 28, 1996 and January 3, 1998 and the three months ended April 4, 1998 and the balance sheet data at December 28, 1996, January 3, 1998 and April 4, 1998 are derived from the consolidated financial statements included elsewhere in this Prospectus which have been audited by Deloitte & Touche LLP, independent public accountants. The data provided for the three months ended March 29, 1997 are derived from unaudited consolidated financial statements and include in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the data for such periods. Interim results for the three months ended April 4, 1998 are not necessarily indicative of results that can be expected in future periods. The pro forma consolidated financial data have been derived from the Unaudited Pro Forma Statement of Operations (as defined) and the related notes thereto included elsewhere in this Prospectus. The pro forma information does not purport to represent what the Company's results would have actually been had the Vistar Transactions and the sale of Lear Siegler occurred at the date indicated nor does such information purport to project the results of the Company for any future period. The summary financial data below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Consolidated Statement of Operations" and the financial statements and notes thereto included elsewhere in this Prospectus.
FISCAL YEAR(1) THREE MONTHS --------------------------------------------------- ENDED PRO -------------------- FORMA MARCH 29, APRIL 4, 1993 1994 1995 1996 1997 1997 1997 1998 ------ ------ ------ ------ ------ ------ --------- -------- (DOLLARS IN MILLIONS) STATEMENT OF OPERATIONS DATA: Sales............................... $328.3 $357.4 $372.1 $438.3 $483.3 $879.8 $107.8 $213.8 Cost of sales....................... 229.7 246.1 261.7 299.6 331.7 679.8 75.8 155.5 ------ ------ ------ ------ ------ ------ ------ ------ Gross profit........................ 98.6 111.3 110.4 138.7 151.6 200.0 32.0 58.3 Selling, general & administrative expenses.......................... 100.4 90.8 93.5 107.3 111.8 186.6 26.0 46.5 Other operating expenses(2)......... -- 21.1 -- 7.6 5.7 8.1 -- 3.1 Loss on sale of Lear Siegler........ -- -- -- -- 5.4 5.4 -- -- Restructuring expense(3)............ 4.6 -- 6.3 -- 2.9 2.9 -- 3.8 ------ ------ ------ ------ ------ ------ ------ ------ Income (loss) from operations....... (6.4) (0.6) 10.6 23.8 25.8 (3.0) 6.0 4.9 Interest expense.................... (15.5) (4.5) (6.0) (6.7) (27.5) (44.5) (6.3) (10.9) Interest income..................... 0.3 2.2 2.9 2.1 1.3 1.5 0.3 0.1 ------ ------ ------ ------ ------ ------ ------ ------ Income (loss) from continuing operations before income taxes, minority interest and extraordinary items............... (21.6) (2.9) 7.5 19.2 (0.4) (46.0) 0.0 (5.9) Income tax benefit (provision)(4)... 0.3 (0.2) (0.1) 17.6 6.8 21.8 (0.1) 1.6 Minority interest................... 0.1 (2.7) (1.1) (10.2) -- -- -- -- ------ ------ ------ ------ ------ ------ ------ ------ Income (loss) from continuing operations before extraordinary items............................. (21.2) (5.8) 6.3 26.6 6.4 $(24.2) (0.1) (4.3) ====== Discontinued operations(5).......... (43.2) -- -- 1.7 -- -- -- Extraordinary loss(6)............... -- (1.5) -- (0.5) (2.8) -- -- ------ ------ ------ ------ ------ ------ ------ Net income (loss)................... $(64.4) $ (7.3) $ 6.3 $ 27.8 $ 3.6 $ (0.1) $ (4.3) ====== ====== ====== ====== ====== ====== ====== OTHER FINANCIAL DATA: EBITDA(7)(8)........................ $ 10.2 $ 6.6 $ 24.5 $ 31.8 $ 37.4 $ 23.8 $ 8.0 $ 15.1 EBITDA margin....................... 3.1% 1.8% 6.6% 7.3% 7.7% 2.7% 7.4% 7.1% Adjusted EBITDA(8)(9)............... $ 22.0 $ 29.1 $ 25.5 $ 42.6 $ 49.6 $ 37.3 $ 8.7 $ 18.2 Pro Forma Adjusted EBITDA to cash interest expense(10).............. 0.9x Cash flows from operating activities........................ (10.3) 6.5 (10.1) 0.1 2.4 (16.7) (15.6) Cash flows from investing activities........................ 153.2 (24.1) (34.7) 21.5 (85.4) (4.3) (5.2) Cash flows from financing activities........................ (115.4) 28.9 5.2 (4.2) 59.2 6.3 23.7 Depreciation and amortization....... 12.0 7.2 7.6 8.0 8.7 23.9 2.0 6.4 Capital expenditures................ 7.7 14.2 12.0 12.8 13.9 4.2 2.4 Ratio of earnings to fixed charges(11)....................... -- -- 1.4x 2.0x -- -- 1.0x -- BALANCE SHEET DATA: Working capital..................... $ 41.0 $ 41.9 $ 58.1 $ 56.6 $ 29.8 $ 56.6 $ 40.3 Total assets........................ 169.8 193.7 188.3 216.2 558.1 204.0 576.4 Total indebtedness.................. 35.0 63.8 69.0 263.7 479.9 270.0 503.6 Stockholders' equity (deficit)...... 7.7 0.2 (0.6) (128.5) (46.9) (128.6) (48.4)
- --------------- (1) Prior to 1998, the Company's fiscal year ended on the Saturday closest to December 31 of each year. On May 18, 1998, the Company changed its fiscal year to the Saturday closest to March 31. 13 16 (2) Other operating expenses in 1994 are comprised of a $2.5 million one-time charge recorded by the Company to conform its method of accounting to Statement of Position (SOP) No. 93-7, "Reporting on Advertising Costs" and $18.6 million primarily related to curtailment and settlement losses for pension plans of previously disposed Lear Siegler subsidiaries. Other operating expenses in 1996 are comprised of management transaction bonuses related to the THL Transaction of $6.9 million and estimated costs (primarily severance) of $0.7 million to exit the activities of Lear Siegler. Other operating expenses in 1997 include $1.0 million of management transaction bonuses, $3.0 million related to acceleration of vesting of certain management stock options and $0.5 million related to forgiveness of certain officer loans made in connection with the Vistar Merger. Also included in other operating expenses in 1997 are costs related to obtaining bondholder consent to the Vistar Merger of $1.2 million. Other operating expenses of $3.1 million in the three months ended April 4, 1998 consist of costs associated with the integration of corporate systems, moving, relocation and other expenses associated with the Vistar Merger. See Notes 1, 2, 4 and 10 to the Company's Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Pro forma results for 1997 also include $2.4 million in one-time integration costs incurred by Vistar in connection with the merger between Windshields and Globe. See "Unaudited Pro Forma Statement of Operations." (3) In 1993, the Company recorded $4.6 million in restructuring charges related to the planned closing of approximately 70 service center locations. In 1995, the Company recorded $6.3 million in restructuring charges. Of this amount, $5.6 million related to the planned closing of 100 service center locations and $0.7 million related to field management reorganization. In 1997, the Company recorded restructuring charges totaling $2.9 million consisting of $0.4 million for planned closing of Safelite service center locations and $2.5 million related to Safelite employee severance. Restructuring charges of $3.8 million for the three months ended April 4, 1998 consisted of $2.5 million for planned closing of approximately 50 Safelite service center locations and $1.3 million related to Safelite employee severance. See Notes 4 and 5 to the Company's Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations." (4) The adoption of SFAS No. 109, "Accounting for Income Taxes" in 1993 was not material to the Company's consolidated results of operations or its financial condition. During 1996 and 1997, the valuation allowance provided against the Company's deferred tax assets was reduced by $25.9 million and $3.0 million, respectively. See Note 14 to the Company's Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations." (5) In 1993, five operating businesses of Lear Siegler were sold and a resulting loss on sale of discontinued operations of $45.2 million was recognized. 1993 income from operations of such businesses was $2.0 million. In 1996, a gain from discontinued operations totaling approximately $1.7 million was recorded, consisting of $27.2 million in favorable resolution of various tax contingencies of previously discontinued Lear Siegler operations offset by $25.5 million of settlement costs for various liability issues related to previously disposed of Lear Siegler subsidiaries. See Note 16 to the Company's Consolidated Financial Statements. (6) In 1994, 1996 and 1997, extraordinary losses of $1.5 million, $0.5 million and $2.8 million, respectively, were recorded, net of minority interest and income tax of $0.3 million, $0.3 million and $1.9 million, respectively, as a result of expensing unamortized loan origination fees related to the early retirement of the associated debt. (7) "EBITDA" is defined herein as income (loss) from operations plus the sum of depreciation, amortization and restructuring expenses. EBITDA is presented in this Prospectus as it is a basis upon which the Company assesses its financial performance and because certain covenants in the Company's borrowing arrangements are tied to these measures. EBITDA as determined by the Company may not be comparable to EBITDA as reported by other companies. EBITDA does not represent funds available for discretionary uses and should not be considered as an alternative to operating income (loss) or net income (loss) as a measure of operating results or to cash flows as a measure of liquidity (each as determined in accordance with generally accepted accounting principles). 14 17 (8) The following is a reconciliation of operating income to EBITDA and adjusted EBITDA for the period presented:
FISCAL YEAR THREE MONTHS --------------------------------------------- ENDED PRO -------------------- FORMA MARCH 29, APRIL 4, 1993 1994 1995 1996 1997 1997 1997 1998 ----- ----- ----- ----- ----- ----- --------- -------- (DOLLARS IN MILLIONS) Income (loss) from operations........ $(6.4) $(0.6) $10.6 $23.8 $25.8 $(3.0) $6.0 $ 4.9 Depreciation and amortization........ 12.0 7.2 7.6 8.0 8.7 23.9 2.0 6.4 Restructuring charges................ 4.6 -- 6.3 -- 2.9 2.9 -- 3.8 ----- ----- ----- ----- ----- ----- ---- ----- EBITDA............................... 10.2 6.6 24.5 31.8 37.4 23.8 8.0 15.1 Other operating expenses............. -- 21.1 -- 7.6 5.7 8.1 -- 3.1 Lear Siegler operating expenses...... 11.8 1.4 1.0 3.2 1.1 -- 0.7 -- Loss on sale of Lear Siegler......... -- -- -- -- 5.4 5.4 -- -- ----- ----- ----- ----- ----- ----- ---- ----- Adjusted EBITDA...................... $22.0 $29.1 $25.5 $42.6 $49.6 $37.3 $8.7 $18.2 ===== ===== ===== ===== ===== ===== ==== =====
(9) "Adjusted EBITDA" is defined herein as EBITDA plus other operating expenses, the operating expenses of Lear Siegler (which has been treated as an exited activity) and the loss recognized by the Company in connection with the sale of Lear Siegler. The estimated costs to exit Lear Siegler activities, consisting primarily of severance costs, were accrued in 1996. Adjusted EBITDA and pro forma adjusted EBITDA do not represent funds available for discretionary uses and should not be considered as an alternative to operating income (loss) or net income (loss) as a measure of operating results or to cash flows as a measure of liquidity (each as determined in accordance with generally accepted accounting principles). (10) "Pro Forma Adjusted EBITDA to cash interest expense" is computed as the ratio of pro forma adjusted EBITDA to pro forma cash interest expense. Adjusted EBITDA to cash interest expense is presented in this Prospectus as it is a basis upon which the Company assesses its financial performance and because certain covenants in the Company's borrowing arrangements are tied to similar measures. See "Unaudited Pro Forma Consolidated Statement of Operations." (11) For purposes of determining the ratio of earnings to fixed charges, earnings are defined as earnings before income taxes and cumulative effect of accounting changes, plus fixed charges. Fixed charges consist of interest expense on all indebtedness and capitalized interest, amortization of deferred financing costs and one-half of rental expense on operating leases, representing that portion of rental expense deemed by the Company to be attributable to interest. For 1993, 1994, 1997, Pro Forma 1997 and the three months ended April 4, 1998 the deficiency of earnings to fixed charges was $21.6 million, $2.9 million, $0.4 million, $46.0 million and $5.9 million, respectively. 15 18 RISK FACTORS In addition to the other information in this Prospectus, the following factors should be considered carefully in evaluating the purchase of the Exchange Notes offered hereby: SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT; NEED TO REFINANCE NOTES As a result of the THL Transactions and the Vistar Transactions, the Company has significant debt service obligations. As of April 4, 1998 the Company had aggregate outstanding indebtedness of approximately $503.6 million, of which $391.2 million represented aggregate outstanding indebtedness under the Bank Credit Agreement (which amount excludes outstanding letters of credit), and stockholders' deficit of $48.4 million. The Company may incur additional indebtedness in the future, subject to certain limitations contained in the instruments governing its indebtedness, including the Indenture. The degree to which the Company is leveraged could have important consequences to holders of the Notes, including the following: (i) the Company's ability to obtain additional financing for working capital, capital expenditures, acquisitions, general corporate purposes and other purposes may be impaired; (ii) a substantial portion of the Company's cash flow from operations must be dedicated to the payment of the principal and interest on its indebtedness thereby reducing the funds available to finance operations; (iii) the Company may be more highly leveraged than certain of its competitors, which may place the Company at a competitive disadvantage; (iv) certain of the Company's borrowings will be at variable rates of interest (including borrowings under the Bank Credit Agreement) which will expose the Company to the risk of fluctuating interest rates; (v) the Company's substantial degree of leverage will limit its flexibility to adjust to changing market conditions, reduce its ability to withstand competitive pressures and make it more vulnerable to a downturn in economic conditions; and (vi) the Company's ability to refinance the Notes in order to pay the principal of the Notes at maturity or upon a Change of Control Triggering Event may be adversely affected. The Company's ability to satisfy its interest payment obligations under its indebtedness will depend largely on its future performance, which, in turn, is subject to prevailing economic conditions and to financial, business and other factors beyond its control. In addition, all amounts owing under the Bank Credit Agreement will become due prior to the time the principal payments on the Exchange Notes will become due and such amounts will need to be refinanced. Furthermore, the Company does not expect to be able to repay the principal amount of the Notes at maturity and accordingly will need to refinance the Notes, or repay the Notes with the proceeds of an equity offering, at or prior to their maturity. There can be no assurance that the Company will be able to generate sufficient cash flow to service its interest payment obligations under its indebtedness or that future borrowings or equity financing will be available for the payment or refinancing of the Company's indebtedness. To the extent that the Company is not successful in negotiating renewals of its borrowings or in arranging new financing, it may have to sell significant assets, which would have a material adverse effect on the Company's business and results of operations. Among the factors that will affect the Company's ability to effect an offering of its capital stock or refinance the Notes are financial market conditions and the value and performance of the Company at the time of such offering or refinancing. There can be no assurance that any such offering or refinancing can be successfully completed. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and "Description of Other Indebtedness." CERTAIN OPERATING CONSIDERATIONS The Company entered into the Vistar Transactions with the expectation that the Vistar Merger will benefit the Company. There can be no assurance that the Company will integrate the businesses and management teams of Safelite and Vistar successfully or that the Company will achieve desired net cost savings. The failure to integrate the two companies' operations or management teams successfully or to achieve such net cost savings would have a material adverse effect on the Company. In addition, certain third parties who have business relationships with the Company, such as customers and suppliers, may 16 19 wish to terminate those relationships as a result of the Company's affiliation with Vistar or Vistar's affiliation with the Company. Although the Company does not believe that any loss of such business relationships which would have a material adverse impact on the Company will occur as a result of the Vistar Merger, there can be no assurance that third parties will not terminate business relationships with the Company as a result of the Vistar Merger. COSTS RELATING TO THE VISTAR MERGER In connection with the Vistar Merger, the Company expects to incur $37 million to $42 million in aggregate costs for severance and the consolidation and elimination of duplicate facilities. The Company also expects to incur a total of $5 million to $10 million in calendar 1998 for certain one-time expenses associated with the integration of corporate systems, temporary service fees, training, moving, relocation and other costs associated with the Vistar Merger. Costs related to the Vistar Merger could increase if the Company encounters difficulties in the integration of the two businesses. There can be no assurance that the combined company will not incur additional costs, which in turn could have a material adverse effect on the business, financial condition or results of operations of the Company. For a discussion of the expected cost savings incident to the Vistar Merger, see "Management's Discussion and Analysis of Financial Condition and Results of Operations." These costs and cost savings have not been reflected in the pro forma adjustments to the Pro Forma Consolidated Statements of Operations. DEBT RESTRICTIONS; COMPLIANCE WITH CERTAIN COVENANTS; ASSET ENCUMBRANCES The Indenture and the Bank Credit Agreement impose restrictions that affect, among other things, the ability of the Company and its subsidiaries, as the case may be, to incur debt, pay dividends, sell assets, create liens, make capital expenditures and investments and otherwise enter into certain transactions outside the ordinary course of business. The Bank Credit Agreement also requires the Company to maintain specified financial ratios and meet certain financial tests. Although the Company is currently in compliance with the covenants and restrictions contained in the Bank Credit Agreement, the Company's ability to continue to comply may be affected by events beyond its control. The breach of any of these covenants or restrictions could result in a default under the Bank Credit Agreement, which in turn could result in the acceleration of indebtedness under other instruments evidencing indebtedness that may contain cross-acceleration or cross-default provisions. In the event of any such default, the lenders under the Bank Credit Agreement could elect to declare all amounts borrowed thereunder, together with accrued interest, to be due and payable, or the lenders could cease making additional revolving loans. If, as a result thereof, a default occurs with respect to Senior Indebtedness, the subordination provisions in the Indenture would likely restrict payments to the holders of the Exchange Notes. In connection with the Bank Credit Agreement, the Company has granted the lenders thereunder a first priority lien on substantially all of its assets. If the Company were unable to repay such amounts, the lenders could foreclose upon the assets pledged to secure such repayment, and the holders of the Exchange Notes might not be able to receive payments, if any, until the payment default was cured or waived, any such acceleration was rescinded, or the indebtedness under the Bank Credit Agreement was discharged or paid in full. SUBORDINATION OF NOTES TO SENIOR INDEBTEDNESS The Notes and the Guarantees are subordinate and junior in right of payment to all existing and future Senior Indebtedness of the Company, including indebtedness of the Company under the Bank Credit Agreement, and to all existing and future Guarantor Senior Indebtedness of the Subsidiary Guarantors, including the guarantees of the Subsidiary Guarantors under the Bank Credit Agreement, and the Notes are also effectively subordinated to all secured indebtedness of the Company and the Subsidiary Guarantors, respectively, to the extent of the value of the assets securing such indebtedness. The obligations under the Bank Credit Agreement are guaranteed by the Subsidiary Guarantors and are secured by substantially all of the assets of the Company and all direct and indirect subsidiaries of the Company and a pledge of the capital stock of certain subsidiaries of the Company. As of April 4, 1998, 17 20 the Company had (i) approximately $403.6 million of Senior Indebtedness (which amount excludes outstanding letters of credit) and (ii) approximately $58.7 million available under the Revolving Credit Facility (less $17.6 million in outstanding letters of credit), to fund the future liquidity needs of the Company, if any, all of which would be Senior Indebtedness, if borrowed. Additional Senior Indebtedness may be incurred by the Company from time to time, subject to certain restrictions. By reason of such subordination, in the event of an insolvency, liquidation, or other reorganization of the Company or any Subsidiary Guarantor, the lenders under the Bank Credit Agreement and other creditors who are holders of Senior Indebtedness or the Guarantor Senior Indebtedness, as applicable must be paid in full before the holders of the Notes may be paid; accordingly, there may be insufficient assets remaining after payment of prior claims to pay amounts due on the Notes. In addition, under certain circumstances, no payments may be made with respect to the Notes if a default exists with respect to certain Senior Indebtedness. See "Description of Notes -- Ranking of Notes." The holders of the Notes will have no direct claim against the Subsidiary Guarantors other than the claim created by the Guarantees. The rights of holders of the Notes to participate in any distribution of assets of any Subsidiary Guarantor upon liquidation, bankruptcy or reorganization may, as is the case with other unsecured creditors of the Company, be subject to prior claims against such Subsidiary Guarantor. The Guarantees may themselves be subject to legal challenge in the event of the bankruptcy or insolvency of a Subsidiary Guarantor, or in certain other circumstances. If such a challenge were upheld, the Guarantees would be invalidated and unenforceable. See "--Fraudulent Conveyance." LIMITED ABILITY OF SUBSIDIARY GUARANTORS TO PERFORM UNDER GUARANTEES The Exchange Notes are guaranteed fully, unconditionally and jointly and severally, by the Subsidiary Guarantors. The Subsidiary Guarantors are all of the current subsidiaries of Safelite Glass Corp. The Subsidiary Guarantors currently do not have any material assets or operations. All significant operations of the Company are conducted by, and all material assets are held by, Safelite Glass Corp. CHANGE OF CONTROL The Indenture provides that, upon the occurrence of a Change of Control Triggering Event, the Company will make an offer to purchase all of the Notes at a price in cash equal to 101% of the aggregate principal amount thereof together with accrued and unpaid interest to the date of purchase. The Bank Credit Agreement prohibits the Company from repurchasing any Notes, except with the proceeds of one or more equity offerings. The Bank Credit Agreement also provides that certain change of control events with respect to the Company would constitute a default thereunder. Any future credit agreements or other agreements relating to Senior Indebtedness to which the Company becomes a party may contain similar restrictions and provisions. In the event a Change of Control Triggering Event occurs at a time when the Company is prohibited from purchasing the Notes, or if the Company is required to make a Net Proceeds Offer (as defined) pursuant to the terms of the Notes, the Company could seek the consent of its lenders to the purchase of the Notes or could attempt to refinance the borrowings that contain such prohibition. If the Company does not obtain such a consent or repay such borrowings, the Company will remain prohibited from purchasing the Notes. In such case, the Company's failure to purchase tendered Notes would constitute an Event of Default under the Indenture. If, as a result thereof, a default occurs with respect to any Senior Indebtedness, the subordination provisions in the Indenture would likely restrict payments to the holders of the Notes. The provisions relating to a Change of Control Triggering Event included in the Indenture may increase the difficulty of a potential acquiror obtaining control of the Company. See "Description of Exchange Notes -- Change of Control." The conversion of the Company's Class B Non-Voting Stock to Class A Voting Stock could result in a Change of Control under the Indenture. See "Description of Capital Stock -- Common Stock." DEPENDENCE ON CERTAIN CUSTOMERS; POTENTIAL ADVERSE IMPACT OF GOVERNMENT REGULATION During fiscal 1997 the Company's five largest customers accounted for approximately 31% of the Company's sales and no customer accounted for more than 10% of the Company's sales. During the 18 21 three months ended April 4, 1998, however, the Company's five largest customers accounted for approximately 32% of the Company's sales, and one of those customers accounted for 12% of the Company's sales. The Company is highly dependent on recurring revenues generated by its insurance company customers and could be adversely affected by changes in such insurance companies' policies concerning coverage for automotive glass replacement claims. Failure by insurance companies to cover automotive glass replacement claims or the imposition of increased deductibles with respect to coverage of automotive glass replacement claims, could significantly reduce the Company's sales generated through its insurance company customers. Certain of the Company's TCS arrangements and MP relationships with insurance company customers are not evidenced by written contracts and are therefore terminable at any time. A significant decrease in business from the Company's insurance company customers would have a material adverse effect on the Company's results of operations and financial condition. See "Business -- Customers" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." Many states have statutes or regulations prohibiting certain referral practices of insurers. Approximately 30 states currently have statutes or regulations which would prohibit an insurance company from requiring a policyholder to use a particular vendor. In addition, new laws or regulations relating to the referral practices of insurance companies may be adopted in these or other states. The Company does not enter into arrangements with insurance companies pursuant to which such insurance companies require policyholders to use the Company for automotive glass replacement or repair services. Although the Company does not believe that existing government regulation of insurance company referral practices will have a material adverse effect on the Company, no assurance can be given that future regulation of such referral practices will not have a material adverse effect on the Company. COST AND AVAILABILITY OF RAW MATERIALS The major raw materials used in the manufacturing of the Company's products include glass and vinyl. Most of the raw materials used in the Company's products are available from multiple sources. However, several raw materials used in the Company's products are currently obtained from a single source. The Company does not have guaranteed supply arrangements with any of its suppliers and there can be no assurance that these suppliers will continue to meet the Company's requirements. An extended interruption in the supply of glass or vinyl could have a material adverse effect on the Company's operating results. There can be no assurance that severe shortages of raw materials will not occur in the future which could increase the cost or delay the shipment of the Company's products and have a material adverse effect on the Company's operating results. Significant increases in the prices of raw materials could also have a material adverse effect on the Company's operating results since the Company may not be able to adjust product pricing to reflect the increases in raw material costs. See "Business -- Suppliers and Raw Materials." RELIANCE ON CENTRALIZED MANUFACTURING All of the Company's manufacturing occurs at facilities in Enfield, North Carolina and Wichita, Kansas. The Company's manufacturing operations utilize certain equipment which, if damaged or otherwise rendered inoperable, would result in the disruption of the Company's manufacturing operations. Although the Company maintains business interruption insurance which the Company believes is adequate, any extended interruption of the operations at these facilities could have a material adverse effect on the Company's operating results. See "Business -- Operations -- Manufacturing." POTENTIAL RISK OF PRODUCT LIABILITY The manufacture and sale of windshields entails risk of product liability claims. To date, no such material product liability claims have been made against the Company relating to its manufacture and sale of windshields. There can be no assurance, however, that such claims will not be made in the future. A successful product liability claim (or series of claims) against the Company in excess of its insurance 19 22 coverage could have a material adverse effect on the Company's business, financial condition and results of operations. COMPETITION The markets for the Company's products and services are very competitive. In the installation and related services market, competition is based on price, customer service, technical capabilities, quality and geographic coverage. This market is highly fragmented with approximately 20,000 competitors. Although the Company is the market leader in installation and related services, it does compete against several other large competitors in this market, the largest two of which have market shares estimated to be 8% and 4%. In addition, many of the Company's competitors have incurred substantially less debt than the Company, which may allow them greater flexibility than the Company in managing their operations. There can be no assurance that the Company will be able to continue to compete effectively with these or other competitors. State Farm, one of the Company's largest customers, began, in a region by region rollout commencing in the summer of 1997, to use a competitor to function as its glass claims call center and bill processing administrator. There can be no assurance that this arrangement will not have an impact on the Company's business with State Farm. See "Business -- Competition." Competition in the wholesale market is based principally on price and quality. The Company is a relatively small participant in the wholesale market, which is dominated by several significantly larger companies. Future growth in the Company's revenues will depend upon the Company's ability to (i) maintain and increase its market share in the installation and related services market while continuing to provide high levels of customer service to insurers and fleet owners, and (ii) access the wholesale market in order to utilize excess manufacturing capacity. No assurance can be given that the Company will be successful in obtaining these objectives. PRICING The price of replacement automotive glass is related to the list prices developed by the National Auto Glass Specification ("NAGS"), an independent third party. Changes to the NAGS list prices have generally followed the wholesale price increases announced by the Original Equipment Manufacturers. Prices charged in the automotive glass replacement industry are calculated using varying percentage discounts from the NAGS price list. Actual revenue per unit ("RPU") charged in the industry has generally been increasing as a result of increases in the NAGS list price, increases in the design complexity of automotive glass and increases in the level of claims processing services associated with insurance-related replacement automotive glass purchases. NAGS list prices and offsetting discounts from NAGS list prices have increased significantly over the past five years. The Company has been informed that NAGS intends to reset its published list prices in early 1999 in order to bring actual prices charged more in line with published list prices. While the Company believes that as list prices are reduced, the related percentage discounts from list price offered by the Company and the Company's competitors will also be reduced, there can be no assurance that the resetting of NAGS list prices will not have an adverse effect on the Company. EFFECT OF WEATHER CONDITIONS; SEASONAL EARNINGS The severity of weather has historically affected the Company's sales and operating income, with severe winters generating increased sales and income and mild winters generating lower sales and income. Accordingly, mild weather conditions may adversely affect the Company's results of operations. The Company's business is somewhat seasonal, with the first and fourth calendar quarters traditionally its slowest periods of activity. This reduced level of sales in the first and fourth calendar quarters has resulted in a disproportionate decline in operating income during these quarters due to the 20 23 Company's significant operating leverage. The Company believes such seasonal trends will continue for the foreseeable future. See "Summary Historical and Pro Forma Financial Information." YEAR 2000 COMPLIANCE The Company relies heavily on computer technologies to operate its business. As a result, the Company continuously seeks to upgrade and improve its computer systems in order to provide better service to its customers and to support the Company's growth. The Company has initiated a program to prepare its computer systems and applications for the year 2000 date change ("Year 2000"). As part of this program, a team has been assigned to evaluate the nature and extent of the work required to make the Company's systems, products, electronic linkages with insurance customers and infrastructure Year 2000 compliant. A number of projects are either underway or under review with respect to Year 2000 compliance for the Company's various business systems, the total cost of which has not yet been determined. While these on-going efforts will involve additional costs, management believes that the costs will not have a material adverse effect on the Company's business, results of operations or financial condition. Year 2000 project costs are difficult to estimate accurately, and projected costs could change due to technological difficulties, project delays, and project cost overruns. The inability of the Company to successfully complete its Year 2000 compliance project or to maintain computer systems that meet the Company's and its customers' needs could have an adverse effect on the Company. ENVIRONMENTAL REGULATION, POSSIBLE CHANGES AND RELATED MATTERS The Company's manufacturing operations in Wichita, Kansas and Enfield, North Carolina involve the handling of materials and the generation of waste materials that are classified as hazardous. The Company is subject to federal, state and local laws and regulations concerning the handling and disposal of hazardous materials, and therefore in the ordinary course of its business, the Company in its manufacturing operations incurs compliance costs. The Company does not anticipate that compliance with federal, state and local provisions regarding the use and disposal of materials into the environment or otherwise relating to the protection of the environment will have any material adverse effect upon the earnings or competitive position of the Company and does not anticipate any material capital expenditures for environmental control facilities for the remainder of the Company's current fiscal year or the succeeding fiscal year. Actions by federal, state and local governments concerning environmental matters, however, could increase the costs of producing the products manufactured by the Company. In addition, the future costs of compliance with environmental laws and regulations and liabilities resulting from currently unknown circumstances or developments could be substantial or could have a material adverse effect on the Company. Regulations resulting from the 1990 amendments to the Clean Air Act (the "1990 Amendments") that will pertain to the Company's manufacturing operations are currently not expected to be promulgated until 1998 or later. The Company cannot predict the level of required capital expenditures resulting from future environmental regulations; however, the Company does not anticipate that expenditures required by such regulations, if any, will have a material adverse effect on the Company. LITIGATION The Company has been sued by nine local automotive glass replacement companies in the U.S. District Court for the Eastern District of Texas. Plaintiffs allege that defendants conspired with insurance companies to boycott plaintiffs and control the business in Texas of replacement and repair of automotive glass and residential and commercial flat glass in violation of Sections 1 and 2 of the Sherman Act, and interfered with contracts. The plaintiffs have claimed damages of approximately $8.9 million, plus attorneys' costs and fees. Under the federal antitrust laws, any damages proven for antitrust violations would be trebled. Under Texas law, punitive damages can be assessed for intentional interference with contract claims. The Company intends to defend these claims vigorously and does not believe they will have a material adverse effect on the Company's financial condition or results of operations. 21 24 On May 11, 1998, the Company was served with a subpoena requiring that it produce documents to a grand jury in Dallas, Texas, conducted by the Antitrust Division of the United States Department of Justice. The documents demanded by the subpoena relate to the pricing of replacement glass at three service center locations in the state of Texas. The Company intends to comply fully with the subpoena. Based on discussions with the Antitrust Division of the United States Department of Justice, management believes that it is unlikely that the Company is the target of this investigation. In addition, management does not believe that the Company or its employees have engaged in any anti-competitive or collusive activities and does not believe that this investigation will result in a material adverse effect on the Company. However, no assurance can be given that the Company will not be found to have engaged in anti-competitive or collusive activities or be liable for fines, penalties, damages and costs or, that if it were liable, that it would not have a material adverse effect on the Company. DEPENDENCE ON KEY PERSONNEL The success of the Company depends in large part on the Company's senior management, including Garen K. Staglin, John F. Barlow and Douglas A. Herron, and its ability to attract and retain other highly qualified management personnel. The Company faces competition for such personnel from other companies and other organizations. There can be no assurance that the Company will be successful in hiring or retaining key personnel. The Company entered into employment agreements with each of Messrs. Staglin, Barlow and Herron in connection with the THL Transactions and the Vistar Merger. The Company does not maintain key man life insurance on any of its executives. See "Management -- Directors and Executive Officers." CONCENTRATION OF OWNERSHIP THL and certain management of the Company own approximately 50.5% of the outstanding Class A Voting Stock of the Company and 32.0% of the outstanding Class B Non-Voting Common Stock. Belron owns 49.5% of the Class A Voting Common Stock and 43.1% of the Class B Non-Voting Common Stock. Pursuant to the Shareholders Agreement, as amended entered into in connection with the Vistar Merger, THL and Belron each have the right to elect half of the members of the Company's Board of Directors. In addition, the Shareholders Agreement gives THL the exclusive right for a three year period from the consummation of the Vistar Merger to require the Company to undertake an initial public offering and requires that THL approval be obtained for any debt or equity financing transactions in which the Company is expected to receive net proceeds in excess of $25 million. See "Transactions -- The Vistar Merger." Because THL and certain management of the Company own more than 50% of the outstanding voting common stock of the Company and THL has the exclusive ability to determine the outcome of fundamental corporate transactions such as refinancing indebtedness of the Company or causing an initial public offering to occur, there can be no assurance that the interests of THL and such management will not conflict with the interests of the holders of the Notes. See "Security Ownership of Certain Beneficial Owners and Management." FRAUDULENT CONVEYANCE The net proceeds from the sale of the Initial Notes were used to finance a portion of the cash consideration paid to the prior shareholders of the Company and Lear Siegler in the THL Transactions. The obligations of the Company and the Subsidiary Guarantors incurred under the Notes and the Guarantees, respectively, may be subject to review under relevant federal and state fraudulent conveyance statutes (the "fraudulent conveyance statutes") in a bankruptcy, reorganization or rehabilitation case or similar proceeding or a lawsuit by or on behalf of unpaid creditors of the Company or the Subsidiary Guarantors, as the case may be. The requirements for establishing a fraudulent conveyance or revocatory transfer vary depending on the law of the jurisdiction which is being applied. If under relevant fraudulent conveyance statutes a court were to find that, at the time the Company or any Subsidiary 22 25 Guarantor incurred the indebtedness represented by the Notes or the Guarantees, respectively, (i) with the intent of hindering, delaying or defrauding current or future creditors of the Company or the Subsidiary Guarantors, as the case may be, or (ii) received less than reasonably equivalent value or fair consideration any of such indebtedness or obligation and at the time of such incurrence: (A) was insolvent or was rendered insolvent by reason of such incurrence, (B) was engaged or about to engage in a business or transaction for which its assets constituted unreasonably small capital or (C) intended to incur, or believed that it would incur, indebtedness beyond its ability to pay as such indebtedness matured (as all of the foregoing terms are defined in or interpreted under the applicable fraudulent conveyance statutes), such court could avoid or subordinate the Notes or Guarantees to presently existing and future indebtedness of the Company and take other action detrimental to the holders of the Notes, including, under certain circumstances, invalidating the Notes or Guarantees. The measure of insolvency for purposes of the foregoing considerations will vary depending upon the federal or local law that is being applied in any such proceeding. Generally, however, the Company or a Subsidiary Guarantor would be considered insolvent if, at the time it incurs the indebtedness constituting the Initial Notes, either (i) the fair market value (or fair saleable value) of its assets is less than the amount required to pay the probable liability on its total existing debts and liabilities (including contingent liabilities) as they become absolute and matured or (ii) it is incurring indebtedness beyond its ability to pay as such indebtedness matures. The Company believes that at the time of issuance of the Initial Notes it received reasonably equivalent value or fair consideration for issuing the Initial Notes and that it (i) (a) was not insolvent rendered insolvent thereby for purposes of the foregoing standards, (b) was and remains in possession of sufficient capital to meet its obligations as such obligations mature or become due and to operate its business effectively and (c) did (and continues to) incur obligations within its ability to pay such obligations as they mature or become due and (ii) will have sufficient assets to satisfy any probable money judgment against it in any pending action. No assurance can be given, however, that a court passing on such issues would reach the same conclusions. LACK OF PUBLIC MARKET; RESTRICTIONS ON TRANSFERABILITY The Company does not intend to apply for a listing of the Exchange Notes on a securities exchange or on any automated dealer quotation system. There is currently no established market for the Exchange Notes and there can be no assurance as to the liquidity of markets that may develop for the Exchange Notes, the ability of the holders of the Exchange Notes to sell their Exchange Notes or the price at which such holders would be able to sell their Exchange Notes. If such markets were to exist, the Exchange Notes could trade at prices that may be lower than the initial market value of the Initial Notes or the Exchange Notes depending on many factors, including prevailing interest rates and the markets for similar securities. The Exchange Notes are expected to be designated for trading in the PORTAL market. The Initial Purchasers have advised the Company that they currently intend to make a market with respect to the Notes. However, the Initial Purchasers are not obligated to do so, and any market making with respect to the Notes, may be discontinued at any time without notice. The Exchange Offer will not be conditioned upon any minimum or maximum aggregate principal amount of Initial Notes being tendered for exchange. No assurance can be given as to the liquidity of the trading market for the Exchange Notes, or, in the case of non-exchanging holders of Initial Notes, the trading market for the Notes following the Exchange Offer. The liquidity of, and trading market for, the Notes also may be adversely affected by general declines in the market for similar securities. Such a decline may adversely affect such liquidity and trading markets independent of the financial performance of, and prospects for, the Company. RECENT HISTORY OF LOSSES ON A CONSOLIDATED BASIS The Company incurred losses from operations and net losses during its 1993 and 1994 fiscal years. Such losses resulted principally from the discontinued operations of Lear Siegler. Adjusted EBITDA of the 23 26 Company, which is defined herein as EBITDA plus other operating expenses, the operating expenses of Lear Siegler (which was treated as an exited activity) and the loss recognized by the Company in connection with the sale of Lear Siegler on September 12, 1997, was $22.0 million and $29.1 million, respectively, during such years. The Company also recognized a net loss for the three months ended April 4, 1998. Such loss resulted principally from restructuring charges and one-time costs associated with the Vistar Merger. See "Summary Historical and Pro Forma Financial Information." CONSEQUENCES OF FAILURE TO EXCHANGE Holders of Initial Notes who do not exchange their Initial Notes for Exchange Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of Initial Notes set forth in the legend thereon as a consequence of the issuance of the Initial Notes pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. In general, the Initial Notes may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register the Initial Notes under the Securities Act. FORWARD-LOOKING STATEMENTS This Prospectus contains forward-looking statements concerning the Company's operations, economic performance and financial condition, including, in particular, the likelihood of the Company's success in developing and expanding its business and successfully realizing expected net synergies from the Vistar Merger. These statements are based upon a number of assumptions and estimates which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the Company, and reflect future business decisions which are subject to change. Some of these assumptions inevitably will not materialize, and unanticipated events will occur which will affect the Company's results. 24 27 THE EXCHANGE OFFER PURPOSE OF THE EXCHANGE OFFER The Initial Notes were originally issued and sold on December 20, 1996. Such sales were not registered under the Securities Act in reliance upon the exemption provided by Section 4(2) of the Securities Act. In connection with the sale of the Initial Notes, the Company agreed to file with the Commission a registration statement relating to an exchange offer (the "Exchange Offer Registration Statement") pursuant to which the Exchange Notes would be offered in exchange for Initial Notes tendered at the option of the holders thereof or, if applicable interpretations of the staff of the Commission did not permit the Company to effect such an exchange offer or any holder of Initial Notes is either not eligible to participate in the exchange offer or does not receive freely transferrable securities in the exchange offer, the Company agreed, at its cost, to file a shelf registration statement covering resales of the Initial Notes (the "Resale Registration Statement") and to have such Resale Registration Statement declared effective and kept effective for a period of three years from the effective date thereof subject to certain exceptions, including suspending the effectiveness thereof for certain valid business reasons. In the event that (i) the Company fails to file the Exchange Offer Registration Statement, (ii) the Exchange Offer Registration Statement is not declared effective by the Commission, or (iii) the Exchange Offer is not consummated or the Resale Registration Statement is not declared effective by the Commission, in each case within specified time periods, the interest rate borne by the Notes shall increase, which interest will accrue and be payable in cash until completion of such filing, declaration of effectiveness or completion of such exchange. See "Exchange and Registration Rights Agreement." The sole purpose of the Exchange Offer is to fulfill obligations of the Company with respect to the foregoing agreement. Following the consummation of the Exchange Offer, the Company does not currently anticipate registering any untendered Initial Notes under the Securities Act and will not be obligated to do so. ACCOUNTING TREATMENT The Exchange Notes will be recorded at the carrying value of the Initial Notes that are exchanged. Therefore, no gain or loss will be recorded in the Company's financial statements as a result of the transaction. TERMS OF THE EXCHANGE The Company hereby offers to exchange, subject to the conditions set forth herein and in the Letter of Transmittal accompanying this Prospectus, $1,000 in principal amount of Exchange Notes for each $1,000 in principal amount of the Initial Notes. The terms of the Exchange Notes are identical in all respects to the terms of the Initial Notes, for which they may be exchanged pursuant to this Exchange Offer, except that the Exchange Notes will generally be freely transferable by holders thereof and the holders of the Exchange Notes (as well as remaining holders of any Initial Notes, other than those who were not eligible to participate in this Exchange Offer) will not be entitled to registration rights under the Exchange and Registration Rights Agreement. See "Exchange and Registration Rights Agreement." The Exchange Notes will evidence the same debt as the Initial Notes and will be entitled to the benefits of the Indenture. See "Description of the Exchange Notes." The Exchange Offer is not conditioned upon any minimum aggregate principal amount of Initial Notes being tendered for exchange. Based on interpretations by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes the Exchange Notes issued pursuant to the Exchange Offer in exchange for Initial Notes may be offered for sale, resold or otherwise transferred by any holder of such Exchange Notes (other than any such holder which is an "affiliate" of the Issuer within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such 25 28 holder's business and such holder has no arrangement or understanding with any person to participate in the distribution of such Exchange Notes. Any holder who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes cannot rely on such interpretations by the staff of the Commission and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any secondary resale transaction. Each broker-dealer that receives Exchange Notes for its own account in exchange for Initial Notes, where such Initial Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution." Interest on the Exchange Notes shall accrue from the last Interest Payment Date on which interest was paid on the Initial Notes so surrendered. Tendering holders of the Initial Notes will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of the Initial Notes pursuant to the Exchange Offer. EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS The Exchange Offer shall expire on the Expiration Date. The term "Expiration Date" means 5:00 p.m. New York City time, on , 1998, unless the Company, in its sole discretion, extends the period during which the Exchange Offer is open, in which event the term "Expiration Date" shall mean the latest time and date on which the Exchange Offer, as so extended by the Company, shall expire. The Company reserves the right to extend the Exchange Offer at any time and from time to time by giving oral or written notice to State Street Bank & Trust Company (the "Exchange Agent") and by timely public announcement communicated, unless otherwise required by applicable law or regulation, by making a release to the Dow Jones News Service. During any extension of the Exchange Offer, all Initial Notes previously tendered pursuant to the Exchange Offer will remain subject to the Exchange Offer. The Exchange Date will be the first business day following the Expiration Date. The Company expressly reserves the right to (i) terminate the Exchange Offer and not accept for exchange any Initial Notes if either of the events set forth below under "Conditions to the Exchange Offer" shall have occurred and shall not have been waived by the Company and (ii) amend the terms of the Exchange Offer in any manner which, in its good faith judgment, is advantageous to the holders of the Initial Notes, whether before or after any tender of the Initial Notes. If any such termination or amendment occurs, the Company will notify the Exchange Agent and will either issue a press release or give oral or written notice to the holders of the Initial Notes as promptly as practicable. Unless the Company terminates the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date, the Company will exchange the Exchange Notes for the Initial Notes on the Exchange Date. HOW TO TENDER The tender to the Company of Initial Notes by a holder thereof pursuant to one of the procedures set forth below will constitute an agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. A holder of an Initial Note may tender the same by (i) properly completing and signing the Letter of Transmittal or a facsimile thereof (all reference in this Prospectus to the Letter of Transmittal shall be deemed to include a facsimile thereof) and delivering the same, together with the certificate or certificates representing the Initial Notes being tendered and any required signature guarantees, to the Exchange Agent at its address set forth on the back cover of this Prospectus on or prior to the Expiration Date, (ii) complying with the procedure for book entry transfer described below or (iii) complying with the guaranteed delivery procedures described below. If tendered Initial Notes are registered in the name of the signer of the Letter of Transmittal and the Exchange Notes to be issued in exchange therefor are to be issued (and any untendered Initial Notes are 26 29 to be reissued) in the name of the registered holder (which term, for the purposes described herein, shall include any participant in The Depository Trust Company ("DTC") (also referred to as a book-entry transfer facility) whose name appears on a security listing as the owner of Initial Notes), the signature of such signer need not be guaranteed. In any other case, the tendered Initial Notes must be endorsed or accompanied by written instruments of transfer in form satisfactory to the Issuer and duly executed by the registered holder and the signature on the endorsement or instrument of transfer must be guaranteed by a commercial bank or trust company located or having an office or correspondent in the United States, or by a member firm of a national securities exchange or of the National Association of Securities Dealers, Inc. (any of the foregoing hereinafter referred to as an "Eligible Institution"). If the Exchange Notes and/or Initial Notes not exchanged are to be delivered to an address other than that of the registered holder appearing on the note register for the Initial Notes, the signature in the Letter of Transmittal must be guaranteed by an Eligible Institution. The method of delivery of Initial Notes and all other documents is at the election and risk of the holder. If sent by mail, it is recommended that registered mail, return receipt requested, be used, proper insurance obtained, and the mailing be made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent on or before the Expiration Date. The Exchange Agent and DTC have confirmed that any financial institution that is a participant in DTC's system (a "Participant") may utilize DTC's Automated Tender Offer Program ("ATOP") to tender Initial Notes. The Exchange Agent will request that DTC establish an account with respect to the Initial Notes for purposes of the Exchange Offer within two business days after the date of this Prospectus. Any Participant may make book-entry delivery of Initial Notes by causing DTC to transfer such Initial Notes into the Exchange Agent's account in accordance with DTC's ATOP procedures for transfer. However, the exchange for the Initial Notes so tendered will only be made after timely confirmation (a "Book-Entry Confirmation") of such book-entry transfer of Initial Notes into the Exchange Agent's account, and timely receipt by the Exchange Agent of an Agent's Message (as such term is defined in the next sentence) and any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message, transmitted by DTC and received by the Exchange Agent and forming part of a Book-Entry Confirmation, which states that DTC has received an express acknowledgment from a Participant tendering Initial Notes which are the subject of such Book-Entry Confirmation that such Participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Issuer may enforce such agreement against such Participant. If a holder desires to accept the Exchange Offer and time will not permit a Letter of Transmittal or Initial Notes to reach the Exchange Agent before the Expiration Date or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if the Exchange Agent has received at its office listed on the back cover hereof on or prior to the Expiration Date a letter, telegram or facsimile transmission from an Eligible Institution setting forth the name and address of the tendering holder, the names in which the Initial Notes are registered and, if possible, the certificate numbers of the Initial Notes to be tendered, and stating that the tender is being made thereby and guaranteeing that within five New York Stock Exchange trading days after the date of execution of such letter, telegram or facsimile transmission by the Eligible Institution, the Initial Notes, in proper form for transfer (or a confirmation of book-entry transfer of such Initial Notes into the Exchange Agent's account at the book-entry transfer facility), will be delivered by such Eligible Institution together with a properly completed and duly executed Letter of Transmittal (and any other required documents). Unless Initial Notes being tendered by the above-described method are deposited with the Exchange Agent within the time period set forth above (accompanied or preceded by a properly completed Letter of Transmittal and any other required documents), the Company may, at its option, reject the tender. Copies of a Notice of Guaranteed Delivery which may be used by Eligible Institutions for the purposes described in this paragraph are available from the Exchange Agent. 27 30 A tender will be deemed to have been received as of the date when (i) the tendering holder's properly completed and duly signed Letter of Transmittal accompanied by the Initial Notes is received by the Exchange Agent, (ii) a confirmation of book-entry transfer of such Initial Notes into the Exchange Agent's account at the book-entry transfer facility is received by the Exchange Agent, or (iii) a Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to similar effect (as provided above) for an Eligible Institution is received by the Exchange Agent. Issuances of Exchange Notes in exchange for Initial Notes tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to similar effect (as provided above) by an Eligible Institution will be made only against deposit of the Letter of Transmittal (and any other required documents) and the tendered Initial Notes. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of Initial Notes will be determined by the Company, whose determination will be final and binding. The Company reserves the absolute right to reject any or all tenders not in proper form or the acceptances for exchange of which may, in the opinion of the counsel of the Company, be unlawful. The Company also reserves the absolute right to waive any of the conditions of the Exchange Offer or any defect or irregularity in the tender of any Initial Notes. None of the Company, the Exchange Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL The Letter of Transmittal contains, among other things, the following terms and conditions, which are part of the Exchange Offer. The party tendering Initial Notes for exchange (the "Transferor") exchanges, assigns and transfer the Initial Notes to the Company and irrevocably constitutes and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact to cause the Initial Notes to be assigned, transferred and exchanged. The Transferor represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Initial Notes and to acquire Exchange Notes issuable upon the exchange of such tendered Initial Notes, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered Initial Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The Transferor also warrants that it will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the exchange, assignment and transfer of tendered Initial Notes or transfer ownership of such Initial Notes on the account books maintained by a book-entry transfer facility. The Transferor further agrees that acceptance of any tendered Initial Notes by the Company and the issuance of Exchange Notes in exchange therefor shall constitute performance in full by the Company of its obligations under the Exchange and Registration Rights Agreement and that the Company shall have no further obligations or liabilities thereunder. All authority conferred by the Transferor will survive the death or incapacity of the Transferor and every obligation of the Transferor shall be binding upon the heirs, legal representatives, successors, assigns, executors and administrators of such Transferor. By tendering Initial Notes, the Transferor certifies that it is not an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act and that it is acquiring the Exchange Notes offered hereby in the ordinary course of such Transferor's business and that such Transferor has no arrangement with any person to participate in the distribution of such Exchange Notes. WITHDRAWAL RIGHTS Initial Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Exchange Agent at its address set forth on the back cover of this Prospectus. Any such notice of withdrawal must specify the person named in the Letter of 28 31 Transmittal as having tendered Initial Notes to be withdrawn, the certificate numbers of Initial Notes to be withdrawn, the principal amount of Initial Notes to be withdrawn, a statement that such holder is withdrawing his election to have such Initial Notes exchanged, and the name of the registered holder of such Initial Notes, and must be signed by the holder in the same manner as the original signature on the Letter of Transmittal (including any required signature guarantees) or be accompanied by evidence satisfactory to the issuer that the person withdrawing the tender has succeeded to the beneficial ownership of the Initial Notes being withdrawn. The Exchange Agent will return the properly withdrawn Initial Notes promptly following receipt of notice of withdrawal. If Initial Notes have been tendered pursuant to the procedures for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Initial Notes or otherwise comply with book-entry transfer facility procedure. All questions as to the validity of notices of withdrawals, including time of receipt, will be determined by the Company, and such determination will be final and binding on all parties. ACCEPTANCE OF NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES Upon the terms and subject to the conditions of the Exchange Offer, the acceptance of Initial Notes validly tendered and not withdrawn and issuance of the Exchange Notes will be made on the Exchange Date. For the purpose of the Exchange Offer, the Company shall be deemed to have accepted for exchange validly tendered Initial Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders of Initial Notes for the purpose of receiving Exchange Notes from the Company and causing the Initial Notes to be assigned, transferred and exchanged. Upon the terms and subject to the conditions of the Exchange Offer, delivery of Exchange Notes to be issued in exchange for accepted Initial Notes will be made by the Exchange Agent promptly after acceptance of the tendered Initial Notes. Initial Notes not accepted for exchange by the Company will be returned without expense to the tendering holders promptly following the Expiration Date or, if the Company terminates the Exchange Offer prior to the Expiration Date, promptly after the Exchange Offer is so terminated. CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other provision of the Exchange Offer, or any extension of the Exchange Offer, the Company will not be required to issue Exchange Notes in respect of any properly tendered Initial Notes not previously accepted and may terminate the Exchange Offer (by oral or written notice to the Exchange Agent and by timely public announcement communicated, unless otherwise required by applicable law or regulation, by making a release to the Dow Jones News Service) or, at its option, modify or otherwise amend the Exchange Offer, if there shall be threatened, instituted or pending any action or proceeding before, or any injunction, order or decree shall have been issued by, any court or governmental agency or other governmental regulatory or administrative agency or commission, (i) seeking to restrain or prohibit the making or consummation of the Exchange Offer or any other transaction contemplated by the Exchange Offer, or assessing or seeking any damages as a result thereof, or (ii) resulting in a material delay in the ability of the Issuer to accept for exchange or exchange some or all of the Initial Notes pursuant to the Exchange Offer, or any statute, rule, regulation, order or injunction shall be sought, proposed, introduced, enacted, promulgated or deemed applicable to the Exchange Offer or any of the transactions contemplated by the Exchange Offer by any government or governmental authority, domestic or foreign, or any action shall have been taken, proposed or threatened, by any government, governmental authority, agency or court, domestic or foreign, that in the reasonable judgment of the Company, might directly or indirectly result in any of the consequences referred to in clauses (i) or (ii) above or, in the reasonable judgment of the Company, might result in the holders of Exchange Notes having obligations with respect to resales and transfers of Exchange Notes which are greater than those described in the interpretations of the Commission referred to on the cover page of this Prospectus, or would otherwise make it inadvisable to proceed with the Exchange Offer. 29 32 In addition, the Company will not accept for exchange any Initial Notes tendered and no Exchange Notes will be issued in exchange for any such Initial Notes, if at such time any stop order shall be threatened or in effect with respect to the Registration Statement of which this Prospectus constitutes a part or the qualification of the Indenture under the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The Company expressly reserves the right to terminate the Exchange Offer and not accept for exchange any Initial Notes upon the occurrence of either of the foregoing conditions (which represent all of the material conditions to the acceptance by the Company of properly tendered Initial Notes). In addition, the Company may amend the Exchange Offer at any time prior to the Expiration Date if either of the conditions set forth above occur. Moreover, regardless of whether either of such conditions has occurred, the Company may amend the Exchange Offer in any manner which, in its good faith judgment, is advantageous to holders of the Initial Notes. The foregoing conditions are for the sole benefit of the Company and may be waived by the Company, in whole part, if, in its reasonable judgment, such waiver is not disadvantageous to holders of the Initial Notes. Any determination made by the Company concerning an event, development or circumstance described or referred to above will be final and binding on all parties. EXCHANGE AGENT State Street Bank and Trust Company has been appointed as the Exchange Agent for the Exchange Offer. Letters of Transmittal must be addressed to the Exchange Agent at its address set forth on the back cover of this Prospectus. Delivery to an address other than as set forth herein, or transmissions of instructions via a facsimile or telex number other than the ones set forth herein, will not constitute a valid delivery. SOLICITATION OF TENDERS; EXPENSES The Company has not retained any dealer-manager or similar agent in connection with the Exchange Offer and will not make any payments to brokers, dealers or others for soliciting acceptances of the Exchange Offer. The Company will, however, pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for reasonable out-of-pocket expenses in connection therewith. The Company will also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this Prospectus and related documents to the beneficial owners of the Initial Notes and in handling or forwarding tenders for their customers. No person has been authorized to give any information or to make any representations in connection with the Exchange Offer other than those contained in this Prospectus. If given or made, such information or representations should not be relied upon as having been authorized by the Company. Neither the delivery of this Prospectus nor any exchange made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the respective dates as of which information is given herein. The Exchange Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Initial Notes in any jurisdiction in which the making of the Exchange Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. However, the Company may, at its discretion, take such action as it may deem necessary to make the Exchange Offer in any such jurisdiction and extend the Exchange Offer to holders of Initial Notes in such jurisdiction. In any jurisdiction the securities laws or blue sky laws of which require the Exchange Offer to be made by a licensed broker or dealer, the Exchange Offer is being made on behalf of the Company by one or more registered brokers or dealers which are licensed under the laws of such jurisdiction. 30 33 OTHER Participation in the Exchange Offer is voluntary and holders should carefully consider whether to accept. Holders of the Initial Notes are urged to consult their financial and tax advisors in making their own decisions on what action to take. As a result of the making of, and upon acceptance for exchange of all validly tendered Initial Notes pursuant to the terms of, this Exchange Offer, the Company will have fulfilled a covenant contained in the terms of the Exchange and Registration Rights Agreement. Eligible holders of the Initial Notes who do not tender their certificates in the Exchange Offer will continue to hold such certificates and their rights under such Initial Notes will not be altered, except for any such rights under the Exchange and Registration Rights Agreement, which by their terms terminate or cease to have further effect as a result of the making of this Exchange Offer. See "Description of the Initial Notes." All untendered Initial Notes will continue to be subject to the restrictions on transfer set forth in the Indenture. To the extent that Initial Notes are tendered and accepted in the Exchange Offer, the trading market for untendered Initial Notes could be adversely affected. The Company may in the future seek to acquire untendered Initial Notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. The Company has no present plan to acquire any Initial Notes which are not tendered in the Exchange Offer or to file a registration statement to permit resales of any Initial Notes which are not tendered pursuant to the Exchange Offer. 31 34 TRANSACTIONS THE THL TRANSACTIONS During 1996, in order to effect the THL Transactions described below, Lite Acquisition Corp., formed and capitalized by THL, made an approximately $117 million equity investment in Safelite (the "THL Equity Investment"). Pursuant to the Recapitalization Agreement, Lite Acquisition Corp. was merged with and into Safelite on December 20, 1996, with Safelite surviving the merger (the "THL Merger"). Upon completion of the THL Merger, THL owned approximately 88% of the voting stock of Safelite and certain existing stockholders of the Company, including management, retained approximately 12% of Safelite's voting stock. The aggregate cash consideration received by the previous owners of Safelite, including LSNWY, was approximately $300 million. Immediately following the THL Merger, Safelite acquired substantially all of the outstanding capital stock of Lear Siegler (including LSNWY) from its current owners for a promissory note equal to the cash THL Merger consideration for Safelite received by LSNWY (the "Seller Note"). Lear Siegler was then merged with and into L.S. Acquisition Corp., a wholly-owned subsidiary of the Company, with L.S. Acquisition Corp. surviving the merger and changing its name to Lear Siegler Holdings Corp. As a result, Lear Siegler became a wholly-owned subsidiary of the Company upon completion of the THL Transactions. LSNWY distributed the THL Merger consideration to a subsidiary of Safelite which repaid the Seller Note. As part of the THL Transactions, the proceeds of the THL Equity Investment, together with approximately $250 million of aggregate proceeds from the debt financings described below, were used to (i) repay approximately $42 million of existing indebtedness, (ii) pay approximately $300 million of stock purchase price and THL Merger consideration, (iii) pay an estimated $17 million of transaction fees and expenses and (iv) pay transaction bonuses aggregating approximately $7 million to certain members of Safelite management. A summary schematic diagram of the structure of Safelite before the THL Transactions and the corporate structure of Safelite following the THL Transactions is set forth below. [PRE-TRANSACTIONS STRUCTURE CHART & POST-TRANSACTIONS STRUCTURE CHART] 32 35 Prior to the THL Transactions, the capital stock of Safelite consisted of a class of Preferential Common Stock, as well as Class A and Class B Common Stock. The Preferential Common Stock was owned by LSNWY Corp., an indirect subsidiary of Lear Siegler. The Class A Common Stock was owned by LSNWY and certain other stockholders, including management of Safelite. The Class B Common Stock was owned by LSNWY and certain other stockholders. The THL Transactions occurred in three steps, each described below. In the first step of the THL Transactions, THL acquired 169,000 shares of Safelite Class A Common Stock for $13.40 per share from certain selling stockholders for aggregate consideration of approximately $2.3 million. Except for such shares and approximately 627,000 shares of Safelite Class A Common Stock and 18,000 shares of Class B Common Stock owned by other existing stockholders, primarily management of Safelite, all remaining shares of Safelite were then owned by LSNWY. In the second step of the THL Transactions, THL capitalized Lite Acquisition Corp. with $56.4 million of common equity and $58.2 million of preferred equity (which, together with the $2.3 million paid for Safelite Class A Common Stock in the first step of the THL Transactions, comprise the $116.9 million THL Equity Investment). Lite Acquisition Corp. then merged with and into Safelite, with Safelite surviving the THL Merger. Immediately following the THL Merger, the Company borrowed $150.0 million pursuant to the 1996 Credit Facilities and consummated the Offering of the Initial Notes, from which it received approximately $97.0 million. Upon effectiveness of the THL Merger: (i) each share of Safelite Class A Common Stock outstanding prior to the Merger (A) was converted into the right to receive cash in the amount of $13.40 or (B) at the election of any holder thereof, remained outstanding and unaffected by the THL Merger (LSNWY agreed that it would not elect to retain any of the 310,000 shares of Safelite Class A Common Stock owned by it and therefore received approximately $4.2 million for such shares in the THL Merger and other stockholders and optionholders received approximately $0.6 million for their Class A Common Stock and options); (ii) each share of Safelite Class B Common Stock outstanding prior to the THL Merger was converted into the right to receive cash equal to $.01; (iii) each share of Safelite Preferential Common Stock outstanding prior to the THL Merger was converted into the right to receive cash (in the aggregate amount of approximately $293.1 million); (iv) each share of Lite Acquisition Corp.'s common stock outstanding prior to the THL Merger was converted into one share of Safelite Class A Common Stock; and (v) each share of Lite Acquisition Corp.'s preferred stock outstanding prior to the THL Merger was converted into one share of Safelite 8% Preferred Stock. Safelite was then owned approximately 88% by THL, and certain existing stockholders of the Company, including management, retained approximately 12% of Safelite's voting stock. In the final step of the THL Transactions, Safelite, through a new wholly-owned subsidiary, L.S. Acquisition Corp., acquired in excess of 96% of the outstanding capital stock of Lear Siegler (including all shares of Lear Siegler preference stock) for a demand promissory note with a principal amount equal to the consideration received by LSNWY in the THL Merger, which amount was approximately $297.3 million. Lear Siegler was merged with and into L.S. Acquisition Corp. with L.S. Acquisition Corp. surviving the merger and changing its name to Lear Siegler Holdings Corp., making Lear Siegler a wholly-owned subsidiary of the Company. On the closing date of the THL Transactions, all of the consideration received by LSNWY in the THL Merger was distributed to L.S. Acquisition Corp. and used to repay the note delivered in connection with the purchase of Lear Siegler's capital stock. As a result of this three-step transaction, THL held a direct equity investment in Safelite and other stockholders of Safelite, primarily management, retained their existing interest in Safelite. The Company believed that this resulting structure accurately reflected the Company's operations, which consist 33 36 entirely of the operations of Safelite, as opposed to the prior Lear Siegler structure which was put in place at a time when Safelite was only one of several operating subsidiaries owned within the Lear Siegler consolidated group. The sources and uses of funds for the THL Transactions were as follows: SOURCES AND USES
AMOUNT --------------------- (DOLLARS IN MILLIONS) Sources: Term Loan Facility(1)....................................... $150.0 Senior Subordinated Notes................................... 100.0 THL Equity Investment(2).................................... 116.9 Management Retained Equity(3)............................... 7.9 ------ $374.8 ====== Uses: Working Capital............................................. $ 0.9 Merger Consideration(4)..................................... 300.1 Repayment of Existing Debt.................................. 41.9 Management Transaction Bonuses(5)........................... 6.9 Management Retained Equity(3)............................... 7.9 Fees and Expenses........................................... 17.1 ------ $374.8 ======
- --------------- (1) After the Closing, the Company had $30 million of availability under a Revolving Credit Facility (less approximately $4.9 million in outstanding letters of credit) and, excluding Lear Siegler and the uses described above, approximately $5 million of cash on the balance sheet. (2) Comprised of $58.7 million of common equity and $58.2 million of preferred equity. (3) Represents value of Safelite Class A Common Stock retained by management. (4) Includes $2.3 million paid directly by THL to certain current stockholders of Safelite for Safelite common stock. (5) These bonuses were accrued in fiscal 1996 and paid in January 1997. SALE OF LEAR SIEGLER On September 12, 1997, the Company sold all of the issued and outstanding shares of the capital stock of Lear Siegler (the "Lear Siegler Stock") to BPLSI Investment Company, a Delaware corporation (the "Purchaser"), pursuant to a Stock Purchase Agreement by and among Lear Siegler, the Company, the Purchaser, and James F. Matthews, the former President of Lear Siegler and the sole stockholder of the Purchaser. The purchase price for the Lear Siegler Stock was $100,000 in cash and a Promissory Note delivered by the Purchaser to the Company. The Promissory Note is not for a fixed dollar amount but instead provides that the Purchaser must pay to the Company an amount equal to 50% of the net proceeds realized, directly or indirectly, by Lear Siegler from the liquidation or other disposition, if any, of the assets belonging to Lear Siegler or its direct or indirect subsidiaries which were seized by the Cuban government when Fidel Castro came to power, or from settlement of any claims relating thereto (the "Cuban Assets"). Due to certain restrictions in the acquisition documents governing the THL Transactions, it is not expected that the Purchaser will be able to make any payment under the Promissory Note until June 21, 2003. Also, due to the wholly-contingent nature of the ability of Lear Siegler or any of its subsidiaries to realize any proceeds from the liquidation or other disposition of any of the Cuban Assets, 34 37 there can be no assurance that the Purchaser will make any payments to the Company under the Promissory Note. Accordingly, the Company has recorded the Promissory Note at a net book value of zero, and recorded a loss of $5.4 million in the year ended January 3, 1998 related to the sale of Lear Siegler. The operations of Lear Siegler, a former industrial conglomerate whose subsidiaries manufactured a range of products, were never an integral part of the Company's automotive glass replacement and repair business. The Company believes that the sale of Lear Siegler will enable the Company to focus on its core business. THE CONSENT SOLICITATION On November 28, 1997, the Company commenced a solicitation of consents (the "Consent Solicitation"), from the holders of the Initial Notes, to certain amendments to the Indenture (the "Indenture Amendments") to be effected through execution of a First Supplemental Indenture. The purpose of the Indenture Amendments was, among other things, to permit the Company to make the Distribution (as defined below) and increase the amount of its senior bank indebtedness in connection with the Distribution and, thereafter, in connection with the Vistar Merger as contemplated by the Merger Agreement entered into on October 10, 1997 between the Company and Vistar (the "Vistar Merger Agreement"). See "-- The Vistar Merger." On December 12, 1997, the Company successfully completed the Consent Solicitation, having received the requisite consents to the Indenture Amendments from the holders of the Initial Notes. Upon consummation of the Distribution, the Company made consent payments aggregating $5.0 million ($50.00 for each $1,000.00 principal amount of Initial Notes then outstanding). THE VISTAR TRANSACTIONS On December 19, 1997, pursuant to the Vistar Merger Agreement, the Company completed the Vistar Merger, whereby Vistar was merged with and into the Company, with the Company as the surviving corporation. Prior to the Vistar Merger, the Company declared and paid a dividend on its outstanding shares of Class A Common Stock in the aggregate amount of approximately $67.2 million and declared and paid a dividend on its outstanding shares of 8% Cumulative Preferred Stock equal to the accrued and unpaid dividends thereon in the aggregate amount of approximately $4.7 million (collectively, the "Dividend"), and the Company redeemed all outstanding shares of its 8% Cumulative Preferred Stock at an aggregate redemption price of $58.2 million (the "Redemption" and, together with the Dividend, the "Distribution"). Subsequent to the Distribution and prior to consummation of the Vistar Merger, the Company effected a 1 for 3 reverse stock split (the "Stock Split") of its Class A Common Stock, which was reclassified as Class A Voting Common Stock ("Class A Voting Stock"), reclassified its currently authorized class of Class B Common Stock as Class B Non-Voting Common Stock ("Class B Non-Voting Stock"), and declared and paid a dividend on each share of Class A Voting Stock outstanding after the Stock Split in the form of two shares of Class B Non-Voting Stock. The Company also authorized the creation of a new series of preferred stock, designated as Non-Voting 8% Preferred Stock (the "Non-Voting Preferred Stock"). As a result of restrictions contained in the Indenture, dividends are not payable in respect of the Non-Voting Preferred Stock unless such payment is in compliance with the "Limitation on Restricted Payments" covenant contained in the Indenture. The Non-Voting Preferred Stock is not mandatorily redeemable. Unlike the 8% Cumulative Preferred Stock, however, the Non-Voting Preferred Stock will be redeemable by the Company, at its option, at any time (provided that the Company is in compliance with the "Limitation on Restricted Payments" covenant in the Indenture). See "Description of Capital Stock -- Preferred Stock." Upon consummation of the Vistar Merger, the holders of Vistar's outstanding capital stock immediately prior to the Vistar Merger (the "Vistar Shareholders") received in exchange for all of the outstanding capital stock of Vistar prior to the Vistar Merger an aggregate of 1,690,101 shares of Class A Voting Stock, 6,959,771 shares of Class B Non-Voting Stock, 40,000 shares of Non-Voting Preferred Stock ($40 million aggregate liquidation preference) and $65 million cash (collectively, the "Merger 35 38 Consideration"). As a result of the Vistar Merger, the holders of the Company's outstanding capital stock immediately prior to the Vistar Merger (the "Safelite Shareholders") retained ownership of 50.5% of the outstanding Class A Voting Stock and became the owners of approximately 33% of the outstanding Class B Non-Voting Stock (including shares subject to exercisable options to acquire Class B Non-Voting Stock) and the Vistar Shareholders became the owners of 49.5% of the outstanding Class A Voting Stock, approximately 67% of the outstanding Class B Non-Voting Stock and 100% of the outstanding Non-Voting Preferred Stock. See "Security Ownership of Certain Beneficial Owners and Management." The Class B Non-Voting Stock may convert into Class A Voting Stock under certain circumstances. See "Description of Capital Stock -- Common Stock." In connection with the Vistar Merger, substantially all of the Safelite Shareholders and all of the Vistar Shareholders entered into a Shareholders Agreement (the "Shareholders Agreement") which established certain rights and restrictions with respect to the management of the Company and transfers of the Class A Voting Stock and the Class B Non-Voting Stock, and a Registration Agreement providing for certain rights to cause the Company to register the Class A Voting Stock and the Class B non-Voting Stock under the Securities Act of 1933, as amended (the "Securities Act"). The Shareholders Agreement was amended by Amendment No. 1 to the Shareholders Agreement, dated as of March 26, 1998. Unless otherwise noted, references herein to the Shareholders Agreement shall mean the Shareholders Agreement, as amended. See "Certain Relationships and Related Transactions." 36 39 UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma consolidated statements of operations (the "Unaudited Pro Forma Consolidated Statements of Operations") of the Company are based on the audited and unaudited financial statements of Safelite and Vistar which are included elsewhere in this Prospectus, as adjusted to illustrate the estimated effects of the Vistar Merger and sale of Lear Siegler. The unaudited pro forma adjustments are based upon available information and certain assumptions that the Company believes are reasonable. The total purchase price for Vistar has been allocated to the tangible and intangible assets and liabilities of Vistar acquired based upon the results of a preliminary evaluation of their estimated respective values. It is the Company's intention, prior to the end of calendar 1998, to complete its evaluation of the acquired assets and liabilities and, as a result, the allocation of the acquisition costs among tangible and intangible assets and liabilities acquired may change. The Unaudited Pro Forma Consolidated Statements of Operations and accompanying notes should be read in conjunction with the historical financial statements of Safelite and other financial information pertaining to both companies included elsewhere in this Prospectus including "Vistar Transactions" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Unaudited Pro Forma Consolidated Statements of Operations have been prepared to give effect to the Vistar Merger and sale of Lear Siegler as though such transactions had occurred as of December 29, 1996, the first day of the Company's 1997 fiscal year. See "Transactions." The Unaudited Pro Forma Consolidated Statements of Operations do not purport to be indicative of what the Company's results of operations would actually have been had the Vistar Merger and sale of Lear Siegler been completed at the beginning of the period indicated or to project the Company's results of operations for any future date. 37 40 SAFELITE GLASS CORP. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS (1) FOR THE YEAR ENDED JANUARY 3, 1998 (DOLLARS IN THOUSANDS)
LEAR SIEGLER VISTAR SAFELITE SAFELITE VISTAR PRO FORMA PRO FORMA PRO FORMA HISTORICAL(2) HISTORICAL ADJUSTMENTS ADJUSTMENTS COMBINED ------------- ---------- ------------ ----------- --------- Sales: Installation and related services............. $430,290 $434,245 $ (15,446)(3) $826,789 (22,300)(4) Wholesale............... 53,014 -- 53,014 -------- -------- -------- Total sales..... 483,304 434,245 879,803 Cost of sales............. 331,658 363,545 (15,446)(3) 679,757 -------- -------- -------- Gross profit.............. 151,646 70,700 200,046 Selling, general and administrative.......... 111,815 80,575 (1,107)(5) (5,149)(6) 186,634 500(7) Restructuring expenses.... 2,865 -- 2,865 Loss on sale of Lear Siegler................. 5,418 5,418 Other operating expenses................ 5,704 2,409 8,113 -------- -------- -------- Operating income (loss)... 25,844 (12,284) (2,984) Interest expense.......... (27,517) (1,554) 72(5) (15,536)(8) (44,535) Interest income........... 1,254 710 (483)(5) 1,481 -------- -------- -------- Income (loss) from continuing operations before income taxes..... (419) (13,128) (46,038) Income tax benefit (provision)............. 6,842 (88) (278)(5) 15,334(9) 21,810 -------- -------- -------- Income (loss) from continuing operations... $ 6,423 $(13,216) $(24,228) ======== ======== ======== Other data: EBITDA(10)(12)............ $ 23,790 Adjusted EBITDA(11)(12)... 37,321 Adjusted EBITDA to cash interest expense(8)(11)(12)...... 0.9x
See Notes to Unaudited Pro Forma Consolidated Statement of Operations. 38 41 SAFELITE GLASS CORP. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS) 1. The pro forma financial data do not give effect to any potential synergies that could result from the Vistar Transactions. The pro forma data are not necessarily indicative of the operating results or financial position that would have occurred had the sale of Lear Siegler and the Vistar Transactions been consummated at the dates indicated, nor are they necessarily indicative of future operating results. 2. The Safelite Historical Statement of Operations includes the operations of Vistar, Inc. from December 19, 1997 (the date of the Vistar Merger) through the Company's fiscal year end. 3. Represents the elimination of inter-company sales between Safelite and Vistar. 4. Reflects estimated impact of certain customer contractual arrangements as a result of the merger of the two companies. 5. Represents the operating expenses, interest expense, interest income and related tax impact of Lear Siegler. 6. Adjusts goodwill amortization to reflect the purchase of Vistar using a thirty year estimated useful life. The preliminary allocation of the purchase price to the tangible and intangible assets of Vistar acquired is detailed below: Accounts receivable......................................... $ 25,839 Inventory................................................... 5,654 Prepaids and other current assets........................... 1,457 Property, plant and equipment............................... 17,878 Deferred taxes.............................................. 31,557 Goodwill.................................................... 278,041 Other assets................................................ 2,726 Accounts payable............................................ (14,900) Other current liabilities................................... (13,133) Restructuring reserves...................................... (26,622) Other liabilities........................................... (8,697) Long-term debt.............................................. (17,716) -------- Total....................................................... $282,084 ========
7. Represents the increase in management fees payable to THL as a result of the Amended and Restated Management Agreement. See "Certain Relationships and Related Transactions." 39 42 8. Reflects the adjustment to interest expense and amortization of deferred financing fees as a result of the Vistar Transactions as detailed below.
YEAR ENDED JANUARY 3, 1998 ---------------- Credit Facility borrowings at estimated interest rates(a): Revolver at 7.50% (includes premium financing)............ $ 4,175 Term Loan A at 7.60%...................................... 11,400 Term Loan B at 8.10%...................................... 8,100 Term Loan C at 8.35%...................................... 8,350 The Notes at 9.875%......................................... 9,875 Vistar unsecured notes payable.............................. 600 -------- Cash interest expense....................................... 42,500 Amortization of deferred financing fees..................... 2,035 -------- Pro forma interest expense.................................. 44,535 Less: Historical interest expense........................... (28,999) -------- Pro forma adjustments....................................... $ 15,536 ========
- --------------- (a) A 0.125 percent change in interest rates would change annual pro forma interest expense by $500. 9. Represents the tax effect of adjustments to reflect the Vistar Transactions. 10. "Pro forma EBITDA" is defined herein as pro forma operating income (loss) plus the sum of depreciation, amortization and restructuring expenses. EBITDA is presented in this Prospectus as it is a basis upon which the Company assesses its financial performance and because certain covenants in the Company's borrowing arrangements are tied to these measures. EBITDA as determined by the Company may not be comparable to EBITDA as reported by other companies. EBITDA does not represent funds available for discretionary uses and should not be considered as an alternative to operating income (loss) or net income (loss) as a measure of operating results or to cash flows as a measure of liquidity (each as determined in accordance with generally accepted accounting principles). 11. "Pro forma adjusted EBITDA" is defined herein as pro forma EBITDA plus other operating expenses. Safelite's other operating expenses includes $1,000 in management transaction bonuses, $2,976 related to the acceleration of certain management options, and $470 related to the forgiveness of certain officer loans made in connection with the Vistar Transactions. Safelite other operating expenses also include $1,258 in costs related to obtaining bondholder consent to the Vistar Merger. Vistar other operating expenses represent one-time integration costs incurred by Vistar as a result of the merger between Windshields and Globe. Pro forma adjusted EBITDA does not represent funds available for discretionary uses and should not be considered as an alternative to operating income (loss) or net income (loss) as a measure of operating results or to cash flows as a measure of liquidity (each as determined in accordance with generally accepted accounting principles). 12. Management has identified certain synergies which are expected to be realized as a result of combining the Company's and Vistar's operations. These synergies are not included in pro forma income from continuing operations before taxes or pro forma adjusted EBITDA. Management has estimated that the annual pre-tax cost savings from these items will range from $52,000 to $57,000 and that net synergies after reflecting the impact of certain customer contractual arrangements discussed in note (3) above will range from $30,000 to $35,000. These net synergies are expected to be realized in part during calendar 1998 and in full during calendar 1999. The synergies identified include (i) reductions in redundant administrative overhead within both field and corporate operations, (ii) elimination of redundant service center locations, (iii) elimination of redundant sales and marketing force activities and (iv) reductions in product costs due to increased purchasing leverage. 40 43 The foregoing are forward looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those contained herein. Potential risks and uncertainties include such factors as the substantial leverage and debt service obligations of the Company as a result of the Vistar Transactions, the ability of the Company to integrate the operations of Vistar with its own operations and achieve the synergies that management currently anticipates, demand for the Company's products and services, competition and other risks identified herein. 41 44 SELECTED CONSOLIDATED FINANCIAL DATA The selected financial data of Safelite set forth below with respect to fiscal years ended December 30, 1995, December 28, 1996 and January 3, 1998 and the three months ended April 4, 1998 and the balance sheet data at December 28, 1996, January 3, 1998 and April 4, 1998 are derived from the financial statements included elsewhere in this Prospectus which have been audited by Deloitte & Touche LLP, independent public accountants. The data presented for the three months ended March 29, 1997 are derived from unaudited consolidated financial statements and include, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the data for such periods. The selected financial data below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Consolidated Statements of Operations" and the financial statements and notes thereto included elsewhere in this Prospectus.
THREE MONTHS ENDED FISCAL YEAR(1) ----------------------- ----------------------------------------------- MARCH 29, APRIL 4, 1993 1994 1995 1996 1997 1997 1998 ------ ------ ------ ------- ------ ----------- -------- (DOLLARS IN MILLIONS) STATEMENT OF OPERATIONS DATA: Sales........................... $328.3 $357.4 $372.1 $ 438.3 $483.3 $ 107.8 $213.8 Cost of sales................... 229.7 246.1 261.7 299.6 331.7 75.8 155.5 ------ ------ ------ ------- ------ ------- ------ Gross profit.................... 98.6 111.3 110.4 138.7 151.6 32.0 58.3 Selling, general & administrative expenses....... 100.4 90.8 93.5 107.3 111.8 26.0 46.5 Other operating expenses(2)..... -- 21.1 -- 7.6 5.7 -- 3.1 Loss on sale of Lear Siegler.... -- -- -- -- 5.4 -- -- Restructuring expense(3)........ 4.6 -- 6.3 -- 2.9 3.8 ------ ------ ------ ------- ------ ------- ------ Income (loss) from operations... (6.4) (0.6) 10.6 23.8 25.8 6.0 4.9 Interest expense................ (15.5) (4.5) (6.0) (6.7) (27.5) (6.3) (10.9) Interest income................. 0.3 2.2 2.9 2.1 1.3 0.3 0.1 ------ ------ ------ ------- ------ ------- ------ Income (loss) from continuing operations before income taxes, minority interest and extraordinary items........... (21.6) (2.9) 7.5 19.2 (0.4) 0.0 (5.9) Income tax benefit (provision)(4)................ 0.3 (0.2) (0.1) 17.6 6.8 (0.1) 1.6 Minority interest............... 0.1 (2.7) (1.1) (10.2) -- -- -- ------ ------ ------ ------- ------ ------- ------ Income (loss) from continuing operations before extraordinary items........... (21.2) (5.8) 6.3 26.6 6.4 (0.1) (4.3) Discontinued operations(5)...... (43.2) -- -- 1.7 -- -- -- Extraordinary loss(6)........... -- (1.5) -- (0.5) (2.8) -- -- ------ ------ ------ ------- ------ ------- ------ Net Income (loss)............... $(64.4) $ (7.3) $ 6.3 $ 27.8 $ 3.6 $ (0.1) $ (4.3) ====== ====== ====== ======= ====== ======= ====== OTHER FINANCIAL DATA: Depreciation and amortization... $ 12.0 $ 7.2 $ 7.6 $ 8.0 $ 8.7 $ 2.0 $ 6.4 Capital expenditures............ 7.7 14.2 12.0 12.8 13.9 4.2 2.4 Ratio of earnings to fixed charges(7).................... -- -- 1.4x 2.0x -- 1.0x -- BALANCE SHEET DATA: Working capital................. $ 41.0 $ 41.9 $ 58.1 $ 56.6 $ 29.8 $ 56.6 $ 40.3 Total assets.................... 169.8 193.7 188.3 216.2 558.1 204.0 576.4 Total indebtedness.............. 35.0 63.8 69.0 263.7 479.9 270.0 503.6 Stockholders' equity (deficit)..................... 7.7 0.2 (0.6) (128.5) (46.9) (128.6) (48.4)
- --------------- (1) Prior to 1998, the Company's fiscal year ended on the Saturday closest to December 31 of each year. On May 18, 1998, the Company changed its fiscal year to the Saturday closest to March 31. (2) Other operating expenses in 1994 are comprised of a $2.5 million one-time charge recorded by the Company to conform its method of accounting to Statement of Position (SOP) No. 93-7, "Reporting on Advertising Costs" and $18.6 million primarily related to curtailment and settlement losses for pension plans of previously disposed Lear Siegler subsidiaries. Other operating expenses in 1996 are comprised of management transaction bonuses related to the THL Transactions of $6.9 million 42 45 and estimated costs (primarily severance) of $0.7 million to exit the activities of Lear Siegler. Other operating expenses in 1997 include $1.0 million of management transaction bonuses, $3.0 million related to acceleration of vesting of certain management stock options and $0.5 million related to forgiveness of certain officer loans made in connection with the Vistar Merger. Also included in other operating expenses in 1997 are costs related to obtaining bondholder consent to the Vistar Merger of $1.2 million. Other operating expenses of $3.1 million in the three months ended 1998 consist of costs associated with the integration of corporate systems, moving, relocation and other expenses associated with the Vistar Merger. See Notes 1, 2, 4 and 10 to the Company's Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations." (3) In 1993, the Company recorded $4.6 million in restructuring charges related to the planned closing of approximately 70 service center locations. In 1995, the Company recorded $6.3 million in restructuring charges. Of this amount, $5.6 million related to the planned closing of 100 service center locations and $0.7 million related to field management reorganization. In 1997, the Company recorded restructuring charges totaling $2.9 million consisting of $0.4 million for planned closing of Safelite service center locations and $2.5 related to Safelite employee severance resulting from the consolidation of Safelite and Vistar field and administrative activities. Restructuring charges of $3.8 million for the three months ended April 4, 1998 consisted of $2.5 million for planned closing of Safelite service center locations and $1.3 million related to Safelite employee severance. See Notes 4 and 5 to the Company's Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations." (4) The adoption of SFAS No. 109, "Accounting for Income Taxes" in 1993 was not material to the Company's consolidated results of operations or its financial condition. During 1996 and 1997, the valuation allowance provided against the Company's deferred tax assets was reduced by $25.9 million and $3.0 million, respectively. See Note 14 to the Company's Consolidated Financial Statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations." (5) In 1993, five operating businesses of Lear Siegler were sold and a resulting loss on sale of discontinued operations of $45.2 million was recognized. 1993 income from operations on such businesses was $2.0 million. In 1996, a gain from discontinued operations totaling approximately $1.7 million was recorded, consisting of $27.2 million in favorable resolution of various tax contingencies of previously discontinued Lear Siegler operations offset by $25.5 million of settlement costs for various liability issues related to previously disposed of Lear Siegler subsidiaries. See Note 16 to the Company's Consolidated Financial Statements. (6) In 1994, 1996 and 1997, extraordinary losses of $1.5 million, $0.5 million and $2.8 million, respectively, were recorded, net of minority interest and income tax of $0.3 million, $0.3 million and $1.9 million, respectively, as a result of expensing unamortized loan origination fees related to the early retirement of the associated debt. (7) For purposes of determining the ratio of earnings to fixed charges, earnings are defined as earnings before income taxes and cumulative effect of accounting changes, plus fixed charges. Fixed charges consist of interest expense on all indebtedness and capitalized interest, amortization of deferred financing costs and one-half of rental expense on operating leases, representing that portion of rental expense deemed by the Company to be attributable to interest. For fiscal 1993, 1994, 1997 and the three months ended April 4, 1998 the deficiency of earnings to fixed charges was $21.6 million, $2.9 million, $0.4 million and $5.9 million, respectively. 43 46 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Safelite is the largest provider of automotive glass replacement and repair services in the United States. The Company's installation and related services customers include insurance companies, commercial fleet leasing and rental car companies, car dealerships and body shops, government agencies and individual consumers. Safelite also acts as a subcontractor for other automotive glass replacement and repair providers. Approximately 94%, or $201.7 million, of the Company's sales for the three months ended April 4, 1998 were derived from installation and related services sales. Of these sales, approximately 80% were generated through the Company's own service centers, mobile vans, and centralized telephone/dispatch centers ("service center sales"). The remainder of installation and related services sales, or $40.5 million, for the three months ended April 4, 1998 were derived from the Company's network of independent automotive glass installation and repair providers which install glass for Safelite under subcontracting arrangements ("network sales"). On December 19, 1997, the Company acquired Vistar, the second largest automotive glass replacement and repair company in the United States (see Note 4 to the Company's financial statements). At April 4, 1998, the combined company had two manufacturing facilities, 74 warehouses, 47 dispatch command centers/central telephone units and 809 service center locations. From the date of the Vistar Merger through April 4, 1998, the Company began its review and elimination of redundant operations. The Company expects to complete these consolidation activities by the end of calendar year 1998. Insurance companies represent the largest installation and related services customer segment comprising approximately 59% and 69% of installation and related services sales in 1997 and the three months ended April 4, 1998, respectively. The implementation of new Master Provider programs coupled with the Vistar Merger continued to generate increases in the Company's sales to insurance companies, with a related increase in lower margin network sales during these periods. The Company manufactures approximately 65% of the windshields it installs and utilizes its excess manufacturing capacity to produce windshields for sale into the wholesale market. Wholesale customers are primarily regional and local automotive glass replacement and repair companies. Approximately 11% and 6% of Safelite's sales for 1997 and the three months ended April 4, 1998, respectively, were derived from wholesale sales. The decline in wholesale sales as a percent of total sales is due primarily to the increase in overall sales resulting from the Vistar Merger. Safelite's strategic focus for its wholesale operations is to maintain sales and increase overall gross margins. The Company's costs and expenses include cost of sales and selling, general and administrative expenses. Cost of sales includes product and distribution costs, installation labor, service center occupancy and vehicle expenses. Selling, general and administrative expenses include costs of the Company's national phone centers, sales force and other general and administrative functions. From 1995 to 1997, the Company's sales increased from $372.1 million to $483.3 million, and Adjusted EBITDA increased from $25.5 million to $49.6 million. For the three month period ended April 4, 1998, the Company generated sales and Adjusted EBITDA of $213.8 million and $18.2 million, respectively. 44 47 RESULTS OF OPERATIONS The following table reflects the Company's sales, related expenses and earnings expressed as a percentage of sales for the periods set forth below.
THREE MONTHS ENDED FISCAL YEAR --------------------- ----------------------- MARCH 29, APRIL 4, 1995 1996 1997 1997 1998 ----- ----- ----- --------- -------- SALES: Installation and related services: Service center........................... 80.7% 75.9% 75.3% 77.0% 75.4% Network.................................. 4.1 10.8 13.7 11.4 18.9 Wholesale................................... 15.2 13.3 11.0 11.6 5.7 ----- ----- ----- ----- ----- Total sales................................... 100.0 100.0 100.0 100.0 100.0 Cost of sales................................. 70.3 68.4 68.6 70.3 72.7 ----- ----- ----- ----- ----- Gross profit.................................. 29.7 31.6 31.4 29.7 27.3 Selling, general and administrative expenses.................................... 25.1 24.5 23.2 24.1 21.7 Restructuring expense......................... 1.7 0.6 1.8 Other operating expenses...................... 1.7 1.2 1.5 Loss on sale of Lear Siegler.................. 1.1 Interest expense.............................. (1.6) (1.5) (5.7) (5.9) (5.1) Interest income............................... 0.7 0.5 0.3 0.3 ----- ----- ----- ----- ----- Income (loss) before income taxes............. 2.0 4.4 (0.1) 0.0 (2.8) Income tax benefit (provision)................ 4.0 1.4 0.8 Minority interest............................. (0.3) (2.4) Discontinued operations....................... 0.4 Extraordinary loss............................ (0.1) (0.6) ----- ----- ----- ----- ----- Net income (loss)............................. 1.7% 6.3% 0.7% 0.0% (2.0)% ===== ===== ===== ===== =====
Three Months Ended April 4, 1998 Compared with Three Months Ended March 29, 1997 Sales. Sales increased $106.0 million in the three months ended April 4, 1998, or 98.3%, to $213.8 million, from $107.8 million in the three months ended March 29, 1997. Installation and related services grew $106.4 million, or 111.7 % to $201.7 million. Approximately 73% of this growth was attributable to service center sales while the remainder was provided by increased network sales. The growth in installation and related services revenue over last year was due primarily to the Vistar Merger and favorable pricing, as overall market conditions remained soft in the first three months of 1998. Wholesale sales fell 3.5 % to $12.1 million despite an 8.0% increase in unit sales. Soft market conditions and greater industry capacity have increased competition at the wholesale level, particularly in the higher margin smaller local glass chains and shops. As a result, much of the increase in unit sales was derived from the more price sensitive truckload buyers who were purchasing in advance of the industry-wide NAGS price increase which took effect March 16, 1998. Gross Profit. Gross profit increased 81.8% to $58.3 million in the three months ended April 4, 1998, from $32.0 million in the corresponding period of the prior year. Gross profit margin decreased to 27.3% in the first three months of 1998, from 29.7% in the corresponding prior year period, as the impact of improved installation and related services pricing and customer mix was more than offset by the higher growth rate of network business relative to total sales. The gross profit margin on network sales is substantially lower than on work performed through Safelite owned service centers. 45 48 Selling, General and Administrative Expenses. Selling, general and administrative expenses rose 78.8% in the first three months of 1998 to $46.5 million, with the Vistar Merger accounting for substantially all of the increase. As a percentage of sales, selling, general and administrative expenses declined to 21.7% in the first three months of 1998 from 24.1% for the corresponding prior year period. This decline in selling, general and administrative expenses as a percent of sales is a result of the Company's improved operating leverage. Income Before Income Taxes. Income before taxes declined to a loss of $5.9 million for the three months ended April 4, 1998, compared with essentially break-even performance for the corresponding prior year period. The decline in income before income taxes despite higher overall gross margin dollars and lower selling general and administrative expenses as a percent of sales was caused primarily by $6.9 million in restructuring charges and one-time integration costs and $4.6 million in increased interest costs associated with the Vistar Merger. Income taxes. The Company recorded an income tax benefit in the first three months of 1998 of $1.6 million, compared to a $0.1 million income tax provision for the first three months of 1997. The income tax benefit (provision) in both periods differs from amounts computed using statutory rates due primarily to amortization of goodwill. Net income. Net income declined to a loss of $4.3 million for the three months ended April 4, 1998 from a loss of $0.1 million in the corresponding prior year period due to the changes described above. 1997 Compared with 1996 Sales. Sales increased $45.0 million in 1997, or 10.3%, to $483.3 million, from $438.3 million in 1996. Installation and related services grew $50.1 million, or 13.2% to $430.3 million. Approximately 63% of this growth was attributable to service center sales while the remainder was provided by increased network sales. The growth in installation and related services revenue over last year was due primarily to favorable pricing and improved customer mix. Instrumental to the improved customer mix has been the addition of new multi-year MP programs with several large insurers, most notably GEICO. Under an MP program, the Company administers 100% of an insurance company's automotive glass claims and, as a result, receives more referrals both to be performed in its own service centers and through its network of independent automotive glass installation providers. The increase in insurance customer sales volume was partially offset by a decline in subcontracting sales volume, as overall market conditions were soft in 1997. Wholesale sales fell 8.9% to $53.0 million as a result of a decline in unit sales partially offset by increased pricing. The pricing improvement came about through a shift of business from more price sensitive truckload buyers to smaller local glass chains and shops. The wholesale business performance reflected the soft market conditions and resulting competition at the wholesale level. Gross Profit. Gross profit increased 9.3% to $151.6 million, from $138.7 million in 1996. Gross profit margin remained virtually constant in 1997 at 31.4% compared to 31.6% in 1996, as the impact of improved installation and related services pricing and customer mix was partially offset by higher product and installation costs. Also negatively affecting the gross margin percentage was the higher growth rate of network business relative to total sales. The gross profit margin on network sales is substantially lower than on work performed through Safelite owned service centers. Selling, General and Administrative Expenses. Selling, general and administrative expenses rose 4.2% in 1997 to $111.8 million. Vistar selling, general and administrative expenses from the December 19, 1997 merger date through year-end accounted for nearly all of the total increase. As a percentage of sales, selling, general and administrative expenses declined to 23.2% in 1997 from 24.5% in 1996. Income Before Income Taxes. Income before income taxes decreased to a loss of ($0.4) million in 1997 from income of $19.2 million in 1996. The decrease was due primarily to $20.8 million in higher interest costs incurred as a result of the Company's December 20, 1996 recapitalization, coupled with a $5.4 million loss on the sale of Lear Siegler and $2.9 million in restructuring charges. Partially offsetting 46 49 these items was a decline in other operating expenses of $1.9 million. Other operating expenses in 1997 consisted of one-time charges related to the Vistar Merger as follows: (i) $3.0 million for acceleration of vesting of certain management stock options, (ii) $1.0 million in management transaction bonuses, (iii) $0.5 million related to the forgiveness of officer loans and (iv) $1.2 million in costs associated with obtaining bondholder consent to amend the terms of the Notes and approve the Vistar Merger. Income Taxes. In 1997, the Company recorded a credit provision for income taxes substantially in excess of the statutory rate primarily due to a reduction of the Company's valuation allowance for deferred tax assets in recognition of the Company's improved profitability, and the recognition of the right to use previously unrecognized federal net operating loss carryforwards obtained in connection with the Lear Siegler sale transaction. The credit provision for income tax in 1997 was $10.8 million less than 1996. The valuation allowance was substantially reduced in 1996 in recognition of the Company's improved profitability at that time. Net Income. Net income declined to $3.6 million from $27.8 million in 1996 primarily as a result of the changes described above as well as the elimination of the adjustment for minority interest as a result of the THL Transactions in 1996. Also contributing to the change was a $2.8 million extraordinary loss in 1997 for the early extinguishment of debt which was made in connection with obtaining new financing for the Vistar Merger. 1996 Compared with 1995 Sales. Sales in 1996 increased $66.2 million, or 17.8%, to $438.3 million, from $372.1 million in 1995. Installation and related services sales grew $64.5 million, or 20.4% to $380.1 million. Approximately half of this growth was attributable to increased service center sales while the remainder was provided by increased network sales. Service center sales increases were the result of volume improvements associated with the continued implementation of Master Provider programs, favorable pricing and improved customer mix. The $32.3 million increase in network sales to $47.5 million was a direct result of the growth in the Company's Master Provider programs. Wholesale sales rose 3% to $58.2 million as a result of price increases which were partially offset by a decline in unit sales of 4.4%. These results reflect the Company's strategic shift of wholesale sales efforts towards higher margin local automotive glass accounts and away from larger, more price-sensitive regional customers. Gross Profit. Gross profit in 1996 increased 25.6% to $138.7 million, from $110.4 million in 1995. Gross profit margin increased to 31.6% in 1996, from 29.7% in 1995. This improvement in gross profit margin was primarily the result of increased service center sales volume, higher prices, and reductions in the Company's fixed cost structure as a result of the 1995 restructuring activities. These improvements in gross profit margin were partially offset by increases in the lower-margin network sales. Selling, General and Administrative Expenses. Selling, general and administrative expenses rose 14.8% in 1996 to $107.3 million. As a percentage of net sales, selling, general and administrative expenses declined to 24.5% from 25.1%. The overall increase in selling, general and administrative expenses was related to the opening of the Company's third national phone center, increased staffing to support the rapid growth in network sales and higher incentive compensation. The decline in selling, general and administrative expenses as a percentage of sales is a result of increased total sales and the benefits of the Company's improved operating leverage. Income Before Income Taxes. Income before income taxes increased 156.0% to $19.2 million in 1996, from $7.5 million in 1995. Income before taxes increased from 2.0% of total sales to 4.4% of total sales as a result of the improved gross profit margins and a decline in selling, general and administrative expenses as a percentage of total sales described above, partially offset by one-time charges for management transaction bonuses of $6.9 million and estimated costs (primarily severance) of $0.7 million to exit the activities of Lear Siegler. 47 50 Income Taxes. In 1996, the Company recorded a credit provision for income taxes of $17.6 million primarily as a result of reversing a valuation allowance for certain deferred tax assets in accordance with the provisions of SFAS No. 109 and in recognition of the Company's improved profitability. Net Income. The increase in net income to $27.8 million from $6.3 million in 1995 was due primarily to the changes in income before taxes and the reversal of the deferred tax valuation allowance described above, offset by an increase in 1996 in the deduction for minority interest earnings of $9.1 million. Also affecting net income in 1996 was a $1.7 million gain, related to Lear Siegler discontinued operations. See Note 16 to the Company's consolidated financial statements. RESTRUCTURING CHARGES Prior to 1990, the Company grew through acquisitions and new service center openings. In late 1991, the new management team undertook a comprehensive review of the Company's operations. The new management team recognized that insurance companies and large fleet owners were responsible for the majority of automotive glass replacement purchasing decisions in the U.S. and focused the Company on providing a total claims management solution. In addition, the Company reorganized its national network by introducing sophisticated information systems that permitted the Company to close redundant service center locations and consolidate certain administrative functions. The initiatives associated with the execution of the Company's new strategy and closing of non-strategic operations resulted in restructuring charges in fiscal 1993 and 1995. In 1993, the Company recorded $4.6 million in restructuring charges related to the closing of approximately 70 service center locations. In 1995, the Company recorded restructuring charges of $5.6 million related to the closing of 100 service center locations and $0.7 million related to field management reorganization. There were no restructuring charges during 1996. As a result of the Vistar Merger, the Company intends to consolidate redundant overhead in both field and corporate operations, eliminate redundant service center locations and eliminate redundant sales and marketing force activities. Management estimates that the aggregate of all merger related closing and consolidation costs will range from $37 million to $42 million. At January 3, 1998 and April 4, 1998, the Company had partially completed its evaluation of redundant locations and activities and recorded $20.8 million and $3.3 million in accruals, respectively, for Vistar employee severance, closure of Vistar service center locations and elimination of duplicate Vistar corporate functions. These costs have been recorded as part of the Company's purchase accounting for Vistar. In addition, at January 3, 1998 and April 4, 1998, the Company recorded restructuring charges of $2.9 million and $3.8 million, respectively, for Safelite employee severance and closing of Safelite service centers (see Notes 4 and 5 to the Company's financial consolidated statements). Prior to December 1998, the Company expects to complete its market-by-market analysis of overlapping field locations and administrative activities of both Vistar and the Company. Costs associated with additional consolidation of Vistar functions and activities will be recorded as an adjustment to the initial purchase allocation. Costs associated with closing Safelite locations will be expensed when the decision to close the facility is made. The Company also expects to incur a total of $5 million to $10 million in calendar 1998 for certain one-time expenses associated with the integration of corporate systems, temporary services fees, training, moving, relocation and other costs associated with the Vistar Merger. Management believes that substantial synergies will result from the integration of Safelite and Vistar operations and the related restructuring activities. These net cost savings are estimated by management to range from $30 million to $35 million, annually. Headcount and service center closings or site consolidations are expected to comprise over 70% of the cost savings. Management believes that a portion of the synergies are achievable during calendar 1998 with full synergies expected to be realized in calendar 1999. 48 51 EFFECTIVE INCOME TAX RATE For the quarter ended April 4, 1998, the Company's provision for income taxes was below the statutory rate due to permanent differences, primarily goodwill. The Company recorded a net income tax benefit of $6.8 million for fiscal year 1997. This tax benefit resulted primarily from a reduction in the valuation allowance relating to net operating loss carryforwards generated prior to 1994, and from obtaining the right to use approximately $16.2 million of previously unrecognized federal net operating loss carryforwards as part of the Lear Siegler sale transaction. The reduction in the valuation allowance was based upon management's review of the Company's historical and current pre-tax earnings, giving effect to adjustments and statutory limitations resulting from the THL Transactions and the Vistar Merger. Based upon this review, management believes that the Company will realize the benefit of a portion of its existing deductible temporary differences. See Note 14 to the Company's Consolidated Financial Statements. Management expects that the increase in interest expense which will occur as a result of the Vistar Merger combined with the Company's net operating loss carryforwards may result in reduced Federal tax payments for a period of up to 10 years. EFFECTS OF INFLATION Inflation has not been material to the Company's operations for the periods presented. QUARTERLY DATA The following table sets forth the Company's quarterly sales for fiscal 1995, 1996, and 1997. NET SALES (DOLLARS IN MILLIONS)
1995 1996 1997 ---------------- ------------- ------------- SALES % SALES % SALES % --------- --- ------ --- ------ --- First Quarter........................... $ 85.6 23% $102.9 24% $107.8 22% Second Quarter.......................... 99.0 26 122.0 28 129.1 27 Third Quarter........................... 99.5 27 115.8 26 126.3 26 Fourth Quarter.......................... 88.0 24 97.6 22 120.1 25 ------ --- ------ --- ------ --- Total Annual.................. $372.1 100% $438.3 100% $483.3 100% ====== === ====== === ====== ===
Historically, the Company has experienced seasonal variations in revenues, with lower revenues typically reported in the first and fourth calendar quarters of each year. See "-- Effect of Weather Conditions; Seasonal Earnings." EFFECT OF WEATHER CONDITIONS; SEASONAL EARNINGS The severity of weather has historically affected the Company's sales and operating income, with severe winters generating increased sales and income and mild winters generating lower sales and income. Accordingly, mild weather conditions may adversely affect the Company's results of operations. The Company's business is somewhat seasonal, with the first and fourth calendar quarters of each year traditionally being its slowest periods of activity. This reduced level of sales in the first and fourth calendar quarters has resulted in a disproportionate decline in EBITDA during the those quarters due to the Company's significant operating leverage. The Company believes such seasonal trends will continue for the foreseeable future. IMPACT OF YEAR 2000 The Company has initiated a program to prepare its computer systems and applications for the year 2000 date change ("Year 2000"). As part of this program, a team has been assigned to evaluate the 49 52 nature and extent of the work required to make the Company's systems, products, electronic linkages with insurance company customers and infrastructure Year 2000 compliant. A number of projects are either underway or under review with respect to Year 2000 compliance for the Company's various business systems, the total cost of which has not yet been determined. Year 2000 project costs are difficult to estimate accurately, and projected costs could change due to technological difficulties, project delays, and project cost overruns. Management will continue to evaluate the estimated cost associated with ensuring that the Company's systems, products and infrastructure are Year 2000 compliant. While these on-going efforts will involve additional costs, management believes that the costs will not have a material adverse effect on the Company's business, results of operations or financial condition. LIQUIDITY AND CAPITAL RESOURCES Net cash used in operating activities for the three months ended April 4, 1998 was $15.6 million, a decrease in cash usage of $1.1 million from the corresponding prior year period. Excluding Lear Seigler discontinued operations in the quarter ended March 29, 1997, cash usage increased by $2.8 million, primarily due to increases in accounts receivable, inventory and debt service associated with the Vistar Merger. Net cash provided by operating activities for 1997 was $2.4 million, an increase in operating cash flows of $2.3 million from 1996. Excluding Lear Siegler discontinued operations, cash flows decreased by $23.3 million in 1997. The primary factor in this decrease was the additional cash required to service the increase in debt which resulted from the THL Transactions in December 1996. Net cash generated by operating activities for 1996 was $0.1 million, an increase of $10.2 million from 1995. Excluding cash flows used to settle Lear Siegler pension plan liabilities in 1995 and Lear Siegler discontinued operations in 1996, the increase in cash flow from operating activities was $20.8 million. This $20.8 million improvement in cash flow was primarily due to improvements in operating income and improved working capital management, offset by the purchase of insurance liability coverage for 1997 through 1999 for approximately $12.0 million. The Company's investing activities consist mainly of capital expenditures for new and existing service center and warehouse locations, capacity and efficiency upgrades to manufacturing facilities, and information technology equipment. Capital expenditures totaled $4.2 million and $2.4 million for the three months ended March 29, 1997 and April 4, 1998, respectively, and $13.9 million, $12.8 million and $12.0 million for 1997, 1996 and 1995, respectively. Included in 1995 capital spending is $3.5 million for the purchase and renovation of the Company's manufacturing/distribution facilities in Wichita, Kansas. The level of 1996 capital expenditures reflects expansion of service center and warehouse coverage into new markets and an upgrade to the Company's manufacturing facilities. The increase in capital spending during 1997 reflects the Company's expansion of service center and warehouse coverage and the purchase of new point of sale equipment for the former Vistar service centers. Capital spending during the three months ended April 4, 1998 reflects the Company's focus on planning merger consolidation activities. Management expects post-integration capital spending levels to increase to approximately $22.0 million annually as a result of the Vistar Merger. Additional integration-related capital expenditures of $3.0 million to $5.0 million in both calendar 1998 and calendar 1999 are expected as a result of (i) converting Vistar service centers and mobile vans to the Safelite logo and format and (ii) expansion of certain centralized telephone/dispatch center locations. The Company believes that cash flows from operating activities and its ability to borrow under its credit facilities will be adequate to meet its debt service obligations, working capital needs and planned capital expenditures at least through the Company's fiscal year end. Historically, the Company has utilized internally generated funds and borrowings under credit facilities to meet ongoing working capital and capital expenditure requirements. In connection with the Distribution and the Vistar Merger, the Company retired existing indebtedness of approximately $150 million and incurred new indebtedness aggregating approximately $365 million. Substantially all of the proceeds of such indebtedness were used to refinance existing bank debt, to fund the Distribution, to pay Vistar Merger consideration and to pay bonuses, fees and expenses related to the Vistar Merger. 50 53 As a result of the Vistar Merger, the Company has significantly increased cash requirements for debt service relating to the New Bank Credit Facilities. See Note 10 to the Company's Consolidated Financial Statements for a description of the amortization of the Term Loan Facility. The Company will rely on internally generated funds and, to the extent necessary, on borrowings under the Revolving Credit Facility, which provides for borrowings up to $100 million, to meet its liquidity needs. At April 4, 1998, the Company has long-term borrowings of $503.6 million and $58.7 million of availability under the Revolving Credit Facility (less $17.6 million in letters of credit outstanding). Management believes that based on the current level of operations and anticipated internal growth, cash flow from operations, together with other available sources of funds, including borrowings under the Revolving Credit Facility, will be adequate to make required payments of principal and interest on the Company's indebtedness and to fund anticipated capital expenditures and working capital requirements. However, actual capital requirements may change. The ability of the Company to meet its debt service obligations and reduce its total debt will be dependent on the future performance of the Company, which in turn, will be subject to general economic conditions and to financial, business, and other factors, including factors beyond the Company's control. A portion of the Company's debt bears interest at floating rates; therefore, its financial condition is and will continue to be affected by changes in prevailing interest rates. CHANGES IN ACCOUNTING STANDARDS At April 4, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income." The components of comprehensive income are net income and the change in minimum pension liability, net of tax. In June 1997, FASB issued SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information" which is effective for the Company's fiscal year ended March 1999. This statement establishes standards for the way that business enterprises report information about operating segments and may result in additional financial statement disclosures for the Company. In February 1998, FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Post-Retirement Benefits" which is effective for the Company's fiscal year ended March 1999. The statement will result in revised financial statement disclosures regarding employers' pensions and other retiree benefits. In June 1998, FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The statement requires derivatives to be recorded on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in fair value of the derivatives are recorded depending upon whether the instruments meet the criterion for hedge accounting. This statement is effective for fiscal years beginning after June 15, 1999. The impact of adopting this statement has not been determined. 51 54 BUSINESS COMPANY OVERVIEW Safelite is the largest provider of automotive glass replacement and repair services in the United States. The Company installed approximately 1.7 million replacement units in 1997 for insurance companies, commercial fleet leasing and rental car companies, car dealerships and body shops, government agencies and individual consumers. The Company provides these installation services through its network of service centers, mobile vans, centralized telephone/dispatch centers and its network of independent automotive glass replacement and repair providers. The Company has targeted its marketing efforts principally towards auto insurance companies which management believes, through their policyholders, directly or indirectly influence approximately 70% of the selections of automotive glass replacement providers. The Company has developed fully integrated claims processing solutions for auto insurance companies which reduce their glass loss expenses and total administrative costs and provide a higher level of customer service to their policyholders. Management believes that this outsourcing capability, coupled with the convenience of nationwide coverage, consistently high quality service and low costs, has provided the Company with a significant competitive advantage in the insurance segment of the market. Since 1993, the Company estimates that it has increased its leading market share in this segment, resulting in improved financial performance as demonstrated by compound annual growth in sales through 1997 of 10% to $483.3 million. During the same period, operating income improved from a loss of $6.4 million in 1993 to $25.8 million of operating income in 1997. Adjusted EBITDA (as defined) for the same period grew from $22.0 million to $49.6 million, a compounded annual growth rate of 22%. Sales, operating income and adjusted EBITDA for the three months ended April 4, 1998 were $213.8 million, $4.9 million and $18.2 million, respectively. See "Summary Historical and Pro Forma Financial Information." On December 19, 1997, Safelite completed the Vistar Merger whereby, Vistar merged with and into the Company with the Company as the surviving corporation. The Vistar Merger was accounted for as an acquisition; accordingly, the operations of Vistar are included in the Company's financial statements from December 19, 1997 forward. Prior to the Vistar Merger, Vistar was the second largest provider of automotive glass replacement and repair services in the United States. Vistar was created on February 29, 1996 from the merger of Windshields America, Inc., a wholly owned subsidiary of Belron (USA) BV, and Globe Glass and Mirror Company. Vistar installed or repaired approximately 1.6 million units in its fiscal year ended March 31, 1997 for insurance companies, commercial fleet leasing and rental car companies, car dealerships and body shops, government agencies and individual consumers. Vistar provided these installation services through its network of 356 service centers and approximately 1,000 mobile vans and its network of independent automotive glass replacement and repair providers. Vistar net sales and operating income were $413.5 and $8.8 million, respectively, for its fiscal year ended March 31, 1997 and $339.5 million and a loss of $8.2 million, respectively, for the nine months ended December 19, 1997. See "Summary of Transactions -- The Vistar Transactions" and "Transactions -- The Vistar Transactions." At April 4, 1998, the combined companies had two manufacturing facilities, 74 warehouses, 47 centralized telephone/dispatch centers, approximately 2,000 mobile vans and 809 service center locations across the United States. The automotive glass replacement and repair industry in 1997 was a $3.0 billion market, representing the installation of approximately 12.5 million replacement units. The replacement and repair of automotive glass is driven by the incidence of breakage. Over the past 10 years, management estimates that total industry sales have grown at approximately 4% per year, primarily as a result of increases in the aggregate number of vehicles on the road, the increases in the number of miles driven and increases in price of automotive replacement glass and repair service, which principally reflect the increasing size and design complexity of automotive glass. Such growth has been fairly consistent year to year, with some variations resulting primarily from fluctuations in weather conditions. The automotive glass replacement and repair industry is highly fragmented with approximately 20,000 competitors. Safelite is the industry leader with an overall market share of approximately 23% and 52 55 the leading market share in the insurance segment of the market. Since the early 1990's, the industry has been consolidating as evidenced by an increase in market share for the top three industry participants from an estimated 24% to an estimated 35% and a decline in market share for small "mom and pop" providers from an estimated 70% to an estimated 55% during the same period. COMPETITIVE STRENGTHS Industry Leadership and Nationwide Coverage. Safelite is the largest competitor in the highly fragmented automotive glass replacement and repair industry. The Company operates service centers in all of the top 100 Metropolitan Statistical Areas ("MSAs") in the United States. Through its nationwide network, the Company can directly serve 70% of the cars and light trucks in the United States and, through its authorized independent replacement and repair centers, achieves over 90% coverage. Safelite has the largest number of service centers and the largest network of independent automotive glass replacement and repair providers in the United States. Management believes that the Company's leadership position and breadth of geographic coverage is a significant competitive advantage in working with insurance companies, commercial fleet lessors and other large customers which increasingly demand consistent quality in both claims processing and automotive glass repair and replacement services on a nationwide basis. Strong, Established Relationships with Major Insurance Companies. Safelite has successfully established strong relationships with the nation's major auto insurance companies, and management believes it has more program relationships with these companies than any of its competitors. The top 30 auto insurers influence approximately 55% of all repairs and replacements in the United States. Safelite has entered into Total Customer Solution ("TCS") arrangements with approximately 25 of those insurers including Farmers Insurance Group, United Services Automobile Association, Prudential Insurance Company of America, and Safeco Corporation. Under a TCS arrangement, Safelite typically serves as one of a few recommended automotive glass replacement providers for an insurance company and provides a range of additional claims management services including computerized referral management, policyholder call management, electronic auditing and billing services and management reporting. Of Safelite's approximately 45 TCS arrangements, those with Allstate, Nationwide Mutual Insurance Company, GEICO, Liberty Mutual Insurance Company, Travelers Group, CNA Insurance Group, Metropolitan Property and Casualty Insurance Company and National General Insurance are also Master Provider relationships. Under an MP program, Safelite acts as the administrator of the insurance company's automotive glass claims. TCS and MP programs significantly lower the processing costs and loss expenses for the insurance companies, provide more consistent and rapid service for policyholders, and increase Safelite's volume with each insurance account. In addition, the Company has entered into TCS arrangements with major fleet and rental car companies including GE Capital Fleet Services, PHH Vehicle Management Services Corporation, USL Capital Fleet Services, Hertz Corporation and Budget Rent-A-Car Systems, Inc. Of these arrangements, those with PHH Vehicle Management and USL Capital Fleet are also MP relationships. By entering into these arrangements with insurance, fleet and rental car companies, Safelite has substantially increased its volume with these accounts and enhanced its base of recurring revenues. Low Cost Provider. Management believes its merger with Vistar, coupled with Belron's worldwide industry experience, will significantly enhance the overall cost advantage Safelite enjoyed prior to the Vistar Merger. Safelite has a total cost advantage compared to its competitors as a result of its manufacturing facilities, its productivity incentive programs, the efficiency of its nationwide distribution network and the critical mass of its centralized customer service, claims processing and information network. Safelite is the only full-scale vertically integrated automotive glass replacement company in the U.S. The Company produces approximately 65% of its windshield needs at its two manufacturing plants in Enfield, North Carolina and Wichita, Kansas. Safelite produces only high-volume windshield models, manufacturing 550 of the total 2,800 active windshield parts available in the industry. Safelite determines which windshield models to produce by assessing the sales trends and estimating future windshield demand after a new automobile model has been on the market for approximately one year. 53 56 The Company uses a three tiered distribution system to better serve its customers and minimize its inventory levels. Two central distribution facilities are located at the Company's manufacturing facilities in Enfield, North Carolina and Wichita, Kansas. These central distribution facilities send inventory to the Company's 74 regional warehouses (27 free-standing warehouses and 47 co-located with the Company's Centralized Telephone Units). These facilities can then quickly and accurately stock the service centers and vans in their local markets on an as-needed basis. Every Safelite employee participates in some form of incentive compensation plan which rewards productivity and/or profitability of the Company. The Company's management estimates that its performance incentive program has increased productivity of its installation associates from 2.5 installations per day in 1991 to 4.0 per day in 1997 (while the industry averaged an estimated 3.0 installations per day and Vistar's installation associates averaged approximately 3.2 installations per day). As a result of the significant economies of scale in its manufacturing, information systems, distribution and installation infrastructure, management believes it has the capacity to add incremental contracts and units at relatively low marginal cost. Sophisticated Information Systems. The Company's automotive information systems allow Safelite to handle all aspects of an insured automotive glass claim effectively and cost efficiently from the initial phone call placed by the insured policyholder to the automatic billing of an insurance company. Through Safelite's fully integrated network ("SAFENET(TM)"), the Company can provide full service to the policyholder by electronically accessing the insurance company's database, verifying the policyholder's coverage status, scheduling the glass installation, checking relevant inventories, ordering delivery (when necessary) of automotive glass to a Safelite service center, repairing or replacing the glass, electronically billing the insurance company and, if applicable, paying the service providers. The insurance company's role is limited to funding the claim payment and updating its policy files. In addition to providing an integrated delivery system, SAFENET(TM) also provides management and Safelite's customers with valuable information. This "real time" data allows Safelite to track and monitor important statistics including customer satisfaction, length of call and speed of installation. Safelite uses this data to improve its customer service and provide comprehensive monthly management reports for its large insurance customers. These reports include information to which the insurance companies do not otherwise have access, including statistics on number of claims, price per claim and percent of repairs versus replacement. Safelite believes it is the only company in the industry currently providing such reports. STRATEGIES FOR GROWTH Expand and Enhance Relationships with Insurance Companies. The Company's principal business strategy is to increase its share in the segment of the automotive glass replacement and repair market influenced by the insurance companies by expanding the breadth and depth of its existing relationships. The Company currently provides its replacement and repair services to the policyholders of virtually every major automotive insurance company in the U.S. The Company focuses its marketing and sales strategy on adding new insurance relationships and increasing its share of business with its existing insurance clients. Management believes that as it processes greater proportions of an insurance company's replacement and repair claims, it can continue to reduce the loss expenses and administrative costs of automotive glass replacement and repair claims for the insurance company, while improving policyholder satisfaction through faster, more reliable and consistent installation service. The Company continually strives to enhance the value it provides to insurance company clients while improving profitability through increased market share. Recent examples include (i) implementation of a Repair First Network to help improve repair performance, (ii) development of on-line call center scheduling capability for faster, more efficient policyholder service and (iii) creation of a SmartPay process under which insurance companies pay only "reasonable and customary" prices for glass claims serviced by non-program providers. Expand Nationwide Coverage. Following the elimination of duplicative service center locations resulting from the Vistar Merger, the Company plans to continue expanding the breadth and depth of its 54 57 nationwide network by selectively acquiring regional automotive glass replacement and repair businesses and opening new service center locations. The Company believes that it can enhance its sales and results through the integration of well-targeted acquisitions into Safelite's nationwide network. In addition, the Company expects to open 5 to 10 additional service centers annually to complement its existing network. Provide Additional Outsourcing Services to Insurance and Fleet Companies. Management believes that Safelite can leverage its existing customer relationships and claims processing infrastructure to provide additional outsourcing services to insurance and fleet companies for items such as pre-insurance vehicle inspection, towing referral, post-collision rental car referral, after hours loss reporting and residential glass claims processing. These services historically carry significant administrative burdens, high processing costs and low dollar loss values, like the automotive glass replacement and repair service that Safelite otherwise provides to insurance and fleet companies efficiently and cost-effectively. The Company is evaluating plans to offer these additional services as a natural extension of its core automotive glass business. INDUSTRY OVERVIEW The market consists of two segments, the manufacture and sale of automotive glass to large original equipment manufacturers ("OEMs") and the manufacturing and installation of automotive glass for the replacement market. The OEM market is generally characterized as a high-volume, manufacturing intensive industry. By contrast, the automotive glass replacement market consists of service providers focused on providing automotive glass replacement installation to a broad base of institutional and individual customers. Replacement automotive glass is generally purchased by installers from large OEM suppliers in the wholesale market. The automotive glass replacement and repair industry in 1997 was an approximately $3.0 billion industry representing the installation of approximately 12.5 million replacement units. The replacement and repair of automotive glass is driven by the incidence of breakage. The market for the installation of replacement automotive glass is highly fragmented with over 20,000 providers of automotive glass replacement services. Many competitors in the industry are small "mom & pop" installers who do not have either the national networks or sophisticated information systems required to effectively compete in a national market. Since the early 1990s, the industry has been consolidating as evidenced by an increase in market share for the top three industry participants from an estimated 24% in 1992 to an estimated 35% in 1997 while the market share for small "mom and pop" providers declined from an estimated 70% to an estimated 55% during the same period. Management expects this consolidation to continue, as insurance companies and large fleet lessors require nationwide coverage and more consistent service while seeking to reduce costs by outsourcing their automotive glass claims. See "-- Customers -- Installation Customers." Over the past 10 years, management estimates that total industry sales have grown at approximately 4% per year. Revenue growth has been due primarily to an increase in the aggregate number of vehicles on the road, from approximately 157 million units in 1985 to approximately 193 million units in 1995 and the increasing number of miles driven per year, from approximately 1.8 billion miles in 1985 to 2.2 billion miles in 1995. Growth in industry sales have also been driven by price increases which principally reflect the increasing size and design complexity of automotive glass. In the aggregate, industry growth has been fairly consistent, with some variation resulting primarily from year-to-year fluctuations in weather conditions. Customers in the automotive glass replacement industry include auto insurance companies, commercial fleet leasing companies, rental car companies, car dealerships, body shops, governmental agencies and individual consumers. Insurance companies represent the largest segment of the market as a result of their payment of replacement automotive glass claims for their policyholders. The Company believes that insurance companies through their policyholders, directly or indirectly, influence approximately 70% of the 55 58 selections of automotive glass replacement providers. As a result of this influence, insurance companies represent the most important segment of the automotive glass replacement market. Auto insurance companies have been under pressure to improve policyholder service, while simultaneously reducing their operating expenses. As a result, the outsourcing of certain functions associated with high volume and low dollar payouts is gaining increasing acceptance within the insurance industry. Automotive glass repair and replacement claims represent a disproportionate administrative burden. Management estimates such claims account for less than 6% of the dollar value of all auto claims paid but over 30% of the total number of auto claims processed. By outsourcing the claims management function and spreading the costs over a larger claims base, insurance companies can eliminate an estimated $50-$100 of processing costs per claim. In addition, insurance companies can reduce their loss severity through lower per unit pricing, and improved repair ratios. PRICING The price of replacement automotive glass is related to the list prices developed by the National Auto Glass Specification ("NAGS"), an independent third party. Changes to the NAGS list prices generally have followed the wholesale price increases announced by the OEMs. Prices charged in the automotive glass replacement industry are calculated using varying percentage discounts from the NAGS price list. Actual revenue per unit ("RPU") charged in the industry has generally been increasing as a result of increases in the NAGS list price, the increasing design complexity of automotive glass and the increasing level of claims processing services associated with insurance-related replacement automotive glass purchases. NAGS list prices and offsetting discounts from NAGS list prices have increased significantly over the past five years. The Company has been informed that NAGS intends to reset its published list prices in early 1999 in order to bring actual prices charged more in line with published list prices. While the Company believes that as list prices are reduced, the related percentage discounts from list price offered by the Company and the Company's competitors will also be reduced, there can be no assurance that the resetting of NAGS list prices will not have a material adverse effect on the Company. CUSTOMERS Safelite has a broad customer base across two primary segments: (i) installation and related services and (ii) wholesale customers. The Company's largest customer base is insurance companies, generating approximately 58%, 53% and 49%, respectively, of total sales for the three months ended April 4, 1998, the year ended January 3, 1998 and the year ending December 28, 1996. Safelite's top ten customers accounted for approximately 41%, 40% and 39% of the Company's consolidated sales in the three months ended April 4, 1998 and fiscal years 1997 and 1996, respectively. Approximately 12% of the Company's consolidated sales were from a single customer in the three months ended April 4, 1998. No customer accounted for more than 10% of the Company's consolidated sales during 1997 and 1996. Installation Customers. The Company's installation and related services customers are described as follows: Insurance. Insurance companies represent Safelite's primary area of strategic focus. Safelite has aggressively pursued this customer group and is the leader in this market segment. From 1993 to 1997, the Company's sales to this market segment have grown at a compound annual rate of approximately 17%. The Company has developed fully integrated claims processing solutions for auto insurance companies which reduce their glass loss expenses and total administrative costs and provide a higher level of customer service to their policyholders. Management believes this outsourcing capability, coupled with the convenience of nationwide coverage, consistently high quality service and low costs, has provided the Company with a significant competitive advantage in the insurance-influenced segment of the market. The Company has developed Total Customer Solution (TCS) arrangements and Master Provider (MP) relationships to service its auto insurance company customers. Under a TCS arrangement, Safelite 56 59 serves as one of a few recommended automotive glass replacement providers for an insurance company and typically provides a range of additional claims management services including computerized referral management, policyholder call management, electronic auditing and billing services and management reporting. Under an MP program, Safelite serves as administrator of the insurance company's automotive glass claims. As administrator, Safelite manages the allocation of the automotive glass replacement business between Safelite and other approved providers based on the insurance company's predetermined criteria. The Company currently provides its automotive glass replacement and repair services for the policyholders of virtually every significant auto insurance company in the U.S. Following is a list of the Company's top insurance customers ranked by total auto insurance premiums written for 1996:
PRIVATE PASSENGER AUTO PHYSICAL DAMAGE NATIONAL RANK NAME PREMIUMS WRITTEN ------------- ---- -------------------- (DOLLARS IN BILLIONS) 1 State Farm................................................. $8.9 2 Allstate................................................... 5.1 3 Farmers Insurance.......................................... 2.3 4 Nationwide Insurance....................................... 1.5 5 USAA Insurance............................................. 1.3 6 GEICO...................................................... 1.0 7 Progressive Group.......................................... 1.0 8 American Family Insurance Group............................ 0.7 9 Liberty Mutual............................................. 0.6 10 Travelers Insurance........................................ 0.6 13 Prudential................................................. 0.4 14 Hartford Insurance Group................................... 0.4 16 Erie Insurance Group....................................... 0.4 17 CNA Insurance Group........................................ 0.4 18 Safeco..................................................... 0.4 19 Metropolitan Group......................................... 0.4 20 Hanover.................................................... 0.4
Source: Best's Review, October 1997 The Company believes that its ability to provide complete claims outsourcing and a consistent level of high quality service on a nationwide basis will continue to make it an attractive partner for the insurance industry. Consumer. The Company defines consumers as cash and credit card customers. Much of this business occurs on a "walk-in" basis as a result of Yellow Pages advertising and insurance referrals. Safelite believes that its 47 Dispatch Command Center/Central Telephone Units ("DCC/CTUs") enable the Company to close more of these consumer sales by using scripted Customer Service Representatives ("CSRs") and offering the most comprehensive mobile and in-store service at competitive prices. This segment does not include individuals who file a claim to be paid by insurance companies. Dealer. The dealer segment is comprised of new and used car dealerships and body shops. Sales are generated largely by the Company's experienced field sales force, which is the largest in the industry. Safelite has dedicated Customer Service Representatives at several DCC/CTU locations who only handle customers in the dealer segment. Dealers generally request automotive glass repair and replacement services for work being done at their captive repair shops, and, to a lesser extent, for mishaps with their car inventories. Body shops generally perform their own installations. Rental Car. The Company has national account relationships with most large rental car companies, including significant arrangements with Budget Rent-A-Car and Hertz. Management estimates that 57 60 Safelite replaces over 90% of both Budget's and Hertz's units. Customers in this segment are served in a cost effective manner, with multiple jobs completed during a single visit to the customer's rental car lot. Fleet. Safelite has national account relationships with the major commercial fleet lessors, including GE Capital Fleet, PHH Vehicle Management and USL Capital Fleet. Of these, the Company has established Master Provider relationships with PHH Vehicle Management and USL Capital Fleet. As fleet companies concentrate their sales with a smaller group of providers who can satisfy requirements for nationwide service and more sophisticated systems, Safelite believes it is well positioned to increase its market share in this segment. By outsourcing their automotive glass replacement needs, large fleet customers are able to take advantage of many of the same benefits provided to Safelite's insurance clients, including lower costs and better service. Subcontract. The subcontract segment represents business which is subcontracted to Safelite by other glass companies. Safelite is an attractive subcontractor because of its broad geographic coverage and ability to deliver rapid and consistent service. In addition, Safelite's fully-automated systems and top quality reputation make the Company an attractive business partner. Government. The government segment includes sales to state and local government agencies such as police and highway departments. WHOLESALE CUSTOMERS. The Company utilizes its excess manufacturing capacity to produce windshields sold into the wholesale market. Wholesale customers include other automotive glass replacement companies and distributors. Almost all of the Company's wholesale customers are in the United States. The Company's wholesale volume allows Safelite to maximize the efficiency of its manufacturing facilities. As the Company grows its higher margin insurance business, however, management expects the wholesale business to decline as a percent of total sales. OPERATIONS SALES AND MARKETING. Safelite's sales organization, with approximately 250 associates, is the largest in the industry. The Company's sales associates are highly trained and use a team selling approach when interacting with customers. Safelite has 15 national "strategic account" representatives. These individuals have built relationships with the major insurance, fleet and rental car company decision makers and average 10 years of industry experience. The strategic account representative system is designed to establish an environment of confidence that positions Safelite to become the sole administrator for an insurance company's glass claims. Safelite also utilizes approximately 235 field sales representatives to educate local insurance agents on the benefits of using Safelite. The field sales representatives have been a critical component in increasing compliance with insurance company automotive glass programs. PRICING. Safelite has a reputation for providing innovative pricing solutions to its customers. Safelite's low cost position enables the Company to be competitive on price. In addition, the Company's TCS and MP programs have shifted the emphasis for auto insurance companies away from the price of an installation to the all-in cost of an automotive glass claim. The Company's prices are generally calculated using a percentage discount from the NAGS price list. Windshields carry higher unit prices than curved tempered glass, and glass parts used in newer vehicle models tend to carry higher list prices than those used in older models. In addition, due to the higher levels of service required for outsourcing programs, insurance and fleet claims typically have a higher average revenue per unit ("RPU"). Overall, Safelite's average RPU has increased from $189 in 1993 to $239 in 1997, a compounded annual growth rate of 6%. CLAIMS MANAGEMENT PROCESS. Safelite is an industry leader in using information systems and technology to improve customer service and better manage its business. The Company's fully integrated network, SAFENET(TM), connects its service centers, vans, central telephone units, warehouses and distribution centers and provides associates with "real time" data for customer information, scheduling, billing, sales and inventory management. The Company's 47 centralized DCC/CTU locations and four 24-hour National Referral Centers serve as the local market "hubs," are strategically located in the 58 61 Company's major markets and receive "real time" data from SAFENET(TM). Approximately 70% of the Company's total customer calls are routed to one of the National Referral Centers or DCC/CTUs. The Company's four National Referral Centers (three in Columbus, Ohio and one in Chicago, Illinois) have capacity for over 6 million calls per year. These facilities provide overflow capacity for local CTU operations and handle almost 65% and 35% respectively, of the Company's auto insurance and fleet calls. Each auto insurance company that outsources automotive glass claims with Safelite receives a dedicated "1-800" number which connects directly into one of the National Referral Centers. At each of the Company's National Referral Centers and DCC/CTUs, professional, scripted CSRs answer customer calls and input directly into a computer the information necessary to schedule an installation, complete the paperwork, order the glass and deliver it to the service location and issue billing. Unlike any of its competitors, the Safelite CSRs can access scheduling information for their entire local market of service centers and vans, as well as monitor inventory levels to determine glass availability. Using SAFENET(TM), the CSRs can schedule the customer at the most convenient service center location and electronically send the customer's information to the service center computer or arrange mobile van service. If there is no nearby Safelite location, the CSRs can schedule the customer through one of the Company's 5,000 authorized independent installation centers. On average, over 90% of Safelite's installations are done through a company owned service center or mobile van. Safelite's DCC/CTUs operate extended evening and weekend hours, enabling customers to make appointments with Safelite when many competitors are closed. The National Referral Centers operate on a 24-hour per day basis. Once the CSR schedules an appointment, the piece of glass is automatically ordered and dispatched. The glass is loaded from the warehouse, which is co-located with the DCC/CTU, onto a Glassmobile for mobile installation or delivery to the appropriate service center location. The inventory movement is recorded electronically by the SAFENET(TM) point-of-sale system. Based on predetermined "optimal" inventory levels for each stock-keeping-unit (SKU) at each warehouse, the sale of a windshield automatically sends an order request to the distribution center and manufacturing request to the production floor. The Company maintains the majority of its inventory at its distribution centers and warehouses (instead of at the service centers) in order to minimize inventory levels and maximize flexibility/speed of delivery. In addition to providing an integrated delivery system, SAFENET(TM) also provides management and Safelite's customers with valuable information. This "real time" data allows Safelite to track and monitor important statistics including customer satisfaction, length of call, and speed of installation. Safelite uses this data to improve its customer service and provide comprehensive monthly management reports for its large insurance customers. These reports include information otherwise generally unavailable to the insurance companies, including statistics on number of claims, price per claim and percent of repairs versus replacement. Safelite believes it is the only company in the industry currently providing such reports. DISTRIBUTION. The Company uses a three tiered distribution system to better serve its customers and minimize its inventory levels. Two central distribution facilities are located at the Company's manufacturing facilities in Enfield, North Carolina and Wichita, Kansas. These central distribution facilities send inventory to the Company's 74 regional warehouses (27 free-standing warehouses and 47 co-located with the Company's CTUs). These facilities can then quickly and accurately stock the service centers and vans in their local markets on an as-needed basis. The Company's distribution system has been structured to optimize speed and efficiency. Trucks pick up windshields from the distribution centers and follow a fixed route schedule, making delivery stops at the Company's warehouses and wholesale customers at almost exactly the same time each week. The same trucks then pick up raw glass from the Company's suppliers and back haul it to Safelite's central distribution facilities. 59 62 The back hauling process lowers Safelite's freight costs for its raw glass, as Safelite is able to move the goods less expensively than its suppliers' delivery rates. Safelite believes that its modern distribution centers are among the lowest cost distribution centers in the industry. PRODUCTS Safelite's primary installation product is the auto windshield. Windshields are made of laminated safety glass, which consists of two layers of glass bound together with a thin layer of vinyl. The safety benefit of laminated glass comes from the strength which the vinyl adds; the vinyl makes it very difficult to penetrate the windshield upon impact. As part of Safelite's commitment to serve all of its customers' automotive glass needs, the Company also offers tempered automotive glass and other products. Tempered glass is generally used for side and rear car and truck windows and is twice as strong as raw glass because of specialized processing which causes the glass to break into dull-edged pebbles, reducing glass-related injuries. Safelite also offers auto products and services including flat glass, bipass glass, installation supplies, wiper blades, window tinting, sunroofs, alarm systems and vehicle inspection services for insurance companies. MANUFACTURING. Safelite is the only full-scale vertically integrated automotive glass replacement company in the U.S. The Company produces 65% of its windshield needs at its two manufacturing plants in Enfield, North Carolina and Wichita, Kansas. The Enfield facility encompasses 146,000 square feet of manufacturing space and has an annual capacity of over one million units. The Wichita facility encompasses 98,000 square feet with an annual production capacity of over 600,000 units. Safelite produces only high-volume windshield models, manufacturing 550 of the total 2,800 active windshield parts available in the industry. Safelite determines which windshield models to produce by assessing the sales trends and estimating future windshield demand after a new automobile model has been on the market for approximately one year. The Company then designs selected windshield models through a process of reverse engineering. The manufacturing process is described as follows: Cutting. Both the Enfield and Wichita plants have numerically controlled (computer programmable) cutting machines and automated machines which follow a cutting ring tool. Two pieces of glass are cut for each windshield; the outer piece is slightly larger than the inner piece (they are later equalized in the bending process). After cutting, the freshly cut edges are ground down to remove any burrs or sharp corners. This process gives the windshield a safe and smooth edge for handling. The glass is then washed and sprayed with a lubricant (allowing the two pieces of glass to later bend independently without sticking together). Painting. The border or band of most new windshields is painted with a ceramic (non-lead based) paint. The paint band hides the installation sealants (urethane) and gives the windshield an improved cosmetic appearance. The paint band designs are reverse engineered from actual OEM windshields and follow the same specifications. Bending. The flat pairs of glass are inspected prior to bending. The pairs are then fitted into the bending tools (molds) that run along a conveyor system through the furnace. This process is repeated every 30 seconds as the new bending mold is readied for another windshield. The bending furnaces are gas heated, time indexed and computer controlled. Lamination. A Poly Vinyl Butyl ("PVB") is used to laminate the two pieces of glass together. The vinyl layer is stored, cut and sandwiched between the pairs of glass in environmentally controlled rooms. A vacuum channel is placed around the sandwich to draw air out. While de-airing, the windshield is sealed into a pressure vessel. The process of lamination begins by rapidly heating and pressurizing the windshields. The heat and pressure are maintained for several minutes and then the vessel is rapidly cooled. The entire process takes about one hour and each autoclave has a capacity of approximately 100 windshields. Encapsulation. Some windshields require a specialized molding to be attached at the plant. This process, Reactive Injection Molding (RIM), is a process whereby two chemicals meet and form a border 60 63 (or gasket) around the part. The attached gasket saves time for the windshield installer since everything is attached at the plant. The Company outsources its encapsulation needs to a supplier. Inspection. Each windshield is inspected through a process consisting of four different functions of inspection and assembly. The finished goods scrap rate has historically been less than 1%. Scrap. The overall manufacturing process produces approximately 11% scrap (as a percentage of original input). The excess glass trim in cutting and other pre-laminated glass is recycled back to the supplier. Scrap glass which has paint on it is disposed of as hazardous waste. Likewise, the vinyl trim is collected and stored to be recycled back to the supplier. Production Scheduling. Production scheduling is a shared responsibility by the plant scheduler, the materials management department in Columbus, Ohio and the Company's MIS system. The system receives daily updated sales and inventory data from all Safelite facilities. This data is used to update the plant schedule by recommending the parts that have the greatest need for replenishment. A computerized schedule of manufacturing is created on a daily basis to optimize inventory levels, plant capacity, plant tooling availability, raw material availability and furnace scheduling. SUPPLIERS AND RAW MATERIALS Safelite generally purchases low volume windshields from third parties, as well as raw glass, vinyl, paint, adhesives and tempered glass. In the three months ended April 4, 1998 and the year ended January 3, 1998, the Company sourced 79% and 63%, respectively, of its purchased glass from Libby- Owens-Ford. The Company also utilizes other suppliers for both domestic and foreign windshields. Safelite buys all of its raw glass from Guardian Automotive, with the exception of solar resistant glass. Vinyl is purchased from E.I. Du Pont De Nemours. The Company believes alternate sources of vinyl are also available. With few exceptions, inventory is centrally purchased at Safelite's headquarters in Columbus, Ohio. The Company believes that its primary raw materials are widely available from numerous suppliers and has not had material difficulty in sourcing windshields or raw materials in the past. PROPERTIES Safelite leases 770 of its 809 installation service centers, with the terms of its leases generally being five years with one or two five year renewal options. Safelite also leases 71 of its 74 warehouses, with the terms of its leases generally being five years with one or two five year renewal options. The Company owns its manufacturing facilities in Enfield, North Carolina and Wichita, Kansas. Safelite's principal corporate office is at 1105 Schrock Road in Columbus, Ohio. Safelite leases this space pursuant to agreements expiring in June 2001. The Company maintains administrative offices at 2400 Farmers Drive in Columbus, Ohio, which it leases pursuant to a lease expiring in November 1998, which the Company plans to renew. Vistar's corporate headquarters and national call center are located at 2 North LaSalle Street, Chicago, Illinois under a lease expiring in July 2005. It is Safelite's intention to retain the space associated with the Chicago call center, but to exit the leased space used for Vistar's corporate headquarters' activities. Safelite also maintains a national referral center, local DCC/CTU and regional warehouse at 760 Dearborn Park Lane in Columbus, Ohio. Safelite leases this space pursuant to agreements expiring in April 2006. The Company's leases generally provide that the Company pay property tax, utilities, common area maintenance, and insurance expenses. Safelite believes that its facilities are adequate for its current needs and that suitable additional space will be available as required. EMPLOYEES As of April 4, 1998, the Company employed approximately 6,850 people. The Company has approximately 400 employees covered by four unions. Safelite has experienced no labor related work stoppages and believes that its employee relations are good. 61 64 COMPETITION The markets for the Company's products and services are very competitive. In the automotive glass replacement industry, competition is based on price, customer service, technical capabilities, quality and geographic coverage. This industry is highly fragmented with approximately 20,000 competitors. Although the Company is the industry leader in the automotive glass replacement industry, it does compete against several other large competitors in this market, the largest two of which have market shares estimated to be 8% and 4%. State Farm, one of the Company's largest customers, began in a region by region rollout commencing in the summer of 1997 to use a competitor to function as its glass claims call center and bill processing administrator. There can be no assurance that this arrangement will not have an impact on the Company's business with State Farm. Competition in the wholesale market is based principally on price and quality. The Company is a relatively small participant in the wholesale market, which is dominated by several significantly larger companies. Future growth in the Company's revenues will depend upon the Company's ability to maintain and increase its market share in the automotive glass replacement industry, while continuing to provide high levels of customer service to insurance companies and fleet owners, and its ability to access the wholesale market in order to utilize excess manufacturing capacity. See "Risk Factors -- Competition." ENVIRONMENTAL REGULATION The Company's manufacturing operations in Wichita, Kansas and Enfield, North Carolina involve handling of materials and the generation of waste materials that are classified as hazardous. The Company is subject to federal, state and local laws and regulations concerning the handling and disposal of hazardous materials, and therefore in the ordinary course of its business, the Company in its manufacturing operations incurs compliance costs. The Company does not anticipate that compliance with federal, state and local provisions regarding the use and disposal of materials into the environment or otherwise relating to the protection of the environment will have any material adverse effect upon the earnings or competitive position of the Company and does not anticipate any material capital expenditures for environmental control facilities for the remainder of the Company's current fiscal year or the succeeding fiscal year. Actions by federal, state and local governments concerning environmental matters, however, could increase the costs of producing the products manufactured by the Company. In addition, the future costs of compliance with environmental laws and regulations and liabilities resulting from currently unknown circumstances or developments could be substantial or could have a material adverse effect on the Company. Regulations resulting from the 1990 amendments to the Clean Air Act that will pertain to the Company's manufacturing operations are currently not expected to be promulgated until 1998 or later. The Company cannot predict the level of required capital expenditures resulting from future environmental regulations; however, the Company does not anticipate that expenditures required by such regulations, if any, will have a material adverse effect on the Company. LITIGATION Safelite is party to certain claims and litigation in the ordinary course of business and litigation concerning environmental compliance which it does not believe will result, individually or in the aggregate, in a material adverse effect upon its financial condition or results of operations. See "-- Environmental Regulation." Safelite has been sued by nine local automotive glass replacement companies in the U.S. District Court for the Eastern District of Texas, claiming violation of federal antitrust laws and interference with contracts. The Company intends to defend these claims vigorously and does not believe they will have a material adverse effect on the Company's financial position or results of operations. On May 11, 1998, the Company was served with a subpoena requiring that it produce documents to a grand jury in Dallas, Texas, conducted by the Antitrust Division of the United States Department of Justice. The documents demanded by the subpoena relate to the pricing of replacement glass at three service center locations in the state of Texas. The Company intends to comply fully with the subpoena. 62 65 Based on discussions with the Antitrust Division of the United States Department of Justice, management believes that it is unlikely that the Company is the target of this investigation. In addition, management does not believe that the Company or its employees have engaged in any anti-competitive or collusive activities and does not believe that this investigation will result in a material adverse effect on the Company. However, no assurance can be given that the Company will not be found to have engaged in anti-competitive or collusive activities or be liable for fines, penalties, damages and costs or, that if it were liable, that it would not have a material adverse effect on the Company. See "Risk Factors -- Litigation." 63 66 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table provides information concerning the directors and executive officers of the Company after giving effect to the Vistar Merger. All directors will hold office until the next annual meeting of stockholders of the Company and until their successors have been duly elected and qualified. All officers will serve at the discretion of the Board of Directors.
NAME AGE POSITION ---- --- -------- Garen K. Staglin............. 52 Chairman of the Board and Director John F. Barlow............... 54 President, Chief Executive Officer and Director Douglas A. Herron............ 48 Senior Vice President, Chief Financial Officer and Director Thomas M. Feeney............. 46 Senior Vice President, Client Sales and Support Douglas R. Maehl............. 50 Senior Vice President, Manufacturing, Distribution and Purchasing Elizabeth A. Wolszon......... 43 Senior Vice President, Marketing and Strategic Planning James K. West................ 55 Senior Vice President, Global Business Development Poe A. Timmons............... 38 Vice President -- Finance and Corporate Controller Anthony J. DiNovi............ 35 Director Selwyn Herson................ 45 Director Adrian F. Jones.............. 44 Director Seth W. Lawry................ 33 Director Thomas H. Lee................ 54 Director Gary Lubner.................. 39 Director Ronnie Lubner................ 64 Director John E. Mason................ 50 Director M. Louis Shakinovsky......... 54 Director Scott M. Sperling............ 40 Director Rodney Stansfield............ 59 Director
A brief biography of each director and executive officer follows: Garen K. Staglin has served as the Company's Chairman of the Board since July 1991 and served as the Company's Chief Executive Officer from July 1991 through the completion of the THL Transactions. From January 1979 to June 1991, Mr. Staglin served in various management roles, most recently as President of the Automotive Services Group of ADP, Inc., a computer services firm. He currently serves as a director for First Data Corp., Cyber Cash, Inc. and QuickResponse Services, Inc. and serves on the Advisory Board of the Stanford Graduate School of Business. John F. Barlow has served as a director and the Company's Chief Operating Officer since September 1991. Mr. Barlow was made Chief Executive Officer following the THL Transactions. From October 1986 to August 1991, Mr. Barlow served as the President and Chief Executive Officer of Western Auto Stores, a retailer of automobile parts. Douglas A. Herron has served as the Company's Senior Vice President and Chief Financial Officer since June 1992. Mr. Herron was elected as a Director of the Company in March 1998. From December 1989 to May 1992, Mr. Herron served as Manager, Finance Operation of GE Medical Systems, 64 67 a leading manufacturer and supplier of diagnostic imaging equipment and financing products to hospitals and clinics throughout the world. Thomas M. Feeney has served as the Company's Senior Vice President Client Sales and Support since 1991 and has been employed with the Company since 1988. Prior to joining Safelite, Mr. Feeney was a Vice President with Tenneco Automotive Retail. Douglas R. Maehl has served as the Company's Senior Vice President of Manufacturing, Distribution and Purchasing since October 1991. From September 1978 to September 1991, Mr. Maehl served as Vice President of Merchandising for Western Auto Stores, a retailer of automobile parts. Poe A. Timmons has served as the Company's Vice President-Finance and Corporate Controller since January 1996. Prior to 1996, Ms. Timmons was an audit partner at Deloitte & Touche LLP, where she served clients in the manufacturing, retail and service industries. Elizabeth A. Wolszon has served as the Company's Senior Vice President of Marketing and Strategic Planning since July 1992. From January 1989 to June 1992, Ms. Wolszon served as Senior Vice President of Marketing for Western Auto Stores, a retailer of automobile parts, and Director of Strategic Planning for Sears Specialty Merchandising, a group of specialty retailing chains owned by Sears Roebuck & Co. James K. West served as the Company's Senior Vice President of Information Systems from June 1990 through February 1998 and recently assumed the role of Senior Vice President, Global Business Development. From November 1987 to May 1990, Mr. West served as the Director of Information Systems for Transworld Music, the largest record retailer in the United States. Anthony J. DiNovi has served as a director since December 1996. Mr. DiNovi has been employed by Thomas H. Lee Company, an investment company, since 1988 and currently serves as a Managing Director. Mr. DiNovi is also Vice President and Trustee of THL Equity Trust III, the general partner of the THL Equity Advisors III Limited Partnership, which is the general partner of the Thoms H. Lee Equity Fund III, L.P. and Vice President of Thomas H. Lee Advisors I and T.H. Lee Mezzanine II, affiliates of ML-Lee Acquisition Fund, L.P., ML-Lee Acquisition Fund II, L.P. and ML-Lee Acquisitions Fund II (Retirement Accounts), L.P., respectively. Mr. DiNovi also serves as a director of CelPage, Inc., Eye Care Centers of America, Inc., Fisher Scientific International Inc. and The Learning Company, Inc. Selwyn Herson has served as a director since the Vistar Merger. Mr. Herson is the Founder and Managing Director of The Windsor Park Management Group, an investment banking and strategic consulting firm based in Los Angeles. Mr. Herson has consulted for Belron International on a number of major projects. Mr. Herson also serves as a Director of S&K Famous Brands, Inc. and several private corporations. Adrian F. Jones has served as a director since the Vistar Merger. Mr. Jones is the Chief Financial Officer of Belron International which he joined in 1986. Prior to joining Belron, Mr. Jones was a manager for Arthur Andersen LLP. Seth W. Lawry has served as a director since December 1996. Since April 1994, Mr. Lawry has been employed by Thomas H. Lee Company, an investment company, and currently serves as a Managing Director. Mr. Lawry is also Vice President of THL Equity Trust III, the general partner of the THL Equity Advisors III Limited Partnership, which is the general partner of the Thomas H. Lee Equity Fund III, L.P. Mr. Lawry also serves as a director of Freedom Securities Corporation and Syratech Corp. From September 1992 to March 1994, Mr. Lawry served as an Associate at Morgan Stanley & Co. Incorporated, an investment bank. From September 1990 to June 1992, Mr. Lawry attended Stanford Graduate School of Business. Thomas H. Lee has served as a Director since March 1998. Mr. Lee is Founder and President of Thomas H. Lee Company, an investment company. Mr. Lee is also Chairman of THL Equity Trust III, the general partner of the THL Equity Advisors III Limited Partnership, which is the general partner of the Thomas H. Lee Equity Fund III, L.P. Mr. Lee also serves as a director of Finlay Enterprises, Inc., First 65 68 Security Services Corporation, Livent, Inc., Miller Import Corporation, Sondik Supply Company and Vail Resorts, Inc. Gary Lubner has served as a Director since March 1998. Mr. Lubner is Managing Director of Autoglass Limited, the United Kingdom's leading automotive glass repair and replacement company. Prior to his appointment as Managing Director of Autoglass Limited in 1995, Mr. Lubner held various positions with Plate Glass & Shatterprufe Industries Limited, South Africa's leading glass and wood processor and distributor. Ronnie Lubner has served as a director since the Vistar Merger. Mr. Lubner is the Chairman and Chief Executive Officer of Plate Glass & Shatterprufe Industries Limited which he joined in 1953. Mr. Lubner is also a director of South African Breweries and Advanta Corporation. John E. Mason has served as a director since the Vistar Merger. Mr. Mason is the Chief Executive officer of Belron International which he joined in 1983 and an Executive Director of Plate Glass & Shatterprufe Industries Limited. M. Louis Shakinovsky has served as a director since the Vistar Merger. Mr. Shakinovsky is the Group Legal Services Director of Belron International and Plate Glass & Shatterprufe Industries Limited which he joined in 1965. Scott M. Sperling has served as a director since December 1996. Since July 1994, Mr. Sperling has served as a Managing Director of Thomas H. Lee Company. Mr. Sperling is also Vice President of THL Equity Trust III, the general partner of the THL Equity Advisors III Limited Partnership, which is the general partner of the Thomas H. Lee Equity Fund III, L.P. Mr. Sperling also serves as a director of Fisher Scientific International Inc., The Learning Company, Livent, Inc. and The General Chemical Group Inc. Prior to joining Thomas H. Lee Company in 1994, Mr. Sperling was managing partner of Aeneas Group, Inc., an investment company and a wholly-owned subsidiary of Harvard Management Company, Inc. Rodney Stansfield has served as a Director since March 1998. Mr. Stansfield was recently appointed Chief Executive Officer of Glass South Africa. Prior to joining Glass South Africa, Mr. Stansfield served as Chief Executive Officer of Libbey-Owens-Ford Co. Mr. Stansfield also serves as a director of Plate Glass & Shatterprufe Industries Limited. COMMITTEES OF THE BOARD OF DIRECTORS The Board of Directors has established an Audit Committee and a Compensation Committee. The Compensation Committee makes recommendations concerning the salaries and incentive compensation of employees of and consultants to Safelite, and oversees and administers the Company's stock option plans. Messrs. Barlow, DiNovi, Mason and Sperling are members of the Compensation Committee. The Audit Committee is responsible for reviewing the results and scope of audits and other services provided by Safelite's independent auditors. Messrs. Jones, Lawry, Shakinovsky, and Staglin are members of the Audit Committee. DIRECTOR COMPENSATION Directors that are neither employees of the Company nor of Thomas H. Lee Company or Belron receive $1,000 for every Board meeting they attend. Such directors are also eligible to receive options under the Company's 1996 and 1998 Stock Option Plans. EMPLOYMENT AGREEMENTS The Company entered into employment agreements with each of Messrs. Staglin, Barlow and Herron in connection with the THL Transactions and the Vistar Merger. The employment agreements for Messrs. Barlow and Staglin were amended on April 30, 1997, to reflect a change in their titles. Mr. Staglin serves as Chairman of the Board with an annual base salary of at least $700,000 and a performance bonus determined by the Board of Directors of the Company. Mr. Barlow serves as President and Chief 66 69 Executive Officer of the Company with a base salary of at least $700,000 and a performance bonus determined by the Board of Directors of the Company. Mr. Herron serves as Senior Vice President and Chief Financial Officer of the Company with a base salary of at least $350,000 and an annual bonus to be determined by the Board of Directors of the Company in accordance with an executive bonus plan (the "Executive Bonus Plan"). Each of the foregoing agreements provides for an initial term of three years with two year automatic renewal periods, unless either party gives notice of its or his intent to terminate the employment agreement at least 30 days, but not more than 60 days, prior to the expiration of the original term or any renewal term. Each of the agreements provides that in the event the executive is terminated due to death or disability, (i) his base salary will continue for six months following the date of termination, (ii) a pro rata portion of his bonus (based on days worked) will be paid (unless the Board of Directors approves a greater amount) and (iii) his additional benefits under his employment agreement will continue for 12 months following the date of termination. If the executive is terminated without cause, (i) his base salary will continue for the greater of 24 months following the date of termination and the remaining portion of the initial term of the agreement, (ii) he will receive a pro rata portion of his bonus (unless the Board of Directors approves a greater amount) and (iii) his additional benefits will continue for 12 months following the date of termination. Each of these agreements includes non-disclosure provisions, as well as non-competition provisions covering the period of employment by the Company plus one year, but in no event less than three years. STOCK OPTION PLANS 1998 Stock Option Plan. The Company's 1998 Stock Option Plan (the "1998 Plan") provides for grants of options to acquire up to 410,000 shares of Class B Non-Voting Common Stock. Incentive stock options may be granted to employees and officers of the Company and non-qualified stock options may be granted to consultants, directors, employees and officers of the Company. The 1998 Plan is administered by the Board of Directors of the Company or a committee thereof consisting of two or more directors. Subject to the provisions of the 1998 Plan, the Board of Directors will have the authority to select optionees and determine the terms of the options granted, including (i) the number of shares subject to each option, (ii) when the option becomes exercisable, (iii) the exercise price of the option (which in the case of an incentive stock option cannot be less than the fair market value of the common stock on the date of grant, or less than 110% of fair market value in the case of employees or officers holding 10% or more of the voting stock of the Company), (iv) the duration of the option and (v) the time, manner and form of payment upon exercise of an option. At April 4, 1998, the Company had 407,500 options outstanding under the 1998 Plan and 2,500 options available for future grant. An option is not transferable by the optionee except by will or by the laws of descent and distribution. Options are exercisable only while the optionee remains in the employ of the Company or for a period of time thereafter. If an optionee becomes disabled or dies while in the employ of the Company, the option is exercisable prior to the last day of the third and sixth month, respectively, following the date of termination of employment. If the optionee leaves the employ of the Company for any other reason, the option terminates immediately upon termination of employment; provided that the Board of Directors may extend this period up to the original expiration date of such option. Options which are exercisable following termination of employment are exercisable only to the extent that the optionee was entitled to exercise such options on the date of such termination. 1996 Stock Option Plan. The Company's 1996 Stock Option Plan (the "1996 Plan") provides for grants of options to acquire up to 175,000 shares of Class A Common Stock. Incentive stock options may be granted to employees and officers of the Company and non-qualified stock options may be granted to consultants, directors, employees and officers of the Company. The 1996 Plan is administered by the Board of Directors of the Company or a committee thereof consisting of two or more directors. Subject to the provision of the 1996 Plan, the Board of Directors will have the authority to select optionees and determine the terms of the options granted, including (i) the 67 70 number of shares subject to each option, (ii) when the option becomes exercisable, (iii) the exercise price of the option (which in the case of an incentive stock option cannot be less than the fair market value of the Common Stock on the date of grant, or less than 110% of fair market value in the case of employees or officers holding 10% or more of the voting stock of the Company), (iv) the duration of the option and (v) the time, manner and form of payment upon exercise of an option. Prior to the Vistar Merger, vesting of options to purchase 160,000 shares of Class A Voting Common Stock issued under the plan was accelerated and all 160,000 options were exercised. The remaining 15,000 outstanding options were converted into the right to purchase an equal number of Class B Non-Voting Common Stock in connection with the Vistar Merger. At April 4, 1998, the Company had 15,000 options outstanding under the 1996 Plan and no options available for future grants. An option is not transferable by the optionee except by will or by the laws of descent and distribution. Options are exercisable only while the optionee remains in the employ of the Company or for a period of time thereafter. If an optionee becomes disabled or dies while in the employ of the Company, the option is exercisable prior to the last day of the third and sixth month, respectively, following the date of termination of employment. If the optionee leaves the employ of the Company for any other reason, the option terminates immediately upon termination of employment; provided that the Board of Directors may extend this period up to the original expiration date of such option. Options which are exercisable following termination of employment are exercisable only to the extent that the optionee was entitled to exercise such options on the date of such termination. 1993 Restated Employee Stock Option Plan. The Company's 1993 Restated Employee Stock Option Plan (the "1993 Restated Stock Option Plan") provides for the grants of options to acquire up to 264,000 shares of Class A Common Stock, in such amounts, on such terms and for such officers and other key employees as the administrators of the 1993 Restated Stock Option Plan may select. Options granted under the Plan are not intended to qualify as Incentive Stock Options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. The 1993 Restated Stock Option Plan is administered by a committee (the "Committee"), consisting of one or more persons appointed by the Board of Directors of the Company, and provides that all of the options shall have a per share exercise price established by the Committee in its sole discretion at the time an option is granted. All options currently outstanding under the 1993 Restated Stock Option Plan became fully vested and exercisable upon the closing of the Vistar Merger. In connection with the Vistar Merger, options to purchase 54,853 shares of Class A Common Stock for $3.00 per share were exercised and outstanding options were converted into options to purchase an equal number of Class B Non-Voting Common Stock. At April 4, 1998, the Company had 2,190 options to purchase Class B Non-Voting Common Stock under the 1993 Plan outstanding and no options available for future grants. Options granted under the 1993 Restated Stock Option Plan become fully exercisable no later than the fifth anniversary of the date of grant and no option may have a term in excess of 10 years from the date of grant. The stock option agreements pursuant to which options have been granted under the 1993 Restated Stock Option Plan provide for acceleration of the options upon the occurrence of a terminating event, which includes the Vistar Merger. Options are exercisable only while the optionee remains an employee of the Company, and the Company shall have the right, at its option upon termination of an optionee's employment to redeem the exercisable portion of the option, or any portion thereof as determined by the Company. If the Company elects not to exercise its right to redeem the exercisable portion of the option, the terminated optionee shall have the right to exercise any unredeemed portion of the then exercisable options at any time within 90 days after the notification date. Options which are exercisable following termination of employment are exercisable only to the extent that the optionee was entitled to exercise such options on the date of such termination. All options are non-transferable other than by will or the laws of descent and distribution. The Company has the right to terminate the option in the event the optionee engages in any prohibited activity, including disclosure of confidential or proprietary knowledge obtained during the course of employment, solicitation of employment after termination of any person who at the time of the solicitation is employed by the Company, publishing any statement or making any statement critical of the Company, 68 71 engaging in any competitive activity during the optionee's employment or during the three years following the optionee's termination or being convicted of a crime against the Company or any of its affiliates. EXECUTIVE COMPENSATION The following table sets forth certain information with respect to the compensation paid by Safelite for services rendered for the three months ended April 4, 1998 and the fiscal years ended January 3, 1998 and December 28, 1996, to its Chief Executive Officer and its four most highly paid executive officers (the "Named Executive Officers"). SUMMARY COMPENSATION TABLE(1)
ANNUAL COMPENSATION -------------------------------------------------- SECURITIES FISCAL OTHER ANNUAL UNDERLYING ALL OTHER NAME AND PRINCIPAL POSITION PERIOD(2) SALARY BONUS COMPENSATION OPTIONS (#) COMPENSATION --------------------------- --------- -------- ---------- ------------ ----------- ------------ Garen K. Staglin........................ 1998 $175,000 $ 34,500 -- 10,000 $ 3,643(4) Chairman of the Board 1997 $700,000 $ 502,851 $57,977(3) 8,424 $ 75(4) 1996 $666,827 $2,230,000 $75,628(3) -- $ 5,246(4) John F. Barlow.......................... 1998 $175,000 $ 34,500 -- 40,000 $ 3,621(5) President and Chief 1997 $693,269 $ 472,274 -- 50,000 $ 3,453(5) Executive Officer 1996 $573,798 $2,040,000 -- -- $ 5,024(5) Douglas A. Herron....................... 1998 $ 96,250 $ 20,653 -- 17,500 $ 3,505(6) Senior Vice President and 1997 $374,904 $ 222,278 -- 23,370 $ 1,479(6) Chief Financial Officer 1996 $327,885 $ 691,713 -- -- $ 4,772(6) Elizabeth A. Wolszon.................... 1998 $ 73,750 $ 15,825 -- 15,000 $ 3,200(7) Senior Vice President 1997 $289,231 $ 163,602 -- 14,076 $ 1,270(7) Marketing and Strategic 1996 $270,192 $ 430,703 -- -- $ 2,113(7) Planning Thomas M. Feeney........................ 1998 $ 71,250 $ 15,289 -- 15,000 $ 6,929(8) Senior Vice President 1997 $274,904 $ 557,587 -- 27,220 $ 3,270(8) Client Sales and Support 1996 $248,077 $ 366,860 -- -- $11,664(8)
- --------------- (1) In accordance with the rules of the Securities and Exchange Commission, other compensation in the form of perquisites and other personal benefits have been omitted because the aggregate amount of such perquisites and other personal benefits constituted less than the lesser of $50,000 or 10% of the total annual salary and bonuses for the Named Executive Officers for such year. Amounts presented reflect compensation earned in the period presented, although payment may have been made in other periods. (2) References to fiscal periods herein are as follows: three months ended April 4, 1998 ("1998"), year ended January 3, 1998 ("1997"), and year ended December 28, 1996 ("1996"). (3) Includes $37,267 and $60,591, respectively, for compensation related to reimbursement of certain expenses. (4) Represents $3,200, $0 and $1,980, respectively, in Company contributions to the 401(k) plan and $443, $75 and $3,266, respectively, in medical plan benefits. (5) Represents $3,200, $0 and $1,980, respectively, in Company contributions to the 401(k) plan and $421, $3,453 and $3,044, respectively, in medical plan benefits. (6) Represents $3,200, $0 and $2,336, respectively, in Company contributions to the 401(k) plan and $305, $1,270 and $2,436, respectively, in medical plan benefits. (7) Represents $3,200, $0 and $2,024, respectively, in Company contributions to the 401(k) plan and $0, $1,270 and $89, respectively, in medical plan benefits. (8) Represents $3,200, $0 and $4,180, respectively, in Company contributions to the 401(k) plan and $3,729, $3,270 and $7,484, respectively, in medical plan benefits. 69 72 The following table sets forth certain information with respect to stock options granted during the three months ended April 4, 1998 and the fiscal year ended January 3, 1998 to each of the executive officers named in the Summary Compensation Table. OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM(1) - ----------------------------------------------------------------------------------------- ------------------------------------- % OF NUMBER OF TOTAL SECURITIES OPTIONS/ UNDERLYING SARS OPTIONS/ GRANTED TO EXERCISE SARS EMPLOYEES OR BASE FISCAL GRANTED IN FISCAL PRICE EXP. NAME PERIOD(2) ($) PERIOD ($/SH)(4) DATE 5% ($) 10% ($) ---- --------- ---------- ---------- --------- --------- ---------- ------------ Garen K. Staglin........................ 1998 10,000 2.4% $19.00 3/26/08 $119,500 $ 302,811 Chairman of the Board 1997 8,424(3) 4.8% $13.40 2/14/07 $ 71,014 $ 179,937 John F. Barlow.......................... 1998 40,000 9.8% $19.00 3/26/08 $478,000 $1,211,200 President and Chief Executive 1997 50,000(3) 28.6% $13.40 2/14/07 $421,500 $1,068,000 Officer Douglas A. Herron....................... 1998 17,500 4.3% $19.00 3/26/08 $209,125 $ 529,900 Senior Vice President and Chief 1997 23,370(3) 13.4% $13.40 2/14/07 $197,009 $ 499,183 Financial Officer Elizabeth A. Wolszon.................... 1998 15,000 3.7% $19.00 3/26/08 $179,250 $ 454,200 Senior Vice President Marketing 1997 14,076(3) 8.0% $13.40 2/14/07 $118,661 $ 300,663 and Strategic Planning Thomas M. Feeney........................ 1998 15,000 3.7% $19.00 3/26/08 $179,250 $ 454,200 Senior Vice President Client 1997 27,220(3) 15.6% $13.40 2/14/07 $229,465 $ 581,419 Sales and Support
- --------------- (1) The amounts under the columns labeled "5%($)" and "10%($)" are included by the Company pursuant to certain rules promulgated by the Securities and Exchange Commission and are not intended to forecast future appreciation, if any, in the price of the Company's common stock. Such amounts are based on the assumption that the option holders hold the options granted for their full term. The actual value of the options will vary in accordance with the market price of the Company's common stock. (2) References to fiscal periods herein are as follows: three months ended April 4, 1998 ("1998") and year ended January 3, 1998 ("1997"). (3) Vesting of options granted was accelerated immediately prior to the Vistar Merger. (4) The exercise price of the options is the fair market value of the underlying common stock at the date of the grant. 70 73 The following table sets forth certain information regarding the exercise of stock options during the three months ended April 4, 1998 and the fiscal year ended January 3, 1998, and the number and value of stock options held by the executive officers named in the Summary Compensation Table as of January 3, 1998 and April 4, 1998. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY OPTIONS AT OPTIONS/SARS SHARES FY-END (#) AT FY-END($) FISCAL ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/ NAME PERIOD(1) ON EXERCISE(#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE ---- --------- --------------- ------------ ------------- ------------- Garen K. Staglin............... 1998 -- -- 10,000 -- Chairman of the Board........ 1997 8,424 $156,686 -- -- John F. Barlow................. 1998 -- -- 40,000 -- President and Chief Executive 1997 50,000 $930,000 -- -- Officer Douglas A. Herron.............. 1998 -- -- 17,500 -- Senior Vice President and 1997 23,370 $434,682 -- -- Chief Financial Officer Elizabeth A. Wolszon........... 1998 -- -- 15,000 -- Senior Vice President 1997 14,076 $261,814 -- -- Marketing and Strategic Planning Thomas M. Feeney............... 1998 -- -- 15,000 -- Senior Vice President Client 1997 31,598 $633,254 -- -- Sales and Support
- --------------- (1) References to fiscal periods herein are as follows: as of and for the three months ended April 4, 1998 ("1998") and as of and for the year ended January 3, 1998 ("1997"). 71 74 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding the beneficial ownership of the Company's Class A Voting Stock, Class B Non-Voting Stock and Non-Voting Preferred Stock, as of April 4, 1998 by (i) each person (or group of affiliated persons) known by the Company to be the beneficial owner of more than 5% of the outstanding common stock, (ii) each Director, (iii) the Company's Chief Executive Officer and the Company's other named executive officers (as determined in accordance with the rules of the Securities and Exchange Commission), and (iv) all of the Company's executive officers and Directors as a group. Except as indicated in the footnotes to this table, the Company believes that the persons named in this table have sole voting and investment power with respect to all the shares of common stock indicated.
NO. OF SHARES NO. OF SHARES NO. OF SHARES OF CLASS A OF CLASS B OF NON-VOTING VOTING % OF NON-VOTING % OF PREFERRED % OF NAME OF BENEFICIAL OWNER STOCK(1) CLASS STOCK(1) CLASS STOCK(1) CLASS ------------------------ ---------- ----- ------------------- ----- ------------------ ----- Garen K. Staglin(2)(3)................. 72,101 2.1% 154,203 1.4% -- -- John F. Barlow(2)(4)................... 72,101 2.1% 184,203 1.7% -- -- Douglas A. Herron(2)(5)................ 21,649 * 60,797 * -- -- Elizabeth A. Wolszon(2)(6)............. 11,993 * 38,985 * -- -- Douglas R. Maehl(2)(6)................. 11,993 * 38,985 * -- -- James K. West(2)(6).................... 11,993 * 38,985 * -- -- Thomas M. Feeney(2)(6)................. 11,993 * 38,985 * -- -- Poe A. Timmons(2)(7)................... 6,505 * 18,011 * -- -- Anthony J. DiNovi(8)................... 1,447,080 42.4% 2,894,160 26.7% -- -- Seth W. Lawry(8)....................... 1,447,080 42.4% 2,894,160 26.7% -- -- Thomas H. Lee(8)....................... 1,447,080 42.4% 2,894,160 26.7% -- -- Scott M. Sperling(8)................... 1,447,080 42.4% 2,894,160 26.7% -- -- Gary Lubner............................ -- -- -- -- -- -- Ronnie Lubner.......................... -- -- -- -- -- -- M. Louis Shakinovsky................... -- -- -- -- -- -- John E. Mason.......................... -- -- -- -- -- -- Adrian F. Jones........................ -- -- -- -- -- -- Selwyn Herson.......................... -- -- -- -- -- -- Rodney Stansfield...................... -- -- -- -- -- -- All Directors and Executive Officers as a Group (19 Persons)................. 1,667,408 50.5% 3,467,314 32.0% -- -- 5% Stockholders: Belron (USA) BV........................ 1,690,101 49.5% 4,487,123 43.1% 20,000 50.0% Kellman Shareholders(9)(10)............ -- -- 2,472,648 23.8% 20,000 50.0% Thomas H. Lee Equity Fund, III, L.P.(11)............................. 1,241,479 36.7% 2,482,959 23.9% -- -- THL-CCI Limited Partnership(12)........ 128,782 3.8% 257,563 2.5% -- --
- --------------- * Less than 1% (1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes general voting power and/or investment power with respect to securities. Shares of common stock subject to options and warrants currently exercisable within 60 days of January 3, 1998 are deemed outstanding. (2) The address of this stockholder is c/o Safelite Glass Corp., 1105 Schrock Road, Columbus, Ohio 43229. 72 75 (3) Includes 54,076 shares of Class A Voting Stock, 108,152 shares of Class B Non-Voting Stock and 10,000 options to purchase shares of Class B Non-Voting Stock owned of record by a Charitable Remainder Unit Trust established for the benefit of Mr. Staglin and his wife. (4) Includes 11,087 shares of Class A Voting Stock and 22,173 shares of Class B Non-Voting Stock owned of record by trusts established for the benefit of Mr. Barlow's children. Also includes 40,000 options to purchase shares of Class B Non-Voting Stock. (5) Includes options to purchase 17,500 shares of Class B Non-Voting Stock. (6) Includes options to purchase 15,000 shares of Class B Non-Voting Stock. (7) Includes options to purchase 5,000 shares of Class B Non-Voting Stock. (8) The address of this stockholder is c/o Thomas H. Lee Company, 75 State Street, Boston, Massachusetts 02109. All such securities are owned by the THL Equity Fund, THL-CCI Limited Partnership and Thomas H. Lee Foreign Fund III, L.P. and may be deemed to be beneficially owned by Messrs. DiNovi, Lawry and Sperling, officers of the Thomas H. Lee Company, pursuant to the definition of beneficial ownership provided in footnote (1). Each of such persons disclaims beneficial ownership of such shares. (9) The Kellman Shareholders and their individual holdings consist of: (i) Family Revocable Trust (2,225,141 shares of Class B Non-Voting Stock and 17,998 shares of Non-Voting Preferred Stock); (ii) Jack Kellman Gift Trust U/A/D 12/16/91 (137,833 shares of Class B Non-Voting Stock and 1,114 shares of Non-Voting Preferred Stock); (iii) Joseph Kellman 1995 Descendants Test for the Family of Jack U/A/D 11/8/95 (13,716 shares of Class B Non-Voting Stock and 111 shares of Non-Voting Preferred Stock); (iv) Joseph Kellman 1995 Descendants Trust for the Family of Richard U/A/D 11/8/95 (13,716 shares of Class B Non-Voting Stock and 111 shares of Non-Voting Preferred Stock); (v) Joseph Kellman 1995 Descendants Trust for the Family of Celia U/A/D 11/8/95 (13,716 shares of Class B Non-Voting Stock and 111 shares of Non-Voting Preferred Stock); (vi) Joseph Kellman Gift Trust for the Family of Jack U/A/D 11/8/95 (22,842 shares of Class B Non-Voting Stock and 185 shares of Non-Voting Preferred Stock); (vii) Joseph Kellman Gift Trust for the Family of Richard U/A/D 11/8/95 (22,842 shares of Class B Non-Voting Stock and 185 shares of Non-Voting Preferred Stock); and (viii) Joseph Kellman Gift Trust for the Family of Celia U/A/D 11/8/95 (22,842 shares of Class B Non-Voting Stock and 185 shares of Non-Voting Preferred Stock). (10) Joseph Kellman is the Trustee of the Family Revocable Trust (which owns 2,225,141 shares of Class B Non-Voting Stock and 17,998 shares of Non-Voting Preferred Stock). Joseph Kellman maintains a principal address at 1000 North Lake Shore Drive, Apartment 47-B, Chicago, Illinois 60610. Allan B. Muchin, Maurice Raizes and Marvin Zimmerman are the Trustees of each of the other Kellman Shareholders listed above in footnote (6) (which own an aggregate of 247,507 shares of Class B Non-Voting Stock and 2,002 shares of Non-Voting Preferred Stock). Messrs. Muchin, Raizes and Zimmerman each maintain a principal business address at c/o Katten, Muchin & Zavis, 525 West Monroe Street, Suite 1600, Chicago, Illinois 60661, and each disclaims beneficial ownership of such shares. (11) THL Equity Advisors III Limited Partnership ("Advisors"), the general partner of the THL Equity Fund and Thomas H. Lee Foreign Fund III, LP., THL Equity Trust III ("Equity Trust"), the general partner of Advisors, Thomas H. Lee, Messrs., DiNovi and Sperling and other managing directors of Thomas H. Lee Company, as Trustees of Equity Trust, and Thomas H. Lee as sole shareholder of Equity Trust, may be deemed to be beneficial owners of the shares held by the THL Equity Fund and Thomas H. Lee Foreign Fund III, L.P. (which owns 76,819 shares of Class A Voting Stock and 153,638 shares of Class B Non-Voting Stock). Each of such persons maintains a principal business address at c/o Thomas H. Lee Company, 75 State Street, Suite 2600, Boston, MA 02109. Each of such persons disclaims beneficial ownership of such shares. 73 76 (12) THL Investment Management Corp., the general partner of THL-CCI Limited Partnership, and Thomas H. Lee, as director and sole shareholder of THL Investment Management Corp., may also be deemed to be beneficial owners of the shares held by THL-CCI Limited Partnership. Each of such persons maintains a principal business address at c/o Thomas H. Lee Company, 75 State Street, Suite 2600, Boston, MA 02109. Each of such persons disclaims beneficial ownership of such shares. 74 77 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In connection with the THL Transactions, the Company entered into a Management Agreement with Thomas H. Lee Company pursuant to which the Company agreed to pay Thomas H. Lee Company a closing fee of $5.0 million in connection with the THL Transactions and an annual fee of $500,000 for each of five successive years, for management services to the Company. Such management services consisted of on-going operational, financial, accounting and strategic planning analysis and advice. Following the initial five year term of such agreement, such agreement was to automatically continue for successive one year terms unless any party thereto, at least ninety days prior to the end of any term, provided all other parties thereto with notice of the intent to terminate the agreement. The Company also entered into employment agreements with each of Messrs. Staglin, Barlow and Herron in connection with the THL Transactions. See "Employment Agreements." Each of the Company's executive officers is also entitled to participate in stock option plans maintained by the Company. See "Management -- Stock Option Plans." Members of management of the Company received a transaction bonus in connection with THL Transactions of approximately $7 million. Of such amount, Mr. Staglin received $2,175,000, Mr. Barlow received $2,040,000, Mr. Herron received $435,000, Mr. Feeney received $183,500, Mr. Maehl received $229,000, Ms. Wolszon received $229,000, Mr. West received $229,000 and Ms. Timmons received $160,000. The Company entered into a stockholders agreement (the "Stockholders' Agreement") with THL, the Named Executive Officers and certain other management stockholders of the Company in connection with the THL Transactions. Pursuant to the Stockholders' Agreement, the stockholders party thereto were required to vote their shares of Class A Common Stock to elect a Board of Directors of the Company consisting of certain directors designated by THL and certain management directors. THL had the right to elect a majority of the Board of Directors. The Stockholders' Agreement also granted THL the right to require the Company to effect the registration of shares of Class A Common Stock THL held for sale to the public, subject to certain conditions and limitations. In addition, under the terms of the Stockholders' Agreement, if the Company proposed to register any of its securities under the Securities Act of 1933, as amended, whether for its own account or otherwise, the stockholder parties thereto were entitled to notice of such registration and were entitled to include their shares therein, subject to certain conditions and limitations. All fees, costs and expenses of any registration effected on behalf of such stockholders under the Stockholders' Agreement (other than underwriting discounts and commissions) were to be paid by the Company. Upon consummation of the Vistar Transactions, the Stockholders' Agreement was terminated and superseded by a Shareholders Agreement entered into among the Company and the Vistar Shareholders (consisting of Belron and the Kellman Shareholders and the respective permitted transferees thereof), the THL Shareholders (consisting of the Thomas H. Lee Equity Fund III, L.P. ("Equity Fund"), Thomas H. Lee Foreign Fund III, L.P. ("Foreign Fund"), THL-CCI Investors Limited Partnership ("THL-CCI") and Big Bend Investments, L.P. and the permitted transferees thereof) and certain members of the Company's management (the "Management Shareholders") (and the permitted transferees thereof). See "Security Ownership of Certain Beneficial Owners and Management." The Shareholders Agreement was amended by Amendment No. 1 to the Shareholders Agreement, dated as of March 26, 1998. Unless otherwise noted, references herein to the Shareholders Agreement shall mean the Shareholders Agreement, as amended. The Shareholders Agreement provides for the composition of the Board of Directors of the Company to be designated one half by certain Vistar Shareholders and one half by certain THL Shareholders. At the closing of the Vistar Transactions, the Company and certain of its shareholders (including Equity Fund, Foreign Fund, THL-CCI, Belron, the Kellman Shareholders and certain management Shareholders) entered into a Registration Agreement (the "Registration Agreement"), which gives such persons so-called "demand" and "piggy-back" rights to require the Company to effect the registration of shares of Registerable Securities (as defined in the Registration Agreement) they hold for sale to the public, subject to certain conditions and limitations. All fees, costs and expenses of any registration 75 78 effected on behalf of such shareholders under the Registration Agreement (other than underwriting discounts and commission) will be paid by the Company. Thomas H. Lee Company received $4.0 million in fees upon consummation of the Vistar Merger. In addition, Belron received fees totaling $3.0 million upon consummation of the Vistar Merger. The Company also paid $2.7 million in advisory fees to The Windsor Park Management Group as consideration for services provided to Vistar in connection with the Vistar Merger. Selwyn Herson, who became a director of the Company after consummation of the Vistar Merger, is an affiliate of The Windsor Park Management Group. At the closing of the Vistar Merger, the Company entered into an Amended and Restated Management Agreement with Thomas H. Lee Company, and an Amended and Restated Management Agreement with Belron (together, the "Management Agreements"), pursuant to which the Company agreed to pay to each of Thomas H. Lee Company and Belron, for management services provided to the Company, an annual fee of $1.0 million. Such management services consist of on-going operational, financial, accounting and strategic planning analysis and advice. The Management Agreements will continue in full force and effect, unless and until terminated by mutual consent of the respective parties thereto, for so long as Thomas H. Lee Company or Belron, as applicable (or any successor thereto or permitted assignee thereof, as the case may be) continues to carry on the business of providing management services of the type described in the respective Management Agreements; provided, however, that (i) either party to a Management Agreement may terminate such Management Agreement following a material breach of the terms thereof by the other party thereto and a failure to cure such breach within 30 days following written notice thereof and (ii) each of the Management Agreements shall automatically terminate upon the sale in an initial public offering registered under the Securities Act of shares of the Company's common stock. In connection with the closing of the Vistar Transactions, certain members of management of the Company received bonuses aggregating $1.0 million. Of such amount, Mr. Staglin received $212,000, Mr. Barlow received $212,000, Mr. Herron received $109,886, Mr. Feeney received $81,344, Mr. Maehl received $74,209, Ms. Wolszon received $84,198, Mr. West received $78,490 and Ms. Timmons received $57,084. In addition, prior to consummation of the Distribution, vesting of certain stock options to purchase an aggregate of 160,000 shares of the Company's Class A Common Stock, previously granted to Mr. Staglin (8,424 options), Mr. Barlow (50,000 options), Mr. Herron (23,370 options), Mr. Feeney (27,220 options), Mr. Maehl (14,076 options), Ms. Wolszon (14,076 options), Mr. West (14,076 options), and Ms. Timmons (8,758 options) under the Company's existing stock option plans, was accelerated, which permitted option holders to exercise those options and participate in the Distribution with respect to the shares of the Company's stock subject thereto. The acceleration of this vesting created a charge of approximately $3.0 million. See "Executive Compensation -- Option/SAR Grants in Last Fiscal Year." Certain former members of management of Vistar received transaction bonuses totaling approximately $5.2 million. In addition, certain former members of Vistar management will and have received severance payments, subject to the terms and conditions of their employment agreements. In connection with consummation of the Vistar Merger, the Company forgave all payments owed to Vistar by Joseph Kellman, formerly a Vistar Shareholder and currently a Safelite Shareholder, under a promissory note with an outstanding principal and interest amount due of approximately $3.5 million, and all payments owed to the Company by certain members of management under notes with outstanding amounts aggregating approximately $470,000. The total amount of loans made to executive officers which were forgiven were as follows: Mr. Staglin, $152,851; Mr. Barlow, $122,274; Mr. Herron, $29,778; Mr. Feeney, $3,237; Ms. Wolszon, $16,102; Mr. Maehl, $16,102; and Mr. West, $15,440. 76 79 DESCRIPTION OF CAPITAL STOCK The authorized capital stock of Safelite consists of 4,960,0000 shares of Safelite Class A Common Stock ("Class A Voting Stock"), $0.01 par value per share, 11,000,000 shares of Safelite Class B Common Stock ("Class B Non-Voting Stock" and, together with the Class A Voting Stock, the "Common Stock"), $0.01 par value per share, and 40,000 shares of 8% Preferred Stock, $.01 par value per share (the "8% Preferred Stock"). The following summary of certain provisions of the Common Stock and Non-Voting Preferred Stock does not purport to be complete and is subject to, and qualified in its entirety by, the provisions of the Company's Restated Certificate of Incorporation (the "Restated Certificate of Incorporation") and by the provisions of applicable law. COMMON STOCK Except as otherwise provided below, all shares of Class A Voting Stock and Class B Non-Voting Stock are identical in all respects and entitle the holders thereof to the same rights, preferences and privileges, subject to the same qualifications, limitations and restrictions, as set forth in the Restated Certificate of Incorporation. Dividends. As and when dividends are declared or paid with respect to shares of Common Stock, whether in cash, property or securities of the Company, the holders of Class A Voting Stock and the holders of Class B Non-Voting Stock are entitled to receive such dividends pro rata at the same rate per share of each class of Common Stock; provided that (i) if dividends are declared or paid in shares of Common Stock, the dividends payable on shares of Class A Voting Stock are payable in shares of Class A Voting Stock and the dividends payable on shares of Class B Non-Voting Stock are payable in shares of Class B Non-Voting Stock, and (ii) if the dividends consist of other voting securities of the Company, the Company will pay to each holder of Class B Non-Voting Stock dividends consisting of non-voting securities (except as otherwise required by law) of the Company which are otherwise identical to the voting securities and which are convertible into such voting securities on the same terms as the Class B Non-Voting Stock is convertible into the Class A Voting Stock. Dissolution, Liquidation or Winding-Up. In the event of any dissolution, liquidation or winding-up of the affairs of the Company, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Company and of the amounts to which the holders of any outstanding shares of any capital stock ranking senior in preference to the Common Stock are entitled, including, without limitation, the holders of Non-Voting Preferred Stock, the holders of the Class A Voting Stock and the holders of the Class B Non-Voting shall be entitled to participate pro rata at the same rate per share of each class of Common Stock in all distributions to the holders of the Common Stock in any liquidation, dissolution or winding-up of the Company. The Board of Directors of the Company, in good faith, shall determine the fair market value, as of the date of distribution, of any property (other than cash) distributed in the event of any dissolution, liquidation or winding-up of the affairs of the Company and such fair market value shall be the amount received in such dissolution, liquidation or winding-up by the stockholders by reason of the distribution of the property). Any such determination made by the Board of Directors of the Company shall be final and binding on the Company and all holders of Common Stock. Voting. Except as otherwise provided below or as otherwise required by applicable law, the holders of Class A Voting Stock are entitled to one vote per share on all matters to be voted on by the Company's stockholders and, except as otherwise required by law, the holders of Class B Non-Voting Stock have no right to vote on any matters to be voted on by the Company's stockholders. Conversion of the Class B Non-Voting Stock. Any holder of shares of Class B Non-Voting Stock has the right to exchange such holder's shares of Class B Non-Voting Stock as follows: (i) any time on or after the Triggering Day (as defined below), all shares of Class B Non-Voting Stock held by any person shall be exchangeable, on a one-for-one basis, for shares of Class A Voting Stock, and (ii) upon or any time after the sale, which is not a Permitted Transfer (as defined below), to any person, such shares of 77 80 Class B Non-Voting Stock which have been so sold shall be exchangeable for shares of Class A Voting Stock. The terms "Triggering Day" and "Permitted Transfer" have the respective meanings set forth in the Shareholders Agreement entered into in connection with the Vistar Transactions, which is filed as an Exhibit to the Registration Statement. See "Certain Relationships and Related Transactions." The conversion of Class B Non-Voting Stock to Class A Voting Stock could result in a Change of Control (as defined in the Indenture). The rights, preferences and privileges of holders of the Common Stock are subject to, and may be adversely affected by, the rights of holders of shares of the Non-Voting Preferred Stock and any other preferred stock that the Company may designate in the future. PREFERRED STOCK The Non-Voting Preferred Stock is an accumulating perpetual preferred stock. The Non-Voting Preferred Stock was part of the merger consideration issued pursuant to the Vistar Transactions. Dividends. The Company will pay cumulative semi-annual dividends on the Non-Voting Preferred Stock if, when and as declared by the Board of Directors of the Company, and to the extent permitted under the General Corporation Law of the State of Delaware, which shall accrue on a daily basis (computed on the basis of a 360-day year and actual days elapsed) at the rate per annum of eight percent (8%) per share of Non-Voting Preferred Stock calculated as a percentage of $1,000 (plus accrued and unpaid dividends), compounded semiannually, from and including the effective date of the Vistar Merger until the redemption of Non-Voting Preferred Stock (with payment being calculated through the date on which payment shall be tendered to the holders of Non-Voting Preferred Stock). This dividend rate will automatically increase to (i) fourteen percent (14%) per annum upon the Occurrence of a Redemption Event (defined below), (ii) fifteen percent (15%) per annum on the first annual anniversary date of such Redemption Event and (iii) sixteen percent (16%) per annum on the second anniversary date of such Redemption Event if the Company elects not to redeem Non-Voting Preferred Stock upon the occurrence of such Redemption Event. Such dividends will accrue and be cumulative whether or not they have been declared and whether or not there are profits, surplus or other funds of the Company legally available for the payment of dividends. The date on which the Company initially issues any shares of Non-Voting Preferred Stock will be deemed to be its "date of issuance" regardless of the number of times transfer of such shares of Non-Voting Preferred Stock is made on the stock records of the Company, and regardless of the number of certificates which may be issued to evidence such shares of Non-Voting Preferred Stock. A "Redemption Event" shall mean (i) an underwritten initial public offering of the Company's capital stock pursuant to a registration statement effected under the Securities Act or (ii) the occurrence of a Change in Control under the terms of the Indenture. If at any time the Company distributes less than the total amount of dividends then accrued with respect to Non-Voting Preferred Stock, such payment will be distributed among the holders of Non-Voting Preferred Stock so that an equal amount will be paid (as nearly as possible) with respect to each outstanding share of Non-Voting Preferred Stock. As a result of restrictions contained in the Indenture, dividends are not payable in respect of the Non-Voting Preferred Stock unless such payment is in compliance with the Limitation on Restricted Payments covenant contained in the Indenture. The accrual of dividends, however, is not subject to restriction in the Indenture. So long as any shares of Non-Voting Preferred Stock remain outstanding, neither the Company nor any Subsidiary (which shall mean any Company, association or other business entity of which the Company directly or indirectly owns at the time more than fifty percent (50%) of the outstanding voting securities or equity interests) will redeem, purchase or otherwise acquire any other equity security of the Company junior to Non-Voting Preferred Stock in right to payment outstanding on the date of the Restated Certificate of Incorporation or thereafter outstanding, including, without limitation, the Common Stock (all such securities collectively, the "Junior Securities"), nor will the Company declare or pay any cash dividend (including accrued dividends) or make any distribution of assets other than shares of 78 81 Junior Securities upon any Junior Securities; provided that nothing in the Restated Certificate of Incorporation shall prohibit the Company from acquiring Common Stock of the Company pursuant to contractual rights approved by the Board of Directors of the Company. Liquidation, Dissolution or Winding-Up. In the event of a Liquidity Event (as defined below), before any distribution or payment may be made with respect to the Junior Securities, holders of each share of Non-Voting Preferred Stock shall be entitled to be paid out of the assets of the Company available for distribution to holders of the Company's capital stock of all classes, whether such assets are capital, surplus, or capital earnings, an amount in cash equal to $1,000 per share of Non-Voting Preferred Stock (which amount, together with the other shares and per share numbers used in the Restated Certificate of Incorporation shall be subject to equitable adjustment whenever there shall occur a stock split, combination, reclassification or other similar event involving the class or series of stock in question), plus accrued dividends from the date of issuance thereof up to and including the date full payment shall be tendered to the holders of Non-Voting Preferred Stock with respect to such Liquidity Event (the "Liquidation Amount"). The term "Liquidity Event" shall mean a liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary. If, upon any such Liquidity Event, the assets of the Company available for distribution to its stockholders shall be insufficient to permit payment to the holders of Non-Voting Preferred Stock of the full amount of the Liquidation Amount to which they are entitled to be paid, the holders of shares of Non-Voting Preferred Stock shall share ratably in any distribution of assets according to the amounts which would be payable with respect to the shares of Non-Voting Preferred Stock held by them upon such distribution if all amounts payable on or with respect to said shares were paid in full. After the payment of the Liquidation Amount shall have been made in full to the holders of Non-Voting Preferred Stock, or funds necessary for such payment shall have been set aside by the Company in trust for the accounts of holders of Non-Voting Preferred Stock so as to be available for such payments, the holders of Non-Voting Preferred Stock shall be entitled to no further participation in the distribution of the assets of the Company, and the remaining assets of the Company legally available for distribution to its stockholders shall be distributed among the holder of other classes of securities of the Company in accordance with their respective terms. The Liquidation Amount shall be paid in cash to the extent the Company has cash available. Whenever a distribution provided for above is payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Company's Board of Directors. As a result of restrictions contained in the Indenture, distributions are not payable in respect of the Non-Voting Preferred Stock unless such distributions are in compliance with the Limitation on Restricted Payments covenant contained in the Indenture. Voting. Except as otherwise required by law, the holders of Non-Voting Preferred Stock shall have no right to vote on any matters to be voted on by the Company's stockholders. Mandatory Redemption. The Non-Voting Preferred Stock is not mandatorily redeemable. Optional Redemption. The Company may redeem Non-Voting Preferred Stock at its option, in whole or in part, at $1,000 per share plus accrued dividends from the date of issuance thereof up to and including the date full payment shall be tendered to holders of Non-Voting Preferred Stock with respect to such redemption (the "Redemption Price"), at any time (the "Redemption Date"). If, at any time, the Company redeems less than all of the outstanding shares of Non-Voting Preferred Stock, such redemption will be made from the holders of Non-Voting Preferred Stock on a pro rata basis based on the number of shares of Non-Voting Preferred Stock held by each stockholder. The terms of the Bank Credit Agreement and the Indenture restrict the Company's ability to redeem shares of the Non-Voting Preferred Stock. Ranking. The Non-Voting Preferred Stock, with respect to dividend and redemption rights and rights upon liquidation, dissolution and winding up, ranks prior to all other series of preferred stock of the Company and all classes of common stock of the Company. No preferred stock or other class of equity securities of the Company ranking senior to or pari passu with the Non-Voting Preferred Stock, with 79 82 respect to dividends or redemption payments or upon dissolution, liquidation or winding up, may be created without the consent of the holders of the Non-Voting Preferred Stock, as described below. Restrictions and Limitations. The Company shall not amend the Restated Certificate of Incorporation without the approval, by vote or written consent, by the holders of at least a majority of the then outstanding shares of Non-Voting Preferred Stock, voting together as a separate class, if such amendment would amend any of the rights, preferences, privileges of or limitations provided for in the Restated Certificate of Incorporation for the benefit of any shares of Non-Voting Preferred Stock. Without limiting the generality of the preceding sentence, the Company will not amend the Restated Certificate of Incorporation without the approval by the holders of at least a majority of the then outstanding shares of Non-Voting Preferred Stock, voting separately as a separate class, if such amendment would: (i) change the relative seniority rights of holders of Non-Voting Preferred Stock as to the payment of dividends in relation to the holders of any other capital stock of the Company; (ii) reduce the amount payable to the holders of Non-Voting Preferred Stock upon the voluntary or involuntary liquidation, dissolution or winding-up of the Company, or change the relative seniority of the liquidation preferences of the holders of Non-Voting Preferred Stock to the rights upon liquidation of the holders of other capital stock of the Company, or change the dividend rights of the holders of Non-Voting Preferred Stock; (iii) cancel or modify the redemption rights provided for in the Restated Certificate of Incorporation; or (iv) cancel or modify the rights of the holders of Non-Voting Preferred Stock provided for in the section of the Restated Certificate of Incorporation entitled "Restrictions and Limitations." No Reissuance of Preferred Stock. No share or shares of Non-Voting Preferred Stock acquired by the Company by reason of redemption, purchase or otherwise shall be reissued, and all such shares shall be canceled, retired and eliminated from the shares which the Company shall be authorized to issue. The Company may from time to time take such appropriate corporate action as may be necessary to reduce the authorized number of shares of Non-Voting Preferred Stock accordingly. CERTAIN CHARTER AND BY-LAW PROVISIONS The Restated Certificate of Incorporation of the Company provides that no director shall be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for (i) any breach of the director's duty of loyalty to the Company or its stockholders; (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) acts or omissions in respect of certain unlawful dividends and payments or stock redemptions or repurchases; or (iv) any transaction from which such director derives improper personal benefit. The effect of this provision is to eliminate the rights of the Company and its stockholders through stockholders' derivative suits on behalf of the Company to recover monetary damages against a director for breach of the fiduciary duty of care as a director (including breaches resulting from negligent or grossly negligent behavior) except in the situations described in clauses (i) through (iv) above. The limitations summarized above, however, do not affect the ability of the Company or its stockholders to seek non-monetary based remedies, such as an injunction or rescission, against a director for breach of his fiduciary duty nor would such limitations limit liability under the Federal Securities Laws. The Company's Amended and Restated Bylaws provide that the Company shall, to the full extent permitted by the Delaware General Corporation Law as currently in effect, indemnify and may advance expenses to, each of its currently acting and former directors, officers, employees and agents arising in connection with their acting in such capacities. 80 83 DESCRIPTION OF OTHER INDEBTEDNESS The description set forth below does not purport to be complete and is qualified in its entirety by reference to certain agreements setting forth the principal terms and conditions of the Bank Credit Agreement. The Chase Manhattan Bank ("Chase") has provided the Company with senior secured credit facilities (referred to herein as the Bank Credit Agreement) in an aggregate principal amount of $450 million under which $350 million was borrowed under the Term Loan Facility (as defined below) in connection with the Vistar Transactions and $41.3 million of a total of $100 million of commitments available (less outstanding letters of credit of $17.6 million) under the Revolving Credit Facility was borrowed at April 4, 1998. Structure. The Bank Credit Agreement consists of (a) a term loan facility in an aggregate principal amount of $350 million (the "Term Loan Facility"), consisting of three tranches in principal amounts of $150 million (the "Tranche A Term Loan"), $100 million (the "Tranche B Term Loan"), and $100 million (the "Tranche C Term Loan"), respectively, and (b) a revolving credit facility providing for revolving loans to the Company and the issuance of letters of credit for the account of the Company in an aggregate principal amount (including the aggregate stated amount of letters of credit and the aggregate reimbursement and other obligations in respect thereof) at any time not to exceed $100 million (the "Revolving Credit Facility"). Availability. The availability of the Bank Credit Agreement is subject to various conditions precedent typical for bank loans, and Chase's commitments to provide the Bank Credit Agreement are also subject to, among other things, the absence of any material adverse change with respect to the Company in particular or the financial, banking or capital markets in general. The full amount of the Term Loan Facility was drawn at the time of the Vistar Transactions and, subject to limited exceptions, amounts repaid or prepaid under the Term Loan Facility may not be reborrowed. Repayment. The Tranche A Term Loan and the Revolving Credit Facility will mature on the sixth anniversary of the initial borrowing under the Bank Credit Agreement (such initial borrowing date referred to hereinafter as the "Closing"). The Tranche B Term Loan will mature on the seventh anniversary of the Closing. The Tranche C Term Loan will mature on the eighth anniversary of the Closing. The Term Loan Facility is subject to the following amortization schedule:
REPAYMENT AMOUNTS --------------------------------------- TRANCHE A TRANCHE B TRANCHE C DATE TERM LOAN TERM LOAN TERM LOAN ---- ----------- ----------- ----------- Last business day in September, December 1999..... $ 5,000,000 $ 250,000 $ 250,000 Last business day in March, June, September and December 2000................................... 5,000,000 250,000 250,000 Last business day in March, June, September and December 2001................................... 7,500,000 250,000 250,000 Last business day in March, June, September and December 2002................................... 10,000,000 250,000 250,000 Last business day in March, June, September 2003............................................ 12,500,000 12,062,500 250,000 December 17, 2003................................. 12,500,000 -- -- Last business day in December 2003................ -- 12,062,500 250,000 Last business day in March, June, September and December 2004................................... -- 12,062,500 11,937,500 December 17, 2004................................. -- 12,062,500 -- Last business day in December 2004................ -- -- 11,937,500 Last business day in March, June and September 2005............................................ -- 11,937,500 December 17, 2005................................. -- -- 11,937,500
In addition, the Bank Credit Agreement is subject to mandatory principal prepayment and commitment reductions (to be applied to the Term Loan Facility) in an amount equal to, subject to certain 81 84 exceptions, (a) 100% of the net cash proceeds of (i) certain debt and equity offerings by the Company or any of its subsidiaries and (ii) certain asset sales or other dispositions and (b) 50% of the Company's excess operating cash flow (as defined in the Bank Credit Agreement). Security. The Bank Credit Agreement is secured by security interests in and pledges of or liens on substantially all the assets of the Company and its subsidiaries, including pledges of all the capital stock of, or other equity interests in, certain subsidiaries of the Company. Guarantee. Each of the Subsidiary Guarantors has guaranteed the Company's indebtedness under the Bank Credit Agreement and, pursuant to the Second Supplemental Indenture, dated as of December 18, 1997, each of the Subsidiary Guarantors has unconditionally guaranteed, on a senior subordinated basis, jointly and severally, the Notes. Interest. At the Company's election, the interest rates per annum applicable to the loans under the Bank Credit Agreement are fluctuating rates of interest measured by reference to either (a) an adjusted London inter-bank offered rate ("LIBOR") plus a borrowing margin or (b) an alternate base rate ("ABR") (equal to the higher of Chase's published prime rate and the Federal Funds effective rate plus 1/2 of 1% per annum) plus a borrowing margin. The borrowing margins applicable to the Tranche A Term Loan and loans under the Revolving Credit Facility are 1.00% per annum for ABR loans and 2.00% per annum for LIBOR loans. The borrowing margins applicable to the Tranche B Term Loan are 1.25% per annum for ABR loans and 2.25% per annum for LIBOR loans. The borrowing margins applicable to the Tranche C Term Loan are 1.50% per annum for ABR loans and 2.50% per annum for LIBOR loans. All of the forgoing margins are subject to reduction based upon the achievement by the Company of certain financial performance thresholds. Amounts under the Bank Credit Agreement not paid when due bear interest at a default rate equal to 2.00% per annum above the rate otherwise applicable. Covenants. The Bank Credit Agreement contains a number of covenants that, among other things, restrict the ability of the Company to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness or amend other debt instruments, pay dividends, create liens on assets, make investments, loans or advances, make acquisitions, create subsidiaries, engage in mergers or consolidations, change the business conducted by the Company, make capital expenditures, or engage in certain transactions with affiliates and otherwise restrict certain corporate activities. In addition, under the Bank Credit Agreement, the Company is required to comply with specified financial ratios and minimum tests, including minimum interest coverage ratios and maximum leverage ratios. The Bank Credit Agreement also contains provisions that limit the Company's ability to amend or modify the Indenture and the Company's ability to prepay or refinance the Notes without the consent of the lenders under the Bank Credit Agreement. Events of Default. The Bank Credit Agreement contains customary events of default including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties in any material respect, cross default and cross acceleration to certain other indebtedness, bankruptcy, material judgments and liabilities, the occurrence of certain ERISA events, failure or invalidity of security or guarantees and change of control. During 1996, the Company purchased workers' compensation, automobile and product liability coverage for the period December 20, 1996 through December 31, 1999. The cost of this insurance was partially financed by approximately $13.7 million in premium financing, payable in monthly installments, including interest of 6.67% to 6.99%, of $514,000 in 1997 and $416,000 in 1998 and 1999. Under the terms of the financing, if the Company cancels its insurance policies for any reason, corresponding unearned premium refunds would be applied directly against the outstanding principal balance. At April 4, 1998, the outstanding principal balance of this premium financing was approximately $7.2 million. 82 85 DESCRIPTION OF EXCHANGE NOTES The Exchange Notes will be issued under the Indenture, dated as of December 20, 1996, among the Company, SGC Franchising Corp. (a former subsidiary of the Company) and Fleet National Bank, as trustee, as amended by the First Supplemental Indenture, dated as of December 12, 1997, between the Company and State Street Bank and Trust Company, as successor trustee to Fleet National Bank (the "Trustee"), and the Second Supplemental Indenture, dated as of December 18, 1997, among the Company, the Subsidiary Guarantors and the Trustee (the "Indenture"). References to the Notes include the Initial Notes and the Exchange Notes unless the context otherwise requires. Upon the issuance of the Exchange Notes, if any, or the effectiveness of a Shelf Registration Statement, the Indenture will be subject to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The following summary of the material provisions of the Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Trust Indenture Act, and to all of the provisions of the Indenture, including the definitions of certain terms therein and those terms made a part of the Indenture by reference to the Trust Indenture Act, as in effect on the date of the Indenture. The definitions of certain capitalized terms used in the following summary are set forth below under "Certain Definitions." For purposes of this section, references to the "Company" include only the Company and not its subsidiaries. The Notes will be unsecured obligations of the Company, ranking subordinate in right of payment to all Senior Indebtedness of the Company. The Notes will be issued in fully registered form only, without coupons, in denominations of $1,000 and integral multiples thereof. Initially, the Trustee will act as Paying Agent and Registrar for the Notes. The Notes may be presented for registration of transfer and exchange at the offices of the Registrar, which initially will be the Trustee's corporate trust office. The Company may change any Paying Agent and Registrar without notice to holders of the Notes (the "Holders"). The Company will pay principal (and premium, if any) on the Notes at the Trustee's corporate office in New York, New York. At the Company's option, interest may be paid at the Trustee's corporate trust office or by check mailed to the registered address of Holders. Any Initial Notes that remain outstanding after the completion of the Exchange Offer, together with the Exchange Notes issued in connection with the Exchange Offer, will be treated as a single class of securities under the Indenture. PRINCIPAL, MATURITY AND INTEREST The Notes are limited in aggregate principal amount to $100 million and will mature on December 15, 2006. Interest on the Notes will accrue at the rate of 9 7/8% per annum and will be payable semiannually in cash on each June 15 and December 15 commencing on June 15, 1997, to the Persons who are registered Holders at the close of business on the June 1 and December 1 immediately preceding the applicable interest payment date. Interest on the Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance. The Notes will not be entitled to the benefit of any mandatory sinking fund. 83 86 REDEMPTION Optional Redemption. The Notes will be redeemable, at the Company's option, in whole at any time or in part from time to time, on and after December 15, 2001, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on December 15 of the year set forth below, plus, in each case, accrued interest to the date of redemption:
YEAR PERCENTAGE - ---- ---------- 2001........................................................ 104.9375% 2002........................................................ 103.2917 2003........................................................ 101.6458 2004 and thereafter......................................... 100.0000
Optional Redemption Upon Equity Offerings. At any time, or from time to time, on or prior to December 15, 1999, the Company may, at its option, use the net cash proceeds of one or more Equity Offerings (as defined below) to redeem up to $35 million of the aggregate principal amount of Notes originally issued at a redemption price equal to 109.875% of the principal amount thereof plus accrued interest to the date of redemption; provided that at least $65 million of the original principal amount of Notes remains outstanding immediately after any such redemption. In order to effect the foregoing redemption with the proceeds of any Equity Offering, the Company shall make such redemption not more than 120 days after the consummation of any such Equity Offering. "Equity Offering" means an offering of Qualified Capital Stock of the Company. SELECTION AND NOTICE In case of a partial redemption, selection of the Notes or portions thereof for redemption shall be made by the Trustee by lot, pro rata or in such manner as it shall deem appropriate and fair and in such manner as complies with any applicable legal requirements; provided, however, that if a partial redemption is made with the proceeds of an Equity Offering, selection of the Notes or portion thereof for redemption shall be made by the Trustee only on a pro rata basis, unless such method is otherwise prohibited. Notes may be redeemed in part in multiples of $1,000 principal amount only. Notice of redemption will be sent, by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption to each Holder whose Notes are to be redeemed at the last address for such Holder then shown on the registry books. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Note. On and after any redemption date, interest will cease to accrue on the Notes or part thereof called for redemption as long as the Company has deposited with the Paying Agent funds in satisfaction of the redemption price pursuant to the Indenture. RANKING OF NOTES The indebtedness evidenced by the Notes will be unsecured Senior Subordinated Indebtedness of the Company, will be subordinated in right of payment, as set forth in the Indenture, to all existing and future Senior Indebtedness of the Company, will rank pari passu in right of payment with all existing and future Senior Subordinated Indebtedness of the Company and will be senior in right of payment to all existing and future Subordinated Obligations of the Company. The Notes will also effectively be subordinated to any Secured Indebtedness of the Company to the extent of the value of the assets securing such Indebtedness, and to all Indebtedness of its Subsidiaries. However, payment from the money or the proceeds of U.S. government obligations held in any defeasance trust described under "-- Legal Defeasance and Covenant Defeasance" below is not subordinated to any Senior Indebtedness or subject to the restrictions described above if the deposit to such trust which is used to fund such payment was permitted at the time of such deposit. 84 87 As of April 4, 1998, the Company had approximately $503.6 million of Senior Indebtedness outstanding (excluding unused commitments) all of which would have been Secured Indebtedness (excluding $17.6 million of outstanding letters of credit). Although the Indenture contains limitations on the amount of additional Indebtedness which the Company and its Restricted Subsidiaries may incur, under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Senior Indebtedness or Secured Indebtedness. See "-- Certain Covenants -- Limitation on Incurrence of Additional Indebtedness" below. Only Indebtedness of the Company that is Senior Indebtedness will rank senior in right of payment to the Notes in accordance with the provisions of the Indenture. The Notes will in all respects rank pari passu in right of payment with all other Senior Subordinated Indebtedness of the Company. The Company has agreed in the Indenture that it will not incur, directly or indirectly, any Indebtedness which is expressly subordinate in right of payment to Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness. Without limiting the foregoing, unsecured Indebtedness is not deemed to be subordinate or junior to Secured Indebtedness merely because it is unsecured. The Company may not pay principal of, premium (if any) or interest on, or any other amount in respect of, the Notes or make any deposit pursuant to the provisions described under "-- Legal Defeasance and Covenant Defeasance" below and may not otherwise purchase, redeem or otherwise retire any Notes (collectively, "pay the Notes") if (i) any Senior Indebtedness is not paid when due in cash or Cash Equivalents or (ii) any other default on Senior Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such Senior Indebtedness has been paid in full in cash or Cash Equivalents. However, the Company may pay the Notes without regard to the foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of the holders of the Designated Senior Indebtedness with respect to which either of the events set forth in clause (i) or (ii) of the immediately preceding sentence has occurred and is continuing. In addition, during the continuance of any default (other than a default described in clause (i) or (ii) of the first sentence of the immediately preceding paragraph) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Notes for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to the Company) of written notice (a "Blockage Notice") of such default from the Representative of the holders of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (ii) because the default giving rise to such Blockage Notice is no longer continuing or (iii) because such Designated Senior Indebtedness has been repaid in full in cash or Cash Equivalents). Notwithstanding the provisions described in the immediately preceding paragraph, unless any of the events described in clause (i) or (ii) of the first sentence of the second immediately preceding paragraph is then occurring, the Company may resume payments on the Notes after the end of such Payment Blockage Period, including any missed payments. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. However, if any Blockage Notice within such 360-day period is given by or on behalf of any holders of Designated Senior Indebtedness other than the Bank Indebtedness, a Representative of holders of Bank Indebtedness may give another Blockage Notice within such period. In no event, however, may the total number of days during which any Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate during any 360 consecutive day period. 85 88 Upon any payment or distribution of the assets or securities of the Company upon a total or partial liquidation or dissolution or reorganization of or similar proceeding relating to the Company or its property or in a bankruptcy, insolvency, receivership or similar proceeding relating to the Company or its property, or in an assignment for the benefit of creditors or any marshaling of the assets and liabilities of the Company, the holders of Senior Indebtedness will be entitled to receive payment in full in cash or Cash Equivalents of the Senior Indebtedness before the holders of the Notes are entitled to receive any payment and, until the Senior Indebtedness is paid in full in cash or Cash Equivalents, any payment or distribution to which holders of the Notes would be entitled but for the subordination provisions of the Indenture will be made to holders of the Senior Indebtedness as their interests may appear. If a payment or distribution is made to holders of the Notes that due to the subordination provisions should not have been made to them, such holders of the Notes are required to hold it in trust for the holders of Senior Indebtedness and pay it over to them as their interests may appear. If payment of the Notes is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness or the Representative of such holders of the acceleration. The Company may not pay the Notes until five business days after such holders or the Representative of the holders of Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Notes only if the subordination provisions of the Indenture otherwise permit payment at that time. By reason of such subordination provisions contained in the Indenture, in the event of insolvency, creditors of the Company who are holders of Senior Indebtedness may recover more, ratably, than the holders of the Notes, and creditors of the Company who are not holders of Senior Indebtedness or of Senior Subordinated Indebtedness (including the Notes) may recover less, ratably, than holders of Senior Indebtedness and may recover more than the holders of Senior Subordinated Indebtedness. GUARANTEES The Indenture provides that, after the Issue Date, the Company will cause each Restricted Subsidiary of the Company that guarantees payment of the Bank Indebtedness (each, a "Subsidiary Guarantor") to execute and deliver to the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary will guarantee (each, a "Guarantee") payment of the Notes. The Subsidiary Guarantors are all of the Company's current Restricted Subsidiaries. Each of the Subsidiary Guarantors has guaranteed the Bank Indebtedness under the Bank Credit Agreement and, pursuant to the Second Supplemental Indenture, dated as of December 18, 1997, among the Company, the Subsidiary Guarantors and the Trustee, each of the Subsidiary Guarantors has guaranteed payment of the Notes. See "Certain Covenants -- Future Guarantees." Each Subsidiary Guarantor unconditionally guarantees, on a senior subordinated basis, jointly and severally, to each Holder and the Trustee, the full and prompt performance of the Company's obligations under the Indenture and the Notes, including the payment of principal of and interest on the Notes. The Guarantees will be subordinated to Guarantor Senior Indebtedness on the same basis as the Notes are subordinated to Senior Indebtedness. The obligations of each Subsidiary Guarantor are limited to the maximum amount which, after giving effect to all other contingent and fixed liabilities of such Subsidiary Guarantor and after giving effect to any collections from or payments made by or on behalf of any other Subsidiary Guarantor in respect of the obligations of such other Subsidiary Guarantor under its Guarantee or pursuant to its contribution obligations under the Indenture, will result in the obligations of such Subsidiary Guarantor under the Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law. Each Subsidiary Guarantor that makes a payment or distribution under a Guarantee shall be entitled to a contribution from each other Subsidiary Guarantor in an amount pro rata, based on the Adjusted Net Assets (as defined in the Indenture) of each Subsidiary Guarantor. Each Subsidiary Guarantor may consolidate with or merge into, liquidate, dissolve or sell its assets to the Company or another Subsidiary Guarantor that is a Wholly Owned Restricted Subsidiary of the Company without limitation, or with other Persons upon the terms and conditions set forth in the 86 89 Indenture. See "Certain Covenants -- Merger, Consolidation and Sale of Assets." In the event that (i) either all of the Capital Stock of a Subsidiary Guarantor is sold by the Company (whether by merger, stock purchase or otherwise) or all or substantially all of the assets of a Subsidiary Guarantor are sold by such Subsidiary Guarantor and such sale complies with the provisions set forth in "Certain Covenants -- Limitation on Asset Sales" or (ii) the lenders under the Bank Credit Agreement release a Subsidiary Guarantor of all guarantees under the Bank Credit Agreement and release all Liens on the property and assets of such Subsidiary Guarantor relating to the Bank Indebtedness, then in each case the Subsidiary Guarantor's Guarantee will be released. Separate financial statements of the Subsidiary Guarantors are not included herein because the Subsidiary Guarantors are jointly and severally liable with respect to the Company's obligations pursuant to the Exchange Notes, and the aggregate net assets, earnings and equity of the Subsidiary Guarantors and the Company are substantially equivalent to the net assets, earnings and equity of the Company on a consolidated basis. CHANGE OF CONTROL The Indenture provides that upon the occurrence of a Change of Control Triggering Event, each Holder will have the right to require that the Company purchase all or a portion of such Holder's Notes pursuant to the offer described below (the "Change of Control Offer"), at a purchase price equal to 101% of the principal amount thereof plus accrued interest to the date of purchase. The Indenture provides that, prior to the mailing of the notice referred to below, but in any event within 30 days following any Change of Control Triggering Event, the Company covenants to (i) repay in full and terminate all commitments under the Bank Indebtedness or offer to repay in full and terminate all commitments under all Bank Indebtedness and to repay the Bank Indebtedness owed to each holder of Bank Indebtedness which has accepted such offer or (ii) obtain the requisite consents under the Bank Credit Agreement to permit the repurchase of the Notes as provided below. The Company shall first comply with the covenant in the immediately preceding sentence before it shall be required to repurchase Notes pursuant to the provisions described below. The Company's failure to comply with this covenant shall constitute an Event of Default described in clause (iii) and not in clause (ii) under "Events of Default" below. Within 30 days following the date upon which the Change of Control Triggering Event occurred, the Company must send, by first class mail, a notice to each Holder, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. Such notice shall state, among other things, the purchase date, which must be no earlier than 30 days nor later than 45 days from the date such notice is mailed, other than as may be required by law (the "Change of Control Payment Date"). Holders electing to have a Note purchased pursuant to a Change of Control Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third business day prior to the Change of Control Payment Date. If a Change of Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay the Change of Control purchase price for all the Notes that might be delivered by Holders seeking to accept the Change of Control Offer. In the event the Company is required to purchase outstanding Notes pursuant to a Change of Control Offer, the Company expects that it would seek third party financing to the extent it does not have available funds to meet its purchase obligations. However, there can be no assurance that the Company would be able to obtain such financing. The definition of Change of Control includes a phrase relating to the sale, lease, exchange or other transfer of "all or substantially all" of the Company's assets as such phrase is defined in the Revised Model Business Corporation Act. Although there is a developing body of case law interpreting the phrase "substantially all," there is no precise definition of the phrase under applicable law. Accordingly, in certain circumstances there may be a degree of uncertainty in ascertaining whether a particular transaction would involve a disposition of "all or substantially all" of the assets of the Company, and 87 90 therefore it may be unclear as to whether a Change of Control has occurred and whether the Holders have the right to require the Company to repurchase such Notes. Neither the Board of Directors of the Company nor the Trustee may waive the covenant relating to a Holder's right to redemption upon a Change of Control Triggering Event. Restrictions in the Indenture described herein on the ability of the Company and its Restricted Subsidiaries to incur additional Indebtedness, to grant Liens on their properties, to make Restricted Payments and to make Asset Sales may also make more difficult or discourage a takeover of the Company, whether favored or opposed by the management of the Company. Consummation of any such transaction in certain circumstances may require redemption or repurchase of the Notes, and there can be no assurance that the Company or the acquiring party will have sufficient financial resources to effect such redemption or repurchase. Such restrictions and the restrictions on transactions with Affiliates may, in certain circumstances, make more difficult or discourage any leveraged buyout of the Company or any of its Subsidiaries by the management of the Company. While such restrictions cover a wide variety of arrangements which have traditionally been used to effect highly leveraged transactions, the Indenture may not afford the Holders of Notes protection in all circumstances from the adverse aspects of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Change of Control" provisions of the Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the "Change of Control" provisions of the Indenture by virtue thereof. CERTAIN COVENANTS The Indenture contains, among others, the following covenants: Limitation on Restricted Payments. The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock) on or in respect of shares of Capital Stock of the Company to holders of such Capital Stock, (b) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock, other than the exchange of such Capital Stock for Qualified Capital Stock, or (c) make any Investment (other than Permitted Investments) (each of the foregoing actions set forth in clauses (a), (b) and (c) being referred to as a "Restricted Payment"), if at the time of such Restricted Payment or immediately after giving effect thereto, (i) a Default or an Event of Default shall have occurred and be continuing, (ii) the Company is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant or (iii) the aggregate amount of Restricted Payments made subsequent to the Issue Date shall exceed the sum of: (w) 50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company earned subsequent to the Issue Date and on or prior to the date the Restricted Payment occurs (the "Reference Date") (treating such period as a single accounting period); plus (x) 100% of the aggregate net cash proceeds received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to the Issue Date and on or prior to the Reference Date of Qualified Capital Stock of the Company (including Capital Stock issued upon the conversion of convertible Indebtedness or in exchange for outstanding Indebtedness); plus (y) without duplication of any amounts included in clause (iii)(x) above, 100% of the aggregate net cash proceeds of any equity contribution received by the Company from a holder of the Company's Capital Stock (excluding any net cash proceeds from such equity contribution to the extent used to redeem Notes in accordance with the optional redemption provisions of the Notes); plus (z) to the extent that any Investment (other than a Permitted Investment) that was made after the Issue Date is sold for cash or 88 91 otherwise liquidated or repaid for cash, the lesser of (A) the cash received with respect to such sale, liquidation or repayment of such Investment (less the cost of such sale, liquidation or repayment, if any) and (B) the initial amount of such Investment. Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph do not prohibit: (1) the payment of any dividend or the consummation of any irrevocable redemption within 60 days after the date of declaration of such dividend or notice of such redemption if the dividend or payment of the redemption price, as the case may be, would have been permitted on the date of declaration or notice; (2) if no Event of Default shall have occurred and be continuing as a consequence thereof, the acquisition of any shares of Capital Stock of the Company, either (i) solely in exchange for shares of Qualified Capital Stock of the Company, or (ii) through the application of net proceeds of a substantially concurrent sale (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company; (3) payments for the purpose of and in an amount equal to the amount required to permit the Company to redeem or repurchase shares of its Capital Stock or options in respect thereof, in each case in connection with the repurchase provisions under employee stock option or stock purchase agreements or other agreements to compensate management employees; provided that such redemptions or repurchases pursuant to this clause (3) shall not exceed $2 million (which amount shall be increased by the amount of any cash proceeds to the Company from (x) sales of its Capital Stock to management employees subsequent to the Issue Date and (y) any "key-man" life insurance policies which are used to make such redemptions or repurchases) in the aggregate; (4) the payment of fees and compensation as permitted under clause (i) of paragraph (b) of the "Transactions with Affiliates" covenant; (5) so long as no Default or Event of Default shall have occurred and be continuing, payments not to exceed $100,000 in the aggregate, to enable the Company to make payments to holders of its Capital Stock in lieu of issuance of fractional shares of its Capital Stock; (6) repurchases of Capital Stock deemed to occur upon the exercise of stock options if such Capital Stock represents a portion of the exercise price thereof; (7) payments made on the Issue Date pursuant to the Recapitalization Agreement and (8) payment of the Distribution. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (iii) of the immediately preceding paragraph, (a) amounts expended (to the extent such expenditure is in the form of cash or other property other than Qualified Capital Stock) pursuant to clauses (1), (2) and (3) of this paragraph shall be included in such calculation, provided that such expenditures pursuant to clause (3) shall not be included to the extent of cash proceeds received by the Company from any "key man" life insurance policies and (b) amounts expended pursuant to clauses 2 (i), (4), (5), (6), (7) and (8) shall be excluded from such calculation. The Indenture will not permit the payment of dividends in respect of the Non-Voting Preferred Stock unless the Company exercises its optional right to redeem the Non-Voting Preferred Stock; provided that the payment of such dividends will only be permitted if such payment is in compliance with the other provisions of the "Limitation on Restricted Payments" covenant. Limitation on Incurrence of Additional Indebtedness. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, "incur") any Indebtedness (other than Permitted Indebtedness); provided, however, that if no Default or Event of Default shall have occurred and be continuing at the time or as a consequence of the incurrence of any such Indebtedness, the Company or any Subsidiary Guarantor may incur Indebtedness if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0. Limitations on Transactions with Affiliates. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (an "Affiliate Transaction"), other than (x) Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained in a comparable 89 92 transaction at such time on an arm's-length basis from a Person that is not an Affiliate; provided, however, that for a transaction or series of related transactions with an aggregate value of $2 million or more, at the Company's option (i) such determination shall be made in good faith by a majority of the disinterested members of the Board of the Directors of the Company or (ii) the Board of Directors of the Company or any such Restricted Subsidiary party to such Affiliate Transaction shall have received a favorable opinion from a nationally recognized investment banking firm that such Affiliate Transaction is on terms not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate; provided, further, that for a transaction or series of related transactions with an aggregate value of $5 million or more, the Board of Directors of the Company shall have received a favorable opinion from a nationally recognized investment banking firm that such Affiliate Transaction is on terms not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate. (b) The foregoing restrictions shall not apply to (i) reasonable fees and compensation paid to, and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any Subsidiary of the Company as determined in good faith by the Company's Board of Directors or senior management; (ii) transactions exclusively between or among the Company and any of its Wholly Owned Restricted Subsidiaries or exclusively between or among such Wholly Owned Restricted Subsidiaries, provided such transactions are not otherwise prohibited by the Indenture; (iii) transactions effected as part of a Qualified Receivables Transaction; (iv) any agreement as in effect as of the Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) in any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Issue Date; (v) Restricted Payments permitted by the Indenture; and (vi) payments made by the Company to, and agreements entered into by the Company with, Affiliates in connection with the Vistar Merger. Limitation on Liens. The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist any Liens of any kind against or upon any of its property or assets, or any proceeds therefrom, unless (i) in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the Notes, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens and (ii) in all other cases, the Notes are equally and ratably secured, except for (A) Liens existing as of the Issue Date and any extensions, renewals or replacements thereof; (B) Liens securing Senior Indebtedness and Guarantor Senior Indebtedness; (C) Liens securing the Notes and the Guarantees; (D) Liens of the Company or a Wholly Owned Restricted Subsidiary on assets of any Subsidiary of the Company; (E) Liens securing Indebtedness which is incurred to refinance Indebtedness which has been secured by a Lien permitted under the Indenture and which has been incurred in accordance with the provisions of the Indenture; provided, however, that such Liens do not extend to or cover any property or assets of the Company or any of its Restricted Subsidiaries not securing the Indebtedness so refinanced; and (F) Permitted Liens. Prohibition on Incurrence of Senior Subordinated Debt. Neither the Company nor any Subsidiary Guarantor will incur or suffer to exist Indebtedness that is senior in right of payment to the Notes or such Subsidiary Guarantor's Guarantee and subordinate in right of payment to any other Indebtedness of the Company or such Subsidiary Guarantor, as the case may be. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on or in respect of its Capital Stock; (b) make loans or advances or to pay any Indebtedness or other obligation owed to the Company or any other Restricted Subsidiary of the Company; or (c) transfer any of its property or assets to the Company or any other Restricted Subsidiary of the Company, except for such encumbrances or restrictions existing under or by reason of: (1) applicable law; (2) the Indenture; (3) non-assignment 90 93 provisions of any contract or any lease entered into in the ordinary course of business; (4) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to the Company or any Restricted Subsidiary of the Company, or the properties or assets of any such Person, other than the Person or the properties or assets of the Person so acquired; (5) agreements existing on the Issue Date (including, without limitation, the Bank Credit Agreement and the Recapitalization Agreement); (6) restrictions on the transfer of assets subject to any Lien permitted under the Indenture imposed by the holder of such Lien; (7) restrictions imposed by any agreement to sell assets permitted under the Indenture to any Person pending the closing of such sale; (8) any agreement or instrument governing Capital Stock of any Person that is acquired after the Issue Date; (9) Indebtedness or other contractual requirements of a Receivables Entity in connection with a Qualified Receivables Transaction; provided that such restrictions apply only to such Receivables Entity; or (10) an agreement effecting a refinancing, replacement or substitution of Indebtedness issued, assumed or incurred pursuant to an agreement referred to in clause (2), (4) or (5) above; provided, however, that the provisions relating to such encumbrance or restriction contained in any such refinancing, replacement or substitution agreement are no less favorable to the Company or the Holders in any material respect as determined by the Board of Directors of the Company than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clause (2), (4) or (5). Limitation on Preferred Stock of Subsidiaries. The Company will not permit any of its Restricted Subsidiaries to issue any Preferred Stock (other than to the Company or to a Wholly Owned Restricted Subsidiary of the Company) or permit any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company) to own any Preferred Stock of any Restricted Subsidiary of the Company. Merger, Consolidation and Sale of Assets. The Company will not, in a single transaction or a series of related transactions, consolidate with or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets to, another Person or Persons unless (i) either (A) the Company shall be the survivor of such merger or consolidation or (B) the surviving Person is a corporation existing under the laws of the United States, any state thereof or the District of Columbia and such surviving Person shall expressly assume all the obligations of the Company under the Notes and the Indenture; (ii) immediately after giving effect to such transaction (on a pro forma basis, including any Indebtedness incurred or anticipated to be incurred in connection with such transaction and including adjustments that are (i) directly attributable to such transaction and (ii) factually supportable), the Company or the surviving Person is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant; (iii) immediately before and immediately after giving effect to such transaction (including any Indebtedness incurred or anticipated to be incurred in connection with the Transactions), no Default or Event of Default shall have occurred and be continuing; (iv) each Subsidiary Guarantor, unless it is the other party to the Transactions, shall have by supplemental indenture confirmed that after consummation of such transaction its Guarantee shall apply, as such Guarantee applied on the date it was granted under the Indenture to the obligations of the Company under the Indenture and the Notes, to the obligations of the Company or such Person, as the case may be, under the Indenture and the Notes; and (v) the Company has delivered to the Trustee an officers' certificate and opinion of counsel, each stating that such consolidation, merger or transfer complies with the Indenture, that the surviving Person agrees to be bound thereby, and that all conditions precedent in the Indenture relating to such transaction have been satisfied. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. Notwithstanding the foregoing clauses (ii) and (iii) of the preceding sentence, (a) any Restricted Subsidiary of the Company may consolidate with, merge into or transfer all or part of its properties and assets to the Company and (b) the Company may merge with an Affiliate incorporated solely for the purpose of reincorporating the Company in another jurisdiction. 91 94 The Indenture provides that upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of the Company in accordance with the foregoing, the surviving entity shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture and the Notes with the same effect as if such surviving entity had been named as such; provided that solely for purposes of computing amounts described in clause (iii) of the first paragraph of the covenant "Limitation on Restricted Payments" above, any such surviving entity to the Company shall only be deemed to have succeeded to and be substituted for the Company with respect to periods subsequent to the effective time of such merger, consolidation, combination or transfer of assets. Each Subsidiary Guarantor (other than any Subsidiary Guarantor whose Guarantee is to be released in accordance with the terms of its Guarantee and the Indenture in connection with any transaction complying with the provisions of "-- Limitation on Asset Sales" or as otherwise provided in the Indenture) will not, and the Company will not cause or permit any Subsidiary Guarantor to, consolidate with or merge with or into any Person other than the Company or any other Subsidiary Guarantor unless: (i) the entity formed by or surviving any such consolidation or merger (if other than the Subsidiary Guarantor) or to which such sale, lease, conveyance or other disposition shall have been made is a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia; (ii) such entity assumes by supplemental indenture all of the obligations of the Subsidiary Guarantor on the Guarantee; (iii) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and (iv) immediately after giving effect to such transaction and the use of any net proceeds therefrom, on a pro forma basis, including adjustments that are (i) directly attributable to such transaction and (ii) factually supportable, the Company could satisfy the provisions of clause (ii) of the first paragraph of this covenant. Limitation on Asset Sales. The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by the Company's Board of Directors), (ii) at least 75% of the consideration received by the Company or such Restricted Subsidiary, as the case may be, from such Asset Sale shall be cash or Cash Equivalents and is received at the time of such disposition; provided that the amount of (x) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet or in the notes thereto) of the Company or such Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes or such Restricted Subsidiary's Guarantee, if any) that are assumed by the transferee of any such assets and (y) any notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or any such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents received) shall be deemed to be cash for purposes of this provision; and (iii) upon the consummation of an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within 365 days of receipt thereof either (A) to prepay any Senior Indebtedness or Guarantor Senior Indebtedness and, in the case of any Senior Indebtedness under any revolving credit facility, effect a permanent reduction in the availability under such revolving credit facility, (B) to reinvest in Productive Assets, or (C) a combination of prepayment and investment permitted by the foregoing clauses (iii)(A) and (iii)(B). On the 366th day after an Asset Sale or such earlier date, if any, as the Board of Directors of the Company or of such Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (iii)(A), (iii)(B) and (iii)(C) of the immediately preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which have not been applied on or before such Net Proceeds Offer Trigger Date as permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the immediately preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by the Company or such Restricted Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days following the applicable Net Proceeds Offer Trigger Date, from all Holders on a pro rata basis that amount of Notes equal to the Net Proceeds Offer Amount at a price equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest thereon, 92 95 if any, to the date of purchase; provided, however, that if at any time any non-cash consideration received by the Company or any Restricted Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with this covenant. Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than $5 million, the application of the Net Cash Proceeds constituting such Net Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time as such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date relating to such initial Net Proceeds Offer Amount from all Asset Sales by the Company and its Restricted Subsidiaries aggregates at least $5 million, at which time the Company or such Restricted Subsidiary shall apply all Net Cash Proceeds constituting all Net Proceeds Offer Amounts that have been so deferred to make a Net Proceeds Offer (the first date the aggregate of all such deferred Net Proceeds Offer Amounts is equal to $5 million or more shall be deemed to be a "Net Proceeds Offer Trigger Date"). Notwithstanding the two immediately preceding paragraphs, the Company and its Restricted Subsidiaries will be permitted to consummate an Asset Sale without complying with such paragraphs to the extent (i) at least 75% of the consideration for such Asset Sale constitutes Productive Assets and (ii) such Asset Sale is for at least fair market value (as determined in good faith by the Company's Board of Directors); provided that any consideration not constituting Productive Assets received by the Company or any of its Restricted Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph shall constitute Net Cash Proceeds and shall be subject to the provisions of the two preceding paragraphs; provided, that at the time of entering into such transaction or immediately after giving effect thereto, no Default or Event of Default shall have occurred or be continuing or would occur as a consequence thereof. Each Net Proceeds Offer will be mailed to the record Holders as shown on the register of Holders within 25 days following the Net Proceeds Offer Trigger Date, with a copy to the Trustee, and shall comply with the procedures set forth in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may elect to tender their Notes in whole or in part in integral multiples of $1,000 in exchange for cash. To the extent Holders properly tender Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering Holders will be purchased on a pro rata basis (based on amounts tendered). A Net Proceeds Offer shall remain open for a period of 20 business days or such longer period as may be required by law. To the extent that the aggregate amount of Notes tendered pursuant to a Net Proceeds Offer is less than the Net Proceeds Offer Amount, the Company may use any remaining Net Proceeds Offer Amount for general corporate purposes. Upon completion of any such Net Proceeds Offer, the Net Proceeds Offer Amount shall be reset at zero. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Asset Sale" provisions of the Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the "Asset Sale" provisions of the Indenture by virtue thereof. Future Guarantees. The Company will not permit any of its Restricted Subsidiaries, directly or indirectly, to incur, guarantee or secure through the granting of Liens the payment of the Bank Indebtedness or any refunding or refinancing thereof, in each case unless such Restricted Subsidiary, the Company and the Trustee execute and deliver a supplemental indenture evidencing such Restricted Subsidiary's Guarantee, such Guarantee to be a senior subordinated unsecured obligation of such Restricted Subsidiary. Neither the Company nor any such Subsidiary Guarantor shall be required to make a notation on the Notes or the Guarantees to reflect any such subsequent Guarantee. Nothing in this 93 96 covenant shall be construed to permit any Restricted Subsidiary of the Company to incur Indebtedness otherwise prohibited by the "Limitation on Incurrence of Additional Indebtedness" covenant. Thereafter, such Restricted Subsidiary shall be a Subsidiary Guarantor for all purposes of the Indenture. Conduct of Business. The Company and its Restricted Subsidiaries will not engage in any businesses which are not the same, similar, related or ancillary to the businesses in which the Company and its Restricted Subsidiaries are engaged on the Issue Date. EVENTS OF DEFAULT The following events are defined in the Indenture as "Events of Default": (i) the failure to pay interest on any Notes when the same becomes due and payable and the default continues for a period of 30 days (whether or not such payment shall be prohibited by the subordination provisions of the Indenture); (ii) the failure to pay the principal on any Notes, when such principal becomes due and payable, at maturity, upon redemption or otherwise (including the failure to make a payment to purchase Notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or not such payment shall be prohibited by the subordination provisions of the Indenture); (iii) a default in the observance or performance of any other covenant or agreement contained in the Indenture which default continues for a period of 30 days after the Company receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Notes; (iv) the failure to pay at final maturity (giving effect to any applicable grace periods and any extensions thereof) the principal amount of any Indebtedness of the Company or any Restricted Subsidiary (other than a Receivables Entity) of the Company, or the acceleration of the final stated maturity of any such Indebtedness if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final maturity or which has been accelerated, aggregates $10 million or more at any time; (v) one or more judgments in an aggregate amount in excess of $10 million shall have been rendered against the Company or any of its Significant Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and non-appealable, and in the event such judgment is covered by insurance, an enforcement proceeding has been commenced by any creditor upon such judgment which is not promptly stayed; (vi) certain events of bankruptcy affecting the Company or any of its Significant Subsidiaries; and (vii) any of the Guarantees of the Subsidiary Guarantors that are also Significant Subsidiaries of the Company ceases to be in full force and effect or any of such Guarantees is declared to be null and void and unenforceable or any of such Guarantees is found to be invalid or any of such Subsidiary Guarantors denies its liability under its Guarantee (other than by reason of release of such Subsidiary Guarantor in accordance with the terms of the Indenture). Upon the happening of any Event of Default specified in the Indenture, the Trustee or the Holders of at least 25% in principal amount of outstanding Notes may declare the principal of and accrued interest on all the Notes to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that it is a "notice of acceleration", and the same shall become immediately due and payable. If an Event of Default with respect to bankruptcy proceedings of the Company occurs and is continuing, then such amount shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder of Notes. The Indenture 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 such declaration and its consequences (i) if the rescission would not conflict with any judgment or decree, (ii) if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration, (iii) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid, (iv) if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances and (v) in the event of the cure or waiver of an Event of Default of the type 94 97 described in clause (vi) or (vii) of the description above of Events of Default, the Trustee shall have received an officers' certificate and an opinion of counsel that such Event of Default has been cured or waived. The holders of a majority in principal amount of the Notes may waive any existing Default or Event of Default under the Indenture, and its consequences, except a default in the payment of the principal of or interest on any Notes. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No director, officer, employee, incorporator or stockholder of the Company shall have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Company may, at its option and at any time, elect to have its obligations and the obligations of the Subsidiary Guarantors discharged with respect to the outstanding Notes ("Legal Defeasance"). Such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Notes, except for (i) the rights of holders of the Notes to receive payments in respect of the principal of, premium, if any, and interest on the Notes when such payments are due, (ii) the Company's obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payments, (iii) the rights, powers, trust, duties and immunities of the Trustee and the Company's obligations in connection therewith and (iv) the Legal Defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, reorganization and insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the holders of the Notes cash in U.S. dollars, non-callable U.S. government obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be; (ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default with respect to the Indenture resulting from the incurrence of Indebtedness, all or a portion of which will be used to decrease the Notes 95 98 concurrently with such incurrence); (v) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under the Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an officers' certificate stating that the deposit was not made by the Company with the intent of preferring the holders of the Notes over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; (vii) the Company shall have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; (viii) the Company shall have delivered to the Trustee an opinion of counsel to the effect that (A) the trust funds will not be subject to any rights of holders of Indebtedness of the Company other than the Notes and (B) assuming no intervening bankruptcy of the Company between the date of deposit and the 91st day following the deposit and that no Holder of the Notes is an insider of the Company, after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; and (ix) certain other customary conditions precedent are satisfied. SATISFACTION AND DISCHARGE The Indenture will be discharged and will cease to be of further effect (except as to surviving rights or registration of transfer or exchange of the Notes, as expressly provided for in the Indenture) as to all outstanding Notes when (i) either (a) all the Notes theretofore authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation or (b) all Notes not theretofore delivered to the Trustee for cancellation have become due and payable and the Company has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Notes to the date of deposit together with irrevocable instructions from the Company directing the Trustee to apply such funds to the payment thereof at maturity or redemption, as the case may be; (ii) the Company has paid all other sums payable under the Indenture by the Company; and (iii) the Company has delivered to the Trustee an officers' certificate and an opinion of counsel stating that all conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture have been complied with. MODIFICATION OF THE INDENTURE From time to time, the Company, the Subsidiary Guarantors and the Trustee, without the consent of the Holders of the Notes, may amend the Indenture for certain specified purposes, including curing ambiguities, defects or inconsistencies, so long as such change does not, in the opinion of the Trustee, adversely affect the rights of any of the Holders in any material respect. In formulating its opinion on such matters, the Trustee will be entitled to rely on such evidence as it deems appropriate, including, without limitation, solely on an opinion of counsel. Other modifications and amendments of the Indenture may be made with the consent of the Holders of a majority in principal amount of the then outstanding Notes issued under the Indenture, except that, without the consent of each holder of the Notes affected thereby, no amendment may: (i) reduce the amount of Notes whose holders must consent to an amendment; (ii) reduce the rate of or change or have the effect of changing the time for payment of interest, including defaulted interest, on any Notes; (iii) reduce the principal of or change or have the effect of changing the fixed maturity of any Notes, or change the date on which any Notes may be subject to redemption or repurchase, or reduce the redemption or repurchase price therefor; (iv) make any Notes payable in money other than that stated in the Notes; (v) make any change in provisions of the Indenture protecting the right of each holder of a Note to receive payment of principal of and interest on such Note on or after the due date thereof or to bring suit to enforce such payment, or permitting holders of a majority in principal amount of the Notes to waive Defaults or Events of Default (other than Defaults 96 99 or Events of Default with respect to the payment of principal of or interest on the Notes); (vi) amend, change or modify in any material respect the obligation of the Company to make and consummate a Change of Control Offer in the event of a Change of Control Triggering Event or make and consummate a Net Proceeds Offer with respect to any Asset Sale that has been consummated or modify any of the provisions or definitions with respect thereto; (vii) modify the subordination provisions (including the related definitions) of the Indenture to adversely affect the holders of Notes in any material respect; or (viii) release any Subsidiary Guarantor that is a Significant Subsidiary of the Company from any of its obligations under its Guarantee or the Indenture otherwise than in accordance with the terms of the Indenture. ADDITIONAL INFORMATION The Indenture provides that the Company will deliver to the Trustee within 15 days after the filing of the same with the Commission, copies of the quarterly and annual reports and of the information, documents and other reports, if any, which the Company is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture further provides that, notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the Commission, to the extent permitted, and provide the Trustee and Holders with such annual reports and such information, documents and other reports specified in Sections 13 and 15(d) of the Exchange Act. The Company and the Subsidiary Guarantors will also comply with the other provisions of Trust Indenture Act, sec.314(a). CERTAIN DEFINITIONS Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for the definition of other terms used herein for which no definition is provided. "Acquired Indebtedness" means Indebtedness (i) of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Company or (ii) assumed in connection with the acquisition of assets from such Person, in each case whether or not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such acquisition. Acquired Indebtedness shall be deemed to have been incurred, with respect to clause (i) of the preceding sentence, on the date such Person becomes a Restricted Subsidiary of the Company and, with respect to clause (ii) of the preceding sentence, on the date of consummation of such acquisition of assets. "Affiliate" means a Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the foregoing, no Person (other than the Company or any Subsidiary of the Company) in whom a Receivables Entity makes an Investment in connection with a Qualified Receivables Transaction shall be deemed to be an Affiliate of the Company or any of its Subsidiaries solely by reason of such Investment. "all or substantially all" shall have the meaning given such phrase in the Revised Model Business Corporation Act. "Asset Acquisition" means (a) an Investment by the Company or any Restricted Subsidiary of the Company in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Company or any Restricted Subsidiary of the Company, or shall be merged with or into the Company or any Restricted Subsidiary of the Company, or (b) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person which constitute all or substantially all of the assets of such Person, any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business. 97 100 "Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by the Company or any of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Company or a Wholly Owned Restricted Subsidiary of the Company of (a) any Capital Stock of any Restricted Subsidiary of the Company; or (b) any other property or assets of the Company or any Restricted Subsidiary of the Company other than in the ordinary course of business; provided, however, that Asset Sales shall not include (i) a transaction or series of related transactions for which the Company or its Restricted Subsidiaries receive aggregate consideration of less than $1 million, (ii) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company as permitted under "Merger, Consolidation and Sale of Assets," (iii) the sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof, (iv) the factoring of accounts receivable arising in the ordinary course of business pursuant to arrangements customary in the industry, (v) the licensing of intellectual property, (vi) disposals or replacements of obsolete equipment in the ordinary course of business, (vii) the sale, lease, conveyance, disposition or other transfer by the Company or any Restricted Subsidiary of assets or property to one or more Wholly Owned Restricted Subsidiaries in connection with Investments permitted under the "Limitations on Restricted Payments" covenant, (viii) sales of accounts receivable and related assets of the type specified in the definition of "Qualified Receivables Transaction" to a Receivables Entity for the fair market value thereof, including cash in an amount at least equal to 75% of the book value thereof as determined in accordance with GAAP, and (ix) transfers of accounts receivable and related assets of the type specified in the definition of "Qualified Receivables Transaction" (or a fractional undivided interest therein) by a Receivables Entity in a Qualified Receivables Transaction. For the purposes of clause (viii), Purchase Money Notes shall be deemed to be cash. "Bank Credit Agreement" means the Credit Agreement to be dated as of the Issue Date, among the Company, the other borrowers thereto from time to time, if any, the lenders party thereto from time to time and The Chase Manhattan Bank, as agent, together with the related documents thereto (including, without limitation, any guarantee agreements, promissory notes and collateral documents), in each case as such agreements may be amended, supplemented or otherwise modified from time to time, or refunded, refinanced, restructured, replaced, renewed, repaid or extended from time to time (whether with the original agents and lenders or other agents and lenders or otherwise, and whether provided under the original Bank Credit Agreement or other credit agreements or otherwise). "Bank Indebtedness" means any and all amounts, whether outstanding on the Issue Date or thereafter incurred, payable under or in respect of the Bank Credit Agreement and any related notes, collateral documents, letters of credit and guarantees, including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or any Restricted Subsidiary of the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means, as to any Person, the board of directors of such Person or any duly authorized committee thereof. "Capitalized Lease Obligation" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP. "Capital Stock" means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated) of corporate stock, including each class of common stock and preferred stock of such Person and (ii) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person. 98 101 "Cash Equivalents" means (i) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody's; (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances (or, with respect to foreign banks, similar instruments) maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $200 million; (v) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (iv) above; and (vi) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (i) through (v) above. "Change of Control" means the occurrence of one or more of the following events: (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company to any Person or group of related Persons (other than the Principal or its Related Parties) for purposes of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of the Indenture); (ii) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the provisions of the Indenture); (iii) any Person or Group (other than the Principal or its Related Parties) shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Company or (iv) the first day on which a majority of the members of the Board of Directors of the Company are not Continuing Directors. "Change of Control Triggering Event" means the occurrence of a Change of Control and the failure of the Notes to have a Minimum Rating on the 30th day after the occurrence of such Change of Control. "Consolidated EBITDA" means, with respect to any Person, for any period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to the extent Consolidated Net Income has been reduced thereby, (A) all income taxes of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period, (B) Consolidated Interest Expense and (C) Consolidated Non-cash Charges. "Consolidated Fixed Charge Coverage Ratio" means, with respect to any Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the "Four Quarter Period") ending on or prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of such Person for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving effect on a pro forma basis for the period of such calculation to (i) the incurrence of any Indebtedness of such Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period, (ii) any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also 99 102 including any Consolidated EBITDA (including any pro forma expense and cost reductions that are (i) directly attributable to such transaction and (ii) factually supportable) attributable to the assets which are the subject of the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Indebtedness or Acquired Indebtedness) occurred on the first day of the Four Quarter Period, (iii) with respect to any such Four Quarter Period commencing prior to the Recapitalization, the Recapitalization (including any pro forma expense and cost reductions related thereto that are (i) directly attributable to such transaction and (ii) factually supportable) shall be deemed to have taken place on the first day of such Four Quarter Period and (iv) any asset sales or asset acquisitions (including any Consolidated EBITDA (including any pro forma expense and cost reductions that are (i) directly attributable to such transaction and (ii) factually supportable) attributable to the assets which are the subject of the asset acquisition or asset sale during the Four Quarter Period) that have been made by any Person that has become a Restricted Subsidiary of the Company or has been merged with or into the Company or any Restricted Subsidiary of the Company during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date that would have constituted Asset Sales or Asset Acquisitions had such transactions occurred when such Person was a Restricted Subsidiary of the Company or subsequent to such Person's merger into the Company, as if such asset sale or asset acquisition (including the incurrence, assumption or liability for any Indebtedness or Acquired Indebtedness in connection therewith) occurred on the first day of the Four Quarter Period; provided that to the extent that clause (ii) or (iv) of this sentence requires that pro forma effect be given to an asset sale or asset acquisition, such pro forma calculation shall be based upon the four full fiscal quarters immediately preceding the Transaction Date of the Person, or division or line of business of the Person, that is acquired or disposed for which financial information is available. If such Person or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; (2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four Quarter Period; and (3) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. "Consolidated Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) Consolidated Interest Expense (excluding amortization or write-off of debt issuance costs in connection with the Transactions) plus (ii) the product of (x) the amount of all dividend payments on any series of Preferred Stock of such Person (other than dividends paid in Qualified Capital Stock) times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated Federal, state and local tax rate of such Person expressed as a decimal. "Consolidated Interest Expense" means, with respect to any Person for any period, the sum of, without duplication, (i) the aggregate of all cash and non-cash interest expense with respect to all outstanding Indebtedness of such Person and its Restricted Subsidiaries, including the net costs associated with Interest Swap Obligations, for such period determined on a consolidated basis in conformity with GAAP, and (ii) the interest component of Capitalized Lease Obligations paid, accrued 100 103 and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" of the Company means, for any period, the aggregate net income (or loss) of the Company and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom (a) gains and losses from Asset Sales (without regard to the $1 million limitation set forth in the definition thereof) or abandonments or reserves relating thereto and the related tax effects according to GAAP and an increase in the valuation allowance relating to deferred tax assets recorded in the fourth quarter of 1996 attributable to the Transactions, (b) gains and losses due solely to fluctuations in currency values and the related tax effects according to GAAP, (c) items classified as extraordinary, unusual or nonrecurring gains and losses, and the related tax effects according to GAAP, (d) the net income (or loss) of any Person acquired in a pooling of interests transaction accrued prior to the date it becomes a Restricted Subsidiary of the Company or is merged or consolidated with the Company or any Restricted Subsidiary of the Company, (e) the net income of any Restricted Subsidiary of the Company to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is restricted by contract, operation of law or otherwise, (f) only for purposes of clause (iii) (w) of the first paragraph of the "Limitation on Restricted Payments" covenant, any amounts included pursuant to clause (iii) (z) of the first paragraph of such covenant, (g) the net loss of any Person other than a Restricted Subsidiary of the Company, (h) the net income of any Person, other than a Restricted Subsidiary, except to the extent of cash dividends or distributions paid to the Company or a Restricted Subsidiary of the Company by such Person unless, in the case of a Restricted Subsidiary of the Company who receives such dividends or distributions, such Restricted Subsidiary is subject to clause (e) above, (i) one time non-cash compensation charges, including any arising from existing stock options resulting from any merger or recapitalization transaction, (j) bonus payments to be paid to senior management of the Company in connection with the Transactions in an aggregate amount (together with the bonus payments made under clause (k)) not to exceed $7.0 million and (k) bonus payments to be paid to senior management following the Closing (but no later than February 28, 1997) in an aggregate amount not to exceed $400,000 and, together with the amounts paid under clause (j) not to exceed $7.0 million in the aggregate. "Consolidated Non-cash Charges" means, with respect to any Person for any period, the aggregate depreciation, amortization and other non-cash expenses of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (excluding any such charges which require an accrual of or a reserve for cash charges for any future period). "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company who (i) was a member of such Board of Directors on the Issue Date, (ii) was nominated for election or elected to such Board of Directors with, or whose election to such Board of Directors was approved by, the affirmative vote of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election or (iii) is any designee of the Principal or its Affiliates or was nominated by the Principal or its Affiliates or any designees of the Principals or their Affiliates on the Board of Directors. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary of the Company against fluctuations in currency values. "Default" means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default. "Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii) any other Senior Indebtedness which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof, are committed to lend up to, at least $25 million and is specifically designated by the Company in the instrument evidencing or governing such 101 104 Senior Indebtedness or another writing as "Designated Senior Indebtedness" for purposes of the Indenture. "Disqualified Capital Stock" means that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event (other than an event which would constitute a Change of Control Triggering Event), matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (except, in each case, upon the occurrence of a Change of Control Triggering Event) on or prior to the final maturity date of the Notes. "Distribution" means a dividend of up to $67.2 million on the Company's outstanding Class A Common Stock, a dividend of approximately $4.7 million representing accrued and unpaid dividends on the Company's 8% Cumulative Preferred Stock and a redemption of the Company's 8% Cumulative Preferred Stock for an amount equal to approximately $58.2 million, in each case to be paid no more than five business days prior to the Vistar Merger. "fair market value" means, unless otherwise specified, with respect to any asset or property, the price which could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the Transactions. Fair market value shall be determined by the Board of Directors of the Company acting reasonably and in good faith and shall be evidenced by a resolution of the Board of Directors of the Company delivered to the Trustee. "GAAP" means generally accepted accounting principles in the United States of America as in effect on the Issue Date, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. "Guarantor Senior Indebtedness" means, with respect to any Subsidiary Guarantor, (i) any Indebtedness of such Subsidiary Guarantor under the Bank Credit Agreement or in respect of Bank Indebtedness and (ii) all Indebtedness of such Subsidiary Guarantor, including in the case of both (i) and (ii) interest thereon (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Subsidiary Guarantor whether or not a claim for post-filing interest is allowed in such proceedings), whether outstanding on the Issue Date or thereafter incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is expressly provided that such obligations are not superior in right of payment to the Guarantee of such Subsidiary Guarantor; provided, however, that Guarantor Senior Indebtedness shall not include (1) any obligation of such Subsidiary Guarantor to a Subsidiary of such Subsidiary Guarantor or to any Subsidiary of the Company, (2) any liability for Federal, state, local or other taxes owed or owing by such Subsidiary Guarantor, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities), (4) any Indebtedness of such Subsidiary Guarantor which is expressly subordinate in right of payment to any other Indebtedness of such Subsidiary Guarantor, (5) any obligations with respect to any Capital Stock or (6) that portion of any indebtedness incurred in violation of the "Limitation on Incurrence of Additional Indebtedness" covenant (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such obligation or their representative and the Trustee shall have received an Officers' Certificate of such Subsidiary Guarantor to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit Indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of the Indenture). "Indebtedness" means with respect to any Person, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all obligations of 102 105 such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all obligations under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business), (v) all obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (vi) guarantees and other contingent obligations in respect of Indebtedness referred to in clauses (i) through (v) above and clause (viii) below, (vii) all obligations of any other Person of the type referred to in clauses (i) through (vi) which are secured by any lien on any property or asset of such Person but which obligations are not assumed by such Person, the amount of such obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the obligation so secured, (viii) all obligations under currency swap agreements and interest swap agreements of such Person and (ix) all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. For purposes hereof, (x) the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock and (y) any transfer of accounts receivable or other assets which constitute a sale for purposes of GAAP shall not constitute Indebtedness hereunder. "Interest Swap Obligations" means the obligations of any Person, pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount. "Investment" means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any Person. "Investment" shall exclude extensions of trade credit by the Company and its Restricted Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Company or such Restricted Subsidiary, as the case may be. For the purposes of the "Limitation on Restricted Payments" covenant, (i) "Investment" shall include and be valued at the fair market value of the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary and shall exclude the fair market value of the net assets of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any Investment shall be the original cost of such Investment plus the cost of all additional Investments by the Company or any of its Restricted Subsidiaries, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment, reduced by the payment of dividends or distributions (including tax sharing payments) in connection with such Investment or any other amounts received in respect of such Investment; provided that no such payment of dividends or distributions or receipt of any such other amounts shall reduce the amount of any Investment if such payment of dividends or distributions or receipt of any such amounts would be included in Consolidated Net Income. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Common Stock of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, the Company no longer owns, directly or indirectly, 100% (or 80% in the case of clause (ix) of the definition of "Permitted Investments") of the outstanding Common Stock of such Restricted Subsidiary, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Common Stock of such Restricted Subsidiary not sold or disposed of. 103 106 "Issue Date" means the date of original issuance of the Notes. "Lien" means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). "Minimum Rating" means either (i) a rating of at least BBB- (or equivalent successor rating) by S&P and (ii) a rating of at least Baa3 (or equivalent successor rating) by Moody's. "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest) received by the Company or any of its Subsidiaries from such Asset Sale net of (a) out-of- pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions), (b) taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements, (c) repayment of Senior Indebtedness that is required to be repaid in connection with such Asset Sale, (d) any portion of cash proceeds which the Company determines in good faith should be reserved for post-closing adjustments, it being understood and agreed that on the day that all such post-closing adjustments have been determined, the amount (if any) by which the reserved amount in respect of such Asset Sale exceeds the actual post-closing adjustments payable by the Company or any of its Subsidiaries shall constitute Net Cash Proceeds on such date; provided that, in the case of the sale by the Company of an asset constituting an Investment (other than a Permitted Investment), the "Net Cash Proceeds" in respect of such Asset Sale shall not include the lesser of (x) the cash received with respect to such Asset Sale and (y) the initial amount of such Investment, less, in the case of clause (y), all amounts (up to an amount not to exceed the initial amount of such Investment) received by the Company with respect to such Investment, whether by dividend, sale, liquidation or repayment, in each case prior to the date of such Asset Sale. "Non-Voting Preferred Stock" means the Company's 8% Non-Voting Preferred Stock, $0.01 par value per share, to be issued by the Company as partial merger consideration in the Vistar Merger. "Permitted Indebtedness" means, without duplication, (i) the Notes and the Guarantees, (ii) Indebtedness incurred pursuant to the Bank Credit Agreement in an aggregate principal amount at any time outstanding not to exceed $450 million (A) less the aggregate amount of Indebtedness of a Receivables Entity in a Qualified Receivables Transaction, (B) less the amount of all mandatory principal payments actually made by the Company in respect of term loans thereunder (excluding (1) any such payments to the extent refinanced at the time of payment under a replaced Bank Credit Agreement and (2) any such payments relating to the Sale of Excluded Assets in an aggregate amount not to exceed $30 million) and (C) in the case of a revolving facility, reduced by any required permanent repayments (which are accompanied by a corresponding permanent commitment reduction) thereunder, (iii) other Indebtedness of the Company and its Restricted Subsidiaries outstanding on the Issue Date reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions thereon, (iv) Interest Swap Obligations of the Company or any of its Restricted Subsidiaries covering Indebtedness of the Company or any of its Restricted Subsidiaries; provided that any Indebtedness to which any such Interest Swap Obligations correspond is otherwise permitted to be incurred under the Indenture; provided, further, that such Interest Swap Obligations are entered into, in the judgment of the Company, to protect the Company and its Restricted Subsidiaries from fluctuation in interest rates on their respective outstanding Indebtedness, (v) Indebtedness under Currency Agreements, (vi) intercompany Indebtedness owed by the Company to any Wholly Owned Restricted Subsidiary of the Company or by any Restricted Subsidiary of the Company to the Company or any Wholly Owned Restricted Subsidiary of the Company, (vii) Acquired Indebtedness of the Company or any Restricted Subsidiary of the Company to the extent the Company could have incurred such Indebtedness in accordance with the "Limitation on Incurrence of Additional Indebtedness" covenant on 104 107 the date such Indebtedness became Acquired Indebtedness; provided that, in the case of Acquired Indebtedness of a Restricted Subsidiary of the Company, such Acquired Indebtedness was not incurred in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company, (viii) guarantees by the Company and its Wholly Owned Restricted Subsidiaries of each other's Indebtedness; provided that such Indebtedness is permitted to be incurred under the Indenture, including, with respect to guarantees by Wholly Owned Restricted Subsidiaries of the Company, the covenant entitled "Future Guarantees," (ix) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or other similar instrument inadvertently drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within five business days of its incurrence, (x) any refinancing, modification, replacement, renewal, restatement, refunding, deferral, extension, substitution, supplement, reissuance or resale of existing or future Indebtedness, including any additional Indebtedness incurred to pay interest or premiums required by the instruments governing such existing or future Indebtedness as in effect at the time of issuance thereof ("Required Premiums") and fees in connection therewith; provided that any such event shall not (1) result in an increase in the aggregate principal amount of Permitted Indebtedness (except to the extent such increase is a result of a simultaneous incurrence of additional Indebtedness (A) to pay Required Premiums and related fees or (B) otherwise permitted to be incurred under the Indenture) of the Company and its Restricted Subsidiaries and (2) create Indebtedness with a Weighted Average Life to Maturity at the time such Indebtedness is incurred that is less than the Weighted Average Life to Maturity at such time of the Indebtedness being refinanced, modified, replaced, renewed, restated, refunded, deferred, extended, substituted, supplemented, reissued or resold (except that this subclause (2) will not apply in the event the Indebtedness being refinanced, modified, replaced, renewed, restated, refunded, deferred, extended, substituted, supplemented, reissued or resold was originally incurred in reliance upon clause (vi) or (xvi) of this definition); provided that no Restricted Subsidiary of the Company that is not a Subsidiary Guarantor may refinance any Indebtedness pursuant to this clause (x) other than its own Indebtedness, (xi) Indebtedness (including Capitalized Lease Obligations) incurred by the Company or any of its Restricted Subsidiaries to finance the purchase, lease or improvement of property (real or personal) or equipment (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets) in an aggregate principal amount outstanding not to exceed $5 million at the time of any incurrence thereof (which amount may, but need not, be incurred in whole or in part under the Bank Credit Agreement), (xii) the incurrence by a Receivables Entity of Indebtedness in a Qualified Receivables Transaction that is not recourse to the Company or any Subsidiary of the Company (except for Standard Securitization Undertakings), (xiii) Indebtedness incurred by the Company or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including, without limitation, letters of credit in respect of workers' compensation claims or self-insurance, or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims, (xiv) Indebtedness arising from agreements of the Company or a Restricted Subsidiary of the Company providing for indemnification, adjustment of purchase price, earn out or other similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Restricted Subsidiary of the Company, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition, provided that the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Company and its Restricted Subsidiaries in connection with such disposition, (xv) obligations in respect of performance and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary of the Company in the ordinary course of business, (xvi) Indebtedness of Vistar constituting Capitalized Lease Obligations in an aggregate principal amount not to exceed $2.0 million and other Indebtedness of Vistar constituting unsecured Indebtedness in an aggregate principal amount not to exceed $8.0 million, in each case which is assumed by the Company upon consummation of the Vistar Merger, and (xvii) additional Indebtedness of the Company and its Restricted Subsidiaries in an aggregate principal amount not to exceed $10 million at any one time outstanding (which amount may, but need not, be incurred in whole or in part under the Bank Credit Agreement). 105 108 "Permitted Investments" means (i) Investments by the Company or any Restricted Subsidiary of the Company in any Wholly Owned Restricted Subsidiary of the Company (whether existing on the Issue Date or created thereafter) and Investments in the Company by any Restricted Subsidiary of the Company; provided that, in the case of an Investment by the Company or any Restricted Subsidiary of the Company in any Wholly Owned Restricted Subsidiary of the Company, such Wholly Owned Restricted Subsidiary is not restricted from making dividends or similar distributions by contract, operation of law or otherwise; (ii) cash and Cash Equivalents; (iii) Investments existing on the Issue Date and Investments made on the Issue Date pursuant to the Recapitalization Agreement; (iv) loans and advances to employees and officers of the Company and its Restricted Subsidiaries not in excess of $1 million at any one time outstanding; (v) accounts receivable created or acquired in the ordinary course of business; (vi) Currency Agreements and Interest Swap Obligations entered into in the ordinary course of the Company's or its Restricted Subsidiaries' businesses and otherwise in compliance with the Indenture; (vii) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (viii) guarantees by the Company or any of its Restricted Subsidiaries of Indebtedness otherwise permitted to be incurred by the Company or any of its Restricted Subsidiaries under the Indenture; (ix) Investments by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (A) such Person becomes a Wholly-Owned Restricted Subsidiary of the Company or (B) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys all or substantially all of its assets to, or is liquidated into, the Company or a Wholly Owned Restricted Subsidiary of the Company; (x) additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (x) that are at the time outstanding, not exceeding $2 million at the time of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value), plus an amount equal to (A) 100% of the aggregate net cash proceeds received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to the Issue Date of Qualified Capital Stock of the Company (including Qualified Capital Stock issued upon the conversion of convertible Indebtedness or in exchange for outstanding Indebtedness or as capital contributions to the Company (other than from a Subsidiary)) and (B) without duplication of any amounts included in clause (x)(A) above, 100% of the aggregate net cash proceeds of any equity contribution received by the Company from a holder of the Company's Capital Stock, that in the case of amounts described in clause (x)(A) or (x)(B) are applied by the Company within 180 days after receipt, to make additional Permitted Investments under this clause (x) (such additional Permitted Investments being referred to collectively as "Stock Permitted Investments"); (xi) any Investment by the Company or a Wholly Owned Subsidiary of the Company in a Receivables Entity or any Investment by a Receivables Entity in any other Person in connection with a Qualified Receivables Transaction; provided that any Investment in a Receivables Entity is in the form of a Purchase Money Note or an equity interest; (xii) Investments received by the Company or its Restricted Subsidiaries as consideration for asset sales, including Asset Sales; provided in the case of an Asset Sale, such Asset Sale is effected in compliance with the "Limitation on Asset Sales" covenant. Any net cash proceeds that are used by the Company or any of its Restricted Subsidiaries to make Stock Permitted Investments pursuant to clause (x) of this definition shall not be included in subclauses(x) and (y) of clause (iii) of the first paragraph of the covenant described under the caption "Certain Covenants -- Limitation on Restricted Payments." "Permitted Liens" means the following types of Liens: (i) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Company or its Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP; (ii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business 106 109 for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (iv) judgment Liens not giving rise to an Event of Default; (v) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries; (vi) any interest or title of a lessor under any Capitalized Lease Obligation; (vii) purchase money Liens to finance property or assets of the Company or any Restricted Subsidiary of the Company acquired in the ordinary course of business; provided, however, that (A) the related purchase money Indebtedness shall not exceed the cost of such property or assets and shall not be secured by any property or assets of the Company or any Restricted Subsidiary of the Company other than the property and assets so acquired and (B) the Lien securing such Indebtedness shall be created within 90 days of such acquisition; (viii) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment, or storage of such inventory or other goods; (ix) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (x) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set-off; (xi) Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under the Indenture; (xii) Liens securing Indebtedness under Currency Agreements; (xiii) Liens securing Acquired Indebtedness incurred in reliance on clause (vii) of the definition of Permitted Indebtedness; provided that such Liens do not extend to or cover any property or assets of the Company or of any of its Restricted Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Company or a Restricted Subsidiary of the Company; (xiv) Liens on assets transferred to a Receivables Entity or on assets of a Receivables Entity, in either case incurred in connection with a Qualified Receivables Transaction; (xv) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company and its Restricted Subsidiaries; (xvi) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (xvii) Liens on property of a Person existing at the time such Person is acquired by, or such Person is merged into or consolidated or amalgamated with, the Company or any Restricted Subsidiary of the Company; provided that such Liens were not created in contemplation of such 107 110 acquisition, merger, consolidation or amalgamation and do not extend to any assets other than those of the Person acquired by, or merged into or consolidated or amalgamated with, the Company or any Restricted Subsidiary of the Company. (xviii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties in connection with the importation of goods; and (xix) Liens existing on the Issue Date, together with any Liens securing Indebtedness incurred in reliance on clause (x) of the definition of Permitted Indebtedness in order to refinance the Indebtedness secured by Liens existing on the Issue Date; provided that the Liens securing the refinancing Indebtedness shall not extend to property other than that pledged under the Liens securing the Indebtedness being refinanced. "Person" means an individual, partnership, corporation, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "Principal" means Thomas H. Lee Company. "Productive Assets" means assets (including Capital Stock) of a kind used or usable in the businesses of the Company and its Restricted Subsidiaries as, or related to such business, conducted on the date of the relevant Asset Sale. "Purchase Money Note" means a promissory note of a Receivables Entity evidencing a line of credit, which may be irrevocable, from the Company or any Subsidiary of the Company in connection with a Qualified Receivables Transaction to a Receivables Entity, which note shall be repaid from cash available to the Receivables Entity, other than amounts required to be established as reserves pursuant to agreements, amounts paid to investors in respect of interest, principal and other amounts owing to such investors and amounts owing to such investors and amounts paid in connection with the purchase of newly generated receivables. "Qualified Capital Stock" means any stock that is not Disqualified Capital Stock. "Qualified Receivables Transaction" means any transaction or series of transactions that may be entered into by the Company or any of its Subsidiaries pursuant to which the Company or any or its Subsidiaries may sell, convey or otherwise transfer to (a) a Receivables Entity (in the case of a transfer by the Company or any of its Subsidiaries) and (b) any other Person (in the case of a transfer by a Receivables Entity), or may grant a security interest in, any accounts receivable (whether now existing or arising in the future) of the Company or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable, all contracts and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable. "Receivables Entity" means a Wholly Owned Subsidiary of the Company (or another Person in which the Company or any Subsidiary of the Company makes an Investment and to which the Company or any Subsidiary of the Company transfers accounts receivable and related assets) which engages in no activities other than in connection with the financing of accounts receivable and which is designated by the Board of Directors of the Company (as provided below) as a Receivables Entity (a) no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which (i) is guaranteed by the Company or any Subsidiary of the Company (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is recourse to or obligates the Company or any Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings or (iii) subjects any property or asset of the Company or any Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings, (b) with which neither the Company nor 108 111 any Subsidiary of the Company has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Company or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing accounts receivable, and (c) to which neither the Company nor any Subsidiary of the Company has any obligation to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors of the Company giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. "Redemption Event" shall mean (i) an underwritten initial public offering of the common stock of the Company or (ii) a Change of Control. "Related Party" means Thomas H. Lee Company and any Affiliate of Thomas H. Lee Company. "Representative" means the indenture trustee or other trustee, agent or representative in respect of any Designated Senior Indebtedness; provided that if, and for so long as, any Designated Senior Indebtedness lacks such a representative, then the Representative for such Designated Senior Indebtedness shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Indebtedness in respect of any Designated Senior Indebtedness. "Restricted Subsidiary" of any Person means any Subsidiary of such Person which at the time of determination is not an Unrestricted Subsidiary. "Sale of Excluded Assets" means an individual Asset Sale which results in net proceeds of no less than $10 million and relates exclusively to property, plant and equipment existing on the Issue Date, together with improvements, repairs, modifications and additions thereon in the ordinary course of business. "S&P" means Standard & Poor's Ratings Service, a division of The McGraw-Hill Companies, Inc. and its successors. "Sale and Leaseback Transaction" means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to the Company or a Restricted Subsidiary of any property, whether owned by the Company or any Restricted Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such Property. "Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. "Senior Indebtedness" means (i) the Bank Indebtedness and (ii) all Indebtedness of the Company, including interest thereon (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company or any Restricted Subsidiary of the Company whether or not a claim for post-filing interest is allowed in such proceedings), whether outstanding on the Issue Date or thereafter incurred, unless in the instrument creating or evidencing the same or pursuant to which the same is outstanding it is expressly provided that such obligations are not superior in right of payment to the Notes; provided, however, that Senior Indebtedness shall not include (1) any obligation of the Company to any Subsidiary of the Company, (2) any liability for Federal, state, local or other taxes owed or owing by the Company, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities), (4) any Indebtedness of the Company which is expressly subordinate in right of payment to any other Indebtedness of the Company, including any Senior Subordinated Indebtedness and any Subordinated Obligations, (5) any obligations with respect to any Capital Stock or (6) that portion of any Indebtedness incurred in violation of the Indenture provisions set forth under "Limitation on Incurrence of Additional Indebtedness" (but, as to any such obligation, no such violation shall be deemed to exist for 109 112 purposes of this clause (6) if the holders(s) of such obligation or their representative and the Trustee shall have received an Officers' Certificate of the Company to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit Indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of the Indenture). "Senior Subordinated Indebtedness" means the Notes and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Notes and is not by its express terms subordinate in right of payment to any Indebtedness of the Company which is not Senior Indebtedness. "Significant Subsidiary" means, as of any date of determination, for any Person, each Restricted Subsidiary of such Person which (i) for the most recent fiscal year of such Person accounted for more than 10% of consolidated revenues or consolidated net income of such Person or (ii) as at the end of such fiscal year, was the owner of more than 10% of the consolidated assets of such Person. "Standard Securitization Undertakings" means representations, warranties, covenants and indemnities entered into by the Company or any Subsidiary of the Company which are reasonably customary in an accounts receivable transaction. "Subordinated Obligation" means any Indebtedness of the Company (whether outstanding on the Issue Date or thereafter incurred) which is expressly subordinate in right of payment to the Notes pursuant to a written agreement. "Subsidiary" means, with respect to any Person, (i) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person or (ii) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. "Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such Person that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the Board of Directors of such Person in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided that (x) the Company certifies to the Trustee that such designation complies with the "Limitation on Restricted Payments" covenant and (y) each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving effect to such designation and treating all Indebtedness of such Unrestricted Subsidiary as being incurred on such date, the Company is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant and (y) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the foregoing provisions. "Vistar Merger Agreement" means that certain Merger Agreement, dated as of October 10, 1997, by and between Vistar, Inc. and the Company. "Vistar Merger" means the merger contemplated by the Vistar Merger Agreement. 110 113 "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding aggregate principal amount of such Indebtedness into (b) the sum of the total of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. "Wholly Owned Restricted Subsidiary" of any Person means any Restricted Subsidiary of such Person of which all the outstanding voting securities (other than directors' qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by such Person or any Wholly Owned Restricted Subsidiary of such Person. BOOK-ENTRY; DELIVERY AND FORM The certificates representing the Exchange Notes will be issued in fully registered form. The Exchange Notes initially will each be represented by a single, permanent global certificate in definitive, fully registered form (the "Global Note") and will be deposited with the Trustee as custodian for DTC and registered in the name of a nominee of DTC. The Global Note. Upon the issuance of the Global Note, DTC or its custodian will credit, on its internal system, the respective principal amount of Exchange Notes, of the individual beneficial interests represented by such global securities to the respective accounts of persons who have accounts with such depositary. Such accounts initially will be designated by or on behalf of the Initial Purchasers. Ownership of beneficial interests in the Global Note will be limited to persons who have accounts with DTC ("participants") or persons who hold interests through participants. Ownership of beneficial interests in the Global Note will be shown on, and the transfer of that ownership will be effected only through records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants). So long as DTC, or its nominee, is the registered owner or holder of the Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or holder of the Exchange Notes represented by such Global Note for all purposes under the Indenture and the Exchange Notes. No beneficial owner of an interest in the Global Note will be able to transfer that interest except in accordance with DTC's applicable procedures, in addition to those provided for under the Indenture. Payments of the principal of, premium (if any) and interest on, the Global Note, will be made to DTC or its nominee, as the case may be, as the registered owner thereof. Neither the Company, the Trustee nor any paying agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interest. The Company expects that DTC or its nominee, upon receipt of any payment of principal, premium, if any, or interest in respect of the Global Note, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Note as shown on the records of DTC or its nominee. The Company also expects that payments by participants will be governed by standing instructions and customary practice, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants. Transfers between participants in DTC will be effected in the ordinary way in accordance with DTC rules and will be settled in clearinghouse funds. If a holder requires physical delivery of a certificated note for any reason, including to sell Exchange Notes to persons in states which require physical delivery of such Exchange Notes, or to pledge such Exchange Notes, such holder must transfer its interest in the Global Note, in accordance with the normal procedures of DTC and the procedures set forth in the Indenture. 111 114 DTC has advised the Company that it will take any action permitted to be taken by a holder of Exchange Notes (including the presentation of Exchange Notes for exchange as described below) only at the direction of one or more participants to whose account the DTC interests in the Global Note is credited and only in respect of such portion of the aggregate principal amount of Exchange Notes as to which such participant or participants has or have given such direction. However, if there is an Event of Default under the Exchange Notes, DTC will exchange the Global Note for certificated notes, which it will distribute to its participants. DTC has advised the Company as follows: DTC is a limited purpose trust issuer organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "Clearing Agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and certain other organizations. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants"). Although DTC has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Note among participants of DTC, it is under no obligation to perform such procedures, and such procedures may be discontinued at any time. Neither the Company nor the Trustee will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. Certificated Notes. If DTC is at any time unwilling or unable to continue as a depositary for the Global Note and a successor depositary is not appointed by the Issuer within 90 days, Certificated Notes will be issued in exchange for the Global Note. DESCRIPTION OF THE INITIAL NOTES The terms of the Initial Notes are substantially identical in all respects (including principal amount, interest rate and maturity) to the terms of the Exchange Notes for which they may be exchanged pursuant to this Exchange Offer, except that the Initial Notes are not freely transferable by holders thereof and were issued subject to certain covenants regarding registration as provided therein and in the Exchange and Registration Rights Agreement (which covenants will, except as provided therein, terminate and be of no further force or effect upon completion of this Exchange Offer). See "Exchange and Registration Rights Agreement." 112 115 EXCHANGE AND REGISTRATION RIGHTS AGREEMENT The Company and the Initial Purchasers entered into the Exchange and Registration Rights Agreement prior to the issuance of the Exchange Notes offered hereby. Pursuant to the Exchange and Registration Rights Agreement, the Company agreed to (i) file with the Commission on or prior to 60 days after the date of issuance of the Initial Notes (the "Issue Date") a registration statement on Form S-1 or Form S-4, if the use of such forms is then available (the "Exchange Offer Registration Statement"), relating to a registered exchange offer (the "Exchange Offer") for the Initial Notes under the Securities Act and (ii) use its reasonable best efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act within 135 days after the Issue Date. As soon as practicable after the effectiveness of the Exchange Offer Registration Statement, the Company will offer to the holders of the Notes who are not prohibited by any law or policy of the Commission from participating in the Exchange Offer the opportunity to exchange their Initial Notes for the Exchange Notes, identical in all material respects to the Initial Notes (except that the Exchange Notes will not contain terms with respect to transfer restrictions) that would be registered under the Securities Act. The Company will keep the Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date notice of the Exchange Offer is mailed to the holders of the Initial Notes. If (i) applicable interpretations of the staff of the Commission do not permit the Company to effect the Exchange Offer as contemplated thereby or (ii) any holder either (A) is not eligible to participate in the Exchange Offer or (B) participates in the Exchange Offer and does not receive freely transferrable Exchange Notes in exchange for tendered Initial Notes, the Company will file with the Commission a shelf registration statement (the "Shelf Registration Statement") to cover resales of Transfer Restricted Securities by such holders who satisfy certain conditions relating to, among other things, the provision of information in connection with the Shelf Registration Statement. For purposes of the foregoing, "Transfer Restricted Securities" means each Initial Note until (i) the date on which such Initial Note has been exchanged for a freely transferable Exchange Note in the Exchange Offer, (ii) the date on which such Initial Note has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iii) the date on which such Initial Note is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. The Company has agreed to use its reasonable best efforts to have the Exchange Offer Registration Statement and, if applicable, a Shelf Registration Statement (each a "Registration Statement") declared effective by the Commission as promptly as practicable after the filing thereof. Unless the Exchange Offer would not be permitted by a policy of the Commission, the Company will commence the Exchange Offer and will use its best efforts to consummate the Exchange Offer as promptly as practicable, but in any event prior to 165 days after the Issue Date. If applicable, the Company will use its best efforts to keep the Shelf Registration Statement effective for a period of three years after the Issue Date, subject to certain exceptions, including suspending the effectiveness thereof for certain valid business reasons. If (i) the applicable Registration Statement is not filed with the Commission on or prior to 60 days after the Issue Date, (ii) the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, is not declared effective within 135 days after the Issue Date (or in the case of a Shelf Registration Statement required to be filed in response to a change in law or the applicable interpretations of Commission's staff, if later, within 45 days after publication of the change in law or interpretation), (iii) the Exchange Offer is not consummated on or prior to 165 days after the Issue Date, or (iv) the Shelf Registration Statement is filed and declared effective within 135 days after the Issue Date (or in the case of a Shelf Registration Statement required to be filed in response to a change in law or the applicable interpretations of Commission's staff, if later, within 45 days after publication of the change in law or interpretation), but shall thereafter cease to be effective (at any time that the Company is obligated to maintain the effectiveness thereof) without being succeeded within 60 days by an additional Registration Statement filed and declared effective (each such event referred to in clauses (i) through (iv), a "Registration Default"), the Company will generally be obligated to pay liquidated damages to each holder of Transfer Restricted Securities, during the period of such Registration Default, in an amount equal to $0.192 per week per $1,000 principal amount of the Initial Notes constituting Transfer Restricted 113 116 Securities held by such holder until the applicable Registration Statement is filed or declared effective, the Exchange Offer is consummated or the Shelf Registration Statement again becomes effective, as the case may be. All accrued liquidated damages shall be paid to holders in the same manner as interest payments on the Initial Notes on semi-annual payment dates which correspond to interest payment dates for the Initial Notes. Following the cure of all Registration Defaults, the accrual of liquidated damages will cease. The Exchange and Registration Rights Agreement also provides that the Company (i) shall make available for a period of 90 days after the consummation of the Exchange Offer a prospectus meeting the requirements of the Securities Act to any broker-dealer for use in connection with any resale of any such Exchange Notes and (ii) shall pay all expenses incident to the Exchange Offer (including the expenses of one counsel to the holders of the Initial Notes) and will indemnify certain holders of the Initial Notes (including any broker-dealer) against certain liabilities, including liabilities under the Securities Act. A broker-dealer that delivers such a prospectus to purchasers in connection with such resales will be subject to certain of the civil liability provisions under the Securities Act, and will be bound by the provisions of the Exchange and Registration Rights Agreement (including certain indemnification rights and obligations). Each holder of the Initial Notes that wishes to exchange such Initial Notes for Exchange Notes in the Exchange Offer will be required to make certain representations, including representations that (i) any Exchange Notes to be received by it will be acquired in the ordinary course of its business, (ii) it has no arrangement with any person to participate in the distribution of the Exchange Notes and (iii) it is not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company or if it is an affiliate, it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. If a holder is not a broker-dealer, it will be required to represent that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Notes. If a holder is a broker-dealer that will receive Exchange Notes for its own account in exchange for Notes that were acquired as a result of market making activities or other trading activities, it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. Holders of the Initial Notes will be required to make certain representations to the Company (as described above) in order to participate in the Exchange Offer, and will be required to deliver information to be used in connection with the Shelf Registration Statement in order to have their Initial Notes included in the Shelf Registration Statement and benefit from the provisions regarding liquidated damages set forth in the preceding paragraphs. A holder who sells Initial Notes pursuant to the Shelf Registration Statement generally will be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Exchange and Registration Rights Agreement which are applicable to such a holder (including certain indemnification obligations). For so long as the Initial Notes are outstanding, the Company will continue to provide to holders of the Notes and to prospective purchasers of the Initial Notes the information required by paragraph (d)(4) of Rule 144A under the Securities Act ("Rule 144A"). The Company will provide a copy of the Exchange and Registration Rights Agreement to prospective purchasers of Initial Notes identified to the Company by an Initial Purchaser upon request. The foregoing description of the Exchange and Registration Rights Agreement is a summary only, does not purport to be complete and is qualified in its entirety by reference to all provisions of the Exchange and Registration Rights Agreement. 114 117 INCOME TAX CONSIDERATIONS Holders of the Notes should consult their own tax advisors with respect to their particular circumstances and with respect to the effects of state, local or foreign tax laws to which they may be subject. The Company believes, based upon the opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation, that the following summary fairly describes the material United States federal income tax consequences expected to apply to the exchange of Initial Notes for Exchange Notes and the ownership and disposition of Exchange Notes under currently applicable law. The discussion does not cover all aspects of federal taxation that may be relevant to, or the actual tax effect that any of the matters described herein will have on, particular holders, and does not address state, local, foreign or other tax laws. Further, the federal income tax treatment of a holder of the Initial Notes and the Exchange Notes may vary depending on the holder's particular situation. Certain holders (including insurance companies, tax-exempt organizations, financial institutions, broker-dealers, taxpayers subject to the alternative minimum tax and foreign persons) may be subject to special rules not discussed below. The description assumes that holders of the Initial Notes and the Exchange Notes will hold the Initial Notes and the Exchange Notes as "capital assets" (generally, property held for investment purposes) within the meaning of Section 1221 of the Code. THE EXCHANGE An exchange of Initial Notes for Exchange Notes will be treated as a "non-event" for federal income tax purposes because the Exchange Notes will not be considered to differ materially in kind or extent from the Initial Notes. As a result, no federal income tax consequences will result to holders exchanging Initial Notes for Exchange Notes. THE EXCHANGE NOTES Interest Payments on the Exchange Notes. The Initial Notes were not issued with original issue discount. The stated interest on the Initial Notes and Exchange Notes should be considered to be "qualified stated interest" and, therefore, will be includible in a holder's gross income (except to the extent attributable to accrued interest at the time of purchase) as ordinary income for federal income tax purposes in accordance with a holder's tax method of accounting. Tax Basis. A holder's adjusted tax basis (determined by taking into account accrued interest at the time of purchase) in an Exchange Note received in exchange for an Initial Note will equal the cost of the Initial Note to such holder, increased by the amounts of market discount previously included in income by the holder and reduced by any principal payments received by such holder with respect to the Exchange Notes and by amortized bond premium. A holder's adjusted tax basis in an Exchange Note purchased by such holder will be equal to the price paid for such an Exchange Note (determined by taking into account accrued interest at the time of purchase), increased by market discount previously included in income by the holder and reduced by any principal payments received by such holder with respect to an Exchange Note and by amortized bond premium. See "Market Discount and Bond Premium" below. Sale, Exchange or Retirement. Upon the sale, exchange or retirement of an Exchange Note, a holder will recognize taxable gain or loss, if any, equal to the difference between the amount realized on the sale, exchange or retirement and such holder's adjusted tax basis in such Exchange Note. Such gain or loss will be a capital gain or loss (except to the extent of any accrued market discount), and will be a long-term capital gain or loss if the Exchange Note has been held for more than one year at the time of such sale, exchange or retirement. Market Discount and Bond Premium. Holders should be aware that the market discount provisions of the Code may affect the Exchange Notes. These rules generally provide that a holder who purchases Exchange Notes for an amount which is less than their principal amount will be considered to have purchased the Exchange Notes at a "market discount" equal to the amount of such difference. Such 115 118 holder will be required to treat any gain realized upon the disposition of the Exchange Note as interest income to the extent of the market discount that is treated as having accrued during the period that such holder held such Exchange Note, unless an election is made to include such market discount in income on a current basis. A holder of an Exchange Note who acquires the Exchange Note at a market discount and who does not elect to include market discount in income on a current basis may also be required to defer the deduction of a portion of the interest on any indebtedness incurred or continued to purchase or carry the Exchange Note until the holder disposes of such Exchange Note in a taxable transaction. If a holder's tax basis in an Exchange Note immediately after acquisition exceeds the stated redemption price at maturity of such Exchange Note, such holder may be eligible to elect to deduct such excess as amortizable bond premium pursuant to Section 171 of the Code. Purchasers of the Exchange Notes should consult their own tax advisors as to the application to such purchasers of the market discount and bond premium rules. HOLDERS OF THE INITIAL NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING OR DISPOSING OF THE INITIAL NOTES AND THE EXCHANGE NOTES, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND POSSIBLE FUTURE CHANGES IN SUCH FEDERAL TAX LAWS. 116 119 PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be issued by a broker-dealer in connection with resales of Exchange Notes received in exchange for Initial Notes where such Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that for a period of 90 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until 1998, all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker- dealer and/or the purchasers of any such Exchange Notes. Any broker-dealer that resells Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 90 days after the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer other than commissions or concessions of any brokers or dealers and will indemnify the holders of the Notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS The validity of the Exchange Notes offered hereby will be passed upon for Safelite by Hutchins, Wheeler & Dittmar, A Professional Corporation, Boston, Massachusetts. INDEPENDENT AUDITORS The consolidated balance sheets of Safelite Glass Corp. and its subsidiaries as of December 28, 1996, January 3, 1998 and April 4, 1998 and the consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the three years in the period ended January 3, 1998 and the three months ended April 4, 1998 included in this Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The consolidated balance sheets of Vistar, Inc. and its subsidiaries as of March 31, 1996 and 1997, and the consolidated statements of earnings (loss), stockholders' equity and cash flows for each of the three years in the period ended March 31, 1997 included in this Prospectus have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report thereto, and are included herein in reliance upon the authority of said firm as experts in giving said report. 117 120 INDEX TO FINANCIAL STATEMENTS FINANCIAL STATEMENTS OF SAFELITE GLASS CORP. AND SUBSIDIARIES: Independent Auditors' Report................................ F-2 Consolidated Balance Sheets -- December 28, 1996, January 3, 1998 and April 4, 1998.................................... F-3 Consolidated Statements of Operations -- Years Ended December 30, 1995, December 28, 1996 and January 3, 1998 and Three Months Ended March 27, 1997 and April 4, 1998... F-4 Consolidated Statements of Stockholders' Equity (Deficit) -- Years Ended December 30, 1995, December 28, 1996 and January 3, 1998 and Three Months Ended April 4, 1998...................................................... F-5 Consolidated Statements of Cash Flows -- Years Ended December 30, 1995, December 28, 1996 and January 3, 1998 and Three Months Ended March 27, 1997 and April 4, 1998... F-6 Notes to Consolidated Financial Statements.................. F-7 FINANCIAL STATEMENTS OF VISTAR, INC. AND SUBSIDIARIES: Report of Independent Public Accountants.................... F-24 Consolidated Balance Sheets -- March 31, 1996 and 1997...... F-25 Consolidated Statements of Earnings (Loss) -- Years Ended March 31, 1995, 1996 and 1997 and Nine Months Ended December 21, 1996 and December 19, 1997................... F-26 Consolidated Statements of Stockholders' Equity -- Years Ended March 31, 1995, 1996 and 1997 and Nine Months Ended December 19, 1997......................................... F-27 Consolidated Statements of Cash Flows -- Years Ended March 31, 1995, 1996 and 1997 and Nine Months Ended December 21, 1996 and December 19, 1997................................ F-28 Notes to Consolidated Financial Statements.................. F-29
F-1 121 INDEPENDENT AUDITORS' REPORT Safelite Glass Corp.: We have audited the accompanying consolidated balance sheets of Safelite Glass Corp. and subsidiaries ("Company") as of December 28, 1996, January 3, 1998, and April 4, 1998, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the years ended December 30, 1995, December 28, 1996 and January 3, 1998, and for the three months ended April 4, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Safelite Glass Corp. and subsidiaries at December 28, 1996, January 3, 1998, and April 4, 1998, and the results of their operations and their cash flows for the years ended December 30, 1995, December 28, 1996 and January 3, 1998, and the three months ended April 4, 1998, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Dayton, Ohio June 25, 1998 F-2 122 SAFELITE GLASS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 28, JANUARY 3, APRIL 4, 1996 1998 1998 ------------ ---------- -------- ASSETS CURRENT ASSETS: Cash and cash equivalents................................. $ 31,188 $ 7,404 $ 10,254 Accounts receivable, net.................................. 29,647 54,927 62,000 Refundable taxes.......................................... 7,600 Inventories............................................... 42,454 48,133 50,535 Prepaid expenses.......................................... 6,684 6,505 11,382 Deferred income taxes..................................... 7,862 24,613 18,416 -------- -------- -------- Total current assets............................... 125,435 141,582 152,587 PROPERTY, PLANT AND EQUIPMENT -- Net........................ 40,119 63,820 61,994 INTANGIBLE ASSETS -- Net.................................... 17,832 292,004 292,325 OTHER ASSETS................................................ 18,970 23,821 24,873 DEFERRED INCOME TAXES....................................... 13,890 36,827 44,576 -------- -------- -------- TOTAL ASSETS....................................... $216,246 $558,054 $576,355 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable.......................................... $ 23,703 $ 45,313 $ 43,480 Current portion -- long-term debt......................... 5,418 6,425 5,941 Accrued expenses: Payroll and related items............................... 17,359 14,768 9,669 Self-insurance reserves................................. 9,086 7,987 7,018 Taxes................................................... 6,376 4,537 546 Accrued interest........................................ 685 1,949 8,695 Restructuring........................................... 561 20,007 22,390 Other................................................... 5,664 10,787 14,529 -------- -------- -------- Total current liabilities.......................... 68,852 111,773 112,268 LONG-TERM DEBT -- Less current portion...................... 258,322 473,499 497,645 OTHER LONG-TERM LIABILITIES: Self-insurance reserves................................... 6,512 5,758 4,895 Pension................................................... 7,733 4,098 671 Restructuring............................................. 1,128 6,846 8,983 Other..................................................... 2,231 2,954 304 -------- -------- -------- Total other long-term liabilities.................. 17,604 19,656 14,853 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY (DEFICIT): Preferred stock issued, 8%, $100 par value at December 28, 1996 and $0.01 thereafter............................... 58,250 1 1 Class A Common Stock issued, $0.01 par value.............. 53 38 38 Class B Common Stock issued, $0.01 par value.............. 1 104 104 Additional paid-in capital................................ 182,368 324,794 324,878 Accumulated deficit....................................... (356,555) (357,761) (362,077) Other..................................................... (12,649) (14,050) (11,355) -------- -------- -------- Total stockholders' deficit........................ (128,532) (46,874) (48,411) -------- -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT................. $216,246 $558,054 $576,355 ======== ======== ========
See notes to consolidated financial statements. F-3 123 SAFELITE GLASS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS)
YEAR ENDED THREE MONTHS ENDED ---------------------------------------- ---------------------- DECEMBER 30, DECEMBER 28, JANUARY 3, MARCH 29, APRIL 4, 1995 1996 1998 1997 1998 ------------ ------------ ---------- ----------- -------- (UNAUDITED) SALES: Installation and related services..................... $315,642 $380,142 $430,290 $ 95,249 $201,684 Wholesale....................... 56,500 58,183 53,014 12,544 12,108 -------- -------- -------- -------- -------- Total sales............. 372,142 438,325 483,304 107,793 213,792 COST OF SALES..................... 261,693... 299,623 331,658 75,758 155,545 -------- -------- -------- -------- -------- GROSS MARGIN...................... 110,449 138,702 151,646 32,035 58,247 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES......... 93,486 107,350 111,815 25,993 46,467 RESTRUCTURING EXPENSES............ 6,311 2,865 3,791 LOSS ON THE SALE OF LEAR SIEGLER......................... 5,418 OTHER OPERATING EXPENSES.......... 7,558 5,704 3,079 -------- -------- -------- -------- -------- OPERATING INCOME.................. 10,652 23,794 25,844 6,042 4,910 INTEREST EXPENSE.................. (6,000) (6,726) (27,517) (6,357) (10,987) INTEREST INCOME................... 2,890 2,094 1,254 279 138 -------- -------- -------- -------- -------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX (PROVISION) BENEFIT AND MINORITY INTEREST........................ 7,542 19,162 (419) (36) (5,939) INCOME TAX (PROVISION) BENEFIT.... (157) 17,605 6,842 (59) 1,623 MINORITY INTEREST................. (1,059) (10,199) -------- -------- -------- -------- -------- INCOME FROM CONTINUING OPERATIONS...................... 6,326 26,568 6,423 (95) (4,316) DISCONTINUED OPERATIONS........... 1,706 EXTRAORDINARY ITEM -- Early extinguishment of debt, net of tax benefit..................... (500) (2,835) -------- -------- -------- -------- -------- NET INCOME (LOSS)................. $ 6,326 $ 27,774 $ 3,588 $ (95) $ (4,316) ======== ======== ======== ======== ========
See notes to consolidated financial statements. F-4 124 SAFELITE GLASS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OTHER PREFERENTIAL -------- AND CLASS A CLASS B ADDITIONAL PREFERRED PREFERRED COMMON COMMON PAID-IN ACCUMULATED TREASURY STOCK STOCK STOCK STOCK CAPITAL DEFICIT STOCK --------- ------------ ------- ------- ---------- ----------- -------- BALANCE, DECEMBER 31, 1994........ $ 32 $11 $ 1 $ 393,562 $(390,655) $ (732) Purchase of 5,256 shares of Class A Treasury Stock................. 5 (5) Net income........................ 6,326 Minimum pension liability adjustment, net of tax........... ------------ --- ---- --------- --------- ------- BALANCE, DECEMBER 30, 1995........ 32 11 1 393,567 (384,329) (737) Issuance of 4,209,689 shares of Class A Common Stock net of issuance costs of $6,502......... 42 49,866 Issuance of 582,498 shares of preferred stock.................. 58,250 Redemption of preferential common stock............................ (32) (293,107) Contributed capital............... 21,314 Purchase of 353,557 shares of Class A Treasury Stock........... (4,720) Exercise of 6,080 stock options... 63 Net income........................ 27,774 Purchase of minority interest..... 10,665 Minimum pension liability adjustment, net of tax........... ------------ --- ---- --------- --------- ------- BALANCE, DECEMBER 28, 1996........ 58,250 53 1 182,368 (356,555) (5,457) Purchase of 1,000 shares of Class A Common Stock................... (11) Stock options exercised........... 2 5,273 Dividend ($12.99 per share)....... (67,194) Preferred stock redemption, including payment of accumulated dividends of $4,794.............. (58,250) (4,794) Elimination of stock subscription receivable....................... Reverse stock split (1 for 3)..... (34) 34 Stock dividend (2 shares of Class B Common Stock for each share of Class A Common Stock)............ 34 (34) Issuance of 1,690,101 shares of Class A Common Stock and 6,959,771 shares of Class B Common Stock..................... 17 69 164,348 Issuance of 40,000 shares of preferred stock.................. $ 1 39,999 Net income........................ 3,588 Minimum pension liability adjustment, net of tax........... ---- ------------ --- ---- --------- --------- ------- BALANCE, JANUARY 3, 1998.......... 1 38 104 324,794 (357,761) (5,468) Issuance of 4,378 shares of Class B Common Stock................... 84 Net loss.......................... (4,316) Minimum pension liability adjustment, net of tax........... ---- ------------ --- ---- --------- --------- ------- BALANCE, APRIL 4, 1998............ $ 1 $ $38 $104 $ 324,878 $(362,077) $(5,468) ==== ============ === ==== ========= ========= ======= OTHER ------------------------ STOCK MINIMUM COMP. SUBSCRIPTION PENSION INCOME RECEIVABLE LIABILITY TOTAL (LOSS) ------------ --------- --------- ------- BALANCE, DECEMBER 31, 1994........ $(372) $(1,631) $ 216 Purchase of 5,256 shares of Class A Treasury Stock................. Net income........................ 6,326 $ 6,326 Minimum pension liability adjustment, net of tax........... (7,156) (7,156) (7,156) ----- ------- --------- ------- BALANCE, DECEMBER 30, 1995........ (372) (8,787) (614) $ (830) ======= Issuance of 4,209,689 shares of Class A Common Stock net of issuance costs of $6,502......... 49,908 Issuance of 582,498 shares of preferred stock.................. 58,250 Redemption of preferential common stock............................ (293,139) Contributed capital............... 21,314 Purchase of 353,557 shares of Class A Treasury Stock........... (4,720) Exercise of 6,080 stock options... (4) 59 Net income........................ 27,774 $27,774 Purchase of minority interest..... 10,665 Minimum pension liability adjustment, net of tax........... 1,971 1,971 1,971 ----- ------- --------- ------- BALANCE, DECEMBER 28, 1996........ (376) (6,816) (128,532) $29,745 ======= Purchase of 1,000 shares of Class A Common Stock................... (11) Stock options exercised........... 5,275 Dividend ($12.99 per share)....... (67,194) Preferred stock redemption, including payment of accumulated dividends of $4,794.............. (63,044) Elimination of stock subscription receivable....................... 376 376 Reverse stock split (1 for 3)..... Stock dividend (2 shares of Class B Common Stock for each share of Class A Common Stock)............ Issuance of 1,690,101 shares of Class A Common Stock and 6,959,771 shares of Class B Common Stock..................... 164,434 Issuance of 40,000 shares of preferred stock.................. 40,000 Net income........................ 3,588 $ 3,588 Minimum pension liability adjustment, net of tax........... (1,766) (1,766) (1,766) ----- ------- --------- ------- BALANCE, JANUARY 3, 1998.......... (8,582) (46,874) $ 1,822 ======= Issuance of 4,378 shares of Class B Common Stock................... 84 Net loss.......................... (4,316) $(4,316) Minimum pension liability adjustment, net of tax........... 2,695 2,695 2,695 ----- ------- --------- ------- BALANCE, APRIL 4, 1998............ $ $(5,887) $ (48,411) $(1,621) ===== ======= ========= =======
See notes to consolidated financial statements. F-5 125 SAFELITE GLASS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEAR ENDED THREE MONTHS ENDED ---------------------------------------- ----------------------- DECEMBER 30, DECEMBER 28, JANUARY 3, MARCH 29, APRIL 4, 1995 1996 1998 1997 1998 ------------ ------------ ---------- ----------- -------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)......................................... $ 6,326 $ 27,774 $ 3,588 $ (95) $ (4,316) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Extraordinary item-early extinguishment of debt......... 500 2,835 Depreciation and amortization........................... 7,621 8,031 8,700 2,003 6,377 Loss on sale of subsidiary.............................. 5,418 Change in equity from exercise of stock options......... 2,976 Minority interest....................................... 862 10,199 Deferred income taxes................................... (19,715) (6,887) 59 (1,552) Loss on disposition of assets........................... 654 258 324 346 Gain from discontinued operations....................... (1,706) Changes in operating assets and liabilities: Accounts receivable................................... (5,011) 2,379 560 (1,217) (7,073) Inventories........................................... (5,159) (704) (145) (690) (2,402) Accounts payable...................................... (2,120) 4,277 1,852 (3,937) (1,833) Accrued expenses...................................... (25,939) 1,615 (2,288) (10,643) (5,099) Other................................................. 12,696 (11,179) (18,478) 1,754 (42) Cash flows provided by (used in) discontinued operations............................................ (21,604) 3,975 (3,940) -------- --------- --------- -------- -------- Net cash flows provided by (used in) operating activities........................................ (10,070) 125 2,430 (16,706) (15,594) -------- --------- --------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures...................................... (11,986) (12,843) (13,856) (4,233) (2,425) Proceeds from sale of fixed assets........................ 1,243 87 87 5 28 Acquisition of intangibles................................ (392) (30) (30) (2,821) Sale of subsidiary........................................ (3,407) Purchases of short-term investments....................... (47,479) (29,570) Maturities of short-term investments...................... 23,500 64,224 Cash paid in Vistar transaction (net of cash acquired).... (68,224) -------- --------- --------- -------- -------- Net cash flows provided by (used in) investing activities........................................ (34,722) 21,506 (85,430) (4,258) (5,218) -------- --------- --------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common and preferred stock.................... 108,217 7 Redemption of preferential common stock................... (293,139) Purchase of treasury stock................................ (5) (4,720) (11) Payments on long-term borrowings.......................... (7,500) (47,500) (166,996) (1,316) (2,219) Proceeds from long-term borrowings........................ 263,740 350,000 Borrowings (payments) on revolver, net.................... 12,700 (21,500) 15,368 7,600 25,881 Capitalized debt issuance costs........................... (9,323) (11,206) Exercise of stock options................................. 2,299 Dividends paid............................................ (71,988) Redemption of preferred stock............................. (58,250) -------- --------- --------- -------- -------- Net cash flows provided by (used in) financing activities........................................ 5,195 (4,225) 59,216 6,291 23,662 -------- --------- --------- -------- -------- NET INCREASE (DECREASE) IN CASH............................. (39,597) 17,406 (23,784) (14,673) 2,850 CASH AT BEGINNING OF PERIOD................................. 53,379 13,782 31,188 31,188 7,404 -------- --------- --------- -------- -------- CASH AT END OF PERIOD....................................... $ 13,782 $ 31,188 $ 7,404 $ 16,515 $ 10,254 ======== ========= ========= ======== ======== SUPPLEMENTAL DISCLOSURES: Cash paid for interest.................................... $ 6,051 $ 5,127 $ 29,550 $ 2,936 $ 3,857 ======== ========= ========= ======== ======== Cash paid for income taxes................................ $ 109 $ 350 $ 492 $ 203 $ 123 ======== ========= ========= ======== ======== Contributed capital....................................... $ 21,314 ========= Common and preferred stock issued in merger............... $ 204,434 ========= Common stock issued as compensation....................... $ 84 ========
See notes to consolidated financial statements. F-6 126 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 30, 1995, DECEMBER 28, 1996 AND JANUARY 3, 1998 AND THREE MONTHS ENDED MARCH 29, 1997 (UNAUDITED) AND APRIL 4, 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business -- Safelite Glass Corp. and subsidiaries (the "Company" or "Safelite") are engaged principally in the manufacture, distribution and installation of replacement automotive glass and related insurance claims processing. The Company is the largest automotive glass replacement and repair company in the United States. Currently, approximately 95% of the Company's sales represent installation and related services with the balance representing sales to wholesale customers. On December 19, 1997, the Company acquired Vistar, Inc. ("Vistar"), the second largest automotive glass replacement and repair company in the United States (see Note 4). At April 4, 1998, the combined company had two manufacturing facilities, 74 warehouses, 47 dispatch command centers/central telephone units and 809 service center locations across the United States. Basis of Accounting -- The consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America and all amounts are expressed in U.S. dollars. The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation -- The consolidated financial statements include the accounts of Safelite Glass Corp. and its wholly-owned subsidiaries which, as discussed herein, include the accounts of Lear Siegler Holdings Corp. ("Lear Siegler") through September 12, 1997 (see Notes 2 and 3). Fiscal Year -- Prior to 1998, the Company used a 52 or 53 week fiscal year that ended on the Saturday nearest December 31. In May 1998, the Company changed its fiscal year to a 52 or 53 week fiscal year that ends on the Saturday closest to March 31. The footnote references to year ends are as follows: December 30, 1995 ("1995"), December 28, 1996 ("1996") and January 3, 1998 ("1997"). The footnote references to the three months ended information are as follows: April 4, 1998 ("1998") and March 29, 1997 ("1997"). Interim Financial Statements -- In the opinion of management, the unaudited consolidated financial statements for the three months ended March 29, 1997, reflect all adjustments, consisting of normal recurring accruals, which are necessary to present fairly the financial position and results of operations for the period then ended. Cash and Cash Equivalents -- The Company considers all short-term investments which have a purchased term of three months or less to be cash equivalents. The carrying amount approximates fair value because of the short maturity of those instruments. Concentration of Credit Risk -- Approximately 38% at December 28, 1996, 58% at January 3, 1998 and 57% at April 4, 1998, of trade accounts receivable are due from insurance companies in connection with sales to individual customers. The balance of trade accounts receivable is due primarily from wholesale and other commercial customers. The number and relative financial strength of the insurance companies limit the Company's exposure to credit risk for insurance related receivables. During the three months ended 1998, $25,779 or 12% of total sales for the period were to a single insurance customer. The diversity and wide geographic dispersion limits the credit risk of receivables from wholesale and other commercial customers. The Company also performs ongoing credit evaluations of the financial condition of its wholesale and other commercial customers which reduces its exposure to loss. The Company maintains reserves for potential uncollectible accounts. F-7 127 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Inventories -- The Company accounts for inventories, which are primarily finished goods, at the lower of standard cost, which approximates actual cost determined utilizing the first in, first out method, or market. Valuation allowances for obsolete and slow moving inventories were $1,621, $1,704 and $1,723 at December 28, 1996, January 3, 1998, and April 4, 1998, respectively. Property, Plant and Equipment -- Property, plant and equipment are recorded at cost. Depreciation is provided using the straight-line method over the following estimated useful lives: Buildings and improvements.................................. 25 years Leasehold improvements...................................... 5-10 years Information technology equipment............................ 3-5 years Other equipment and furniture............................... 3-7 years
Intangible Assets -- Intangible assets consist principally of trademarks and goodwill which are being amortized using the straight-line method over their estimated useful lives of five to forty years. Debt Issuance Costs -- Debt issuance costs are amortized over the life of the related debt. Long-Lived Assets -- Long-lived assets, certain identifiable intangibles and goodwill related to those assets to be held and used, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable from undiscounted future cash flows. Revenue Recognition -- Revenue from auto glass installation and related services is recognized when the service is performed. Revenue from the distribution of auto glass to wholesale customers is recognized when the product is shipped. Cost of Sales -- Cost of sales includes product and distribution costs as well as installation labor, occupancy and vehicle expenses. Advertising Costs -- The Company expenses all advertising costs. The costs of yellow pages advertising are expensed at the time the yellow pages phone book is published. Total advertising expense was $5,910, $7,123 and $7,367 in 1995, 1996 and 1997, respectively. Total advertising expense for the three months ended 1997 (unaudited) and 1998 was $1,807 and $2,298, respectively. Other Operating Expenses -- Other operating expenses in 1996 consist of $6,858 in management transaction bonuses related to the THL Transaction and estimated costs (primarily severance) of $700 to exit the activities of Lear Siegler (see Note 2). Other operating expenses in 1997 include $1,000 of management transaction bonuses, $2,976 related to the acceleration of vesting of certain management stock options, and $470 related to forgiveness of certain officer loans made in connection with the Vistar Merger (see Note 4). Also included in other operating expenses in 1997 are costs related to obtaining bondholder consent to the Vistar Merger of $1,258 (see Note 10). Other operating expenses of $3,079 in the three months ended 1998 consist of costs associated with the integration of corporate systems, moving, relocation and other expenses associated with the Vistar Merger. Interest Rate Swaps -- The Company uses settlement accounting to account for its interest rate swap agreements. Comprehensive Income -- At April 4, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income." Components of comprehensive income are net income and the change in minimum pension liability net of income tax effect. Other -- The following Statements of Financial Accounting Standards (SFAS) were issued by the Financial Accounting Standards Board and will be adopted by the Company during the fiscal year ending April 3, 1999. The impact of adopting these statements has not been determined. F-8 128 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information," was issued in June 1997. This statement establishes standards for the way that business enterprises report information about operating segments. SFAS No. 132, "Employers' Disclosures about Pensions and Other Post-Retirement Benefits," was issued in February 1998 and revises the current disclosure requirements for employers' pensions and other retiree benefits. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued in June 1998. The statement requires derivatives to be recorded on the balance sheet as assets or liabilities, measured at fair value. Gains or losses resulting from changes in fair value of the derivatives are recorded depending upon whether the instruments meet the criterion for hedge accounting. This statement is effective for fiscal years beginning after June 15, 1999. The impact of adopting this statement has not been determined. Reclassifications -- Certain reclassifications have been made to conform balances with the 1998 presentation. 2. THE THL TRANSACTIONS Prior to December 20, 1996, the Company was an indirect subsidiary of Lear Siegler. The transactions described below, which occurred on December 20, 1996, were pursuant to a Recapitalization Agreement and Plan of Merger and Stock Purchase Agreement dated November 8, 1996 (collectively, the "THL Transactions"). As a result of the THL Transactions, Safelite's preferential common shares were converted into the right to receive cash, and Thomas H. Lee Equity Fund III, L.P., together with certain of its affiliates and certain other investors (collectively "THL"), obtained 88% of Safelite's common stock. Certain existing shareholders, primarily Safelite management, retained the remaining interest. The Agreement also provided for Safelite's acquisition (through a newly formed subsidiary) of substantially all of the outstanding common stock of Lear Siegler, its former parent. Significant components of the transactions were as follows: (1) THL acquired 169,000 shares of Safelite Class A Common Stock from certain selling shareholders for aggregate consideration of approximately $2,265. Subsequent to this transaction, all remaining common stock, except for 626,910 shares of Class A Common Stock and 17,991 shares of Class B Common Stock owned by existing shareholders (primarily management), was owned by LSNWY, a wholly-owned subsidiary of Lear Siegler. (2) THL capitalized Lite Acquisition Corp. with $56,410 of common equity and $58,250 of preferred equity. Lite Acquisition Corp. was then merged with and into Safelite with Safelite surviving the merger ("Merger"). Upon effecting the Merger: (i) each share of Safelite Class A Common Stock outstanding prior to the Merger was converted into the right to receive $13.40 or, at the election of the holder thereof, to remain outstanding and unaffected by the Merger (LSNWY and certain other shareholders and option holders elected to sell their shares and received in the aggregate $4,154 and $507, respectively); (ii) each share of Safelite Class B Common Stock outstanding prior to the Merger was converted into the right to receive cash equal to $0.01; F-9 129 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (iii) each share of Safelite Preferential Common Stock outstanding prior to the Merger was converted into the right to receive cash, the aggregate amount of which was approximately $293,139; (iv) each share of Lite Acquisition Corp.'s common stock outstanding prior to the Merger was converted into one share of Safelite Class A Common Stock; and (v) each share of Lite Acquisition Corp.'s preferred stock outstanding prior to the Merger was converted into one share of Safelite 8% Preferred Stock. (3) Immediately following the Merger, the Company borrowed $150,000 under a new senior credit facility, issued $100,000 in senior subordinated notes and retired $41,875 in existing bank facility debt (see Note 10). (4) In the final step of the transactions, Safelite, through a new wholly-owned subsidiary, L.S. Acquisition Corp., acquired substantially all of the outstanding capital stock of Lear Siegler (including all shares of Lear Siegler preference stock) for a demand promissory note with a principal amount equal to the consideration received by LSNWY in the Merger, which amount was approximately $297.3 million. Lear Siegler was merged with and into L.S. Acquisition Corp. with L.S. Acquisition Corp. surviving the Merger and changing its name to Lear Siegler Holdings Corp., making Lear Siegler a wholly-owned subsidiary of the Company. On the closing date of the transactions, all of the consideration received by LSNWY in the Merger was distributed to L.S. Acquisition Corp. which was used to repay the note delivered in connection with the purchase of Lear Siegler's capital stock. The THL Transactions were accounted for as a recapitalization of Safelite and in accordance with the provisions of FASB Technical Bulletin No. 85-5. Accordingly, the stock held by the former minority shareholders of Safelite was treated as if it was acquired by Lear Siegler. The carrying value of the minority interest exceeded the fair value of the minority shares acquired by approximately $5,800. Inventory was increased by $1,600 and non-current assets were reduced by $7,400 to allocate this fair value adjustment. Prior to the THL Transactions, Lear Siegler operated as a holding company whose principal activity was to oversee its discontinued operations. The Lear Siegler activities did not provide future benefit to Safelite; thus on December 20, 1996, management of Safelite adopted a formal plan to exit the activities of Lear Siegler. Accordingly, severance, lease termination and related costs of $700 to close Lear Siegler's office located in New Jersey were accrued in accordance with Emerging Issues Task Force Statement No. 94-3. This amount was included in other operating expenses for 1996. In connection with the THL Transactions, certain selling shareholders agreed to reimburse the Company should the Company be required to pay tax liabilities of Lear Siegler arising from disputes with various taxing authorities. Additional paid-in capital of $21,314, the amount of tax liabilities recorded by Lear Siegler, was recorded to reflect the assumption of the tax liabilities by the selling shareholders. 3. SALE OF LEAR SIEGLER On September 12, 1997, the Company sold all of the issued and outstanding shares of the capital stock of Lear Siegler (the "Lear Siegler Stock") to BPLSI Investment Company, a Delaware corporation (the "Purchaser"), pursuant to a Stock Purchase Agreement by and among Lear Siegler, the Company, the Purchaser, and James F. Matthews (the President of Lear Siegler and the sole stockholder of the Purchaser). The net book value of Lear Siegler on the sale date was $5,500, which was comprised of $3,500 in cash, $13,400 in other assets and $11,400 in liabilities. F-10 130 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The sale price of the Lear Siegler Stock was $100 in cash and a promissory note delivered by the Purchaser to the Company. The promissory note provides that the Purchaser must pay to the Company an amount equal to 50% of the net proceeds realized, directly or indirectly, by Lear Siegler from the liquidation or other disposition, if any, of the assets belonging to Lear Siegler or its direct or indirect subsidiaries which were seized by the Cuban government when Fidel Castro came to power, or from settlement of any claims relating thereto (the "Cuban Assets") if the Purchaser receives dividends or other distributions from Lear Siegler. Due to certain restrictions in the documents governing the December 20, 1996 recapitalization of Safelite, no payments are anticipated under the promissory note for six years. The promissory note will remain in full force and effect until the earlier of (a) June 21, 2017, or (b) after six years, such time as all of the Cuban Assets have been liquidated or otherwise disposed of, and Lear Siegler is permitted to distribute the net proceeds thereof, and the Company receives 50% of such net proceeds plus interest from the date of disposition to the date of payment. Due to the wholly-contingent nature of the ability of Lear Siegler or any of its subsidiaries to realize any proceeds from the liquidation or other disposition of any of the Cuban Assets, there can be no assurance that the Purchaser will make any payments to the Company under the promissory note. Accordingly, the Company has recorded this promissory note at a net book value of zero, and a loss of $5,418 related to the sale. 4. THE VISTAR TRANSACTIONS On December 19, 1997, the Company merged with Vistar, with the Company as the corporation surviving the merger (the "Vistar Merger"). The Company's merger with Vistar has been accounted for as a purchase transaction, with results of Vistar included in the Company's financial statements from the acquisition date. Prior to the Vistar Merger, the Company paid a dividend on its outstanding shares of Class A Common Stock in the aggregate amount of $67,194 and paid a dividend on its outstanding shares of 8% Cumulative Preferred Stock equal to the accrued and unpaid dividends thereon in the aggregate amount of $4,794 (collectively, the "Dividend"), and redeemed all outstanding shares of its 8% Cumulative Preferred Stock at an aggregate redemption price of $58,250 (the "Redemption" and, together with the Dividend, the "Distribution"). Subsequent to the Distribution and immediately prior to the consummation of the Vistar Merger, the Company effected a 1 for 3 reverse stock split (the "Stock Split") of its Class A Common Stock, which was reclassified as Class A Voting Common Stock ("Class A Voting Stock"), reclassified its Class B Common Stock as Class B Non-Voting Stock ("Class B Non-Voting Stock"), and paid a dividend on each share of Class A Voting Stock outstanding after the Stock Split in the form of two shares of Class B Non-Voting Stock. The Company also authorized the creation of a new series of preferred stock, designated as Non-Voting 8% Preferred Stock (the "Non-Voting Preferred Stock"). The Non-Voting Preferred Stock is an accumulating perpetual preferred stock. As a result of restrictions contained in the indenture governing its 9 7/8% Senior Subordinated Notes due 2006 (the "Indenture"), dividends are not payable in respect of the Non-Voting Preferred Stock unless such payment is in compliance with the "Limitation on Restricted Payments" covenant contained in the Indenture. Cumulative undeclared preference dividends were $131 and $798 as of January 3, 1998 and April 4, 1998, respectively. The Non-Voting Preferred Stock is not mandatorily redeemable. Unlike the 8% Cumulative Preferred Stock, however, the Non-Voting Preferred Stock is redeemable by the Company, at its option, at any time (provided that the Company is in compliance with the "Limitation on Restricted Payments" covenant). The purchase price paid by the Company to the holders of Vistar's outstanding capital stock (the "Vistar Shareholders") in exchange for all of the outstanding capital stock of Vistar consisted of 1,690,101 shares of Class A Voting stock (valued at $19.01 a share), 6,959,771 shares of Class B Non-Voting Stock (valued at $19.01 a share), 40,000 shares of Non-Voting Preferred Stock ($40,000 aggregate liquidation preference) and $65,000 cash (collectively, the "Merger Consideration"). The aggregate purchase price was $269,434. As a result of the Vistar Merger, the holders of the Company's F-11 131 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) outstanding capital stock immediately prior to the Vistar Merger (the "Safelite Shareholders") retained ownership of 50.5% of the outstanding Class A Voting Stock and became the owners of approximately 33% of the outstanding Class B Non-Voting stock (including shares subject to exercisable options to acquire Class B Non-Voting Stock) and the Vistar Shareholders became the owners of 49.5% of the outstanding Class A Voting Stock, approximately 67% of the outstanding Class B Non-Voting Stock and 100% of the outstanding Non-Voting Preferred Stock. In connection with the Vistar Merger, substantially all of the Safelite Shareholders and all of the Vistar Shareholders entered into a Shareholders Agreement (the "Shareholders Agreement"), which established certain rights and restrictions with respect to the management of the Company and transfers of the Class A Voting Stock and the Class B Non-Voting Stock, and a Registration Agreement providing for certain rights to cause the Company to register the Class A Voting Stock and the Class B Non-Voting Stock under the Securities Act of 1933, as amended. Fees and expenses paid in connection with the Vistar Merger totaled approximately $14,550. Of these total fees and expenses, approximately $3,000, $3,010 and $2,737 were paid to THL, Belron International (a former Vistar shareholder) and The Windsor Park Management Group, respectively. The Windsor Park Management Group is affiliated with an individual who became a director of the Company subsequent to the Vistar Merger. Also in connection with the Vistar Merger, THL amended its existing management agreement with the Company to remove any future obligations of the Company to pay transaction fees and to set the annual management fee payable thereunder at $1,000. Belron International entered into an Amended and Restated Management Agreement with the Company to replace its existing management agreement with Vistar, pursuant to which Belron will continue to receive a management fee of $1,000 per year. Each of such agreements with THL and Belron International will terminate upon consummation of an initial public offering of the Company's common stock. The Company also paid THL $1,000 in connection with the debt refinancing. Payment of the Distribution, the cash portion of the Merger Consideration, the refinancing of Vistar's senior credit financing and the fees and expenses of the transaction were financed through borrowings made pursuant to a refinancing of the Company's existing senior credit facility (see Note 10). The excess purchase price over the fair value of identifiable net assets acquired has been allocated to goodwill. Goodwill of $278,041 recorded in the transaction will be amortized over 30 years using the straight-line method. The allocation of the purchase price to the net assets acquired is preliminary with respect to certain amounts, pending the results of certain studies which have not yet been completed. The following summary was prepared to illustrate the pro forma results of operations as if the Vistar acquisition had occurred at the beginning of the fiscal years presented without the benefit of any synergies. Included in the pro forma presentation is the impact of certain purchase adjustments directly attributable to the acquisition which are expected to have a continuing impact.
THREE MONTHS ENDED 1996 1997 MARCH 29, 1997 -------- -------- -------------- (UNAUDITED) (UNAUDITED) Net sales.................................... $828,439 $902,665 $199,170 Income (loss) from continuing operations before extraordinary charge................ 4,835 (9,035) (5,316) Net income (loss)............................ 6,041 (11,870) (5,316)
The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the operating results that would have occurred had the Vistar acquisition been consummated as of the beginning of the fiscal years presented, nor is it necessarily indicative of future operating results. The pro forma financial information does not reflect any synergies that may be achieved F-12 132 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) from the combined operations. Included in pro forma net income are adjustments to conform the accounting practices of the companies which decreased net income by $287 in 1996 and increased net income by $46 in 1997. As a result of the Merger, the Company intends to consolidate redundant overhead in both field and corporate operations, eliminate redundant service center locations and eliminate redundant sales and marketing force activities. At January 3, 1998 and April 4, 1998, the Company had partially completed its evaluation of redundant locations and activities and recorded the following accrual as part of its purchase accounting for Vistar:
THREE MONTHS 1997 ENDED 1998 ------- ------------ Closing of Vistar service center locations.................. $ 1,734 $1,472 Vistar field and corporate severance........................ 13,556 1,873 Elimination of redundant Vistar corporate functions......... 5,559 ------- ------ $20,849 $3,345 ======= ======
Prior to December 1998, the Company expects to complete its market-by-market analysis of overlapping field locations and administrative activities of both Vistar and the Company. Costs associated with additional consolidation of Vistar functions and activities will be recorded as an adjustment to the initial purchase allocation. The costs associated with closing Safelite locations will be expensed when the decision as to which facilities to close is made. Management estimates the aggregate of all merger related closing and consolidation costs will range from $37,000 to $42,000. 5. RESTRUCTURING EXPENSES Prior to 1990, the Company grew through acquisitions and internal service center openings. In 1991, a new management team developed a strategic plan to focus the Company on its primary insurance customers. The plan called for growth to be achieved by increasing the Company's share of the auto glass replacement market through enhanced relationships with insurance companies and other large volume clients. Automated solutions to address insurance claims processing costs were and are an integral part of management's marketing strategy. An additional element of the Company's strategic plan was a market-by-market review of its distribution and service center configuration, and the Company's customer service capabilities. The objective was to restructure local markets as required to maximize service quality and capacity at lower costs. During 1993 and 1994, the Company refined its overall market based approach with the development and testing of centralized Dispatch Command Center/Central Telephone Units (DCC/CTU). These facilities serve as local market "hubs" which connect service centers, vans, central telephone units, warehouses and distribution centers and provide "real time" data for scheduling, billing, sales and inventory management. The success of the DCC/CTU concept led the Company in 1995 to restructure its field operations by closing approximately 100 service centers and reorganizing field management. The 1995 provision for this restructuring of $6,311 consists principally of planned service center closing costs of $5,605 and field management reorganization costs of $706. As described in Note 4, at January 3, 1998 and April 4, 1998, the Company had partially completed its review of redundant corporate and field operations which resulted from its acquisition of Vistar. Accordingly, restructuring provisions for $2,865 and $3,791, respectively, were recorded in each period. The January 3, 1998, provision consisted of $415 related to Safelite service center closings and $2,450 related to Safelite employee severance. The April 4, 1998, provision consisted of $2,491 related to Safelite service center closings and $1,300 related to Safelite employee severance. The Company F-13 133 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) expects to complete its merger related restructuring review by December 1998 and anticipates that further restructuring provisions will be taken in its fiscal year ending March 1999. The following summarizes the reserve activity:
YEARS ENDED THREE MONTHS ENDED --------------------------- --------------------- 1995 1996 1997 1997 1998 ------- ------- ------- ----------- ------- (UNAUDITED) Beginning balance.............. $ $ 5,098 $ 1,689 $1,689 $26,853 Restructuring liabilities acquired -- Vistar........... 2,438 Restructuring Merger accrual... 20,849 3,345 Restructuring provision........ 6,311 2,865 3,791 Used for intended purpose...... (1,213) (3,409) (988) (264) (2,616) ------- ------- ------- ------ ------- Ending balance................. $ 5,098 $ 1,689 $26,853 $1,425 $31,373 ======= ======= ======= ====== =======
6. ACCOUNTS RECEIVABLE
DECEMBER 28, JANUARY 3, APRIL 4, 1996 1998 1998 ------------ ---------- -------- Trade receivables............................. $31,748 $ 70,755 $ 74,622 Less allowance for uncollectible accounts..... (2,101) (15,828) (12,622) ------- -------- -------- Net........................................... $29,647 $ 54,927 $ 62,000 ======= ======== ========
YEARS ENDED THREE MONTHS ENDED --------------------------- --------------------- 1995 1996 1997 1997 1998 ------- ------- ------- ----------- ------- (UNAUDITED) Allowance for uncollectible accounts: Balance, beginning of period... $ 2,301 $ 2,413 $ 2,101 $2,101 $15,828 Provision...................... 1,354 1,015 1,469 618 1,319 Vistar Merger.................. 14,002 Charge-offs.................... (1,242) (1,327) (1,744) (587) (4,525) ------- ------- ------- ------ ------- Balance, end of period......... $ 2,413 $ 2,101 $15,828 $2,132 $12,622 ======= ======= ======= ====== =======
7. PROPERTY, PLANT & EQUIPMENT
DECEMBER 28, JANUARY 3, APRIL 4, 1996 1998 1998 ------------ ---------- -------- Land.......................................... $ 4,672 $ 5,569 $ 5,569 Buildings and leaseholds...................... 33,336 43,148 47,333 Equipment and furniture....................... 52,764 71,950 81,186 -------- -------- -------- Total............................... 90,772 120,667 134,088 Less accumulated depreciation (50,653) (56,847) (72,094) -------- -------- -------- Net........................................... $ 40,119 $ 63,820 $ 61,994 ======== ======== ========
F-14 134 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Depreciation expense was $6,851, $7,239 and $7,622 for the years ended 1995, 1996 and 1997, respectively. Depreciation expense for the three months ended 1997 (unaudited) and 1998 was $1,822 and $3,876, respectively. 8. INTANGIBLE AND OTHER ASSETS
DECEMBER 28, JANUARY 3, APRIL 4, 1996 1998 1998 ------------ ---------- -------- Trademarks.................................... $24,168 $ 24,264 $ 24,264 Goodwill...................................... 853 276,096 278,918 Non-compete agreements........................ 46 76 76 ------- -------- -------- Total............................... 25,067 300,436 303,258 Less accumulated amortization................. (7,235) (8,432) (10,933) ------- -------- -------- Net........................................... $17,832 $292,004 $292,325 ======= ======== ========
Amortization expense in 1995, 1996 and 1997 was $770, $792 and $1,078, respectively. Amortization expense for the three months ended 1997 (unaudited) and 1998 was $181 and $2,501, respectively. 9. LEASES The Company leases many of its vehicles and service center locations under operating leases. Most of the service center location leases provide renewal options. Future minimum rental commitments under non-cancelable operating leases for facilities (including closed service centers), vehicles and equipment at April 4, 1998, are as follows: Year: 1998...................................................... $ 46,349 1999...................................................... 38,092 2000...................................................... 26,423 2001...................................................... 14,147 2002...................................................... 6,879 Thereafter................................................ 7,328 -------- Total............................................. $139,218 ========
For 1995, 1996 and 1997, rent expense under all operating leases was $24,028, $25,180 and $28,585, respectively. Rent expense for the three months ended 1997 (unaudited) and 1998 was $6,674 and $14,164, respectively. 10. LONG-TERM DEBT At December 28, 1996, the Company had a credit facility consisting of (a) a term loan facility of $150,000, (a $75,000 "Tranche A Term Loan" and a $75,000 "Tranche B Term Loan") and (b) a revolving credit facility, including letters of credit, which provided up to a maximum of $30,000. The rate of interest on these borrowings was based on the prime rate or Eurodollar rate, at the Company's option. A commitment fee of 1/2% per annum was required on the unused portion of the credit facility. In connection with the Vistar Merger, a new credit facility was entered into which consists of (a) a term loan facility in an aggregate principal amount of $350,000 (the "Term Loan Facility"), consisting of F-15 135 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) three tranches in principal amounts of $150,000 (the "Tranche A Term Loan"), $100,000 (the "Tranche B Term Loan"), and $100,000 (the "Tranche C Term Loan"), respectively, and (b) a revolving credit facility, including letters of credit, which provides up to $100,000 (the "Revolving Credit Facility"). The Tranche A Term Loan and the Revolving Credit Facility mature on September 30, 2003, the Tranche B Term Loan and the Tranche C Term Loan mature on September 30, 2004 and September 30, 2005, respectively. In addition, the new credit facility is subject to mandatory principal prepayment and commitment reductions (to be applied to the Term Loan Facility) in an amount equal to, subject to certain exceptions, (a) 100% of the net cash proceeds of (i) certain debt and equity offerings by the Company or any of its subsidiaries, and (ii) certain asset sales or other dispositions, and (iii) 50% of the Company's excess cash flow (as defined). Borrowings under the facility are collateralized by substantially all assets of the Company. The rate of interest on these borrowings is based on the prime rate, or LIBOR, at the Company's option. At April 4, 1998, the interest rates in effect were 7.125%, 7.125%, 7.625% and 7.875% on the Revolver, Tranche A, Tranche B and Tranche C Term Loans, respectively. The credit facility contains a number of covenants that, among other things, restrict the ability of the Company and its subsidiaries to dispose of assets, incur additional indebtedness, incur guarantee obligations, prepay other indebtedness or amend other debt instruments, pay dividends, create liens on assets, make investments, loans or advances, make acquisitions, create subsidiaries, engage in mergers or consolidations, change the business conducted by the Company, make capital expenditures, or engage in certain transactions with affiliates and otherwise restrict certain corporate activities. In addition, the Company must comply with specified financial ratios and minimum tests, including minimum interest coverage ratios and maximum leverage ratios. The Company utilizes interest rate exchange agreements to manage the exposure associated with interest rate fluctuations. During fiscal 1997, the Company purchased interest rate swaps in the notional amount of $100,000 to hedge the impact of changing interest rates on its variable rate debt. The swap agreements mature March 31, 2000; the counterparty, however, has the option to extend maturity until March 31, 2002. The swap agreements provide for interest to be received on notional amounts at variable rates and provides for interest to be paid on the same notional amounts at fixed rates. The fixed interest rates do not change over the life of the swap agreements. The variable interest rates are reset every three months and are based on LIBOR. The credit risk associated with the interest rate swap agreements revolve around the ability of the counterparty to perform its obligation under the agreement. The Company does not anticipate nonperformance by the counterparty. Terms of the swap agreements are as follows:
JANUARY 3, APRIL 4, 1998 1998 ---------- -------- Notional amount............................................. $100,000 $150,000 Fair value (unrealized losses).............................. (1,568) (2,250) Average received rate (variable)............................ 5.91% 5.69% Average pay rate (fixed).................................... 6.19% 6.19% Average life (years)........................................ 2.25 2.00
Net interest received or paid on these contracts is reflected in interest expense. The difference between the interest paid and received on the interest rate swap contracts resulted in $328 and $70 of additional interest expense in 1997 and the three months ended 1998, respectively. In connection with the THL Transactions described in Note 2, on December 20, 1996, the Company issued $100,000 in 9 7/8% Senior Subordinated Notes (the "Notes") due December 15, 2006. The Notes are subordinated in right of payment to all existing and future senior indebtedness of the Company. Upon F-16 136 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) a change in control triggering event, as defined, the Company is required to make an offer to repurchase the Notes at 101%. The Notes are redeemable at the option of the Company on or after December 15, 2001, at prices decreasing from 104 15/16% on December 15, 2001 to par at December 15, 2004. In addition, prior to December 15, 1999, the Company, at its option, may redeem (at 109 7/8%) up to $35,000 of principal with the proceeds of one or more equity offerings. During 1997, the noteholders were paid $5,000 in exchange for their consent for the Company to modify the terms of the Notes and to allow the Company to enter into the Vistar Merger. This payment is being amortized over the remaining life of the Notes. Costs of the consent solicitation of $1,258 were expensed in 1997. The Company has various unsecured notes payable with interest rates ranging from 6.4% to 8.5% and prime plus 1%. Maturities of the Company's long-term debt are as follows:
APRIL 4, 1998 --------------------------------------------------------- DUE DATE SENIOR FOR FISCAL REVOLVING TERM SUBORDINATED NOTES OTHER YEAR ENDING NOTES LOANS NOTES PAYABLE (NOTE 12) TOTAL ----------- --------- -------- ------------ ------- --------- -------- 1999.......................... $1,298 $4,643 $ 5,941 2000.......................... $ 16,500 210 2,585 19,295 2001.......................... 24,500 1,200 25,700 2002.......................... 34,500 1,200 35,700 2003.......................... 56,313 1,200 57,513 Thereafter.................... $41,250 218,187 $100,000 359,437 ------- -------- -------- ------ ------ -------- Total................. $41,250 $350,000 $100,000 $5,108 $7,228 $503,586 ======= ======== ======== ====== ====== ========
The carrying amount of debt approximates its fair value. The Company had letters of credit outstanding totaling $17,556 as of April 4, 1998. 11. CAPITAL STOCK In conjunction with the Vistar Merger described in Note 4, the Company effected a 1 for 3 reverse stock split of its Class A Common Stock and reclassified these shares as Class A Voting Common Stock. The Class B Common Stock was reclassified as Class B Non-Voting Common Stock, and a stock dividend was paid, in which two shares of Class B Non-Voting Common Stock were issued for each share of Class A Voting Common Stock. The Company paid $4,794 in accrued dividends on the 8% Cumulative Preferred Stock and redeemed the preferred stock for $58,250. A new series of preferred stock was issued and designated as Non-Voting 8% Preferred Stock. Treasury shares were converted into Class A Voting Common Stock and Class B Non-Voting Common Stock via the 1 for 3 reverse stock split and the Class B Common Stock reclassification, respectively. The 2 for 1 stock dividend was not paid for shares held in treasury. F-17 137 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following represents the number of shares outstanding and held in treasury for each class of stock at respective dates. Share amounts for December 28, 1996, have not been restated for the reverse stock split or stock dividend.
DECEMBER 28, JANUARY 3, APRIL 4, 1996 1998 1998 ------------ ---------- ---------- 8% Cumulative Preferred Stock.......................... 582,498 8% Non-Voting Preferred Stock.......................... 40,000 40,000 Class A Common Stock Issued............................ 5,326,935 Class A Common Stock Held in Treasury.................. 358,813 Class A Voting Common Stock............................ 3,534,283 3,534,283 Class A Voting Common Stock Held in Treasury........... 119,938 119,938 Class B Common Stock Issued............................ 50,000 Class B Common Stock Held in Treasury.................. 50,000 Class B Non-Voting Common Stock........................ 10,458,260 10,462,638 Class B Non-Voting Common Stock Held in Treasury....... 50,000 50,000
The Company has several stock option plans and agreements which provide for the sale of Class A and Class B Common Stock to certain key associates, consultants and members of the Board of Directors. Options vest in periods ranging from zero to five years and are generally exercisable for a period of ten years from the date of grant. All options granted have exercise prices which were not less than fair market value at the date of grant. In conjunction with the Vistar Merger, all options for Class A shares were converted to options to purchase the same number of Class B shares. At April 4, 1998, all options outstanding are to key associates and are for Class B Non-Voting shares. The following table summarizes the stock options outstanding:
DECEMBER 30, DECEMBER 28, 1995 1996 JANUARY 3, 1998 APRIL 4, 1998 ----------------- ----------------- ------------------- ------------------ WEIGHTED WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE SHARES PRICE ------ -------- ------ -------- -------- -------- ------- -------- Outstanding at beginning of period................... 5,025 $241.78 45,532 $ 29.35 54,780 $24.90 17,190 $12.08 Granted.................... 42,133 3.00 15,328 3.00 175,000 13.40 407,500 19.00 Exercised.................. (6,080) 3.00 (203,611) 11.17 Forfeited.................. (1,626) 3.00 (8,979) 136.63 ------ ------- ------ ------- -------- ------ ------- ------ Outstanding at end of period................... 45,532 $ 29.35 54,780 $ 24.90 17,190 $12.08 424,690 $18.72 ====== ======= ====== ======= ======== ====== ======= ====== Exercisable at period end...................... 4,149 $292.00 11,209 $110.05 876 $ 3.00 1,314 $ 3.00 ====== ======= ====== ======= ======== ====== ======= ====== Weighted-average fair value of options granted during the period using the Black-Scholes pricing model.................... $ 1.56 $ 1.43 $ 3.64 $ 4.64 Assumptions used: Expected dividend yield.................. 0% 0% 0% 0% Expected volatility...... 0% 0% 0% 0% Risk-free interest rate................... 7.5% 6.6% 6.2% 5.7% Expected life of option (in years)............. 10.0 10.0 5.2 5.0
F-18 138 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table shows various information about stock options outstanding at April 4, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------------- -------------------------- WEIGHTED WEIGHTED WEIGHTED NUMBER AVERAGE AVERAGE NUMBER AVERAGE EXERCISE OUTSTANDING AT REMAINING EXERCISE EXERCISABLE AT EXERCISE PRICES APRIL 4, 1998 LIFE PRICE APRIL 4, 1998 PRICE -------- -------------- --------- -------- -------------- -------- $ 3.00 2,190 6.9 $ 3.00 1,314 $3.00 13.40 15,000 9.3 13.40 19.00 407,500 10.0 19.00 ------- ---- ------ ----- ----- $ 3.00-$19.00 424,690 9.9 $18.72 1,314 $3.00 ======= ==== ====== ===== =====
During 1997, the Company recorded $2,976 of expenses associated with the acceleration of the vesting of 160,000 management stock options. The Company accounts for employee stock options using the intrinsic value method allowed by Accounting Principles Board Opinion No. 25. Had compensation costs been determined based on the fair value method of Statement of Financial Accounting Standard No. 123 for all plans, the Company's net earnings would have been reduced to the pro forma amounts as follows:
YEAR ENDED THREE MONTHS ENDED --------------------------- --------------------- 1995 1996 1997 1997 1998 ------ ------- ------ ----------- ------ (UNAUDITED) Net earnings (in thousands): As reported................... $6,326 $27,774 $3,588 (95) (4,316) Pro forma..................... $6,317 $27,764 $3,577 (95) (4,319)
At April 4, 1998 there were 2,500 options available for grant. 12. COMMITMENTS AND CONTINGENCIES For certain of its workers' compensation, automobile, product and associate health care liabilities, the Company is self-insured, subject to certain stop-loss coverage. The estimated costs of reported claims and of incurred-but-not-reported claims are accrued, generally using actuarial estimates based on claims history. The amount the Company will ultimately incur for these liabilities could differ from these estimates. During 1996, the Company purchased insurance to cover Safelite's remaining workers' compensation, automobile and product liabilities for the period July 1, 1989 through December 31, 1994. The Company no longer has any liability for these contingencies; therefore, the self-insured accrual for this period has been removed from the financial statements. This transaction had no significant impact on results of operations for 1996. During 1996, the Company also purchased workers' compensation, automobile and product liability coverage for the period December 20, 1996 through December 31, 1999. The cost of this insurance was partially financed by $13,740 in premium financing, payable in monthly installments, including interest of 6.67% to 6.99%, of $514 in 1997 and $416 in 1998 and 1999. Under the terms of the financing, if the Company cancels its insurance policies for any reason, corresponding unearned premium refunds would be applied directly against the outstanding principal balance. At April 4, 1998, the outstanding principal balance of this premium financing was $7,228. On June 25, 1998, a customer advised Safelite, following a review of contract terms, that the customer is disputing certain billings made to it by Vistar prior to the Vistar Merger. The customer has provided Safelite with a preliminary estimate of the disputed amount which the Company is reviewing. The ultimate resolution of this matter is not presently determinable but, in the opinion of management, F-19 139 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) such resolution is not expected to have a significant impact on the Company's financial statements. In the event the Company is required to make any payment, such cost would be allocated to goodwill associated with the Vistar Merger. The Company is involved in various litigation and disputes arising in the normal course of its business, primarily related to vehicle accidents and human resource related issues. The Company is also involved in certain environmental actions brought by the U.S. Environmental Protection Agency and certain state agencies. The ultimate resolution of these matters is not presently determinable but, in the opinion of management, such resolution is not expected to have a significant impact on the Company's financial statements. 13. SAVINGS AND RETIREMENT PLANS Safelite maintains a 401(k) savings plan, covering substantially all associates, except the former employees of Vistar, that provides basic employer matching contributions of up to 40% (depending upon the participant's years of service) of the first 4% of each participant's compensation. Bonus employer contributions up to 50% of the basic employer contribution are also made depending upon the level of associate participation in the plan. Safelite also maintains a 401(k) savings plan covering substantially all the former associates of Vistar, that provides basic matching contributions of up to 25% of the first 6% of each participant's compensation. Safelite contributions to its 401(k) savings plans were $636, $762 and $998 for the years 1995, 1996 and 1997, respectively. Contributions for the three months ended 1997 (unaudited) and 1998 were $386 and $491, respectively. Safelite also has a defined benefit plan whose benefits were frozen and fully vested to participants effective June 30, 1993. The funded status of the Safelite defined benefit plan is as follows:
DECEMBER 28, JANUARY 3, APRIL 4, 1996 1998 1998 ------------ ---------- -------- Accumulated and projected benefit obligation (all vested) for services provided to date............... $(14,964) $(17,192) $(18,548) Less market value of plan assets...................... 14,319 16,932 18,738 -------- -------- -------- Plan assets in excess of (less than) projected benefit obligation.......................................... (645) (260) 190 Unrecognized net loss resulting from past experience different from that assumed......................... 1,227 1,284 895 Adjustment to recognize minimum pension liability..... (1,227) (1,284) -------- -------- -------- Prepaid (accrued) pension cost........................ $ (645) $ (260) $ 1,085 ======== ======== ======== Discount Rate......................................... 7.5% 7.0% 7.0%
Plan assets at April 4, 1998 are invested in common and preferred stocks, corporate and U.S. government bonds and money market funds. The expected long-term rate of return on plan assets was 8.5% for all periods. As part of the sale of Lear Siegler (Note 3), the Company retained the liability for pension obligations of former Lear Siegler employees and related pension assets. Plan benefits are based on various formulae, the principal factors of which are years of service and compensation during the years immediately preceding retirement. The Company's funding policy for these plans is to make the minimum annual contributions required by applicable regulations. No further accruals for service costs will be made. F-20 140 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The funded status of the Lear Siegler defined benefit plan is as follows:
DECEMBER 28, JANUARY 3, APRIL 4, 1996 1998 1998 ------------ ---------- -------- Accumulated and projected benefit obligation (all vested) for services provided to date............... $(33,805) $(35,475) $(35,576) Less market value of plan assets...................... 26,717 31,637 34,905 -------- -------- -------- Plan assets in excess of (less than) projected benefit obligation.......................................... (7,088) (3,838) (671) Unrecognized net loss................................. 10,133 13,020 9,814 Adjustment to recognize minimum pension liability..... (10,133) (13,020) (9,814) -------- -------- -------- Accrued pension cost.................................. $ (7,088) $ (3,838) $ (671) ======== ======== ======== Discount Rate......................................... 7.5% 7.0% 7.0%
Plan assets at April 4, 1998 consist primarily of a bond mutual fund, U.S. government obligations and cash equivalents. The expected long-term rate of return on plan assets was 8.75% in 1995 and 8.5% in 1996, 1997 and the three months ended 1998. Net periodic pension expense (income) for all of the Company's defined benefit plans for the respective periods includes the following components:
YEAR ENDED THREE MONTHS ----------------------------- ENDED 1995 1996 1997 1998 ------- ------- ------- ------------ Service cost-benefit earned during the period..................................... $ 15 Interest cost on the projected benefit obligation................................. 3,219 $ 3,225 $ 3,560 $ 911 Actual return on plan assets................. (4,273) (2,736) (3,861) (5,771) Net amortization and deferral................ 939 (494) 558 4,840 ------- ------- ------- ------- Net periodic pension expense (income)........ $ (100) $ (5) $ 257 $ (20) ======= ======= ======= =======
Net periodic pension expense for the three months ended 1997 (unaudited) was $64. At December 28, 1996, January 3, 1998 and April 4, 1998, the Company recorded, as required by SFAS No. 87, an additional minimum pension liability of $11,360, $14,304, and $9,814, respectively, related to certain unfunded pension obligations. The corresponding cumulative charge to stockholders' equity (deficit) for these amounts at December 28, 1996, January 3, 1998 and April 4, 1998, net of applicable taxes, was $6,816, $8,582 and $5,887, respectively. 14. INCOME TAXES Income taxes are provided for the amounts estimated to be payable on tax returns for the current year. Deferred income taxes are provided for all temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. If necessary, based upon available evidence, a valuation allowance is provided for the amount of deferred tax assets that are not expected to be realized. F-21 141 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The components of the income tax provision (benefit) before extraordinary items are as follows:
YEAR ENDED THREE MONTHS ENDED --------------------------- ---------------------- 1995 1996 1997 1997 1998 ---- -------- ------- ----------- ------- (UNAUDITED) Current.............................. $157 $ 2,110 $ 45 $ (71) Deferred............................. (19,715) (6,887) $59 (1,552) ---- -------- ------- --- ------- Total................................ $157 $(17,605) $(6,842) $59 $(1,623) ==== ======== ======= === =======
The income tax provision (benefit) differs from the amounts determined by applying the statutory income tax rate as a result of the following:
YEAR ENDED THREE MONTHS ENDED ------------------------------ ---------------------- 1995 1996 1997 1997 1998 ------- -------- ------- ----------- ------- (UNAUDITED) Income taxes at statutory rate.... $ 2,640 $ 6,706 $ (147) $(13) $(2,079) Reduction in valuation allowance....................... (2,000) (25,894) (2,996) State income taxes................ 312 958 (21) (1) (197) Lear Siegler net operating losses.......................... (5,674) Other, principally permanent differences..................... (795) 625 1,996 73 653 ------- -------- ------- ---- ------- Provision (benefit) for income taxes........................... $ 157 $(17,605) $(6,842) $ 59 $(1,623) ======= ======== ======= ==== =======
Items comprising the Company's net deferred tax assets and liabilities are as follows:
DECEMBER 28, JANUARY 3, APRIL 4, 1996 1998 1998 ------------ ---------- -------- Deferred tax assets: Net operating loss carryforwards.................... $ 32,035 $ 46,688 $ 45,825 Differences between book and tax basis of inventories...................................... 2,530 3,993 3,770 Reserves not currently deductible................... 17,406 10,533 14,321 Restructuring reserves.............................. 9,862 12,549 Deductible intangibles.............................. 4,502 29 Pension............................................. 4,547 5,722 3,925 Other............................................... 2,738 2,340 Difference between book and tax basis of property, plant and equipment.............................. 4,373 Valuation Allowance................................. (36,182) (21,800) (21,800) -------- -------- -------- Total....................................... 23,074 61,840 62,992 -------- -------- -------- Deferred tax liabilities: Difference between book and tax basis of property, plant and equipment.............................. (1,322) (400) -------- -------- -------- Net deferred tax asset................................ $ 21,752 $ 61,440 $ 62,992 ======== ======== ========
A valuation allowance reduces the amount of deferred tax assets that management believes more likely than not will not be recognized. The valuation allowance is based on available information at the balance sheet date including historical earnings, net operating loss limitations and other factors which may impact the Company's ability to realize the tax benefits. F-22 142 SAFELITE GLASS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) As part of the sale of Lear Siegler, the Company obtained the right to use approximately $16,210 of previously unrecognized federal net operating loss carryforwards. In addition, deferred tax assets totaling $11,386 related to Lear Siegler, which had been fully reserved, were assigned to Lear Siegler in the sale transaction. At April 4, 1998, the Company has net operating loss carryforwards for federal income tax purposes totaling approximately $112,000 which expire through 2017. 15. EXTRAORDINARY ITEM During 1997 the Company recorded an extraordinary loss of $2,835, net of income tax benefit of $1,890, as a result of expensing unamortized loan origination costs related to its 1996 credit facility and fees paid to the lenders of its new credit facility. In 1996, the Company recorded an extraordinary loss of $500, net of income tax benefit of $344, for the unamortized loan origination fees related to the early repayment of another debt obligation. 16. DISCONTINUED OPERATIONS In 1996, the Company recorded income from discontinued operations of $1,706. This income was primarily the result of resolving, in 1996, various liability and tax issues associated with operating units of Lear Siegler which were discontinued in prior years. The following summarizes the significant items: Settlement of liability issues.............................. $(25,500) Adjustment of state tax contingencies....................... 19,606 Tax refund.................................................. 7,600 -------- $ 1,706 ========
F-23 143 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Vistar, Inc.: We have audited the accompanying consolidated balance sheets of VISTAR, INC. (formerly Globe Glass & Mirror Co. and successor of Windshields America, Inc.) (an Illinois corporation) AND SUBSIDIARIES as of March 31, 1996 and 1997, and the related consolidated statements of earnings (loss), stockholders' equity and cash flows for each of the three years in the period ended March 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Vistar, Inc. and Subsidiaries as of March 31, 1996 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1997, in conformity with generally accepted accounting principles. The financial statements of Vistar, Inc. and Subsidiaries as of December 19, 1997, and for the nine-month periods ended December 21, 1996, and December 19, 1997, were not audited by us and, accordingly, we do not express an opinion on them. Chicago, Illinois April 7, 1997 (except with respect to the matter described in Note 15, as to which the date is July 22, 1998) F-24 144 VISTAR, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
MARCH 31 -------------------- 1996 1997 DEC. 19, 1997 -------- -------- ------------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents............................ $ 13,438 $ 3,016 $ 4,942 Marketable securities................................ 700 750 -- Trade accounts receivable, less allowance for doubtful accounts of $2,656, $3,733 and $14,002, respectively...................................... 30,065 36,035 30,452 Inventories.......................................... 21,347 13,804 7,010 Income tax refunds receivable and prepayments........ 11,682 3,958 3,808 Prepaid expenses and other current assets............ 6,388 8,511 5,675 Current maturities of notes receivable............... 972 677 452 Deferred income taxes................................ 14,802 10,969 4,684 -------- -------- -------- Total current assets.............................. 99,394 77,720 57,023 -------- -------- -------- PROPERTY, PLANT AND EQUIPMENT, at cost: Land................................................. 962 962 962 Buildings and building improvements.................. 1,023 1,023 1,481 Machinery and equipment.............................. 13,657 20,077 20,143 Leasehold improvements............................... 10,082 11,175 11,328 Furniture and fixtures............................... 2,993 3,356 3,540 -------- -------- -------- 28,717 36,593 37,454 Less-Accumulated depreciation and amortization....... 8,653 15,801 19,576 -------- -------- -------- Property, plant and equipment, net................ 20,064 20,792 17,878 -------- -------- -------- OTHER ASSETS: Notes receivable, excluding current maturities....... 800 800 125 Deferred income taxes................................ 11,739 11,722 16,787 Intangible assets.................................... 157,791 148,417 144,119 Other noncurrent assets.............................. 6,645 2,374 6,605 -------- -------- -------- Total other assets................................ 176,975 163,313 167,636 -------- -------- -------- $296,433 $261,825 $242,537 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt................. $ 4,772 $ 2,906 $ 1,721 Trade accounts payable............................... 23,584 18,639 19,581 Other current liabilities............................ 34,436 35,125 26,108 -------- -------- -------- Total current liabilities......................... 62,792 56,670 47,410 -------- -------- -------- LONG-TERM DEBT, excluding current maturities........... 45,088 17,624 16,695 -------- -------- -------- PREFERENCE STOCK ($10 par value, 44,167 shares issued and outstanding)..................................... 176,250 176,250 132,023 -------- -------- -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common stock, $10 par value, 100,000 shares authorized; 45,970 shares issued and outstanding (excluding preference shares)..................... 460 460 460 Additional paid-in capital........................... 78,857 78,857 78,857 Accumulated deficit.................................. (67,014) (68,036) (32,908) -------- -------- -------- Total stockholders' equity........................ 12,303 11,281 46,409 -------- -------- -------- $296,433 $261,825 $242,537 ======== ======== ========
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. F-25 145 VISTAR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) (IN THOUSANDS)
FOR THE YEARS ENDED MARCH 31 FOR THE NINE MONTHS ENDED ------------------------------ ----------------------------- 1995 1996 1997 DEC. 21, 1996 DEC. 19, 1997 -------- -------- -------- ------------- ------------- (UNAUDITED) NET SALES........................ $114,319 $172,821 $413,504 $318,762 $339,502 -------- -------- -------- -------- -------- COST OF SALES: Materials...................... 41,896 67,219 186,263 140,076 164,289 Labor.......................... 17,604 27,104 75,242 56,970 71,151 Vehicle........................ 5,074 6,058 12,209 9,861 11,740 Occupancy...................... 6,371 9,229 16,165 10,759 13,439 Other.......................... 16,711 21,075 22,402 17,873 26,185 -------- -------- -------- -------- -------- 87,656 130,685 312,281 235,539 286,804 -------- -------- -------- -------- -------- Gross profit................ 26,663 42,136 101,223 83,223 52,698 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES........ 21,543 38,001 72,090 55,458 49,968 AMORTIZATION OF INTANGIBLE ASSETS......................... 3,285 5,001 13,371 9,558 10,162 NONRECURRING CHARGES............. -- -- 6,939 5,323 793 RESTRUCTURING CHARGES............ -- 9,532 -- -- -- -------- -------- -------- -------- -------- Operating income (loss)........ 1,835 (10,398) 8,823 12,884 (8,225) -------- -------- -------- -------- -------- INTEREST EXPENSE................. (49) (731) (2,046) (1,698) (1,206) INTEREST INCOME.................. -- 98 437 327 600 -------- -------- -------- -------- -------- Income (loss) before income taxes....................... 1,786 (11,031) 7,214 11,513 (8,831) (PROVISION) BENEFIT FOR INCOME TAXES.......................... (175) 1,807 (8,236) (8,416) (268) -------- -------- -------- -------- -------- NET INCOME (LOSS)................ $ 1,611 $ (9,224) $ (1,022) $ 3,097 $ (9,099) ======== ======== ======== ======== ========
The accompanying notes to consolidated financial statements are an integral part of these statements. F-26 146 VISTAR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS)
ADDITIONAL COMMON PAID-IN ACCUMULATED STOCK CAPITAL DEFICIT TOTAL ------ ---------- ----------- -------- BALANCE, March 31, 1994...................... $ -- $42,229 $(59,401) $(17,172) Conversion of amounts due to Belron into capital................................. -- 20,000 -- 20,000 Net income................................. -- -- 1,611 1,611 ---- ------- -------- -------- BALANCE, March 31, 1995...................... -- 62,229 (57,790) 4,439 Conversion of amounts due to Belron into capital................................. -- 17,088 -- 17,088 Merger with Globe.......................... 460 (460) -- -- Net loss................................... -- -- (9,224) (9,224) ---- ------- -------- -------- BALANCE, March 31, 1996...................... 460 78,857 (67,014) 12,303 Net loss................................... -- -- (1,022) (1,022) ---- ------- -------- -------- BALANCE, March 31, 1997...................... 460 78,857 (68,036) 11,281 Preference stock dilution (unaudited)...... -- -- 44,227 44,227 Net loss (unaudited)....................... -- -- (9,099) (9,099) ---- ------- -------- -------- BALANCE, December 19, 1997 (unaudited)....... $460 $78,857 $(32,908) $ 46,409 ==== ======= ======== ========
The accompanying notes to consolidated financial statements are an integral part of these statements. F-27 147 VISTAR, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
FOR THE YEARS ENDED MARCH 31 FOR THE NINE MONTHS ENDED ----------------------------- ----------------------------- 1995 1996 1997 DEC. 21, 1996 DEC. 19, 1997 ------- -------- -------- ------------- ------------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)................................. $ 1,611 $ (9,224) $ (1,022) $ 3,097 $(9,099) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities -- Depreciation.................................... 2,160 3,183 6,198 4,009 5,260 Amortization.................................... 3,285 5,001 13,371 9,558 10,162 Deferred income tax (benefit) provision......... -- (1,992) 5,543 1,741 1,220 (Gain) loss on disposal of property, plant and equipment..................................... (97) 508 74 (27) 6 Restructuring and other charges................. -- 9,532 -- -- -- Change in assets and liabilities, net of effects of business acquisitions -- Trade accounts receivable..................... (105) (4,676) (5,468) (1,983) 5,603 Inventories................................... (2,669) (2,400) 7,910 3,886 6,851 Prepaid expenses and other current assets..... (832) (471) 6,931 13,168 3,215 Trade accounts payable........................ (1,355) 3,802 (4,945) 14,776 851 Other current liabilities..................... (2,268) (5,039) 3,938 10,625 (6,747) Other......................................... (40) (4,387) 4,571 2,544 (3,557) ------- -------- -------- -------- ------- Net cash provided by (used in) operating activities................................ (310) (6,163) 37,101 61,394 13,765 ------- -------- -------- -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Sale (purchase) of marketable securities.......... -- (700) (50) -- 750 Cash paid for businesses, net of cash acquired.... (3,181) (10,728) (7,156) (7,153) (1,622) Cash obtained in Merger........................... -- 15,014 -- -- -- Purchases of property, plant and equipment........ (3,248) (4,583) (8,042) (6,061) (3,553) Proceeds from sale of property, plant and equipment....................................... 150 447 -- 24 -- Collections on notes receivable................... -- 28 381 123 219 ------- -------- -------- -------- ------- Net cash used in investing activities....... (6,279) (522) (14,867) (13,067) (4,206) ------- -------- -------- -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in revolving line of credit............ -- 19,869 (25,869) (28,269) (7,633) Payments on long-term debt........................ (114) (1,409) (4,462) -- -- Net increase (decrease) in payable to Belron...... 6,907 (381) (2,325) -- -- ------- -------- -------- -------- ------- Net cash provided by (used in) financing activities................................ 6,793 18,079 (32,656) (28,269) (7,633) ------- -------- -------- -------- ------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS....................................... 204 11,394 (10,422) 20,058 1,926 CASH AND CASH EQUIVALENTS, beginning of period...... 1,840 2,044 13,438 13,438 3,016 ------- -------- -------- -------- ------- CASH AND CASH EQUIVALENTS, end of period............ $ 2,044 $ 13,438 $ 3,016 $ 33,496 $ 4,942 ======= ======== ======== ======== ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for -- Interest........................................ $ 11 $ 613 $ 2,092 $ 237 $ 1,129 Income taxes.................................... 122 895 10,319 3,498 475
The accompanying notes to consolidated financial statements are an integral part of these statements. F-28 148 VISTAR, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLAR AMOUNTS IN THOUSANDS) 1. ORGANIZATION AND PRESENTATION Windshields America, Inc., together with its subsidiaries ("Windshields"), was a wholly owned subsidiary of Belron (USA) BV ("Belron") through February 29, 1996. On that date, Windshields merged with and into Globe Glass & Mirror Co. ("Globe") with Belron retaining a 51% ownership interest in the merged entity (the "Merger"). The previous stockholders of Globe obtained a 49% ownership interest in the merged entity. The common stock of Globe survived the Merger; Windshields' common stock was canceled and retired. The Merger was accounted for as a reverse acquisition in accordance with the purchase method of accounting with Windshields as the deemed acquirer. Pursuant to such accounting, each of the 50,000 shares of Windshields common stock ($.001 par value) outstanding as of the Merger date were exchanged for approximately .9194 shares of newly issued Globe common stock ($10 par value) resulting in Belron owning 51% of the merged entity. The merged entity originally retained the name of Globe Glass & Mirror Co. but later changed its name to Vistar, Inc. The accompanying consolidated financial statements include the accounts of Windshields through the Merger date and of the merged entity thereafter. All significant intercompany accounts and transactions have been eliminated in consolidation. As used herein, the "Company" refers to Windshields through February 29, 1996, and the merged entity and its subsidiaries thereafter. The Company's business consists primarily of the replacement and repair of automotive glass throughout the United States. A significant portion of the Company's sales are to customers in the insurance industry. In the opinion of management, the financial statements as of December 19, 1997, and for the nine months ended December 21, 1996, and December 19, 1997, include all adjustments, consisting only of normal recurring adjustments, which are necessary to present fairly the financial position and results of operations for the periods then ended. Operating results for any interim period are not necessarily indicative of results that may be expected for the full year. All interim numbers presented herein are unaudited. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS Cash equivalents consist of short-term liquid investments. Outstanding balances of the Company's controlled disbursement accounts are included in trade accounts payable ($9,324, $7,155 and $8,051 at March 31, 1996, March 31, 1997, and December 19, 1997, respectively). Restricted cash, held in escrow accounts for insurance purposes and in support of certain indebtedness, amounted to $5,717, $1,655 and $1,393 as of March 31, 1996, March 31, 1997, and December 19, 1997, respectively, and is classified as other noncurrent assets. MARKETABLE SECURITIES Marketable securities consisted of fixed income securities with original maturities of less than one year and were carried at amortized cost, which approximated fair market value, as the Company had the ability and intent to hold them to maturity. INVENTORIES All inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value) and consist primarily of replacement glass. In 1997, the Company entered into an agreement to purchase a substantial portion of its glass inventory from one supplier. The provisions of this agreement allow the Company to maintain lower inventory levels. F-29 149 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is recorded at cost which, for such assets acquired in a business combination, represents the estimated fair value of such assets at their acquisition date. Major renewals and betterments which extend the useful life of an asset are capitalized; routine maintenance and repairs are expensed as incurred. Upon the sale or retirement of these assets, the related gross cost and accumulated depreciation are removed from the accounts and any related gain or loss is reflected in earnings. Depreciation and amortization of property, plant and equipment are computed using the straight-line method for financial reporting purposes based on the following estimated useful lives:
CLASSIFICATION PERIOD -------------- ------ Building and building improvements.................. 10 to 40 years Machinery and equipment............................. 2 to 10 years Leasehold improvements.............................. Over the life of the lease Furniture and fixtures.............................. 5 to 10 years
INTANGIBLE ASSETS The excess cost over the fair value of net assets acquired in the Merger is being amortized on a straight-line basis over 20 years. Other such excess costs, resulting from various acquisitions of smaller glass replacement and repair businesses, are being amortized on a straight-line basis over five or ten years. After an acquisition, the Company continually reviews whether subsequent events and circumstances have occurred that indicate the remaining estimated useful life of such excess costs may warrant revision or that the remaining balance may not be recoverable. If events and circumstances indicate that excess costs related to a particular business should be reviewed for possible impairment, the Company uses projections to assess whether future operating income of the business on a nondiscounted basis is likely to exceed the amortization of such excess costs over its remaining life, to determine whether a write-down to recoverable value is appropriate. Should an impairment be identified, a loss would be reported to the extent that the carrying value exceeds the fair value of that goodwill as determined by valuation techniques available in the circumstances. Other intangible assets (with a net recorded value of $3,917, $3,763 and $4,957 as of March 31, 1996, March 31, 1997, and December 19, 1997, respectively) include the costs of noncompete agreements with certain previous owners of businesses acquired by Globe prior to the Merger, costs associated with the acquisition of customer lists and costs incurred in obtaining trade names. Such costs are being amortized on a straight-line basis over five years, except for costs of noncompete agreements which are amortized over the term, not to exceed seven years, of the agreements. Accumulated amortization of all intangible assets as of March 31, 1996, March 31, 1997, and December 19, 1997, amounted to $18,480, $31,851 and $42,013, respectively. ADVERTISING COSTS The Company's yellow pages advertising qualifies as direct response advertising and therefore the Company capitalizes such advertising costs and amortizes the expense over the period in which the benefits are expected (the life of the publication), which is generally one year or less. Advertising costs of $2,399, $2,287 and $2,572 were reported as prepaid expenses as of March 31, 1996, March 31, 1997, and December 19, 1997, respectively. Total advertising expense was $2,007, $2,894, $5,156, $3,548 and $4,873 in fiscal 1995, fiscal 1996, fiscal 1997 and the nine months ended December 21, 1996, and December 19, 1997, respectively. F-30 150 INCOME TAXES Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. REVENUE RECOGNITION Revenue is recognized when the replacement or repair service is performed. NEW ACCOUNTING PRONOUNCEMENTS In July, 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"), and Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. SFAS No. 131 introduces a new model for segment reporting, called the "management approach." The management approach is based on the way that the chief operating decision maker organizes segments within a company for making operating decisions and assessing performance. Management is currently evaluating the provisions of this statement to determine its impact upon current reporting. Both SFAS No. 130 and SFAS No. 131 will be adopted by the Company by fiscal year 1999. In April, 1998, the American Institute of Certified Public Accountants issued Statement of Position No. 98-5, "Reporting on the Cost of Start-up Activity" ("SOP 98-5"). SOP 98-5 establishes the standard on the financial reporting of start-costs and organization cost. SOP 98-5 requires costs of start-up activities and organization cost to be expensed as incurred. Management is currently evaluating the provisions of this statement to determine its impact upon current reporting. SOP 98-5 will be adopted by the Company by fiscal year 1999. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In addition, certain prior-year amounts have been reclassified to conform with current-year presentation. 3. ACQUISITIONS Based on independent appraisals of Globe, the purchase price paid in the Merger by Windshields was determined to be $176,250. In connection with the Merger, the Company and its stockholders entered into various agreements which stipulate a dividend policy and certain stockholder rights, including put and call provisions on the shares retained by the Globe shareholders. Such put options provide that the Globe shareholders, solely at their option, could put their entire common stock holdings to the Company, or in certain circumstances, to Belron for the greater of the Company's Market Value, as defined, and a preestablished minimum after the one year anniversary of the Merger. Accordingly, such shares have been classified as Preference Stock outside of stockholders' equity. Any changes in the minimum value of the putable shares are reflected as an adjustment to Preference Stock on the Company's balance sheet with an offsetting adjustment in Accumulated Deficit. Market value, as of March 31, 1997, based on a determination by the shareholders, had not changed since the Merger. However, based on the Market Value of the Company implied in the December 19, 1997, merger of the F-31 151 Company with and into Safelite Glass Corp. ("Safelite"), as described in Note 14, the value of the putable shares was reduced by $44,227 as of December 19, 1997. The Merger purchase price was allocated to Globe's net assets as follows: Cash.................................................... $ 15,014 Trade accounts receivable............................... 14,865 Inventories............................................. 8,627 Income tax refunds receivable........................... 11,682 Other current assets.................................... 7,955 Property, plant and equipment........................... 10,982 Intangible assets....................................... 137,217 Other assets............................................ 23,931 Trade accounts payable.................................. (12,865) Other current liabilities............................... (22,158) Long-term debt.......................................... (19,000) =========
Included in the above allocation are $22,403 of deferred tax assets related to Windshields which had been fully reserved before the Merger and are further described in Note 8. Additionally, as a condition of the Merger, Belron converted $17,088 of advances loaned to the Company into permanent capital during fiscal 1996. Advances due to Belron are non-interest bearing. Also, during fiscal 1995, fiscal 1996 and fiscal 1997, the Company acquired the net assets and businesses of several companies in purchase transactions for aggregate purchase prices of approximately $5,056, $20,461 and $8,492, respectively. During the nine months ended December 21, 1996, and December 19, 1997, the Company acquired the net assets and businesses of several companies in purchase transactions for aggregate purchase prices of approximately $8,492 and $2,298, respectively. These acquisitions were not material to the Company. All of the above acquisitions were accounted for as purchases and, accordingly, the purchase price was allocated to the related assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. Certain allocations have been, or may be, adjusted based on more current available information. Future adjustments, if any, will be made prior to the one year anniversary of the related acquisition and are not expected to be material. Operating results of acquired businesses have been included in the consolidated financial statements from the date of acquisition. The following table summarizes the composition of the acquisitions described above and consideration paid therefore:
YEARS ENDED MARCH 31 NINE MONTHS ENDED ---------------------------- ------------------------------ 1995 1996 1997 DEC. 21, 1996 DEC. 19, 1997 ------ -------- ------ ------------- ------------- (UNAUDITED) Merger value.................... $ -- $176,250 $ -- $ -- $ -- Cash paid or withheld pending collection of acquired accounts receivable........... 2,886 11,292 7,491 7,491 1,823 Notes issued to sellers......... 2,170 9,169 1,001 1,001 475 ------ -------- ------ ------ ------ Total consideration........... 5,056 196,711 8,492 8,492 2,298 Assets acquired................. 4,182 252,361 9,204 9,204 2,389 ------ -------- ------ ------ ------ Liabilities assumed............. $ 874 $ 55,650 $ 712 $ 712 $ 91 ====== ======== ====== ====== ======
F-32 152 4. RESTRUCTURING AND NONRECURRING CHARGES In conjunction with the Merger, the Company recorded a restructuring charge of $9,532 and an additional $3,966 reserve in purchase accounting primarily for the closure of duplicative Windshields and Globe stores, warehouses and offices and for the estimated costs related to the concurrent decisions to change the Company's name (ultimately to Vistar, Inc.) and to change from a procurement practice of warehousing inventory to a vendor-managed inventory program. Estimated closure costs included (a) $2,371 for the severance of approximately 220 store, warehouse and corporate office employees, (b) $3,010 for future noncancelable rental payments for facilities subsequent to the date of their respective closure, (c) $1,199 for the write-off of abandoned assets and (d) $3,570 for various other related costs necessary for or resulting from the closure of the facilities, such as legal and brokerage fees to terminate and/or sublet leases and building restoration costs. Costs to tear down facility signs with the Windshields and Globe names ($500) and the estimated undepreciated carrying value of such signs ($645) were also reserved. Based on the larger size of the merged company, management elected to discontinue the warehousing of inventory prior to its shipment to Company-owned stores. A program was established whereby certain vendors were awarded a substantial portion of the Company's procurement requirements in exchange for delivery directly to the stores. These vendors would acquire the inventory at the Company's warehouses as the first step in implementing this program. A $1,135 reserve was established for the estimated difference between the aggregate carrying value and the bulk (versus retail) price that these vendors would pay for this inventory. Additionally, the carrying value ($1,068) of certain computer software systems under development by Windshields at the time of the Merger was reserved as management elected to convert the Windshields operations onto the Globe systems. Total noncash charges, representing asset write-offs, were $4,047. By December 19, 1997, all affected facilities were closed and all affected employees were terminated. Actual severance, rental payments and other costs were not materially different than those estimated when the reserves were established. In addition to the costs described above, the Company incurred $6,939, $5,323 and $793 of nonrecurring costs in fiscal 1997 and the nine-month periods ended December 21, 1996, and December 19, 1997, respectively, related to the integration of the Windshields and Globe businesses, the identification of the new name and the implementation of the vendor-managed inventory program. Such costs included various consulting fees, temporary services fees, moving, relocation and other costs. No such future nonrecurring costs are anticipated. 5. NOTES RECEIVABLE A summary of notes receivable is as follows:
MARCH 31 ---------------- 1996 1997 DEC. 19, 1997 ------ ------ ------------- (UNAUDITED) Note receivable related to sale of a Globe subsidiary, due on demand, plus interest at 10% to 14.4%......................................... $ 833 $ 563 $455 Notes receivable from officers and employees with interest at various amounts...................... 14 33 -- Other notes receivable, primarily with interest at 5% to 10%........................................ 925 881 122 ------ ------ ---- Total notes receivable........................... 1,772 1,477 577 Less -- Current maturities......................... 972 677 452 ------ ------ ---- Due by 1999...................................... $ 800 $ 800 $125 ====== ====== ====
F-33 153 The carrying value of these notes receivable approximate their estimated fair market value based on their interest rates and near-term maturities. 6. OTHER CURRENT LIABILITIES A summary of other current liabilities is as follows:
MARCH 31 ------------------ 1996 1997 DEC. 19, 1997 ------- ------- ------------- (UNAUDITED) Salaries and wages............................... $ 8,483 $ 4,711 $ 4,266 Vacation......................................... 3,501 964 50 Restructuring.................................... 13,100 5,695 1,075 Customer rebates................................. 3,350 9,796 5,275 Other............................................ 6,002 13,959 15,442 ------- ------- ------- Total other current liabilities................ $34,436 $35,125 $26,108 ======= ======= =======
7. FINANCING ARRANGEMENTS On March 31, 1996, the Company had two lines of credit, a temporary unsecured demand loan providing for borrowings of $50,000 and a $10,000 credit line secured by receivables and inventory that had been superseded and limited to zero borrowings by the demand loan but not canceled. Outstanding borrowings on the demand loan bore interest of LIBOR plus 0.5% or, at the Company's discretion, the bank's prime rate (averaging 8.25% at March 31, 1996). The demand loan had no significant covenants. Aggregate borrowings on the demand loan as of March 31, 1996, were $38,869. Subsequent to March 31, 1996, the $10,000 credit line was canceled. On May 9, 1996, the demand loan was replaced by a credit facility allowing aggregate borrowings of $50,000 until March 31, 1998, after which maximum borrowings were required to be reduced by $5,000 each April 1 down to $35,000 and paid in full by May 9, 2001. Pursuant to this refinancing, the outstanding borrowings on the demand note as of March 31, 1996, were classified as long term. Borrowings on the credit facility bore interest at LIBOR plus applicable margin or, at the Company's discretion, the bank's prime rate (averaging 6.4% at December 18, 1997). The covenants under the agreement required the Company to maintain, among other things, minimum profitability, liquidity and net worth levels. Aggregate borrowings under this credit line were $13,000 as of March 31, 1997. In connection with the December 19, 1997, merger of the Company with and into Safelite, as described in Note 14, the Company's borrowings under this line of credit were paid off by Safelite on December 18, 1997. The amount paid on behalf of the Company, including accrued interest, was $11,597. The Company also has various unsecured notes payable related to acquisitions, with interest rates ranging from 6.4% to 8.33%, and prime plus 1.0% which totaled $10,991 (current maturity $4,772), $7,530 (current maturity $2,906) and $6,216 (current maturity $1,371) as of March 31, 1996, March 31, 1997, and December 19, 1997, respectively. Principal payments on this debt are due in various increments through September, 2003. As of December 19, 1997, the Company was in compliance with all the covenants governing its indebtedness. Based upon borrowing rates currently available to the Company for borrowings with similar terms and maturities, the fair value of the Company's debt was approximately equal to its carrying value as of March 31, 1996, March 31, 1997, and December 19, 1997. F-34 154 The aggregate maturities of long-term debt as of March 31, 1997, are as follows: Year ending March 31 -- 1998.................................................. $ 2,906 1999.................................................. 1,010 2000.................................................. -- 2001.................................................. 1,200 2002.................................................. 14,200 Thereafter............................................ 1,214 ------- $20,530 =======
The Company had letters of credit outstanding totaling $10,312, $8,621 and $0 as of March 31, 1996, March 31, 1997, and December 19, 1997, respectively. These letters of credit were issued primarily to guarantee various promissory notes and insurance activities. 8. INCOME TAXES Components of the (provision) benefit for income taxes are as follows:
YEAR ENDED MARCH 31 NINE MONTHS ENDED -------------------------- ------------------------------ 1995 1996 1997 DEC. 21, 1996 DEC. 19, 1997 ----- ------ ------- ------------- ------------- (UNAUDITED) Currently payable -- Federal......................... $(132) $ (168) $(1,870) $(5,465) $ -- State........................... (43) (17) (823) (1,210) 952 Deferred.......................... -- 1,992 (5,543) (1,741) (1,220) ----- ------ ------- ------- ------- $(175) $1,807 $(8,236) $(8,416) $ (268) ===== ====== ======= ======= =======
The principal items comprising the difference between income taxes on the income (loss) before income taxes computed at the federal statutory rate and the actual (provision) benefit for income taxes are as follows:
YEAR ENDED MARCH 31 NINE MONTHS ENDED ---------------------------- ------------------------------ 1995 1996 1997 DEC. 21, 1996 DEC. 19, 1997 ------ ------- ------- ------------- ------------- (UNAUDITED) Tax benefit (expense) computed at the statutory rate......... $ (607) $ 3,751 $(2,453) $(3,914) $ 3,003 Nondeductible amortization of excess costs.................. (779) (530) (2,503) (1,890) (1,858) State income taxes, net of federal benefit............... (45) 416 (964) (875) (37) Change in valuation allowance... 1,316 (1,298) -- -- -- Other........................... (60) (532) (2,316) (1,737) (1,376) ------ ------- ------- ------- ------- $ (175) $ 1,807 $(8,236) $(8,416) $ (268) ====== ======= ======= ======= =======
F-35 155 The tax effects of temporary differences that give rise to significant portions of deferred income tax benefits (obligations) are as follows:
MARCH 31 ------------------ 1996 1997 DEC. 19, 1997 ------- ------- ------------- Allowance for doubtful accounts.......................... $ 1,154 $ 1,027 $ 5,500 Inventory bases differences.............................. 1,863 848 540 Property, plant and equipment bases differences.......... 552 948 (191) Intangible assets bases differences...................... 2,034 3,548 4,502 Accrued vacation......................................... 1,322 64 20 Accrued rent............................................. 742 944 572 Accrued insurance........................................ 1,064 940 2,460 Restructuring reserve.................................... 5,568 2,278 430 Alternative minimum tax credit carryforwards............. 247 274 483 Net operating loss carryforwards......................... 14,417 10,353 10,244 Valuation allowances..................................... (1,693) -- -- Other, net (729) 1,467 (3,089) ------- ------- ------- Total net deferred income tax benefits......... $26,541 $22,691 $21,471 ======= ======= =======
In the accompanying consolidated balance sheet, these net deferred income tax benefits are classified as current or noncurrent based on the classification of the related asset or liability for financial reporting. A deferred income tax obligation or benefit that is not related to an asset or liability for financial reporting, including deferred income tax assets related to carryforwards, are classified according to the expected reversal date of the temporary difference. As of the date of the Merger, Windshields had net deferred income tax assets of $22,403, primarily due to net operating loss carryforwards. All such assets were fully offset by a valuation allowance. Based on Windshields' historical operating results, management concluded that realization of any benefit from these income tax assets was not reasonably assured. However, due to the merger with Globe and based on its historical operating results and the Company's forecast of future operating results, management has concluded that the Company will likely realize the benefit of these deferred income tax assets. Accordingly, the valuation allowance of $22,403 was eliminated and, pursuant to purchase accounting, the resulting net deferred income tax assets were considered as additional assets acquired in the Merger. In addition to these carryforwards, the Company has recorded net operating loss carryforwards attributable to Globe which relate to taxable losses in the period just prior to the Merger. These taxable losses also created $11,682 of federal and state income tax refunds from net operating loss carrybacks which were recorded as receivables by the Company as of March 31, 1996, and substantially collected in fiscal 1997. The net operating losses which could not be carried back are subject to various state limitations and accordingly, the Company had established a valuation allowance against such carryforwards. However, during fiscal 1997, it was determined that such limitations would not impair the realizability of these carryforwards and accordingly, the related valuation allowance was reversed. The remaining net federal operating losses of the Company as of December 19, 1997, aggregate to $25,780 and expire, if unutilized, in various increments from 2004 to 2007. Utilization of such carryforwards in any particular year may be limited under current income tax regulations regarding changes in ownership. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible subject to the limitations noted above. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. In order to fully realize the benefit of its deferred tax F-36 156 assets, the Company will need to generate substantial future taxable income. Taxable income for the fiscal years ended March 31, 1996 and 1997, was $7,873 and $11,461, respectively (before the effect of net operating loss carryforwards). Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these unreserved deductible differences. 9. PROFIT-SHARING/401(K) PLAN Through December 31, 1996, the Company had two defined contribution 401(k) profit-sharing plans covering substantially all Windshield employees who had completed 90 days of service and all Globe nonunion employees. Employees were allowed to make contributions to the 401(k) plans up to certain specified limits. The Company matched the employee contributions at specified rates up to certain percentages of the employee's compensation. These plans were merged into a single plan, with similar provisions, effective January 1, 1997. The Company contributed approximately $254, $255, $596, $418 and $468 to these 401(k) plans during fiscal 1995, fiscal 1996, fiscal 1997 and the nine months ended December 21, 1996, and December 19, 1997, respectively. 10. OTHER RELATED-PARTY TRANSACTIONS Prior to the Merger, Belron's parent charged the Company a fee equal to 0.5% of net sales for management services. Such charges amounted to $574 and $744 during the years ended March 31, 1995 and 1996. Concurrent with the Merger, the management fee for such services was changed to $1,000 annually, plus expenses incurred by Belron's parent in providing such services. Under this arrangement, $80 was charged to the Company during the month ended March 31, 1996, $1,000 was charged during the year ended March 31, 1997 ($750 through December 21, 1996), and $780 for the nine months ended December 19, 1997. The arrangement was scheduled to be terminated on the fifth anniversary of the Merger unless otherwise extended by agreement of the stockholders. The amount due to Belron at March 31, 1996, was $2,574 (included in other current liabilities). Such amounts were not material at March 31, 1997, or December 19, 1997. In addition, since the Merger, the Company had a receivable in the amount of $3,050 from a significant shareholder of the Company. This receivable is due in accordance with the terms of the original Merger agreement. Interest accrued and unpaid on this receivable amounted to $400 as of December 19, 1997. 11. LEASE COMMITMENTS The Company leases certain of its operating facilities, offices and equipment under long-term operating leases. Certain leases require the payment of property taxes, insurance and maintenance and contain certain escalation provisions and renewal options. The Company also leases vehicles under master leases which typically contain three-year lease terms and expects to renew or replace vehicle leases as they mature. At March 31, 1997, the Company's commitments under leases with noncancelable terms of more than one year are as follows: Year ending March 31 -- 1998...................................................... $13,405 1999...................................................... 10,583 2000...................................................... 7,925 2001...................................................... 5,187 2002...................................................... 2,967 Thereafter................................................ 4,134 ------- $44,201 =======
F-37 157 Total rent expense was approximately $8,436, $9,519 and $15,864 for the years ended March 31, 1995, 1996 and 1997, respectively, and $10,084 and $10,783 for the nine months ended December 21, 1996, and December 19, 1997, respectively. 12. SIGNIFICANT CUSTOMER Revenues from a significant customer of the Company were approximately $9,000 and $124,000 for the years ended March 31, 1996 and 1997, respectively, and $111,000 and $117,000 for the nine months ended December 21, 1996, and December 19, 1997, respectively. Trade accounts receivable related to this significant customer were $6,580, $7,788 and $6,615 as of March 31, 1996, March 31, 1997, and December 19, 1997, respectively. As this customer was a significant customer of Globe, the revenue amount listed above for fiscal 1996 primarily reflects one month's activity. Approximately 47% in fiscal 1995, 69% in fiscal 1996, 70% in fiscal 1997 (61% through December 21, 1996) and 67% for the nine months ended December 19, 1997, of total sales were derived from customers in the insurance industry. The Company's exposure to credit risk is mitigated by the financial strength of its insurance company customers and the number of such customers. 13. CONTINGENCIES The Company is involved in various legal actions arising in the ordinary course of business. The liabilities, if any, associated with these matters are not determinable as of December 19, 1997. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on the Company's financial position or results of operations. 14. SUBSEQUENT EVENT (UNAUDITED) Effective December 19, 1997, the Company consummated a merger with Safelite in a transaction which was accounted for under the purchase method of accounting as an acquisition of the Company by Safelite. Stockholders of the Company received cash, common and preferred shares of Safelite (aggregating to approximately $269,434) in exchange for 100% of the outstanding common and preference shares of the Company. Certain provisions related to the preference shares were amended to facilitate the merger, and such shares are no longer putable to or callable by the combined company. The Company had incurred $1,899 of transaction costs as of December 19, 1997. As Safelite will reimburse the Company for such costs, the Company recorded this amount as an intangible asset. 15. SUBSEQUENT EVENT On June 25, 1998, a customer advised Safelite, following a review of contract terms, that the customer is disputing certain billings made to it by Vistar prior to the Vistar Merger. The customer has provided Safelite with a preliminary estimate of the disputed amount, which Safelite is reviewing. The ultimate resolution of this matter, which could be material to the financial position and results of operations of Vistar, is not presently determinable. Accordingly, no provision has been made with respect to any potential outcome of this matter in the accompanying financial statements. F-38 158 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. - ------------------------------------------------------------ TABLE OF CONTENTS Prospectus Summary.............................. 3 Risk Factors.................................... 16 The Exchange Offer.............................. 25 Transactions.................................... 32 Unaudited Pro Forma Financial Data.............. 37 Selected Consolidated Financial Data............ 42 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 44 Business........................................ 52 Management...................................... 64 Security Ownership of Certain Beneficial Owners and Management................................ 72 Certain Relationships and Related Transactions.................................. 75 Description of Capital Stock.................... 77 Description of Other Indebtedness............... 81 Description of Exchange Notes................... 83 Book-Entry; Delivery and Form................... 111 Description of the Initial Notes................ 112 Exchange and Registration Rights Agreement...... 113 Income Tax Considerations....................... 115 Plan of Distribution............................ 117 Legal Matters................................... 117 Independent Auditors............................ 117 Index to Financial Statements................... F-1
, 1998 159 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the General Corporation Law of the State of Delaware provides as follows: (a) A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. (c) To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (d) Any indemnification under subsections (a) of this section (unless ordered by a court) shall be made by the corporation only as authorized in specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be made (1) by a majority vote of the board of directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) if there are no such directors or, if such directors so direct, by independent legal counsel in a written opinion, or (3) by the shareholders. (e) Expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an II-1 160 undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. (f) The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. (g) A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under this section. (h) For purposes of this section, references to the corporation shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. (i) For purposes of this section, references to other enterprises shall include employee benefit plans; references to fines shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to serving at the request of the corporation shall include any service as a director, officer, employee, or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner not opposed to the best interests of the corporation as referred to in this section. (j) The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. The Company's Amended and Restated By-Laws (Exhibit 3.2) provide that the Company shall indemnify its directors and officers to the fullest extent permitted by Delaware law. The Company maintains insurance with respect to, among other things, the liabilities that may arise under the statutory provisions referred to above. The directors and officers of the Company also are insured against certain liabilities, including certain liabilities arising under the Securities Act of 1933, which might be incurred by them in such capacities and against which they are not indemnified by the Company. II-2 161 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits. Unless otherwise indicated, all Exhibits have been previously filed. 3.1* Restated Certificate of Incorporation of the Company, as amended. 3.2* Amended and Restated By-Laws of the Company. 3.3* Articles of Incorporation of Carcomp Services, Inc., as amended. 3.4* By-Laws of Carcomp Services, Inc. 3.5* Articles of Incorporation of U.S.A. Glas, Inc., as amended. 3.6* By-Laws of U.S.A. Glas, Inc. 3.7* Articles of Incorporation of U.S. Auto Glass Centers, Inc. 3.8* By-Laws of U.S.A. Auto Glass Centers, Inc. 4.1 Indenture dated as of December 20, 1996 between the Company and Fleet National Bank, as Trustee. 4.2* First Supplemental Indenture dated as of December 12, 1997 between the Company and State Street Bank and Trust Company, as Trustee. 4.3* Second Supplemental Indenture dated as of December 18, 1997 between the Company and State Street Bank and Trust Company. 5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation regarding legality of the securities being registered. 8 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation regarding tax matters. 10.1 Recapitalization Agreement and Plan of Merger and Stock Purchase Agreement, dated as of November 8, 1996, by and among Lear Siegler Holdings Corp., The LS Selling Stockholders (as defined therein), the Company, LSNWY Corp., LS Acquisition Corp. and Lite Acquisition Corp. 10.2* Credit Agreement, amended and restated through December 17, 1997, by and among the Company, various lending institutions, The Chase Manhattan Bank, Bankers Trust Company and Goldman Sachs Credit Partners L.P. 10.3 Employment Agreement, dated as of December 20, 1996, by and between the Company and Garen K. Staglin. 10.4 Employment Agreement, dated as of December 20, 1996, by and between the Company and John F. Barlow. 10.5 Employment Agreement, dated as of December 20, 1996, by and between the Company and Douglas A. Herron. 10.6 Safelite Glass Corp. 1996 Stock Option Plan. 10.7* Safelite Glass Corp. 1998 Stock Option Plan 10.8* Amended and Restated Management Agreement, dated as of December 18, 1997, by and between the Company and Thomas H. Lee Company. 10.9* Amended and Restated Management Agreement, dated as of December 18, 1997, by and between the Company and Belron International BV. 10.10* Amended and Restated Shareholders Agreement, dated as of December 18, 1997, among the Company and the stockholders named therein. 10.11* Pledge Agreement, dated as of December 17, 1997, made by the Company in favor of The Chase Manhattan Bank, as Collateral Agent. 10.12* Amendment No. 1 to the Amended and Restated Shareholders' Agreement, dated as of March 26, 1998. 10.13* Amendment to the Safelite Glass Corp. 1998 Stock Option Plan.
II-3 162 10.14* Registration Agreement, dated as of December 18, 1997, among the Company and the stockholders named therein. 10.15* Security Agreement, as amended and restated through December 17, 1997, among the Company and The Chase Manhattan Bank, as Collateral Agent. 10.16* Subsidiary Guaranty, as amended and restated through December 17, 1997, made by each of the Company's subsidiaries name therein, in favor of The Chase Manhattan Bank, as Collateral Agent. 12.1* Computation of the Ratio of Earnings to Fixed Charges for the Company. 21.1 List of subsidiaries of the Company. 23.1* Consent of Deloitte & Touche LLP. 23.2* Consent of Arthur Andersen LLP. 23.3 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (included in Exhibit 5.1). 24.1* Powers of Attorney (contained on the signature page hereto). 25.1** Statement on Form T-1 of the eligibility of the Trustee. 27.1* Financial Data Schedule. 99.1* Letter of Transmittal. 99.2* Notice of Guaranteed Delivery. 99.3* Form of Exchange Agent Agreement between the Company and State Street Bank and Trust Company.
- --------------- * Filed herewith. ** To be filed by amendment. (b) Financial Statement Schedules. Schedules have been omitted since the information is not applicable, not required or is included in the financial statements or notes thereto. ITEM 22. UNDERTAKINGS. (a)(1) The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to the reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form. (a)(2) The registrant undertakes that every prospectus (i) that is filed pursuant to paragraph (1) immediately preceding or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415 (sec.230.415 of this chapter), will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (a)(3) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than II-4 163 the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (b) The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (c) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. (d) The undersigned registrant hereby undertakes: (d)(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement. (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (sec.230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement. (iii) To include any material information with respect to the plan of distribution information in the registration statement; (d)(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (d)(3) To remove from registration by means of post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-5 164 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COLUMBUS, STATE OF OHIO, ON THE 14TH DAY OF AUGUST 1998. SAFELITE GLASS CORP. By: /s/ JOHN F. BARLOW ------------------------------------ John F. Barlow POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below constitutes and appoints John F. Barlow and Anthony J. DiNovi, and each of them, with the power to act without the other, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities to sign any or all amendments or post-effective amendments to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agent, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ JOHN F. BARLOW Director, President and Chief August 14, 1998 - --------------------------------------------------- Executive Officer (principal John F. Barlow executive officer) /s/ GAREN K. STAGLIN Director and Chairman of the August 14, 1998 - --------------------------------------------------- Board Garen K. Staglin /s/ DOUGLAS A. HERRON Senior Vice President, Treasurer August 14, 1998 - --------------------------------------------------- and Chief Financial Officer Douglas A. Herron (principal financial and accounting officer) /s/ ANTHONY J. DINOVI Director August 14, 1998 - --------------------------------------------------- Anthony J. DiNovi /s/ SELWYN HERSON Director August 14, 1998 - --------------------------------------------------- Selwyn Herson
II-6 165
SIGNATURE TITLE DATE --------- ----- ---- Director August , 1998 - --------------------------------------------------- Adrian F. Jones /s/ SETH W. LAWRY Director August 14, 1998 - --------------------------------------------------- Seth W. Lawry /s/ THOMAS H. LEE Director August 14, 1998 - --------------------------------------------------- Thomas H. Lee /s/ GARY LUBNER Director August 14, 1998 - --------------------------------------------------- Gary Lubner /s/ RONNIE LUBNER Director August 14, 1998 - --------------------------------------------------- Ronnie Lubner /s/ JOHN E. MASON Director August 14, 1998 - --------------------------------------------------- John E. Mason /s/ M. LOUIS SHAKINOVSKY Director August 14, 1998 - --------------------------------------------------- M. Louis Shakinovsky /s/ SCOTT M. SPERLING Director August 14, 1998 - --------------------------------------------------- Scott M. Sperling /s/ RODNEY STANSFIELD Director August 14, 1998 - --------------------------------------------------- Rodney Stansfield
II-7 166 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COLUMBUS, STATE OF OHIO, ON THE 14TH DAY OF AUGUST, 1998. CARCOMP SERVICES, INC. By: /s/ JOHN F. BARLOW -------------------------------------- John F. Barlow POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below constitutes and appoints John F. Barlow and Douglas A. Herron, and each of them, with the power to act without the other, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities to sign any or all amendments or post-effective amendments to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agent, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ JOHN F. BARLOW Director and President August 14, 1998 - --------------------------------------------------- (principal executive officer) John F. Barlow /s/ GAREN K. STAGLIN Director August 14, 1998 - --------------------------------------------------- Garen K. Staglin /s/ DOUGLAS A. HERRON Vice President and Treasurer August 14, 1998 - --------------------------------------------------- (principal financial and Douglas A. Herron accounting officer Director August , 1998 - --------------------------------------------------- Adrian F. Jones /s/ M. LOUIS SHAKINOVSKY Director August 14, 1998 - --------------------------------------------------- M. Louis Shakinovsky
II-8 167 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COLUMBUS, STATE OF OHIO, ON THE 14TH DAY OF AUGUST, 1998. U.S.A. GLAS, INC. By: /s/ JOHN F. BARLOW -------------------------------------- John F. Barlow POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below constitutes and appoints John F. Barlow and Douglas A. Herron, and each of them, with the power to act without the other, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities to sign any or all amendments or post-effective amendments to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agent, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ JOHN F. BARLOW Director and President August 14, 1998 - --------------------------------------------------- (principal executive officer) John F. Barlow Director August , 1998 - --------------------------------------------------- Garen K. Staglin /s/ DOUGLAS A. HERRON Vice President and Treasurer August 14, 1998 - --------------------------------------------------- (principal financial and Douglas A. Herron accounting officer Director August , 1998 - --------------------------------------------------- Adrian F. Jones /s/ M. LOUIS SHAKINOVSKY Director August 14, 1998 - --------------------------------------------------- M. Louis Shakinovsky
II-9 168 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COLUMBUS, STATE OF OHIO, ON THE 14TH DAY OF AUGUST, 1998. U.S. AUTO GLASS CENTERS, INC. By: /s/ JOHN F. BARLOW -------------------------------------- John F. Barlow POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below constitutes and appoints John F. Barlow and Douglas A. Herron, and each of them, with the power to act without the other, his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities to sign any or all amendments or post-effective amendments to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agent, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ JOHN F. BARLOW Director and President August 14, 1998 - --------------------------------------------------- (principal executive officer) John F. Barlow /s/ GAREN K. STAGLIN Director August 14, 1998 - --------------------------------------------------- Garen K. Staglin /s/ DOUGLAS A. HERRON Vice President and Treasurer August 14, 1998 - --------------------------------------------------- (principal financial and Douglas A. Herron accounting officer Director August , 1998 - --------------------------------------------------- Adrian F. Jones /s/ M. LOUIS SHAKINOVSKY Director August 14, 1998 - --------------------------------------------------- M. Louis Shakinovsky
II-10 169 EXHIBIT INDEX
EXHIBIT NO. - ------- 3.1* Restated Certificate of Incorporation of the Company, as amended. 3.2* Amended and Restated By-Laws of the Company. 3.3* Articles of Incorporation of Carcomp Services, Inc., as amended. 3.4* By-Laws of Carcomp Services, Inc. 3.5* Articles of Incorporation of U.S.A. Glas, Inc., as amended. 3.6* By-Laws of U.S.A. Glas, Inc. 3.7* Articles of Incorporation of U.S. Auto Glass Centers, Inc. 3.8* By-Laws of U.S.A. Auto Glass Centers, Inc. 4.1 Indenture dated as of December 20, 1996 between the Company and Fleet National Bank, as Trustee. 4.2* First Supplemental Indenture dated as of December 12, 1997 between the Company and State Street Bank and Trust Company, as Trustee. 4.3* Second Supplemental Indenture dated as of December 18, 1997 between the Company and State Street Bank and Trust Company. 5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation regarding legality of the securities being registered. 8 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation regarding tax matters. 10.1 Recapitalization Agreement and Plan of Merger and Stock Purchase Agreement, dated as of November 8, 1996, by and among Lear Siegler Holdings Corp., The LS Selling Stockholders (as defined therein), the Company, LSNWY Corp., LS Acquisition Corp. and Lite Acquisition Corp. 10.2* Credit Agreement, amended and restated through December 17, 1997, by and among the Company, various lending institutions, The Chase Manhattan Bank, Bankers Trust Company and Goldman Sachs Credit Partners L.P. 10.3 Employment Agreement, dated as of December 20, 1996, by and between the Company and Garen K. Staglin. 10.4 Employment Agreement, dated as of December 20, 1996, by and between the Company and John F. Barlow. 10.5 Employment Agreement, dated as of December 20, 1996, by and between the Company and Douglas A. Herron. 10.6 Safelite Glass Corp. 1996 Stock Option Plan. 10.7* Safelite Glass Corp. 1998 Stock Option Plan 10.8* Amended and Restated Management Agreement, dated as of December 18, 1997, by and between the Company and Thomas H. Lee Company. 10.9* Amended and Restated Management Agreement, dated as of December 18, 1997, by and between the Company and Belron International BV. 10.10* Amended and Restated Shareholders Agreement, dated as of December 18, 1997, among the Company and the stockholders named therein. 10.11* Pledge Agreement, dated as of December 17, 1997, made by the Company in favor of The Chase Manhattan Bank, as Collateral Agent. 10.12* Amendment No. 1 to the Amended and Restated Shareholders' Agreement, dated as of March 26, 1998. 10.13* Amendment to the Safelite Glass Corp. 1998 Stock Option Plan. 10.14* Registration Agreement, dated as of December 18, 1997, among the Company and the stockholders named therein.
170
EXHIBIT NO. - ------- 10.15* Security Agreement, as amended and restated through December 17, 1997, among the Company and The Chase Manhattan Bank, as Collateral Agent. 10.16* Subsidiary Guaranty, as amended and restated through December 17, 1997, made by each of the Company's subsidiaries name therein, in favor of The Chase Manhattan Bank, as Collateral Agent. 12.1* Computation of the Ratio of Earnings to Fixed Charges for the Company. 21.1 List of subsidiaries of the Company. 23.1* Consent of Deloitte & Touche LLP. 23.2* Consent of Arthur Andersen LLP. 23.3 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (included in Exhibit 5.1). 24.1* Powers of Attorney (contained on the signature page hereto). 25.1** Statement on Form T-1 of the eligibility of the Trustee. 27.1* Financial Data Schedule. 99.1* Letter of Transmittal. 99.2* Notice of Guaranteed Delivery. 99.3* Form of Exchange Agent Agreement between the Company and State Street Bank and Trust Company.
- --------------- * Filed herewith. ** To be filed by amendment. EX-3.1 2 RESTATED CERTIFICATE OF INCORPORATION 1 EXHIBIT 3.1 RESTATED CERTIFICATE OF INCORPORATION OF SAFELITE GLASS CORP. Safelite Glass Corp. (the "Corporation"), a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The present name of the Corporation is Safelite Glass Corp. The name under which the Corporation was originally incorporated is LS Acquisition Corp. No. 23. The date of filing of its original Certificate of Incorporation with the Secretary of State was January 13, 1987. 2. This Restated Certificate of Incorporation restates, integrates and further amends the Restated Certificate of Incorporation, as amended, of the Corporation to read as herein set forth in full: FIRST: The name of the Corporation is Safelite Glass Corp. SECOND: The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. THIRD: The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The aggregate number of shares of all classes of capital stock which the Corporation shall have the authority to issue is 16,000,000 shares of capital stock, of which 40,000 shares shall be designated Non-Voting 8% Preferred Stock, par value $.01 per share, 4,960,000 shares shall be designated as Class A Voting Common Stock, par value $.01 per share (the "Class A Common"), and 11,000,000 shares shall be designated as Class B Non-Voting Common Stock, par value $.01 per share (the "Class B Common," and together with the Class A Common, the "Common Stock"). Effective upon the filing of this Restated Certificate of Incorporation, each three (3) shares of issued and outstanding Class A Common Stock shall automatically and without further action on the part of the holder thereof be converted into one (1) share of Class A Voting Common Stock. A. The powers, preferences and rights of the shares of Preferred Stock, and the qualifications, limitations or restrictions thereof are as follows: 2 1. Designation and Amount. The Corporation shall be authorized to issue 40,000 shares designated as Non-Voting 8% Preferred Stock, par value $.01 per share (the "Preferred Stock"). Preferred Stock shall have the preferences, limitations and rights set forth below. 2. Dividends. (a) General Obligation. The Corporation will pay cumulative semi-annual dividends on Preferred Stock if, when and as declared by the Board of Directors of the Corporation, and to the extent permitted under the General Corporation Law of the State of Delaware, which shall accrue on a daily basis (computed on the basis of a 360-day year and actual days elapsed) at the rate per annum of eight percent (8%) per share of Preferred Stock calculated as a percentage of $1,000 (plus accrued and unpaid dividends), compounded semi-annually, from and including December 18, 1997 until the redemption of Preferred Stock (with payment being calculated through the date on which payment shall be tendered to the holders of Preferred Stock). This dividend rate will automatically increase to (i) fourteen percent (14%) per annum upon the occurrence of a Redemption Event (defined below), (ii) fifteen percent (15%) per annum on the first annual anniversary date of such Redemption Event and (iii) sixteen percent (16%) per annum on the second anniversary date of such Redemption Event if the Corporation elects not to redeem Preferred Stock upon the occurrence of such Redemption Event. Such dividends will accrue and be cumulative whether or not they have been declared and whether or not there are profits, surplus or other funds of the Corporation legally available for the payment of dividends. The date on which the Corporation initially issues any shares of Preferred Stock will be deemed to be its "date of issuance" regardless of the number of times transfer of such shares of Preferred Stock is made on the stock records of the Corporation, and regardless of the number of certificates which may be issued to evidence such shares of Preferred Stock. A "Redemption Event" shall mean (i) an underwritten initial public offering (a "Public Offering") of the Corporation's capital stock pursuant to a registration statement effected under the Securities Act of 1933, as amended (the "Securities Act") or (ii) the occurrence of a Change in Control under the terms of the Indenture, dated as of December 20, 1996, as amended from time to time, by and between the Corporation and Fleet National Bank, Trustee. (b) Distributing Partial Dividend Payments. If at any time the Corporation distributes less than the total amount of dividends then accrued with respect to Preferred Stock, such payment will be distributed among the holders of Preferred Stock so that an equal amount will be paid (as nearly as possible) with respect to each outstanding share of Preferred Stock. (c) Priority. So long as any shares of Preferred Stock remain outstanding neither the Corporation nor any Subsidiary (which shall mean any corporation, association or other business entity of which the Corporation directly or indirectly owns at the time more than fifty percent (50%) of the outstanding voting securities or equity interests) will redeem, purchase or otherwise acquire any other equity security of the Corporation junior to Preferred Stock in right to payment now or hereafter outstanding, including, without limitation, the Common Stock (all such securities collectively, the "Junior Securities"), nor will the Corporation declare or pay any cash dividend -2- 3 (including accrued dividends) or make any distribution of assets other than shares of Junior Securities upon any Junior Securities; provided nothing herein shall prohibit the Corporation from acquiring Common Stock of the Corporation pursuant to contractual rights approved by the Board of Directors of the Corporation. 3. Liquidation, Dissolution or Winding Up. (a) Treatment at Liquidation, Dissolution and Winding Up. In the event of a Liquidity Event (as herein defined), before any distribution or payment may be made with respect to the Junior Securities, holders of each share of Preferred Stock shall be entitled to be paid out of the assets of the Corporation available for distribution to holders of the Corporation's capital stock of all classes, whether such assets are capital, surplus, or capital earnings, an amount in cash equal to $1,000 per share of Preferred Stock (which amount, together with the other share and per share numbers used herein shall be subject to equitable adjustment whenever there shall occur a stock split, combination, reclassification or other similar event involving the class or series of stock in question), plus accrued dividends from the date of issuance thereof up to and including the date full payment shall be tendered to the holders of Preferred Stock with respect to such Liquidity Event (the "Liquidation Amount"). The term "Liquidity Event" shall mean a liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary. If upon any such Liquidity Event the assets of the Corporation available for distribution to its stockholders shall be insufficient to permit payment to the holders of Preferred Stock of the full amount of the Liquidation Amount to which they are entitled to be paid, the holders of shares of Preferred Stock shall share ratably in any distribution of assets according to the amounts which would be payable with respect to the shares of Preferred Stock held by them upon such distribution if all amounts payable on or with respect to said shares were paid in full. After the payment of the Liquidation Amount shall have been made in full to the holders of Preferred Stock or funds necessary for such payment shall have been set aside by the Corporation in trust for the accounts of holders of Preferred Stock so as to be available for such payments, the holders of Preferred Stock shall be entitled to no further participation in the distribution of the assets of the Corporation, and the remaining assets of the Corporation legally available for distribution to its stockholders shall be distributed among the holders of other classes of securities of the Corporation in accordance with their respective terms. (b) Distributions in Cash. The Liquidation Amount shall be paid in cash to the extent the Corporation has cash available. Whenever a distribution provided for in this Section 3 is payable in property other than cash, the value of such distribution shall be the fair market value of such property as determined in good faith by the Corporation's Board of Directors. -3- 4 4. Voting Power. Except as otherwise required by law, the holders of Preferred Stock shall not be entitled to vote on any corporate matters. 5. Redemption. (a) The Corporation may redeem Preferred Stock at its option, in whole or in part, at $1,000 per share plus accrued dividends from the date of issuance thereof up to and including the date full payment shall be tendered to holders of Preferred Stock with respect to such redemption (the "Redemption Price"), at any time (the "Redemption Date"). (b) Surrender of Certificates. Each holder of shares of Preferred Stock to be redeemed under this Section 5 shall surrender the certificate or certificates representing such shares to the Corporation at the principal office of the Corporation, and thereupon the Redemption Price for such shares as set forth in this Section 5 shall be paid to the order of the person whose name appears on such certificate or certificates. Irrespective of whether the certificates therefor shall have been surrendered, all shares of Preferred Stock which are the subject of a redemption shall be deemed to have been redeemed and shall be canceled effective as of the closing of the Public Offering or the Redemption Date, as the case may be, unless the Corporation shall default in the payment of the Redemption Price. (c) Partial Redemptions. If at any time the Corporation redeems less than all of the outstanding shares of Preferred Stock, such redemption will be made from the holders of Preferred Stock on a pro rata basis based upon the number of shares of Preferred Stock held by each stockholder. 6. Restrictions and Limitations. The Corporation shall not amend this Restated Certificate of Incorporation without the approval by vote or written consent, by the holders of at least a majority of the then outstanding shares of Preferred Stock, voting together as a separate class, if such amendment would amend any of the rights, preferences, privileges of or limitations provided for herein for the benefit of any shares of Preferred Stock. Without limiting the generality of the preceding sentence, the Corporation will not amend this Restated Certificate of Incorporation without the approval by the holders of at least a majority of the then outstanding shares of Preferred Stock, voting separately as a separate class, if such amendment would: (i) change the relative seniority rights of holders of Preferred Stock as to the payment of dividends in relation to the holders of any other capital stock of the Corporation; (ii) reduce the amount payable to the holders of Preferred Stock upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, or change the -4- 5 relative seniority of the liquidation preferences of the holders of Preferred Stock to the rights upon liquidation of the holders of other capital stock of the Corporation, or change the dividend rights of the holders of Preferred Stock; (iii) cancel or modify the redemption rights of the holders of Preferred Stock provided for in Section 5 herein; or (iv) cancel or modify the rights of the holders of Preferred Stock provided for in this Section 6. 7. Notices of Record Date. In the event of: (a) any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any other right, or (b) any capital reorganization of the Corporation, any reclassification or recapitalization of the capital stock of the Corporation, any merger of the Corporation, or any transfer of all or substantially all of the assets of the Corporation to any other corporation, or any other entity or person, or (c) any voluntary or involuntary dissolution, liquidation or winding up of the Corporation, then and in each such event the Corporation shall mail or cause to be mailed to each holder of Preferred Stock a notice specifying (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right and a description of such dividend, distribution or right, (ii) the date on which any such reorganization, reclassification, recapitalization, transfer, merger, dissolution, liquidation or winding up is expected to become effective and (iii) the time, if any, that is to be fixed, as to when the holders of record of Common Stock (or other securities, including Preferred Stock) shall be entitled to exchange their shares of Common Stock (or other securities, including Preferred Stock) for securities or other property deliverable upon such reorganization, reclassification, recapitalization, transfer, merger, dissolution, liquidation or winding up. Such notice shall be mailed at least ten (10) business days prior to the date specified in such notice on which such action is to be taken. 8. No Reissuance of Preferred Stock. No share or shares of Preferred Stock acquired by the Corporation by reason of redemption, purchase or otherwise shall be reissued, and all such shares shall be canceled, retired and eliminated from the shares which the Corporation shall be authorized to issue. The Corporation may from time to time take such appropriate corporate action as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly. -5- 6 B. Except as otherwise provided in this Part B or as otherwise required by applicable law, all shares of Class A Common and Class B Common shall be identical in all respects and shall entitle the holders thereof to the same rights, preferences and privileges, subject to the same qualifications, limitations and restrictions, as set forth herein. The powers, preferences and rights of the shares of Class A Common and Class B Common, and the qualifications, limitations or restrictions thereof are as follows: 1. Dividends. As and when dividends are declared or paid with respect to shares of Common Stock, whether in cash, property or securities of the Corporation, the holders of Class A Common and the holders of Class B Common shall be entitled to receive such dividends pro rata at the same rate per share of each class of Common Stock; provided that (i) if dividends are declared or paid in shares of Class A Common or Class B Common, the dividends payable in shares of Class A Common shall be payable to holders of Class A Common and the dividends payable in shares of Class B Common shall be payable to holders of Class B Common and (ii) if the dividends consist of other voting securities of the Corporation, the Corporation shall pay to each holder of Class B Common dividends consisting of non-voting securities (except as otherwise required by law) of the Corporation which are otherwise identical to the voting securities and which are convertible into such voting securities on the same terms as the Class B Common is convertible into the Class A Common. 2. Dissolution, Liquidation or Winding-Up. In the event of any dissolution, liquidation or winding-up of the affairs of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation and of the amounts to which the holders of any outstanding shares of any capital stock ranking senior in preference to the Common Stock and including, without limitation, Preferred Stock, the holders of the Class A Common Stock and the holders of the Class B Common Stock shall be entitled to participate pro rata at the same rate per share of each class of Common Stock in all distributions to the holders of the Common Stock in any liquidation, dissolution or winding up of the Corporation. The Board of Directors of the Corporation, in good faith, shall determine the fair market value, as of the date of distribution, of any property (other than cash) distributed in the event of any dissolution, liquidation or winding-up of the affairs of the Corporation (and such fair market value shall be the amount received in such dissolution, liquidation or winding-up by the stockholders by reason of the distribution of the property). Any determination made by the Board of Directors of the Corporation pursuant to this Section 2 shall be final and binding on the Corporation, and all holders of Common Stock. -6- 7 3. Voting Power. Except as otherwise provided in this Part B or as otherwise required by applicable law, the holders of Class A Common shall be entitled to one vote per share on all matters to be voted on by the Corporation's stockholders, and the holders of Class B Common shall have no right to vote on any matters to be voted on by the Corporation's stockholders. 4. Conversion of the Class B Common. (a) Any holder of shares of Class B Common shall have the right to exchange such holder's shares of Class B Common as follows: (i) any time on or after the Triggering Day, all shares of Class B Common held by any person shall be exchangeable, on a one-for-one basis, for shares of Class A Common and (ii) upon or any time after the sale, which is not a Permitted Transfer, to any person, such shares of Class B Common which have been so sold shall be exchangeable for shares of Class A Common. The terms "Triggering Day" and "Permitted Transfer" shall have the meaning set forth in that certain Shareholders Agreement among the Corporation and its stockholders dated as of December ___, 1997. (b) Surrender of Certificates. From and after such time as the shares of Class B Common are exchangeable pursuant to Section 4(a) above, each such share of Class B Common may be exchanged for one share of Class A Common in the following manner: each holder of shares of Class B Common wishing to exchange shares of Class B Common for shares of Class A Common shall surrender the certificate or certificates representing such shares to the Corporation at the principal office of the Corporation, and thereupon the Corporation shall cause such shares to be exchanged for the same number of shares of Class A Common. The Corporation shall, within 3 business days of receipt of a duly endorsed certificate(s) of Class B Common, cause to be issued to such holder thereof a certificate for shares of Class A Common equal in number to the shares of Class B Common represented by the certificate(s) which had been surrendered for exchange by such beneficial holder. FIFTH: The Board of Directors is expressly authorized to adopt, amend, or repeal the by-laws of the Corporation. SIXTH: Elections of directors need not be by written ballot unless the by-laws of the Corporation shall otherwise provide. SEVENTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided, however, that the foregoing shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. If the General -7- 8 Corporation Law of Delaware is hereafter amended to permit further elimination or limitation of the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of Delaware as so amended. Any repeal or modification of this Article Seventh by the stockholders of the Corporation or otherwise shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. EIGHTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which said application has been made, be binding on all the creditors or class of creditors, and/or on all of the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. NINTH: The Corporation reserves the right to amend, alter, change, or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. 3. This Restated Certificate of Incorporation was duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said Safelite Glass Corp. has caused this certificate to be signed by David W. Wood, its Secretary, this 18th day of December, 1997. SAFELITE GLASS CORP. By:_________________________________ David W. Wood Secretary -8- EX-3.2 3 AMENDED AND RESTATED BY-LAWS 1 EXHIBIT 3.2 AMENDED AND RESTATED BYLAWS OF SAFELITE GLASS CORP. (A DELAWARE CORPORATION) ADOPTED: DECEMBER 18, 1997 2 AMENDED AND RESTATED BYLAWS OF SAFELITE GLASS CORP. (a Delaware corporation) ARTICLE 1. OFFICES Section 1. Registered Office. The registered office of the corporation within the state of Delaware shall be in the city of Wilmington, county of New Castle. Section 2. Other Offices. The Corporation may also have an office or offices other than said registered office at such place or places, either within or outside of the state of Delaware, as the board of directors shall from time to time determine or the business of the Corporation may require. ARTICLE II. MEETINGS OF STOCKHOLDERS Section 1. Place of Meetings. All meetings of the stockholders for the election of directors or for any other purpose shall be held at any such place, either within or outside of the state of Delaware, as shall be designated from time to time by the board of directors and stated in the notice of meeting or in a duly executed waiver thereof. Section 2. Annual Meeting. The annual meeting of stockholders shall be held at 10:00 a.m., on the first Tuesday of October, if not a legal holiday, and if a legal holiday, then on the next succeeding day not a legal holiday, at 10:00 a.m., or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of meeting or in a duly executed waiver thereof. At such annual meeting, the stockholders shall elect, by a plurality vote, a board of directors and transact such other business as may properly be brought before the meeting. Section 3. Special Meetings. Special meetings of stockholders, unless otherwise prescribed by statute, may be called at any time by the board of directors or the chairman of the board, and shall be called by the secretary upon the request in writing of a stockholder or stockholders holding of record at least ten percent (10%) of the voting power of the issued and outstanding shares of stock of the Corporation entitled to vote at such meeting. Section 4. Notice of Meetings. Except as otherwise expressly required by statute, written notice of each annual and special meeting of stockholders stating the date, place, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given to each stockholder of record entitled to vote thereat not fewer than ten (10) or more than sixty (60) days before the date of the meeting. Business transacted at any special meeting of the stockholders shall be limited to the purposes stated in the notice. Notice shall be given personally or by mail, and, if by mail, shall be sent in a - 1 - 3 postage prepaid envelope, addressed to the stockholder at his address as it appears on the records of the Corporation. Notice by mail shall be deemed given at the time when the same shall be deposited in the United States mail, postage prepaid. Notice of any meeting shall not be required to be given to any person who attends such meeting, person or by proxy for the express purpose of except when such person attends the meeting in objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, or who, either before or after the meeting, shall submit a signed, written waiver of notice, in person or by proxy. Neither the business to be transacted at nor the purpose of an annual or special meeting of stockholders need be specified in any written waiver of notice. Section 5. List of Stockholders. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten (10) days before each meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, showing the address and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city, town, or village where the meeting is to be held, which place shall be specified in the notice of meeting, or, if not specified, at the place where the meeting is to be held. The list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 6. Quorum, Adjournments. The holders of a majority of the voting power of the issued and outstanding stock of the Corporation entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at all meetings by stockholders, except as otherwise provided by statute or by the certificate of incorporation of the Corporation. If, however, such quorum shall not be present or represented by proxy at any meeting of stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented by proxy. At such adjourned meeting at which a quorum shall be present or represented by proxy, any business may be transacted that might have been transacted at the meeting as originally called. If the adjournment is for more than thirty (30) days, or if after adjournment a new record date is set, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 7. Organization. At each meeting of stockholders, the chairman of the board or, in his absence, the chief executive officer or a co-chief executive officer shall act as chairman of the meeting. The secretary or, in his absence or inability to act, the person whom the chairman of the meeting shall appoint secretary of the meeting shall act as secretary of the meeting and keep the minutes thereof. - 2 - 4 Section 8. Order of Business. The order of business at all meetings of the stockholders shall be as determined by the chairman of the meeting. Section 9. Voting. Except as otherwise provided by statute or the certificate of incorporation of the Corporation, each stockholder of the Corporation shall be entitled at each meeting of stockholders to one (1) vote for each share of capital stock of the corporation standing in his name on the record of stockholders of the Corporation: (a) on the date fixed pursuant to the provisions of Section 7 of Article V of these bylaws as the record date for the determination of the stockholders who shall be entitled to notice of and to vote at such meeting; or (b) if no such record date shall have been so fixed, then at the close of business which notice thereof shall be given, or, if notice is on the day next preceding the day on waived, at the close of business on the date next preceding the day on which the meeting is held. Each stockholder entitled to vote at any meeting of stockholders may authorize another person or persons to act for him by a proxy signed by such stockholder or his attorney-in-fact, but no proxy shall be voted after eleven (11) months from its date unless the proxy provides for a longer period. Every proxy shall be revocable, prior to the taking of the vote, at the will of the stockholder executing it, except as otherwise provided by law, by a writing delivered to the Corporation stating that the proxy is so revoked or by a subsequent proxy executed by, or by attendance at the meeting and voting in person by, the person executing the proxy. Any such proxy shall be delivered to the secretary of the meeting at or prior to the time designated in the order of business for so delivering such proxies. When a quorum is present at any meeting, the vote of the holders of a majority of the voting power of the issued and outstanding stock of the Corporation entitled to vote thereon, present in person or represented by proxy, shall decide any question brought before such meeting, unless the question is one upon which, by express provision of statute or of the certificate of incorporation of the Corporation or of these bylaws, a different vote is required, in which case such express provision shall govern, and control the decision of such question. Unless required by statute, or determined by the chairman of the meeting to be advisable, the vote on any question need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by Its proxy, if there be such proxy, and shall state the number of shares voted. Section 10. Inspectors. The board of directors may, in advance of any meeting of stockholders, appoint one (1) or more inspectors to act at such meeting or any adjournment thereof If any of the inspectors so appointed shall fail to appear or act, the chairman of the meeting shall, or if inspectors shall not have been appointed, the chairman of the meeting may, appoint one or more inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine - 3 - 5 the number of shares of capital stock of the Corporation outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the validity and effect of proxies, and shall receive votes, ballots, or consents; hear and determine all challenges and questions arising in connection with the right to vote; count and tabulate a votes, ballots, or consents; determine the results, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting, the inspectors shall make a report in writing of any, challenge, request, or matter determined by them and shall execute a certificate of any fact found by them. No director or candidate for the office of director shall act as an inspector of an election of directors. Inspectors need not be stockholders. Section 11. Action by Consent. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken for or in connection with any corporate action, by any provision of statute or of the certificate of incorporation of the Corporation or of these bylaws, the meeting and vote of stockholders may be dispensed with, and the action taken without such meeting and vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not fewer than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of stock of the Corporation entitled to vote thereon were present and voted. Section 12. Ratification of Acts of Directors and Officers. Except as otherwise provided by law or by the certificate of incorporation of the Corporation, any transaction or contract or act of the Corporation or of the directors or the officers of the Corporation may be ratified by the affirmative vote of the holders of the number of shares which would have been necessary to approve such transaction, contract or act at a meeting of stockholders, or by the written consent of stockholders in lieu of a meeting. ARTICLE III. BOARD OF DIRECTORS Section 1. General Powers. The business and affairs of the Corporation shall be managed by or under the direction of the board of directors. The board of directors may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by statute or the certificate of incorporation of the Corporation directed or required to be exercised or done by the stockholders. Section 2. Number, Qualifications, Election, and Term of Office. The number of directors constituting the board of directors shall be ten (10) or as otherwise fixed, from time to time, by the affirmative vote of a majority of the entire board of directors or by action of the stockholders of the Corporation. Any increase or decrease in the number of directors shall be effective as determined by the board. Directors need not be stockholders. Except as otherwise provided by statute or these bylaws, the directors shall be elected at the annual meeting of stockholders. Each director shall hold office until his successor shall have been - 4 - 6 elected and qualified, or until his death, or until he shall have resigned, or have been removed, as hereinafter provided in these bylaws. Section 3. Place of Meetings. Meetings of the board of directors shall be held at such place or places, within or outside of the state of Delaware, as the board of directors may from time to time determine or as shall be specified in the notice of any such meeting. Section 4. Annual Meeting. The board of directors shall meet for the purpose of organization, the election of officers, and the transaction of other business, as soon as practicable after each annual meeting of stockholders, on the same day and at the same place where such annual meeting shall be held. Notice of such meeting need not be given in the event such annual meeting is not so held. The annual meeting of the board of directors may be held at such other time or place (within or outside of the state of Delaware) as shall be specified in a notice thereof given as hereinafter provided in Section 7 of this Article III. Section 5. Regular Meetings. Regular meetings of the board of directors shall be held at such time and place as the board of directors may fix. if any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting that would otherwise be held on that day shall be held at the same hour on the next succeeding business day. Notice of regular meetings of the board of directors need not be given except as otherwise required by statute or these bylaws. Section 6. Special Meetings. Special meetings of the board of directors may be called by the chairman of the board, by one or more directors of the Corporation, or by the chief executive officer or a co-chief executive officer. Section 7. Notice of Meetings. Notice of each special meeting of the board of directors (and of each regular meeting for which notice shall be required) shall be given by the secretary as hereinafter provided in this Section 7, in which notice shall be stated the time and place of the meeting. Except as otherwise required by these bylaws, such notice need not state the purposes of such meeting. Notice of each such meeting shall be sent by overnight courier to each director, addressed to him at his residence or usual place of business, at least three (3) days before the day on which such meeting is to be held, or shall be sent addressed to him at such place by telegraph, cable, telex, telecopier, or other similar means, or be delivered to him personally or be given to him by telephone or other similar means, at least twenty-four (24) hours before the time at which such meeting is to be held. Notice of any such meeting need not be given to any director who shall, either before or after the meeting, submit a signed waiver of notice or who shall attend such meeting, except when he shall attend for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Section 8. Quorum and Manner of Acting. A majority of the entire board of directors shall constitute a quorum for the transaction of business at any meeting of the board of - 5 - 7 directors, and, except as otherwise expressly required by statute, the certificate of incorporation of the Corporation, or these bylaws, the act of a majority of the entire board of directors shall be the act of the board of directors. In the absence of a quorum at any meeting of the board of directors, a majority of the directors present thereat may adjourn such meeting to another time and place. Notice of the time and place of any such adjourned meeting shall be given to all of the directors unless such time and place were announced at the meeting at which the adjournment was taken, in which case such notice shall only be given to the directors who were not present thereat. At any adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting as originally called. The directors shall act only as a board and the individual directors shall have no power as such. Section 9. Organization. At each meeting of the board of directors, the chairman of the board or, in the absence of the chairman of the board, the chief executive officer or a co-chief executive officer (or, in his or their absence, another director chosen by the majority of the directors present) shall act as chairman of the meeting and preside thereat. The secretary or, in his absence, any person appointed by the chairman of the meeting shall act, as secretary of the meeting and keep the minutes thereof. Section 10. Resignations. Any director of the Corporation may resign at any time by giving written notice of his resignation to the Corporation. Any such resignation shall take effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon its receipt. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 11. Vacancies. Any vacancy in the board of directors, whether arising from death, resignation, removal (with or without cause), an increase in the number of directors, or any other cause, may be filled by the vote of a majority of the directors then in office, though fewer than a quorum, or by the sole remaining director, or by the stockholders at the next annual meeting thereof or at a special meeting thereof Each director so elected shall hold office until his successor shall have been elected and qualified or until removed. Section 12. Removal of Directors. Any director may be removed, either with or without cause, at any time, by the holders of a majority of the voting power of the issued and outstanding capital stock of the Corporation entitled to vote at an election of directors. Section 13. Compensation. The board of directors shall have authority to fix the compensation, including fees for reimbursement of expenses, of directors for services to the Corporation in any capacity. Section 14. Committees. The board of directors may, by resolution passed by a majority of the entire board of directors, designate one or more committees, including an executive committee, each committee to consist of one or more of the directors of the - 6 - 8 Corporation. The board of directors may designate one or more directors as alternates of any committee, who may replace any absent or disqualified member at any meeting of the committee. In addition, in the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Except to the extent restricted by statute or the certificate of incorporation of the Corporation, each such committee, to the extent provided in the resolution creating it, shall have and may exercise all the powers and authority of the board of directors and may authorize the seal of the Corporation to be affixed to all papers that require it. Each such committee shall serve at the pleasure of the board of directors and have such name as may be determined from time to time by resolution adopted by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors. Section 15. Action by Consent. Unless restricted by the certificate of incorporation of the Corporation, any action required or permitted to be taken by the board of directors or any committee thereof may be taken without a meeting if all of the board of directors or such committee, as the case may be, consent thereto in writing, and each writing is filed with the minutes of the proceedings of the board of directors or such committee, as the case may be. Section 16. Telephonic Meeting. Unless restricted by the certificate of incorporation of the Corporation, any one (1) or more members of the board of directors or any committee thereof may participate in a meeting of the board of directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation by such means shall constitute presence in person at the meeting. ARTICLE IV. OFFICERS Section 1. Number and Qualifications. The officers of the Corporation shall be elected by the board of directors and shall include the chairman of the board, the president, the chief executive officer or the co-chief executive officers, one or more vice presidents, the secretary, and the treasurer. If the board of directors wishes, it may also elect other officers (including one or more assistant treasurers and one or more assistant secretaries) as may be necessary or desirable for the business of the Corporation. Any two or more offices may be held by the same person, and no officer, except the chairman of the board, need be a director. Each officer shall hold office until his successor shall have been duly elected and shall have qualified, or until his death, or until he shall have resigned or have been removed, as hereinafter provided in these bylaws. Section 2. Resignations. Any officer of the corporation may resign at any time by giving written notice of his resignation to the Corporation. Any such resignation shall take - 7 - 9 effect at the time specified therein or, if the time when it shall become effective shall not be specified therein, immediately upon number receipt. Unless otherwise specified therein, the acceptance of any such resignation shall not be necessary to make it effective. Section 3. Removal. Any officer of the corporation may be removed, either with or without cause, at any time, by the board of directors at any meeting or by consent as provided in Article III. Section 4. Chairman of the Board. The chairman of the board shall be a member of the board of directors. If present, the chairman of the board shall preside at each meeting of the board of directors or the stockholders. He shall advise and counsel with the chief executive officer or the co-chief executive officers, and with other executives of the Corporation, and shall perform such other duties as may from time to time be assigned to him by the board of directors. Section 5. President. The president shall, in the absence of the chairman of the board, preside at each meeting of the board of directors or the stockholders. The president shall perform all duties incident to the office of president and such other duties as may from time to time be assigned to him by the chairman of the board or the board of directors. Section 6. Chief Executive Officer or Co-Chief Executive Officers. The chief executive officer or co-chief executive officers shall, in the absence of the chairman of the board, preside at each meeting of the board of directors or the stockholders. The chief executive officer or co-chief executive officers shall perform all duties incident to the office of chief executive officer and such other duties as may from time to time be assigned to him or them by the chairman of the board or the board of directors. Section 7. Vice President(s). Each vice president shall perform all such duties as from time to time may be assigned to him by the board of directors, the chairman of the board, or the chief executive officer or a co-chief executive officer. At the request of the chairman of the board or the chief executive officer or a co-chief executive officer, or in the absence of such chief executive officer or both co-chief executive officers or in the event of his or their inability or refusal to act, the vice president, or if there shall be more than one (1), the vice presidents in the order determined by the chairman of the board or the board of directors (or if there be no such determination, then the vice presidents in the order of their election), shall perform the duties of the chief executive officer, and, when so acting, shall have the powers of and be subject to the restrictions placed upon the chief executive officer or co-chief executive officers in respect of the performance of such duties. Section 8. Treasurer. The treasurer shall: have charge and custody of, and be responsible for, all the funds and securities of the corporation; keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation; deposit all moneys and other valuables to the credit of the Corporation in such depositories as may be designated by - 8 - 10 the board of directors or pursuant to its direction; receive, and give receipt for, moneys due and payable to the Corporation from any source whatsoever; disburse the funds of the Corporation and supervise the investments of its funds, taking proper vouchers therefor; render to the board of directors, whenever the board of directors may require, an account of the financial condition of the Corporation; and in general, perform all duties incident to the office of treasurer and such other duties as from time to time may be assigned to him by the board of directors. Section 9. Secretary. The secretary shall: keep or cause to be kept in one (1) or more books provided for the purpose, the minutes of all meetings of the board of directors, the committees of the board of directors, and the stockholders; see that all notices are duly given in accordance with the provisions of these bylaws and as required by law- be custodian of the records and the seal of the Corporation and affix and attest the seal to all certificates for shares of the Corporation (unless the seal of the Corporation on such certificates shall be a facsimile, as hereinafter provided) and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; see that the books, reports, statements, certificates, and other documents and records required by law to be kept and filed are properly kept and filed; and in general, perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to his by the board of directors. Section 10. Assistant Treasurer. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties as from time to time may be assigned by the board of directors. Section 11. Assistant Secretary. The assistant secretary, or if there shall be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties as from time to time may be assigned by the board of directors. Section 12. Compensation. The compensation of the officers of the Corporation for their services as such officers shall be fixed from time to time by the board of directors. An officer of the Corporation shall not be prevented from receiving compensation by reason of the fact that he is also a director of the Corporation. ARTICLE V. STOCK CERTIFICATES AND THEIR TRANSFER Section 1. Stock Certificates. Every holder of stock in the Corporation shall be entitled to have a certificate, signed by, or in the name of the Corporation by, the chairman of - 9 - 11 the board or the chief executive officer or a co-chief executive officer or a vice president and by the treasurer or an assistant treasurer or the secretary or an assistant secretary of the Corporation, certifying the number of shares owned by such stockholder in the Corporation. If the Corporation shall be authorized to issue more than one (1) class of stock or more than one (1) series of any class, the designations, preferences, and relative participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations, or restriction of such preferences and/or rights shall be set forth in full or sized on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock, provided that, except as otherwise provided in Section 202 of the General Corporation Law of the State of Delaware, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate that the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the designations, preferences, and relative participating, optional, or other special rights of each class of stock or series thereof and. the qualifications, limitations, or restrictions of such preferences and/or rights. Section 2. Facsimile Signatures. Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Section 3. Lost Certificates. The board of directors may direct a new - -certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his legal representative, to give the Corporation a bond in such sum as it may direct sufficient to indemnify it against any claim that may be made against the Corporation on account of the alleged loss, theft, or destruction of any such certificate or the issuance of such new certificate Section 4. Transfers of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its records-, provided, however, that the Corporation shall be entitled to recognize and enforce any lawful restriction on transfer. Whenever any transfer of stock shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of transfer if, when the certificates are presented to the Corporation for transfer, both the transferor and the transferee request the Corporation to do so. - 10 - 12 Section 5. Transfer Agents and Registrars. The board of directors may appoint, or authorize any officer or officers to appoint, one (1) or more transfer agents and one (1) or more registrars. Section 6. Regulations. The board of directors may make such additional rules and regulations, not inconsistent with these bylaws, as it may deem expedient concerning the issue, transfer, and registration of certificates for shares of stock of the Corporation. Section 7. Fixing the Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion, or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date that shall not be more than sixty (60) or fewer than ten (10) days before the date of such meeting, and not more than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, provided, however, that the board of directors may fix a new record date for the adjourned meeting. Section 8. Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its records as the owner of shares of stock to receive dividends and to vote as such owner. The Corporation shall be entitled to hold liable for calls and assessments a person registered on its records as the owner of shares of stock, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares of stock on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware. ARTICLE VI. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 1. General. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the fight of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contenders or its equivalent, shall not, of itself, create a presumption that the person did - 11 - 13 not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 2. Derivative Actions. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, provided that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of the State of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. Section 3. Indemnification in Certain Cases. To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections I and 2 of this Article VI, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. Section 4. Procedure. Any indemnification under Sections I and 2 of this Article VI (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in such Sections I and 2. Such determination shall be made (a) by the board of directors by a majority vote of the directors who were not parties to such action, suit or proceeding, even though less than a quorum or (b) if there are no such directors, or, even if obtainable, a quorum of disinterested directors so direct, by independent legal counsel in a written opinion, or (c) by the stockholders. Section 5. Advances for Expenses. Expenses (including reasonable attorneys' fees) incurred in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon number receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall be ultimately determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VI. - 12 - 14 Section 6. Rights Not Exclusive. The indemnification and advancement of expenses provided by, or granted pursuant to, the other Sections of this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any law, bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. Section 7. Insurance. The Corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article VI. Section 8. Definition of Corporation. For the purposes of this Article VI, references to "the Corporation" include all constituent corporations (including any constituent of a constituent) absorbed in a consolidation or merger as well as the resulting or surviving corporation which, if its separate existence had continued, would have had the power and authority to indemnify its directors, officers, and employees or agents, so that, any person who is or was a director, officer, employee or agent of such a constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provisions of this Article VI with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. Section 9. Survival of Rights. The indemnification and advancement of expenses provided by, or granted pursuant to this Article VI shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 10. Other Definitions. For purposes of this Article VI, references to "other enterprises" shall include employee benefit plans; references to "other enterprises" shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer or agent of the corporation which imposes duties on, or involves services by, such director, officer or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article VI. - 13 - 15 ARTICLE VII. GENERAL PROVISIONS Section 1. Dividends. Subject to the provisions of statute and the certificate of incorporation of the Corporation, dividends upon the shares of capital stock of the Corporation may be declared by the board of directors at any regular or special meeting. Dividends may be paid in cash, in property, or in shares of stock of the Corporation, unless otherwise provided by statute or the certificate of incorporation of the Corporation. Section 2. Reserves. Before Payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the board of directors may, from time to time, in its absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the board of directors may think conducive to the interests of the Corporation. The board of directors may modify or abolish any such reserves in the manner in which it was created. Section 3. Seal. The seal of the Corporation shall be in such form as shall be approved by the board of directors. Section 4. Fiscal Year. The fiscal year of the corporation shall be fixed, and once fixed, may thereafter be changed, by resolution of the board of directors. Section 5. Checks, Notes, Drafts, Etc. All checks, notes, drafts, or other orders for the payment of money of the Corporation shall be signed, endorsed or accepted in the name of the corporation by such officer, officers, person or persons as from time to time may be designated by the board of directors or by an officer or officers authorized by the board of directors to make such designation. Section 6. Execution of Contracts, Deeds, Etc. The board of directors may authorize any officer or officers, and any agent or agents, in the name and on behalf of the Corporation, to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts, and other obligations or instruments, and such authority may be general or confined to specific instances. Section 7. Voting of Stock in Other Corporations. Unless otherwise provided by resolution of the board of directors, the chairman of the board or the chief executive officer or a co-chief executive officer from time to time, may (or may appoint one (1) or more attorneys or agents to) cast the votes that the Corporation may be entitled to cast as a stockholder or otherwise in any other corporation, any of whose shares or securities may be held by the Corporation, at meetings of the holders of the shares or other securities of such other corporation. In the event one (1) or more attorneys or agents are appointed, the chairman of the board, the chief executive officer or a co-chief executive officer may instruct the person or persons so appointed as to the manner of casting such votes or giving such consent. The - 14 - 16 Chairman of the board or the chief executive officer or a co-chief executive officer may, or may instruct the attorneys or agents appointed to, execute or cause to be executed in the name and on behalf of the Corporation and under its seal or otherwise, such written proxies, consents, waivers, or other instruments as may be necessary or proper in the circumstances. ARTICLES VIII. AMENDMENTS These bylaws may be amended or repealed or new bylaws adopted (a) by action of the stockholders entitled to vote thereon at any annual or special meeting of stockholders or (b) if the certificate of incorporation of the corporation so provides, by action of the board of directors at a regular or special meeting thereof. Any bylaw made by the board of directors may be amended or repealed by action of the stockholders at any annual or special meeting of stockholders. - 15 - EX-3.3 4 ARTICLES OF INCORPORATION OF CARCOMP SERVICES, INC 1 Exhibit 3.3 File Number 5613-936-2 ---------- STATE OF ILLINOIS OFFICE OF THE SECRETARY OF STATE TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING: I, George H. Ryan, Secretary of State of the State of Illinois, do hereby certify that CARCOMP SERVICES, INC., A DOMESTIC CORPORATION, INCORPORATED UNDER THE LAWS OF THIS STATE OCTOBER 15, 1990, APPEARS TO HAVE COMPLIED WITH ALL THE PROVISIONS OF THE BUSINESS CORPORATION ACT OF THIS STATE RELATING TO THE FILING OF ANNUAL REPORTS AND PAYMENT OF FRANCHISE TAXES, AND AS OF THIS DATE, IS IN GOOD STANDING AS A DOMESTIC CORPORATION IN THE STATE OF ILLINOIS************************************* IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois this 10th day of December A.D., 1997 /s/ George H. Regan -------------------------------------------- SECRETARY OF STATE 2 File Number [Illegible] ----------- STATE OF ILLINOIS OFFICE OF THE SECRETARY OF STATE WHEREAS, ARTICLES OF INCORPORATION OF THE GLOBE GROUP, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE BEEN FILED IN THE OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE BUSINESS CORPORATION ACT OF ILLINOIS, IN FORCE JULY 1, A.D. 1984. Now, Therefore, I Jim Edgar, Secretary of State of the State of Illinois by virtue of the powers vested in me by law, do hereby issue this certificate and attach hereto a copy of the Application of the aforesaid corporation. IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois, at the City of Springfield, this 15th day of October A.D. 1990 and of the Independence of the Untied States the two hundred and 15th. /s/ Jim Edgar ----------------------------------- SECRETARY OF STATE 3 JIM EDGAR SECRETARY OF STATE STATE OF ILLINOIS ARTICLES OF INCORPORATION Pursuant to the provisions of "The Business Corporation Act of 1983", the undersigned incorporators(s) hereby adopt the following Articles of Incorporation. ARTICLE ONE The name of the corporation is The Globe Group, Inc. --------------------------------------------------------------------------------------- (Shall contain the word "corporation", "company", incorporated", ----------------------------------------------------------------------------------------------------------------------- "limited", or an abbreviation thereof) ARTICLE TWO The name and address of the initial registered agent and its registered office are: Registered Agent David R. Shevitz --------------------------------------------------------------------------------------------------------- First Name Middle Name Last Name Registered Office 525 West Monroe, Suite # 1600 --------------------------------------------------------------------------------------------------------- Number Street Suite # (A PO Box alone is not acceptable) Chicago 60606 Cook --------------------------------------------------------------------------------------------------------- City Zip Code County ARTICLE THREE The purpose or purposes for which the corporation is organized are: IF NOT SUFFICIENT SPACE TO COVER THIS POINT, ADD ONE OR MORE SHEETS OF THIS SIZE. To engage in any lawful act or activity for which corporations may be organized under the Illinois Business Corporation Act. ARTICLE FOUR Paragraph 1: The authorized shares shall be: CLASS *PAR VALUE PER SHARE NUMBER OF SHARES AUTHORIZED ====================================================================================================================== common 1(cent) 10,000 ---------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------- Paragraph 2: The preferences, qualifications, limitations, restrictions and the special or relative rights in respect of the shares of each class are: IF NOT SUFFICIENT SPACE TO COVER THIS POINT, ADD ONE OR MORE SHEETS OF THIS SIZE. ARTICLE FIVE The number of shares to be issued initially, and the consideration to be received by the corporation therefor, are: *PAR VALUE NUMBER OF SHARES Consideration to be CLASS PER SHARE PROPOSED TO BE ISSUED received therefor ====================================================================================================================== common 1(cent) 100 $100.00 ---------------------------------------------------------------------------------------------------------------------- $ ---------------------------------------------------------------------------------------------------------------------- $ ---------------------------------------------------------------------------------------------------------------------- $ ---------------------------------------------------------------------------------------------------------------------- TOTAL $100.00 ----------------------------------- *A declaration as to a "par value" is optional. This space may be marked "n/a" when no reference to a par value is desired.
4 ARTICLE SIX OPTIONAL The number of directors constituting the initial board of directors of the corporation is ________, and the names and addresses of the persons who are to serve as directors until the first annual meeting of shareholders or until their successors be elected an qualify are: NAME RESIDENTIAL ADDRESS ====================================================================================================================== ---------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------------------------- ARTICLE SEVEN OPTIONAL (a) It is estimated that the value of all property to be owned by the corporation for the $__________________ following year wherever located will be: (b) It is estimated that the value of the property to be located within the State of Illinois $__________________ during the following year will be: (c) It is estimated that the gross amount of business which will be transacted by the $__________________ corporation during the following year will be: (d) It is estimated that the gross amount of business which will be transacted from places of $__________________ business in the State of Illinois during the following year will be: ARTICLE EIGHT OTHER PROVISIONS Attach a separate sheet of this size for any other provision to be included in the Articles of Incorporation, e.g., authorizing preemptive rights; denying cumulative voting; regulating internal affairs; voting majority requirements; fixing a duration other than perpetual; etc. NAMES & ADDRESSES OF INCORPORATORS The undersigned incorporators(s) hereby declare(s), under penalties of perjury, that the statements made in the foregoing Articles of Incorporation are true. Dated October 15, 1990. ---------- -- SIGNATURES AND NAMES POST OFFICE ADDRESS 1. /s/ Gilbert L. Bratten 1. 700 South Second Street ------------------------------------------------- ---------------------------------------------------------- Signature Street Gilbert L. Bratten Springfield, IL 62704 ------------------------------------------------- ---------------------------------------------------------- Name (please print) City/Town State Zip 2. 2. ------------------------------------------------- ---------------------------------------------------------- Signature Street ------------------------------------------------- ---------------------------------------------------------- Name (please print) City/Town State Zip 3. 3. ------------------------------------------------- ---------------------------------------------------------- Signature Street ------------------------------------------------- ---------------------------------------------------------- Name (please print) City/Town State Zip (Signatures must be in ink on original document. Carbon copy, xerox or rubber stamp signatures may only be used on conformed copies). NOTE: If a corporation acts as incorporator, the name of the corporation and the state of incorporation shall be shown and the execution shall be by its President or Vice-President and verified by him, and attested by its Secretary or an Assistant Secretary.
5 File Number 5613 936 2 ---------- STATE OF ILLINOIS OFFICE OF THE SECRETARY OF STATE WHEREAS, ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF THE GLOBE GROUP, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE BEEN FILED IN THE OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE BUSINESS CORPORATION ACT OF ILLINOIS, IN FORCE JULY 1, A.D. 1984. Now, Therefore, I, Jim Edgar, Secretary of State of the State of Illinois by virtue of the powers vested in me by law, do hereby issue this certificate and attach hereto a copy of the Application of the aforesaid corporation. IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois, at the City of Springfield, this 24th day of October A.D. 1990 and of the Independence of the United States the two hundred and 15th. /s/ Jim Edgar ------------------------------- SECRETARY OF STATE 6 File # 5613 936 2 ------------ JIM EDGAR SECRETARY OF STATE STATE OF ILLINOIS ARTICLES OF AMENDMENT Pursuant to the provisions of "The Business Corporation Act of 1983", the undersigned corporation hereby adopts these Articles of Amendment to its Articles of Incorporation. ARTICLE ONE The name of the corporation is The Globe Group, Inc. ------------------------------------ __________________________________________________________ (Note 1) ARTICLE TWO The following amendment of the Articles of Incorporation was adopted on October 24, 1990 in the manner indicated below ("X" one box only) [X] By a majority of the incorporators provided no directors were named in the articles of incorporation and no directors have been elected, or by a majority of the board of directors, in accordance with Section 10 10, the corporation having issued no shares as of the time of adoption of this amendment. (Note 2) [ ] By a majority of the board of directors, in accordance with Section 10 15, shares having been issued but shareholder action not being required for the adoption of the amendment. (Note 3) [ ] By the shareholders, in accordance with Section 10 20, a resolution of the board of directors having been duly adopted and submitted to the shareholders At a meeting of shareholders, not less than the minimum number of votes required by statute and by the articles of incorporation were voted in favor of the amendment. (Note 4) [ ] By the shareholders, in accordance with Sections 10 20 and 7 10 a resolution of the board of directors having been duly adopted and submitted to the shareholders A consent in writing has been signed by shareholders having not less than the minimum number of votes required by statute and by the articles of incorporation Shareholders who have not consented in writing have been given notice in accordance with Section 7 10. (Note 4) [ ] By the shareholders, in accordance with Sections 10 20 and 7 10, a resolution of the board of directors have been duly adopted and submitted to the shareholders A consent in writing has been signed by all the shareholders entitled to vote on this amendment. (Note 4) (INSERT AMENDMENT) (ANY ARTICLE BEING AMENDED IS REQUIRED TO BE SET FORTH IN ITS ENTIRETY.) (SUGGESTED LANGUAGE FOR AN AMENDMENT TO CHANGE THE CORPORATE NAME IS: RESOLVED THAT THE ARTICLES OF INCORPORATION BE AMENDED TO READ AS FOLLOWS:) RESOLVED, that Article One of the Articles of Incorporation be amended to read as follows: "The name of the corporation is AutoComp Services, Inc." - -------------------------------------------------------------------------------- (NEW NAME) All changes other than name, include on page 2 (over) 7 PAGE 2 RESOLUTION RESOLVED, that Article Eight of the Articles of Incorporation have inserted therein the following: "Cumulative voting of shares of stock of the corporation shall not be allowed under any circumstances." 8 PAGE 3 ARTICLE THREE The manner in which any exchange, reclassification or cancellation of issued shares, or a reduction of the number of authorized shares of any Class below the number of issued shares of that class, provided for or effected by this amendment, is as follows. (If not applicable, insert "No change") No change ARTICLE FOUR (a) The manner in which said amendment effects a change in the amount of paid-in capital (Paid-in capital replaces the terms Stated Capital and Paid-in Surplus and is equal to the total of these accounts) is as follows: (If not applicable, insert "No change") No change (b) The amount of paid-in capital (Paid in Capital replaces the terms Stated Capital and Paid in Surplus and is equal to the total of these accounts) as changed by this amendment is as follows. (If not applicable, insert "No change") No change Before Amendment After Amendment Paid-in Capital $_______________ $______________ (COMPLETE EITHER ITEM 1 OR 2 BELOW) (1) The undersigned corporation has caused these articles to be signed by its duly authorized officers, each of whom affirm, under penalties of perjury, that the facts stated herein are true. Dated _____________________, 19____________________________ _____________________________________________ (Exact Name of Corporation) attested by _______________________________________________ by __________________________________________ (Signature of Secretary or Assistant Secretary) (Signature of President or Vice President) ----------------------------------------------- --------------------------------------------- (Type or Print Name and Title) (Type or Print Name and Title) (2) If amendment is authorized by the incorporators, the incorporators must sign below. OR If amendment is authorized by the directors and there are no officers, then a majority of the directors or such directors as may be designated by the board, must sign below. The undersigned affirms, under penalties of perjury, that the facts stated herein are true. Dated October 24 , 1990 ------------------------------------------- -- /s/ Gilbert L. Bratten - ----------------------------------------------------------- --------------------------------------------- Gilbert L. Bratten - ----------------------------------------------------------- --------------------------------------------- - ----------------------------------------------------------- --------------------------------------------- - ----------------------------------------------------------- ---------------------------------------------
9 PAGE 4 NOTES AND INSTRUCTIONS NOTE 1 State the true exact corporate name as it appears on the records of the office of the Secretary of State, BEFORE any amendments herein reported. NOTE 2 Incorporators are permitted to adopt amendments ONLY before any shares have been issued and before any directors have been named or elected. (ss.10.10) NOTE 3 Directors may adopt amendments without shareholder approval in only six instances, as follows: (a) to remove the names and addresses of directors named in the articles of incorporation; (b) to remove the name and address of the initial registered agent and registered office, provided a statement pursuant to ss.5.10 is also filed; (c) to split the issued whole shares and unissued authorized shares by multiplying them by a whole number, so long as no class or series is adversely affected thereby; (d) to change the corporate name by substituting the work "corporation", "incorporated", "company", "limited", or the abbreviation "corp.", "inc.", "co.", or "ltd." for a similar word or abbreviation in the name, or by adding a geographical attribution to the name; (e) to reduce the authorized shares of any class pursuant to a cancellation statement filed in accordance with ss.9 05. (f) to restate the articles of incorporation as currently amended. (ss.10.15) NOTE 4. All amendments not adopted under ss. 10.10 or ss. 10.15 require (1) that the board of directors adopt a resolution setting forth the proposed amendment and (2) that the shareholders approve the amendment. Shareholder approval may be (1) by vote at a shareholders' meeting (either annual or special) or (2) by consent, in writing, without a meeting. To be adopted, the amendment must receive the affirmative vote or consent of the holders of at least 2/3 of the outstanding shares entitled to vote on the amendment (but if class voting applies, then also at least a 2/3 vote within each class is required). The articles of incorporation may supersede the 2/3 vote requirement by specifying any smaller or larger vote requirement not less than a majority of the outstanding shares entitled to vote and not less than a majority within each class when class voting applies. (ss. 10.20) NOTE 5: When shareholder approval is by written consent, all shareholders must be given notice of the proposed amendment at least 5 days before the consent is signed. If the amendment is adopted, shareholders who have not signed the consent must be promptly notified of the passage of the amendment. (secs. 7.10 & 10.20) 10 File Number 5613-925-2 STATE OF ILLINOIS OFFICE OF THE SECRETARY OF STATE WHEREAS, ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF AUTOCOMP SERVICES, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE BEEN FILED IN THE OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE BUSINESS CORPORATION ACT OF ILLINOIS, IN FORCE JULY 1, A.D. 1984. Now Therefore, I, George H. Ryan, Secretary of State of the State of Illinois, by virtue of the powers vested in me by law, do hereby issue this certificate and attach hereto a copy of the Application of the aforesaid corporation. IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois, at the City of Springfield, this 26th day of February A.D. 1991 and of the Independence of the United States the two hundred and 15th. /s/ George H. Regan ---------------------------- George H. Regan Secretary of State 11 File No. 5613-936-2 SECRETARY OF STATE STATE OF ILLINOIS ARTICLES OF AMENDMENT Pursuant to the provisions of "The Business Corporation Act of 1983", the undersigned corporation hereby adopts these Articles of Amendment to its Articles of Incorporation. ARTICLE ONE The name of the corporation is AutoComp Services, Inc. (Note 1) ARTICLE TWO The following amendment of the Articles of Incorporation was adopted on February 25, 1991 in the manner indicated below. ("X" one line only.) [ ] By a majority of the incorporations, provided no directors were named in the articles of incorporation and no directors have been elected; or by a majority of the board of directors, in accordance with Section 10.10, the corporation having issued no shares as of the time of adoption of this amendment; (Note 2) [ ] By a majority of the board of directors, in accordance with Section 10.15, shares having been issued but shareholder action not being required for the adoption of the amendment; (Note 3) [ ] By the shareholders, in accordance with Section 10.20, a resolution of the board of directors having been duly adopted and submitted to the shareholders. At a meeting of shareholders, not less than the minimum number of votes required by statute and by the articles of incorporation were voted in favor of the amendment; (Note 4) [ ] By the shareholders, in accordance with Sections 10.20 and 7.10 a resolution of the board of directors having been duly adopted and submitted to the shareholders. A consent in writing has been signed by shareholders having not less than the minimum number of votes required by statute and by the articles of incorporation. Shareholders who have not consented in writing have been given notice in accordance with Section 7.10, and (Note 4) [X] By the shareholders, in accordance with Sections 10.20 and 7.10, a resolution of the board of directors have been duly adopted and submitted to the shareholders. A consent in writing has been signed by all the shareholders entitled to vote on this amendment. (Note 4) (INSERT AMENDMENT) (Any article being amended is required to be set forth in its entirety.) (Suggested language for an amendment to change the corporate name is: RESOLVED, that the Articles of Incorporation be amended to read as follows:) RESOLVED, that Article One of the Articles of Incorporation be amended to read as follows: "The name of the corporation is CarComp Services, Inc." ------------------------------------------------------- (NEW NAME) ALL CHANGES OTHER THAN NAMES, INCLUDE ON PAGE 2 (OVER) 12 PAGE 2 RESOLUTION N/A 13 ARTICLE THREE The manner in which any exchange, reclassification or cancellation of issued shares, or a reduction of the number of authorized shares of any class below the number of issued shares of that class, provided for or effected by this amendment, is as follows: (if not applicable, insert "No change") NO CHANGE ARTICLE FOUR (a) The manner in which said amendment effects a change in the amount of paid-in capital (Paid-in capital replaces the terms Stated Capital and Paid in Surplus and is equal to the total of these accounts) is as follows: (if not applicable, insert "No change") NO CHANGE (b) The amount of paid-in capital (Paid-in capital replaces the terms Stated Capital and Paid in Surplus and is equal to the total of these accounts) as changed by this amendment is as follows: (if not applicable, insert "No change") NO CHANGE Before Amendment After Amendment Paid-in Capital $_______________ $_____________ (Complete either Item 1 or 2 below) (1) The undersigned corporation has caused these articles to be signed by its duly authorized officers, each of whom affirm, under penalties of perjury, that the facts stated herein are true. Dated February 25, 1991 AutoCorp Services, Inc. /s/ Robert J. Kubiak, Assistant Secretary /s/ Edward Cheskis, President - ----------------------------------------- ----------------------------- (2) If amendment is authorized by the incorporators, the incorporators must sign below. If amendment is authorized by the directors and there are no officers, then a majority of the directors or such directors as may be designated by the board, must sign below. Dated ____________________, 19 14 NOTES AND INSTRUCTIONS NOTE 1: State the true exact corporate name as it appears on the records of the office of the Secretary of State, BEFORE any amendments herein reported. NOTE 2: Incorporators are permitted to adopt amendments ONLY before any shares have been issued and before any directors have been named or elected. (ss.10.10) NOTE 3: Directors may adopt amendments without shareholder approval in only six instances as follows: (a) to remove the names and addresses of directors named in the articles of incorporation; (b) to remove the name and address of the initial registered agent and registered office, provided a statement pursuant to ss.5.10 is also filed; (c) to split the issued whole shares and unissued authorized shares by multiplying them by a whole number, so long as no class or series is adversely affected thereby; (d) to change the corporate name by substituting the work "corporation", "incorporated", "limited", or the abbreviation "corp.", "inc.", "co.', or "ltd." for a similar word or abbreviation in the name, or by adding a geographical attribution to the name; (e) to reduce the authorized shares of any class pursuant to a cancellation statement filed in accordance with ss.9.05; (f) to restate the articles of incorporation as currently amended. (ss.10.15) NOTE 4: all amendments not adopted under ss.10.10 or ss.10.15 require (1) that the board of directors adopt a resolution setting forth the proposed amendment and (2) that the shareholders approve the amendment. Shareholder approval may be (1) by vote at a shareholders' meeting (either annual or special) or (2) by consent, in writing, without a meeting. To be adopted, the amendment must receive the affirmative vote or consent of the holders of at least 2/3 of the outstanding shares entitled to vote on the amendment (but if class voting applies, then also at least a 2/3 vote within each class is required). The articles of incorporation may supersede the 2/3 vote requirement by specifying any smaller or larger vote requirement not less than a majority of the outstanding shares entitled to vote and not less than a majority within each class when class voting applies. (ss.10.20) NOTE 5: When shareholder approval is by written consent, all shareholders must be given notice of the proposed amendment at least 5 days before the consent is signed. If the amendment is adopted, shareholders who have not signed the consent must be promptly notified of the passage of the amendment. (secs. 7.10 & 10.20). 15 FORM BCA 10-30 - -------------------------------------------------------------------------------- ARTICLES OF AMENDMENT Filing Fee $25.00 Filing Fee for Re-Stated Articles $100.00 Filed Feb. 26, 1991 George H. Ryan, Secretary of State Return to: Corporation Department Secretary of State Springfield, Illinois 62756 Telephone 217-782-6961 335290-1 EX-3.4 5 BY-LAWS OF CARCOMP SERVICES, INC. 1 Exhibit 3.4 BY-LAWS OF CARCOMP SERVICES, INC. (name changed amendment dated 2/26/91) 2 BY-LAWS ARTICLE I SHAREHOLDERS SECTION 1.1. ANNUAL MEETING. An annual meeting of the shareholders shall be held on the second Monday in September of each year, for the purpose of electing directors and for the transaction of such other business as may come before the meeting; provided, however, that if in any year such date shall be a legal holiday, such meeting shall be held on the next succeeding business day. SECTION 1.2. PLACE OF MEETING. The board of directors may designate any place, either within or without the State of Illinois, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. SECTION 1.3. VOTING BY BALLOT. Voting on any question or in any election may be by voice unless the presiding officer shall order or any shareholder shall demand that voting be by ballot. ARTICLE II DIRECTORS SECTION 2.1. NUMBER. The number of directors of the corporation shall be one (1). SECTION 2.2. REGULAR MEETINGS. A regular meeting of the board of directors shall be held without other notice than this by-law, immediately after the annual meeting of shareholders. If the board of directors resolves to hold any additional regular meetings such resolution shall constitute sufficient notice thereof. SECTION 2.3. SPECIAL MEETINGS. Special meetings of the board of directors may be called by or at the request of the chairman of the board, the president or at least one-third of the number of directors constituting the whole board. The person or persons authorized to call special meetings of the board of directors may fix any place as the place for holding any special meeting of the board of directors called by them. Written notice of any special meetings shall be delivered to each director at his business address at least five (5) days previous to said meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegram company. - 2 - 3 ARTICLE III COMMITTEES A majority of the board of directors may create one or more committees and appoint members of the board to serve on the committee or committees. Each committee shall have such authority as the board of directors may from time to time direct. ARTICLE IV OFFICERS SECTION 4.1. ELECTION AND TERM OF OFFICE. The officers of the corporation shall be elected annually by the board of directors at the regular meeting of the board of directors held after each annual meeting of shareholders. However, new offices may be created and filled. and vacancies may be filled at any meeting of the board of directors. Each officer shall hold office until the next regular meeting of directors following the annual meeting of shareholders or until his earlier death, resignation or his removal in the manner provided by law. SECTION 4.2. NUMBER. The officers of the corporation shall be chosen by the board of directors and shall be a president and a secretary, The board of directors may also choose a chairman of the board, one or more vice chairmen, one or more vice presidents, a treasurer, and one or more assistant secretaries and assistant treasurers, and such additional officers and agents as the board of directors may deem necessary from time to time. Any two or more offices may be held by the same person. Those officers chosen by the board shall have such duties as are hereinafter described. SECTION 4.3. THE CHIEF EXECUTIVE OFFICER. The board of directors shall designate whether the chairman of the board, if one shall have been chosen, or the president shall be the chief executive officer of the corporation. If a chairman of the board has not been chosen, or if one has been chosen but not designated chief executive officer, then the president shall be the chief executive officer of the corporation. The chief executive officer shall be the principal executive officer of the corporation and shall in general supervise and control all of the business and affairs of the corporation, unless otherwise provided by the board of directors. He shall preside at all meetings of the stockholders and of the board of directors and shall see that orders and resolutions of the board of directors are carried into effect. He may sign bonds, mortgages, certificates for shares and all other contracts and documents whether or not under the seal of the corporation except in cases where the signing and execution thereof shall be expressly delegated by law, by the board of directors or by these by-laws to some other officer or agent of the corporation. He shall have general powers of supervision and shall be the final arbiter of all differences between officers of the corporation and his decision as to any matter affecting the corporation shall be final and binding as between the officers of the corporation subject only to its board of directors. - 3 - 4 SECTION 4.4. THE PRESIDENT. In the absence of the chief executive officer or in the event of his inability or refusal to act, if the chairman of the board has been designated chief executive officer, the president shall perform the duties of the chief executive officer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the chief executive officer. At all other times the president shall have the active management of the business of the corporation under the general supervision of the chief executive officer. He shall have concurrent power with the chief executive officer to sign bonds, mortgages, certificates for shares and other contracts and documents, whether or not under the seal of the corporation except in cases where the signing and execution thereof shall be expressly delegated by law, by the board of directors, or by these by-laws to some other officer or agent of the corporation. In general, he shall perform all duties incident to the office of president and such other duties as the chief executive officer or the board of directors may from time to time prescribe. SECTION 4.5. THE CHAIRMAN OF THE BOARD. The chairman of the board, if one is chosen, shall be chosen from among the members of the board. If the chairman of the board has not been designated chief executive officer, he shall perform such duties as may be assigned to him by the chief executive officer or by the board of directors. SECTION 4.6. VICE CHAIRMAN OF THE BOARD. In the absence of the chief executive officer or in the event of his inability or refusal to act, if the chairman of the board has been designated chief executive officer, the vice-chairman, or if there be more than one, the vice-chairmen, in the order determined by the board of directors, shall perform the duties of the chief executive officer, and when so acting shall have all the powers of and be subject to all the restrictions upon the chief executive officer. At all other times, the vice-chairman or vice-chairmen shall perform such duties and have such powers as the chief executive officer or the board of directors may from time to time prescribe. SECTION 4.7. THE VICE-PRESIDENT. In the absence of the president or in the event of his inability or refusal to act, the vice-president (or in the event there be more than one vice-president, the executive vice-president and then the other vice-president or vice-presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the chief executive officer or the board of directors may from time to time prescribe. SECTION 4.8. THE SECRETARY. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, - 4 - 5 and shall perform such other duties as may be prescribed by the board of directors or the chief executive officer, under whose supervision he shall be. He shall have custody of the corporate seal of the corporation and he, or an assistant secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his signature. SECTION 4.9. THE ASSISTANT SECRETARY. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the chief executive officer or the board of directors may from time to time prescribe. SECTION 4.10. THE TREASURER. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at its regular meetings, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation. If required by the board of directors, he shall give the corporation a bond (which shall be renewed every six (6) years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all book, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. SECTION 4.11. THE ASSISTANT TREASURER. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the chief executive officer or the board of directors may from time to time prescribe. ARTICLE V INDEMNIFICATION - 5 - 6 SECTION 5.1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. (a) The corporation shall, to the fullest extent to which it is empowered to do so by The Illinois Business Corporation Act of 1983 (the "Act") or any other applicable laws as may from time to time be in effect, indemnify any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that he or she is or was a director or officer of the corporation, or who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. (b) The corporation shall, to the fullest extent to which it is empowered to do so by the Act or any other applicable laws as may from time to time be in effect, 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 a right of the corporation to procure judgment in its favor by reason of the fact that such person is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, if such person acted in good faith and in manner he or she reasonably believed to be in, or not opposed to the best interests of the corporation, provided that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his or her duty to the corporation, unless and only to the extent that 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 of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court shall deem proper. SECTION 5.2. CONTRACT WITH THE CORPORATION. The provisions of this Article V shall be deemed to be a contract between the corporation and each director or officer who serves in any such capacity at any time while this Article V and the relevant provisions of the Act or other applicable law, if any, are in effect, and any repeal or modification of any such law or of this Article V shall not affect any rights or obligations then existing with respect to any state of facts then or heretofore existing or any action, suit or proceeding theretofore or thereafter brought or threatened based in whole or in part upon such state of facts. However, the provisions of this Article V shall not be deemed to be a contract between the corporation and any directors and/or officers of any corporation (the "Predecessor Corporation") which shall merge into or consolidate with this corporation when this corporation shall be the surviving or - 6 - 7 resulting corporation, and any such directors, officers, employees and/or agents of the Predecessor Corporation shall be indemnified to the extent required under Section 8.75 of the Act only at the discretion of the board of directors of this corporation. - 7 - EX-3.5 6 ARTICLES OF INCORPORATION OF USA GLASS INC. 1 Exhibit 3.5 File Number [Illegible] ----------- STATE OF ILLINOIS OFFICE OF THE SECRETARY OF STATE Whereas, ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF U.S.A. GLASS, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE BEEN FILED IN THE OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE BUSINESS CORPORATION ACT OF ILLINOIS, IN FORCE JULY 1, A.D. 1984. Now therefore, I, Jim Edgar, Secretary of State of the State of Illinois, by virtue of the powers vested in me by law do hereby issue this certificate and attach hereto a copy of the Application of the aforesaid corporation. In testimony whereof, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois at the City of Springfield, this 26th day of April AD 1989 and of the Independence of the United States the two hundred and 13th, /s/ Jim Edgar ---------------------------------- Secretary of State 2 ARTICLES OF INCORPORATION Pursuant to the provisions of "The Business Corporation Act of 1983", the undersigned incorporator(s) hereby adopt the following Articles of Incorporation. ARTICLE ONE The name of the corporation is U.S.A. Glass, Inc. ARTICLE TWO The name and address of the initial registered agent and its registered office are: Registered Agent Maurice P. Raizes Registered Office 208 South LaSalle Street, Suite 1860 Chicago, 60604 Cook ARTICLE THREE The purpose or purposes for which the corporation is organized are: The distribution, sale and installation of automobile glass and related products. The transaction of any and all lawful business for which corporations may be incorporated under the Illinois Corporations Act. ARTICLE FOUR Paragraph 1: The authorized shares shall be: Class *Par value per share Number of shares authorized Common N/A 10,000 Paragraph 2: The preferences, qualifications, limitations, restrictions and the special or relative rights in respect of shares of each class are: ARTICLE FIVE: The number of shares to be issued initially, and the consideration to be received by the corporation therefore, are: 3 Number of *Par Value shares to be Consideration to be Class per share issued received therefor Common N/A 100 $100.00 Total $100.00 ARTICLE SIX OPTIONAL The number of directors constituting the initial board of directors of the corporation is ________, and the names and addresses of the persons who are to serve as directors under the first annual meeting of shareholders or until their successors be elected and qualify are: Name Residential Address ARTICLE SEVEN OPTIONAL (a) It is estimated that the value of all $_________________ property to be owned by the corporation for the following year wherever located will be: (b) It is estimated that the value of the $_________________ property to be located within the State of Illinois during the following year will be: (c) It is estimated that the gross amount of $_________________ business will be transacted by the corporation during the following year will be: 4 (a) It is estimated that the value of all $_________________ property to be owned by the corporation for the following year wherever located will be: (d) It is estimated that the gross amount of $_________________ business which will be translated from places of business in the State of Illinois during the following year will be: ARTICLE EIGHT OTHER PROVISIONS Attached separate sheet of this size for any other provision to be included in the Articles of Incorporation, e.g., authorizing pre-emptive rights; denying cumulative voting; regulating internal affairs; voting majority requirements; fixing a duration other than perpetual; etc. The undersigned incorporator(s) hereby declare(s), under penalties of perjury, that the statements made in the foregoing Articles of Incorporation are true. Dated: August 22, 1988 Signatures and Names Post Office Address 1. /s/ Richard J. Lee 1. 1880 W. Fullerton Ave. ----------------------------- Chicago, IL 60614 Richard Lee ----------------------------- 2. 2. ----------------------------- --------------------------------- ----------------------------- ------------------------------------- 3. 3. ----------------------------- ---------------------------------- ----------------------------- ------------------------------------- (Signatures must be in ink on original document. Carbon copy, xerox or rubber stamp signal. may only be used on conformed copies) NOTE: If a corporation acts as incorporator, the name of the corporation and the state of incorporation shall be shown and the execution shall be by its President or Vice-President and verified by him, and attested by its Secretary or an Assistant Secretary. 5 State of Illinois Office of THE SECRETARY OF STATE Whereas, ARTICLES OF INCORPORATION OF U.S.A. GLASS, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE BEEN FILED IN THE OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE BUSINESS CORPORATION ACT OF ILLINOIS, IN FORCE JULY 1, A.D. 1984. Now therefore, I, Jim Edgar, Secretary of State of the State of Illinois, by virtue of the powers vested in me by law do hereby issue this certificate and attach hereto a copy of the Application of the aforesaid corporation. In testimony whereof, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois at the City of Springfield, this 29th day of August AD 1988 and of the Independence of the United States the two hundred and 13th, /s/ Jim Edgar ----------------------------------- Secretary of State 6 ARTICLES OF AMENDMENT Pursuant to the provisions of "The Business Corporation Act of 1983", the undersigned corporation hereby adopts these Articles of Amendment to its Articles of Incorporation. ARTICLE ONE The name of the corporation is U.S.A. Glass, Inc. ARTICLE TWO The following amendment of the Articles of Incorporation was adopted on April 7, 1989 in the manner indicated below. ("x" one box only) [ ] By a majority of the board of directors, in accordance with Section 10.15, shares having been issued but shareholder action not being required for the adoption of the amendment; (Note 2) [ ] By a majority of the board of directors, in accordance with Section 10.15, shares having been issued but shareholder action not being required for the adoption of the amendment; (Note 3) [ ] By the shareholders, in accordance with Section 10.20, a resolution of the board of directors having been duly adopted and submitted to the shareholders. At a meeting of shareholders, not less than the minimum number of votes required by statute and by the Articles of incorporation were voted in favor of the amendment; (Note 4) [ ] By the shareholders, in accordance with Sections 10.20 and 7.10 a resolution of the board of directors having been duly adopted and submitted to the shareholders. A consent in writing has been signed by shareholders having not less than the minimum number of votes required by statute and by the Articles of incorporation. Shareholders who have not consented in writing have been given notice in accordance with Section 7.10; (Note 4) [ ] By the shareholders, in accordance with Sections 10.20 and 7.10, a resolution of the board of directors have been duly adopted and submitted to the shareholders. A consent in writing has been signed by all the shareholders entitled to vote on this amendment. (Note 4) (INSERT AMENDMENT) (Any article being amended is required to be set forth in its entirety.) (Suggested language for an amendment to change the corporate name is RESOLVED, that the Articles of Incorporation be amended to read as follows:) U.S.A. Glas, Inc. - -------------------------------------------------------------------------------- (New Name) 7 ARTICLE THREE The manner in which any exchange, reclassification or cancellation of issued shares, or a reduction of the number of authorized shares of any class below the number of issued shares of that class, provided for or elected by this amendment, is as follows. (If not applicable, insert "No change") No change ARTICLE FOUR (a) The manner in which said amendment effects a change in the amount of paid-in-capital (Paid-in capital replaces the terms Stated Capital and Paid in Surplus and is equal to the total of these accounts) is as follows: (If not applicable, insert "No change") No change (b) The amount of paid-in capital (Paid in Capital replaces the terms Stated Capital and Paid in Surplus and is equal to the total of these accounts; as changed by this amendment is as follows: (If not applicable, insert "No change") No change Before Amendment After Amendment Paid-In Capital $_______________ $_____________ (Complete either Item 1 or 2 below) The undersigned corporation has caused these Articles to be signed by its duly authorized officers, each of whom affirm, under penalties of perjury, that the facts stated herein are true. Dated April 10, 1989 U.S.A. Glass, Inc. Attested by /s/ Maurice P. Raizes by /s/ Joe Kellman ------------------------------- -------------------------------- (Signature of Secretary) (Signature of President) Maurice P. Raizes, Secretary Joe Kellman, President ------------------------------- -------------------------------- (Type or Print Name and Title) (Type of Print Name and Title) If amendment is authorized by the incorporators, the Incorporators must sign below. OR If amendment is authorized by the directors and there are no officers, then a majority of the directors or such directors as may be designated by the board, must sign below. The undersigned affirms, under penalties of perjury, that the facts stated herein are true. Dated_____________________________, 19__ - ---------------------------------------- ------------------------------------ - ---------------------------------------- ------------------------------------ - ---------------------------------------- ------------------------------------ 8 NOTES AND INSTRUCTIONS NOTE 1. State the true exact corporate name as it appears on the records of the office of the Secretary of State. BEFORE any amendments herein reported. NOTE 2. Incorporators are permitted to adopt amendments only before any shares have been issued and before any directors have been named or elected. (ss. 1010) NOTE 3. Directors may adopt amendments without shareholder approval in only six instances, as follows: (a) to remove the names and addresses of directors named in the Articles of incorporation; (b) to remove the name and address of the initial registered agent and registered office, provided a statement pursuant to ss.5.10 is also filed; (c) to split the issued who shares and unissued authorized shares by multiplying them by a whole number, so long as no class or series is adversely affected thereby; (d) to change the corporate name by substituting the word "corporation", "incorporated", "company", "limited", or the abbreviation "corp", "inc.", "co.", or "ltd." or a similar word or abbreviation in the name, or by adding a geographical attribution to the name; (e) to reduce the authorized shares of any class pursuant to a cancellation statement filed in accordance with ss.9.05. (f) to restate the Articles of incorporation as currently amended.(ss.10.15) NOTE 4. All amendments not adopted under ss.10.10 or ss.10.15 require (1) that the board of directors adopt a resolution setting forth the proposed amendment and (2) that the shareholders approve the amendment. Shareholder approval may be (1) by vote at a shareholders' meeting (either annual or special) or (2) by consent, in writing, without a meeting. To be adopted, the amendment must receive the affirmative vote or consent of the holders of at least 2/3 of the outstanding shares entitled to vote on the amendment (but if class voting applies, then also at least a 2/3 vote within each class is required). The Articles of incorporation may supersede the 2/3 vote requirement by specifying any smaller or larger vote requirement not less than a majority of the outstanding shares entitled to vote and not less than a majority within each class when class voting applies. (ss.10.20) NOTE 5. When shareholder approval is by written consent, all shareholders must be given notice of the proposed amendment at least 5 days before the consent is signed. If the amendment is adopted, shareholders who have not signed the consent must be promptly notified of the passage of the amendment. (secs.7.10 & 10.20) 9 File Number 5520-596-5 STATE OF ILLINOIS OFFICE OF THE SECRETARY OF STATE To all to whom these Presidents Shall Come Greeting: I, George H. Ryan, Secretary of State of the State of Illinois, do hereby certify that U.S.A. GLAS, INC., A DOMESTIC CORPORATION, INCORPORATED UNDER THE LAWS OF THIS STATE AUGUST 29, 1988, APPEARS TO HAVE COMPLIED WITH ALL THE PROVISIONS OF THE BUSINESS CORPORATION ACT OF THIS STATE RELATING TO THE FILING OF ANNUAL REPORTS AND PAYMENT OF FRANCHISE TAXES, AND AS OF THIS DATE, IS IN GOOD STANDING AS A DOMESTIC CORPORATION IN THE STATE OF ILLINOIS*** In Testimony Whereof, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois this 10th day of DECEMBER A.D., 1997. /s/ George H. Regan -------------------------------------------- SECRETARY OF STATE EX-3.6 7 BY-LAWS OF USA GLASS, INC. 1 Exhibit 3.6 BY-LAWS OF U.S.A. GLASS, INC. ARTICLE I OFFICES The corporation shall continuously maintain in the State of Illinois a registered office and a registered agent whose business office is identical with such registered office, and may have other offices within or without the state. ARTICLE II SHAREHOLDERS FURTHER, RESOLVED, that Article II, Section 1 of the corporation's by-laws be and the same are amended by deleting therefrom the first sentence in its entirety and substituting the following: "The annual meeting of the shareholders shall be held on the first Monday in July of each year or at such time as the board of directors may designate for the purpose of electing directors and for the transaction of such other business as may come before the meeting." - ------------------------------------------- SECTION 3. PLACE OF MEETING. The board of directors may designate any place, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be at SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, date, and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the date of the meeting, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets not less than 20 nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the president, or the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his or her address as it appears on the records of the corporation, with postage thereon prepaid. When a meeting is adjourned to 2 another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. SECTION 5. FIXING OF RECORD DATE. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payments of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors of the corporation may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 60 days and for a meeting of shareholders, not less than 10 days, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets, not less than 20 days before the date of such meeting, no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividends, the date on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. A determination of shareholders shall apply to any adjournment of the meeting. SECTION 6. VOTING LISTS. The officer or agent having charge of the transfer book for shares of the corporation shall make, within 20 days after the record date for a meeting of shareholders or 10 days before such meeting, whichever is earlier, a complete list of the shareholders entitled to vote at such meeting; arranged in alphabetical order, with the address of and the number of shares held by each which list, for a period of 10 days prior to such meeting, shall be kept on file at the registered office of the corporation and shall be subject to inspection by any shareholder, and to copying a t the shareholder's expense, at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original share ledger or transfer book, or a duplicate thereof kept in this State, shall be prima facie evidence as to who are the shareholders entitled to examine such last or share ledger or transfer book or to vote at a any meeting of shareholders. SECTION 7. QUORUM. The holders of a majority of the outstanding shares of the corporation entitled to vote on a matter, represented in person or by proxy, shall constitute a quorum for consideration of such matter at any meeting of shareholders, but in no event shall a quorum consist of less than one-third of the outstanding shares entitled so to vote; provided that if less than a majority of the outstanding shares are represented at said meeting, a majority of the shares so represented may adjourn the meeting at any time without further notice, if a quorum is present, the affirmative vote of the majority of the shares represented at the meeting shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the Business Corporation Act, the articles of incorporation or these by-laws. At any adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting. Withdrawal of shareholders from any meeting shall not cause failure of a duly constituted quorum at that meeting. - 2 - 3 SECTION 8. PROXIES. Each shareholder may appoint a proxy to vote or otherwise act for him or her by signing an appointment form and delivering it to the person so appointed, but no such proxy shall be valid after 11 months from the date of its execution, unless otherwise provided in the proxy. SECTION 9. VOTING OF SHARES. Each outstanding share, regardless of class, shall be entitled to one vote in each matter submitted to vote at a meeting of shareholders, and in all elections for directors, every shareholder shall have the right to vote the number of shares owned by such shareholder for as many persons as there are directors multiplied by the number of such shares or to distribute such cumulative votes in any proportion among any number of candidates. Each shareholder may vote either in person or by proxy as provided in SECTION 8 hereof. SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares held by the corporation in a Fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares entitled to vote at any given time. Shares registered in the name of another corporation, domestic or foreign, may be voted by any officer, agent, proxy or other legal representative authorized to vote such shares under the law of incorporation of such corporation. Shares registered in the name of a deceased person, a minor ward or a person under legal disability, may be voted by his or her administrator, executor or court appointed guardian, either in person or by proxy without a transfer of such shares into the name of such administrator, executor or court appointed guardian. Shares registered in the name of a trustee may be voted by him or her, either in person or by proxy. Shares registered in the name of a receiver may be voted by such receiver, and shares held or under the control of a receiver may be voted by such receiver without the transfer thereof into his or her name if authority to do so is contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Any number of shareholders may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote or otherwise represent their shares, for a period not to exceed 10 years, by entering into a written voting trust agreement specifying the terms and conditions of the voting trust and by transferring, their shares to such trustee or trustees for the purpose of the agreement. Any such trust agreement shall not become effective until a counterpart of the agreement is deposited with the corporation at its registered office. The counterpart of the voting trust agreement so deposited with the corporation shall be subject to - 3 - 4 the same right of examination by a shareholder of the corporation, in person or by agent or attorney, as are the books and records of the corporation, and shall be subject to examination by any holder of a beneficial interest in the voting trust, either in person or by agent or attorney, at any reasonable time for any proper purpose. Shares of its own stock belonging to this corporation shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time, but shares of its own stock held by it in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares at any given time. SECTION 11. CUMULATIVE VOTING. In all elections for directors, every shareholder shall have the right to vote in person or by proxy, the number of shares owned by him/her, for as many persons as there are directors to be elected, or to cumulate such votes, and give one candidate as many votes as the number of directors multiplied by the number of his/her shares shall equal, or to distribute them on the same principle among as many candidates as he/she shall think fit. The articles of incorporation may be amended to limit or eliminate cumulative voting rights in all or specified circumstances, or to limit or deny voting rights or to provide special voting rights as to any class or classes or series of shares of the corporation. SECTION 12. INSPECTORS. At any meeting of shareholders, the presiding officer may, or upon the request of any shareholder, shall appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting, based upon their determination of the validity and effect of proxies; count all votes and report the results; and do such other acts as are proper to conduct the election and voting with impartiality and fairness to all the shareholders. Each report of an inspector shall be in writing and signed by him or her or by a majority of them if there be more than one inspector acting at such meeting. If there is move than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. SECTION 13. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting and without a vote, if a consent in writing, setting forth the action so taken shall be signed (a) If 5 days prior notice of the proposed action is given in writing to all of the shareholders entitled to vote with respect to the subject matter hereof, by the holders of outstanding shares having not less than the minimum - 4 - 5 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 voting or (b) by all of the shareholders entitled to vote with respect to the subject matter thereof. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given in writing to those shareholders who have not consented in writing. In the event that the action which is consented to is such as would have required the filing of a certificate under any section of the Business Corporation Act if such action had been voted on by the shareholders at a meeting thereof, the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of shareholders, that written consent has been given in accordance with the provisions of SECTION 7.10 of the Business Corporation Act and that written notice has been given as provided in such SECTION 7.10. SECTION 14. VOTING BY BALLOT. Voting on any question or in any election may be by voice unless the presiding officer shall order or any shareholder shall demand that voting be by ballot. ARTICLE III DIRECTORS SECTION 1. GENERAL POWERS. The business of the corporation shall be managed by or under the direction of its board of directors. A majority of the board of directors may establish reasonable compensation for their services of other officers, irrespective of any personal interest. SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of the corporation shall be one. Each director shall hold office until the next annual meeting of share holders; or until his successor shall have been elected and qualified. Directors need not be residents of Illinois or shareholders of the corporation. The number of directors may be increased or decreased from time to time by the amendment of this section. No decrease shall have the effect of shortening the term of any incumbent, director. SECTION 3. REGULAR MEETINGS. A regular meeting of the board of directors shall be held without other notice than this by-law, immediately after the annual meeting of shareholders. The board of directors may provide, by resolution, the time and place for holding of additional regular meetings without other notes than such resolution. SECTION 4. SPECIAL MEETINGS. Special meetings of the board or directors may be called by or at the request of the president or any two directors. The person or persons authorized to call special meetings of the board of directors may fix any place as the place for holding any special meeting of the board of directors called by them. - 5 - 6 SECTION 5. NOTICE. Notice of any special meeting shall be given at least ___ days previous thereto by written notice to each director at his business address. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegram company. The attendance of a director at, any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. SECTION 6. QUORUM. A majority of the number of directors fixed by these by-laws shall constitute a quorum for transaction of business at any meeting of the board of directors; provided that if less than a majority of such number of directors are at said meeting, a majority of the directors present may adjourn the meeting at any time without further notice. SECTION 7. MANNER OF ACTING. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by statute, these by-laws, or the articles of incorporation. SECTION 8. VACANCIES. Any vacancy on the board of directors may be filled by election at the next annual or special meeting of shareholders. A majority of the board of directors may fill any vacancy prior to such annual or special meeting of shareholders. SECTION 9. RESIGNATION AND REMOVAL OF DIRECTORS. A director may resign at any time upon written notice to the board of directors. A director may be removed with or without cause, by a majority of shareholders if the notice of the meeting names the director or directors to be removed at said meetings. SECTION 10. INFORMAL ACTION BY DIRECTORS. The authority of the board of directors may be exercised without a meeting if a consent in writing, setting forth the action taken, is signed by all of the directors entitled to vote. SECTION 11. COMPENSATION. The board of directors, by the affirmative vote of a majority of directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise notwithstanding any director conflict of interest. By resolution of the board of directors, the directors may be paid their expenses, if any, of attendance at each meeting of the board. No such payment previously mentioned in this section shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. - 6 - 7 SECTION 12. PRESUMPTION OF ASSENT. A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken unless his or her dissent shall be entered in the minutes of the meeting or unless he or she shall file his or her written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered or certified mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. SECTION 13. COMMITTEES. A majority of the board of directors may create one or more committees of two or more members to exercise appropriate authority of the board of directors. A majority of such committee shall constitute a quorum for transaction of business. A committee may transact business without a meeting by unanimous written consent. ARTICLE IV OFFICERS SECTION 1. NUMBER. The officers of the corporation shall be a president, one or more vice-presidents, a treasurer, a secretary, and such other officers as may be elected or appointed by the board of directors. Any two or more offices may be held by the same person. SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation shall be elected annually by the board of directors at the first meeting of the board of directors held after each annual meeting of shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the board of directors. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Election of an officer shall not of itself create contract rights. SECTION 3. REMOVAL. Any officer elected or appointed by the board of directors may be removed by the board of directors whenever in its judgment the best interest of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 4. PRESIDENT. The president shall be the principal executive officer of the corporation. Subject to the direction and control of the board of directors, he/she shall be in charge of the business of the corporation; he shall see that the resolutions and directions of the board of directors are carried into effect except in those instances in which that responsibility is specifically assigned to some other person by the board of directors; and, in general, he/she shall discharge all duties incident to the office of president and such other - 7 - 8 duties as may be prescribed by the board of directors from time to time. He shall preside at all meetings of the shareholders and of the board of directors. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the board of directors or these by-laws, he may execute for the corporation certificates for its shares, and any contracts, deeds, mortgages, bonds or other instruments which the board of directors has authorized to be executed, and he may accomplish such execution either under or without the seal of the corporation and either individually or with the secretary, any assistant secretary, or any other officer thereunto authorized by the board of directors, according to the requirements of the form of the instrument. He may vote all securities which the corporation is entitled to vote except as and to the extent such authority shall be vested in a different officer or agent of the corporation by the board of directors. SECTION 5. THE VICE-PRESIDENTS. The vice-president (or in the event there be more than one vice-president, each of the vice presidents) shall assist the president in the discharge of his/her duties as the president may direct and shall perform such other duties as from time to time may be assigned to him/her by the president or by the board of directors. In the absence of the president or in the event of his/her inability or refusal to act, the vice-president (or in the event there be more than one vice-president, the vice-presidents in the order designated by the board of directors, or by the president if the board of directors has not made such a designation, or in the absence of any designation, then in the order of seniority of tenure as vice president) shall perform the duties of the president and when so acting, shall have the powers of and be subject to all the restrictions upon the president. Except in those instances in which the authority to execute is expressly delegated to another of officer or agent of the corporation or a different mode of execution is expressly prescribed by the board of directors or these by-laws, the vice president (or each of them if there are more than one) may execute for the corporation certificates for its shares and any contracts, deeds, mortgages, bonds or other instruments which the board of directors has authorized to be executed, and he/she may accomplish such execution either under or without the seal of the corporation and either individually or with the secretary, any assistant secretary, or any other officer thereunto authorized by the board of directors, according to the requirements of the form of the instrument. SECTION 6. THE TREASURER. The treasurer shall be the principal accounting and financial officer of the corporation. He shall: (a) have charge of and be responsible for the maintenance of adequate books of account for the corporation; (b) have charge and custody of all funds and securities of the corporation, and be responsible therefor and for the receipt and disbursement thereof; and (c) perform all the duties incident to the office of treasurer, and such other duties as from time to time may be assigned to him by the president or by the board of directors. If required by the board of directors, the treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the board of directors may determine. - 8 - 9 SECTION 7. THE SECRETARY. The secretary shall: (a) record the minutes of the shareholders' and of the board of directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these by-laws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation; (d) keep a register of the post-office address of each shareholder which shall be furnished to the secretary by such shareholder; (e) sign with the president or a vice-president, or any other officer thereunto authorized by the board of directors, certificates for shares of the corporation, the issue of which shall have been authorized by the board of directors, and any contracts, deeds, mortgages, bonds, or other instruments which the board of directors has authorized to be executed, according to the requirements of the form of the instrument, except when a different mode of execution is expressly prescribed by the board of directors or theses by laws; (f) have general charge of the stock transfer books of the corporation; (g) have authority to certify the by-laws, resolutions of the shareholders and board of directors and committees thereof, and other documents of the corporation as true and correct copies thereof, and (h) perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him/her by the president or by the board of directors. SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The assistant treasurers and assistant secretaries shall perform such duties as shall be assigned to them by the treasurer or the secretary, respectively, or by the president or the board of directors. The assistant secretaries may sign with the president, or a vice-president, or any other officer thereunto authorized by the board of directors, certificates for shares of the corporation, the issue of which shall have been authorized by "the board of directors, and any contracts, deeds, mortgages, bonds, or other instruments. which the board of directors has authorized to be executed, according to the requirements of the form of the instrument, except when a different mode of execution is expressly prescribed by the board of directors or these by-laws. The assistant treasurers shall respectively, if required by the board of directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the board of directors shall determine. SECTION 9. SALARIES. The salaries of the officers shall be fixed from time to time by the board of directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation. ARTICLE V CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. CONTRACTS. The board of directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. - 9 - 10 SECTION 2. LOANS. No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the board of directors. SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness if issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the board of directors. SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the board of directors may select. ARTICLE VI SHARES AND THEIR TRANSFER SECTION 1. SHARES REPRESENTED BY CERTIFICATES AND UNCERTIFICATED SHARES. Shares either shall be represented by certificates or shall be uncertificated shares. Certificates representing shares of the corporation shall be signed by the appropriate officers and may be sealed with the seal or a facsimile of the seal of the corporation. If a certificate is countersigned by a transfer agent or registrar, other than the corporation or its employee, any other signatures may be facsimile. Each certificate representing shares shall be consecutively numbered or otherwise identified, and shall also state the name of the person to whom issued, the number and class of shares (with designation of series, if any), the date of issue, and that the corporation is organized under Illinois law. If the corporation is authorized to issue shares of more than one class or of series within a class, "he certificate shall also contain such information or statement as may be required by law. Unless prohibited by the articles of incorporation, the board of directors may provide by resolution that some or all of any class or series of shares shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until the certificate has been surrendered to the corporation. Within a reasonable time after the issuance or transfer of uncertificated shares, the corporation shall send the registered owner thereof a written notice of all information that would appear on a certificate. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares shall be identical to those of the holders of certificates representing shares of the same class and series. The name and address of each shareholder, the number and class of shares held and the date on which the shares were issued shall be entered on the books of the corporation. The person - 10 - 11 in whose name shares stand on the books of the corporation shall be deemed the owner thereof for all purposes as regards the corporation. SECTION 2. LOST CERTIFICATES. If a certificate representing shares has allegedly been lost or destroyed the board of directors may in its discretion, except as may be required by law, direct that a new certificate be issued upon such indemnification and other reasonable requirements as it may impose. SECTION 3. TRANSFERS OF SHARES. Transfer of shares of the corporation shall be recorded on the books of the Corporation. Transfer of shares represented by a certificate, except in the case of a lost or destroyed certificates, shall be made on surrender for cancellation of the certificate for such shares. A certificate presented for transfer must be duly endorsed and accompanied by proper guaranty of signature and other appropriate assurances that the endorsement is effective. Transfer of an uncertificated share shall be made on receipt by the corporation of an instruction from the registered owner or other appropriate person. The instruction shall be in writing or a communication in such form as may be agreed upon in writing by the corporation. ARTICLE VII FISCAL YEAR The fiscal year of the corporation shall be fixed by resolution of the board of directors. ARTICLE VIII DISTRIBUTIONS The board of directors may authorize, and the corporation may make, distributions to its shareholders, subject to any restrictions in its articles of incorporation or provided by law. ARTICLE IX SEAL The corporate seal shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Illinois." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced, provided that the affixing of the corporate seal to an instrument shall not give the instrument additional force or effect, or change the construction thereof, and the use of the corporate seal is not mandatory. ARTICLE X - 11 - 12 WAIVER OF NOTICE Whenever any notice is required to be given under the provisions of these by-laws or under the provisions of the articles of incorporation or under the provisions of The Business Corporation Act of the State of Illinois, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time started therein, shall be deemed equivalent to the giving of such notice. Attendance at any meeting shall constitute waiver of notice thereof unless the person at the meeting objects to the holding of the meeting because proper notice was not given. ARTICLE XI INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS SECTION 1. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the 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 such person in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment or settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interest of the corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. SECTION 2. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such 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 such person in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she 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 - 12 - 13 shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that 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 shall deem proper. SECTION 3. To the extent that a director, officer, employee or agent of a corporation has been successful, on the merits or otherwise, in the defense or any action, suit or proceeding referred to in sections 1 and 2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses actually and reasonably incurred by such person in connection therewith. SECTION 4. Any indemnification under sections 1 and 2 shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is roper in the circumstances because he or she has met the applicable standard of conduct set forth in sections 1 and 2. Such determination shall be made (a) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the shareholders. SECTION 5. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding, as authorized by the board of directors in the specific case, upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount, unless it shall ultimately be determined that he or she is entitled to be indemnified by the corporation as authorized in this article. SECTION 6. The indemnification provided by this article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement vote of shareholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 7. The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation woudl have the power to indemnify such person against such liability under the provisions of these sections. - 13 - 14 SECTION 8. If the corporation has paid indemnity or had advanced expenses to a director, officer, employee or agent, the corporation shall report the indemnification or advance in writing to the shareholders with or before the notice of the next shareholders' meeting. SECTION 9. References to "the corporation" shall include, in addition to the surviving corporation, any merging corporation, including any corporation having merged with a merging corporation, absorbed in a merger which otherwise would have lawfully been entitled to indemnify its directors, officers and employees or agents. ARTICLE XII AMENDMENTS Unless the power to make, alter, amend or repeal the by-laws is reserved to the shareholders by the articles of incorporation, the by-laws of the corporation may be made, altered, amended or repealed by the shareholders or the board of directors, by no by-law adopted by the shareholders may be altered, amended or repealed by the board of directors if the by-laws so provide. The by-laws may contain any provisions for the regulation and management of the affairs of the corporation not inconsistent with the law or the articles of incorporation. - 14 - EX-3.7 8 ARTICLES OF INCORPORATION OF US AUTO GLASS CENTERS 1 Exhibit 3.7 JOINT PLAN OF MERGER AND AGREEMENT OF MERGER BETWEEN U.S. AUTO GLASS CENTERS, INC. AND ACME GLASS, INCORPORATED WITH U.S. AUTO GLASS CENTERS, INC. SURVIVING CORPORATION WHEREAS, U.S. AUTO GLASS CENTERS, INC., hereinafter called U.S. Auto or the Surviving Corporation, is an Illinois corporation with principal place of business at Chicago, Illinois; and WHEREAS, the aggregate number of shares that U.S. AUTO is authorized to issue is 1,000 common shares at a par value of $100.00 each, of which 250 shares are outstanding; and WHEREAS, ACME GLASS, INCORPORATED, hereinafter called ACME is a Michigan corporation with its principal place of business at Jackson, Michigan; and WHEREAS, the aggregate number of shares that ACME is authorized to issue is 500 common shares at a par value of $10.00 each, 400 of which shares are outstanding and are owned legally and beneficially by U.S. AUTO; and 2 WHEREAS, it is desirable for the benefit of both parties and their shareholders that the properties, businesses, assets and liabilities of both parties be combined into one surviving corporation which shall be U.S. AUTO. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto in accordance with the applicable provisions of the laws of the States of Illinois and Michigan do hereby agree as follows: 1. MERGER. ACME shall be merged with and into U.S. AUTO and U.S. Auto does hereby merge ACME with and into itself. On and after the effective date of this contemplated merger: (a) U.S. AUTO shall be the Surviving Corporation, and shall continue to exist as a domestic corporation under the laws of Illinois, with all of the rights and obligations of such surviving domestic corporation as are provided by the Illinois Business Corporation Act, and especially Section 157.69 thereof. (b) ACME, as constituent corporation, pursuant to the Michigan Business Corporation Act, and the Illinois Business Corporation Act, shall cease to exist (except as otherwise provided for specific purposes in such Act), and its property shall become the property of U.S. AUTO as the Surviving Corporation. 3 2. ARTICLES OF INCORPORATION; BY-LAWS. The Articles of Incorporation as amended by By-Laws of U.S. AUTO shall continue as the Articles of Incorporation and By-Laws of the Surviving Corporation. 3. DIRECTORS. The Directors of U.S. AUTO shall be the Directors of the Surviving Corporation until their successors are duly elected and qualified under the By-Laws of the Surviving Corporation. 4. SHARES OF SURVIVOR. Each common share of U.S. AUTO outstanding on the effective date of the merger shall thereupon, without further action, become one common share of the Surviving Corporation, without the issuance or exchange of new shares or share certificates. 5. CANCELLATION OF ACME SHARES. All authorized and outstanding common shares of ACME, such shares being owned in their entirety by U.S. AUTO, and all rights in respect thereof, shall be cancelled forthwith on the effective date of the merger, and the certificates representing such shares shall be surrendered and cancelled. 6. APPROVAL. This Agreement and Plan of Merger shall be submitted to the shareholders of U.S. AUTO and ACME for approval as required by the laws of Illinois and Michigan respectively. If and when such required approval is obtained, the proper officers of each corporation shall, and are hereby authorized and directed to, perform all such further acts 4 and execute and deliver to the proper authorities for filing all documents, as the same may be necessary or property to render effective the merger contemplated by this Plan and Agreement. 7. ABANDONMENT OF PLAN. Notwithstanding any of the provisions of this Agreement, the sole Director of U.S. AUTO at any time before or after approval by shareholders of either or both corporations, and prior to the effective date of the merger herein contemplated, and for any reason he may deem sufficient and proper, shall have the power and authority to abandon and refrain from making effective the contemplated merger as set forth herein; in which case this Plan and Agreement shall thereby by cancelled and become null and void. 8. EFFECTIVE DATE. This merger shall be effective upon the date of filing with the Secretary of State of Illinois. IN WITNESS WHEREOF, U.S. AUTO and ACME has caused this Agreement to be executed in their corporate names by their respective officers and also by the sole director of each corporation on the 7th day of December, 1979. U.S. AUTO GLASS CENTERS, INC. By: /s/ Joseph Kellman ------------------------------- President Attest: /s/ Joseph Kellman ----------------------------------- Its Sole Directors /s/ [Illegible] - --------------------------------- Assistant Secretary 5 ACME GLASS, INCORPORATED By: /s/ Joseph Kellman ------------------------------- President Attest: /s/ Joseph Kellman ----------------------------------- Its Sole Directors /s/ [Illegible] - --------------------------------- Assistant Secretary 6 Certificate Number: 3834 STATE OF ILLINOIS OFFICE OF THE SECRETARY OF STATE TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING: WHEREAS, Articles of Merger duly signed, and verified, of GLOBE GLASS OF ARKANSAS, INC., an Arkansas Corporation, MOBILE GLASS COMPANY, a California Corporation, TRI-STATE GLASS & TRIM CO., A, U.S. AUTO GLASS CENTER, INC., an Indiana Corporation, CENTRAL GLASS & TRIM COMPANY, a Missouri Corporation, U.S. AUTO GLASS CENTERS OF OHIO, INC., AN OHIO CORPORATION, GLASCO OF BRISTOL, INC., a Tennessee Corporation, ACME U.S. AUTO GLASS CENTERS, INC., a Texas Corporation, and GLOBE GLASS CO. OF WISCONSIN, INC., a Wisconsin Corporation, merged into U.S. AUTO GLASS CENTERS, INC., an Illinois Corporation, have been filed in the Office of the Secretary of State on the 16th day of December, A.D. 1974, as provided by "THE BUSINESS CORPORATION ACT" in force July 13, A.D. 1933, as amended; Now, therefore, I, MICHAEL J. HOWLETT, Secretary of State of the State of Illinois, by virtue of the powers vested in me by law, do hereby issue this certificate of merger and attach thereto a copy of the Articles of Merger of the aforesaid CORPORATION. IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois. Done at the City of Springfield this 16th day of December, A.D. 1974, and of the Independence of the United States the one hundred and 99th . Michael J. Howlett ----------------------------------- Secretary of State (SEAL) 7 ARTICLES OF MERGER 4995-264-3 OF DOMESTIC AND FOREIGN Date Paid 12-16-94 CORPORATION Filing Fee $550.00 Clerk - ------------------------------ ----------------------------------- TO: MICHAEL HOWLETT, Secretary of State The undersigned corporations, pursuant to Section 69a of "The Business Corporation Act" of the State of Illinois, hereby execute the following articles of merger: ARTICLE ONE The names of the corporations proposing to merge and the names of the states under the laws of which such corporations are organized, are as follows: Name of Corporation State of Incorporation ------------------- ---------------------- U.S. Auto Glass Centers, Inc. Illinois Globe Glass of Arkansas, Inc. Arkansas Mobile Glass Company California U.S. Auto Glass Centers, Inc. Colorado Tri-State Glass & Trim Co., a U.S. Auto Glass Center, Inc. Indiana Central Glass & Trim Service, Inc. Michigan Allen Transfer Company Missouri U.S. Auto Glass Centers of OHIO, Inc. OHIO Glasco of Bristol, Inc. Tennessee Acme U.S. Auto Glass Centers, Inc. Texas Globe Glass Co. of Wisconsin, Inc. Wisconsin ARTICLE TWO The laws of Illinois, Arkansas, California, Colorado, Indiana, Michigan, Missouri, OHIO, Tennessee, Texas and Wisconsin, the states under which such corporations are organized, permit such merger. 8 ARTICLE THREE The name of the surviving CORPORATION shall be U.S. AUTO GLASS CENTERS, INC., and it shall be governed by the laws of the State of Illinois. ARTICLE FOUR The plan of merger is as follows: A. The following corporations shall be merged into U.S. AUTO GLASS CENTERS, INC., an Illinois CORPORATION: Globe Glass of Arkansas, Inc., an Arkansas CORPORATION. Mobile Glass Company, a California CORPORATION. U.S. Auto Glass Centers, Inc., a Colorado CORPORATION. Tri-State Glass & Trim Co., a U.S. Auto Glass Center, Inc, an Indiana CORPORATION. Central Glass & Trim Service, Inc., a Michigan CORPORATION. Allen Transfer Company, a Missouri CORPORATION. U.S. Auto Glass Centers of OHIO, Inc., an OHIO CORPORATION. Glasco of Bristol, Inc., a Tennessee CORPORATION. Acme U.S. Auto Glass Centers, Inc., a Texas CORPORATION. Globe Glass Co. of Wisconsin, Inc., a Wisconsin CORPORATION. B. U.S. Auto Glass Centers, Inc. (Illinois); Globe Glass of Arkansas, Inc. (Arkansas); Mobile Glass Company (California); U.S. Auto Glass Centers, Inc. (Colorado); Tri- State Glass & Trim Co., a U.S. Auto Glass Center, Inc. (Indiana); Central Glass & Trim Service, Inc. (Michigan); Glasco of Bristol, Inc. (Tennessee); Acme U.S. Auto Glass Centers, Inc. (Texas); Globe Glass Co. of Wisconsin, Inc. (Wisconsin) shall become a single CORPORATION which shall be U.S. AUTO GLASS CENTERS, INC., an Illinois CORPORATION, the surviving CORPORATION. The separate existence of the Globe Glass of Arkansas, Inc. (Arkansas); Mobile Glass Company (California); U.S. Auto Glass Centers, Inc. (Colorado); Tri-State Glass & Trim Co., a U.S. Auto Glass Center, Inc. (Indiana); Central Glass & Trim Service, Inc. (Michigan); Allen Transfer Company (Missouri); U.S. Auto Glass Centers of OHIO, Inc. (OHIO); Glasco of Bristol, Inc. (Tennessee); Acme U.S. Auto Glass Centers, Inc. (Texas); and Globe Glass Co. of Wisconsin, Inc. (Wisconsin) shall cease, and the existence of U.S. AUTO GLASS CENTERS, INC., an Illinois CORPORATION, shall continue. C. U.S. AUTO GLASS CENTERS, INC., an Illinois CORPORATION, shall possess all the rights, privileges, immunities and franchises, as well as of a public as of a private nature, of U.S. AUTO GLASS CENTERS, INC. (Illinois); Globe Glass of Arkansas, Inc. (Arkansas); Mobile Glass Company (California); U.S. Auto Glass Centers, Inc. (Colorado); Tri- State Glass & Trim Co., a U.S. Auto Glass Center, Inc. (Indiana); Central Glass & Trim Service, Inc. (Michigan); Glasco of Bristol, Inc. (Tennessee); Acme U.S. Auto Glass Centers, Inc. (Texas); and Globe Glass Co. of Wisconsin, Inc. (Wisconsin). All property, real, personal, or 9 mixed, and all debts due on whatever account and all other __________ in action and all and every other interest of or belonging or due to Globe Glass of Arkansas, Inc. (Arkansas); Mobile Glass Company (California); U.S. Auto Glass Centers, Inc. (Arkansas); Mobile Glass Company (California); U.S. Auto Glass Centers, Inc. (Colorado); Tri-State Glass & Trim Coo., a U.S. Auto Glass Center, Inc. (Indiana); Central Glass & Trim Service, Inc. (Michigan); Allen Transfer Company (Missouri); U.S. Auto Glass Centers of OHIO, Inc. (OHIO); Globe Glass Co. of Wisconsin, Inc. (Wisconsin) shall be taken and deemed to be transferred and vested in U.S. AUTO GLASS CENTERS, INC., an Illinois CORPORATION, without further act or deed. D. U.S. AUTO GLASS CENTERS, INC., an Illinois CORPORATION, shall become responsible and liable for all the liabilities and obligations of Globe Glass of Arkansas, Inc. (Arkansas); Mobile Glass Company (California); U.S. Auto Glass Centers, Inc. (Colorado); Tri-State Glass & Trim Co., a U.S. Auto Glass Center, Inc. (Indiana); Central Glass & Trim Service, Inc. (Michigan); Allen Transfer Company (Missouri); U.S. Auto Glass Centers of OHIO, Inc. (OHIO); Glasco of Bristol, Inc. (Tennessee); Acme U.S. Auto Glass Centers, Inc. (Texas); and Globe Glass Co. of Wisconsin, Inc. (Wisconsin). E. This merger shall be consummated as a non-taxable reorganization under the terms and provisions of Sections 354 through 375, both inclusive of the Internal Revenue Code, and under Regulation 1.3682 of the Internal Revenue Service Regulations and any other applicable sections of the Code or Regulations of the Internal Revenue Service. F. Each of the following corporations: Globe Glass of Arkansas, Inc. (Arkansas) Mobile Glass Company (California) U.S. Auto Glass Centers, Inc. (Colorado) Tri-State Glass & Trim Co., a U.S. Auto Glass Center, Inc. (Indiana) Central Glass & Trim Service, Inc. (Michigan) Allen Transfer Company (Missouri) U.S. Auto Glass Centers of OHIO, Inc. (OHIO) Glasco of Bristol, Inc. (Tennessee) Acme U.S. Auto Glass Centers, Inc. (Texas) Globe Glass Co. of Wisconsin, Inc. (Wisconsin) are all wholly owned subsidiaries of U.S. AUTO GLASS CENTERS, INC., an Illinois CORPORATION, and upon the effective date of the merger all of the issued and outstanding shares of stock of: Globe Glass of Arkansas, Inc. (Arkansas) Mobile Glass Company (California) U.S. Auto Glass Centers, Inc. (Colorado) Tri-State Glass & Trim Co., a U.S. Auto Glass Center, Inc. (Indiana) Central Glass & Trim Service, Inc. (Michigan) Allen Transfer Company (Missouri) 10 U.S. Auto Glass Centers of OHIO, Inc. (OHIO) Glasco of Bristol, Inc. (Tennessee) Acme U.S. Auto Glass Centers, Inc. (Texas) Globe Glass Co. of Wisconsin, Inc. (Wisconsin) shall be canceled. ARTICLE FIVE Effective date of merger: For all purposes of the laws of the State of Illinois, the merger provided for shall become effective and the separate existences of: Globe Glass of Arkansas, Inc. (Arkansas) Mobile Glass Company (California) U.S. Auto Glass Centers, Inc. (Colorado) Tri-State Glass & Trim Co., a U.S. Auto Glass Center, Inc. (Indiana) Central Glass & Trim Service, Inc. (Michigan) Allen Transfer Company (Missouri) U.S. Auto Glass Centers of OHIO, Inc. (OHIO) Glasco of Bristol, Inc. (Tennessee) Acme U.S. Auto Glass Centers, Inc. (Texas) Globe Glass Co. of Wisconsin, Inc. (Wisconsin) except insofar as they may be continued by statute, shall cease as soon as these articles of merger shall be adopted, approved, and acknowledged in accordance with the laws of the State of Illinois and certificates of its adoption and approval shall have been executed in accordance with such laws and the articles of merger shall have been filed in and accepted by the office of the Secretary of State of the State of Illinois. ARTICLE SIX The officers and directors of U.S. AUTO GLASS CENTERS, INC., an Illinois CORPORATION, shall continue after the merger as officers and directors of the surviving CORPORATION. On the effective date of the merger, the by-laws and purposes of U.S. AUTO GLASS CENTERS, INC. (Illinois) as presently enforced shall be the by-laws and purposes of the surviving CORPORATION until the same shall be altered, amended or repealed or until new by-laws and purposes shall be adopted. ARTICLE SEVEN As to each CORPORATION, the number of shares outstanding and the number of and designation of the shares of any class entitled to vote as a class are: 11
- -------------------------------------------------------------------------------------------------------- Total No. of Designation of No. of Total No. of Shares Class Entitled Shares of Shares Entitled to to Vote as a Such Class Name of Corporation Outstanding Vote Class (If any) (If any) - ------------------- ------------ ------------ -------------- ---------- - -------------------------------------------------------------------------------------------------------- U.S. Auto Glass Centers, Inc. (Illinois) 250 250 None None - -------------------------------------------------------------------------------------------------------- Globe Glass of Arkansas, Inc. (Arkansas) 100 100 None None - -------------------------------------------------------------------------------------------------------- U.S. Auto Glass Centers, Inc. (Colorado) 1,500 1,500 None None - -------------------------------------------------------------------------------------------------------- Tri-State Glass & Trim Co., a U.S. Auto Glass Center, Inc. (Indiana) 100 100 None None - -------------------------------------------------------------------------------------------------------- Central Glass & Trim Service, Inc. (Michigan) 100 100 None None - -------------------------------------------------------------------------------------------------------- Allen Transfer Company (Missouri) 1,000 1,000 None None - -------------------------------------------------------------------------------------------------------- U.S. Auto Glass Centers of OHIO, Inc. (OHIO) 100 100 None None - -------------------------------------------------------------------------------------------------------- Glasco of Bristol, Inc. (Tennessee) 1,287,38 1,287.38 None None - -------------------------------------------------------------------------------------------------------- Acme U.S. Auto Glass Centers, Inc. (Texas) 100 100 None None - -------------------------------------------------------------------------------------------------------- Globe Glass Co. of Wisconsin, Inc. (Wisconsin) 100 100 None None - --------------------------------------------------------------------------------------------------------
12 ARTICLE EIGHT As to each CORPORATION, the number of shares voted for and against the plan, respectively, and the number of shares of any class entitled to vote as a class voted for and against the plan, are:
- --------------------------------------------------------------------------------------------------------------- Total Total Shares Shares Shares Shares Voted Voted Voted Voted Name of Corporation For Against Class For Against - ------------------- -------- ------- ----- ------ ------- - --------------------------------------------------------------------------------------------------------------- U.S. Auto Glass Centers, Inc. (Illinois) 250 None N/A N/A N/A - --------------------------------------------------------------------------------------------------------------- Globe Glass of Arkansas, Inc. (Arkansas) 100 None N/A N/A N/A - --------------------------------------------------------------------------------------------------------------- U.S. Auto Glass Centers, Inc. (Colorado) 1,500 None N/A N/A N/A - --------------------------------------------------------------------------------------------------------------- Tri-State Glass & Trim Co., a U.S. Auto Glass Center, Inc. (Indiana) 100 None N/A N/A N/A - --------------------------------------------------------------------------------------------------------------- Central Glass & Trim Service, Inc. (Michigan) 100 None N/A N/A N/A - --------------------------------------------------------------------------------------------------------------- Allen Transfer Company (Missouri) 1,000 None N/A N/A N/A - --------------------------------------------------------------------------------------------------------------- U.S. Auto Glass Centers of OHIO, Inc. (OHIO) 100 None N/A N/A N/A - --------------------------------------------------------------------------------------------------------------- Glasco of Bristol, Inc. (Tennessee) 1,287,38 None N/A N/A N/A - --------------------------------------------------------------------------------------------------------------- Acme U.S. Auto Glass Centers, Inc. (Texas) 100 None N/A N/A N/A - --------------------------------------------------------------------------------------------------------------- Globe Glass Co. of Wisconsin, Inc. (Wisconsin) 100 None N/A N/A N/A - ---------------------------------------------------------------------------------------------------------------
13 ARTICLE NINE All provisions of the laws of the State of Illinois, Arkansas, California, Colorado, Indiana, Michigan, Missouri, OHIO, Tennessee, Texas and Wisconsin, applicable to the proposed merger have been complied with. IN WITNESS WHEREOF, each of the undersigned corporations has caused these articles of merger to be executed in its name by its president and its corporate seal to be hereunto affixed, attested by its secretary, this 4th day of December, 1974. U. S. AUTO GLASS CENTERS, INC. (Illinois) Attest: [ILLEGIBLE] By: /s/ Joseph Kellman - --------------------------------------- ------------------------------- Secretary President GLOBE GLASS OF ARKANSAS, INC. Attest: [ILLEGIBLE] By: /s/ Joseph Kellman - --------------------------------------- ------------------------------- Secretary President MOBILE GLASS COMPANY Attest: [Illegible] By: /s/ Joseph Kellman - --------------------------------------- ------------------------------- Secretary President U.S. AUTO GLASS CENTERS, INC. (Colorado) Attest: [Illegible] By: /s/ Joseph Kellman - --------------------------------------- ------------------------------- Secretary President 14 TRI-STATE GLASS & TRIM CO., a U.S. Auto Glass Center, Inc. Attest: [Illegible] By: /s/ Joseph Kellman - --------------------------------------- --------------------------------- Secretary President CENTRAL GLASS & TRIM SERVICE, INC. Attest: [Illegible] By: /s/ Joseph Kellman - --------------------------------------- --------------------------------- Secretary President ALLEN TRANSFER COMPANY Attest: [Illegible] By: /s/ Joseph Kellman - --------------------------------------- --------------------------------- Secretary President U.S. AUTO GLASS CENTERS OF OHIO, INC. Attest: [Illegible] By: /s/ Joseph Kellman - --------------------------------------- --------------------------------- Secretary President GLASCO OF BRISTOL, INC. Attest: [Illegible] By: /s/ Joseph Kellman - --------------------------------------- --------------------------------- Secretary President ACME U.S. AUTO GLASS CENTERS, INC. Attest: [Illegible] By: /s/ Joseph Kellman - --------------------------------------- --------------------------------- Secretary President 15 GLOBE GLASS CO. OF WISCONSIN, INC. Attest: [Illegible] By: /s/ Joseph Kellman - --------------------------------------- --------------------------------- Secretary President STATE OF ILLINOIS) COUNT OF COOK ) SS. I, Patricia S. Stewart, a Notary Public do hereby certify that on the 4th day of December, 1974, personally appeared before me JOSEPH KELLMAN, who declares that he is the President of U.S. AUTO GLASS CENTERS, INC. (Illinois), one of the corporations executing the foregoing documents, and being first duly sworn, acknowledged that he signed the foregoing articles of merger in the capacity herein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year before written. /s/ Patricia Stewart ------------------------------------- NOTARY PUBLIC STATE OF ILLINOIS) COUNT OF COOK ) SS. I, Patricia S. Stewart, a Notary Public do hereby certify that on the 4th day of December, 1974, personally appeared before me JOSEPH KELLMAN, who declares that he is the President of GLOBE GLASS OF ARKANSAS, INC., one of the corporations executing the foregoing documents, and being first duly sworn, acknowledged that he signed the foregoing articles of merger in the capacity herein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year before written. /s/ Patricia Stewart ------------------------------------- NOTARY PUBLIC 16 STATE OF ILLINOIS) COUNT OF COOK ) SS. I, Patricia S. Stewart, a Notary Public do hereby certify that on the 4th day of December, 1974, personally appeared before me JOSEPH KELLMAN, who declares that he is the President of MOBILE GLASS COMPANY, one of the corporations executing the foregoing documents, and being first duly sworn, acknowledged that he signed the foregoing articles of merger in the capacity herein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year before written. /s/ Patricia Stewart ------------------------------------- NOTARY PUBLIC STATE OF ILLINOIS) COUNT OF COOK ) SS. I, Patricia S. Stewart, a Notary Public do hereby certify that on the 4th day of December, 1974, personally appeared before me JOSEPH KELLMAN, who declares that he is the President of U.S. AUTO GLASS CENTERS, INC. (Colorado), one of the corporations executing the foregoing documents, and being first duly sworn, acknowledged that he signed the foregoing articles of merger in the capacity herein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year before written. /s/ Patricia Stewart ------------------------------------- NOTARY PUBLIC 17 STATE OF ILLINOIS) COUNT OF COOK ) SS. I, Patricia S. Stewart, a Notary Public do hereby certify that on the 4th day of December, 1974, personally appeared before me JOSEPH KELLMAN, who declares that he is the President of TRI-STATE GLASS & TRIM CO., A U.S. Auto Glass Center, Inc., one of the corporations executing the foregoing documents, and being first duly sworn, acknowledged that he signed the foregoing articles of merger in the capacity herein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year before written. /s/ Patricia Stewart ------------------------------------- NOTARY PUBLIC STATE OF ILLINOIS) COUNT OF COOK ) SS. I, Patricia S. Stewart, a Notary Public do hereby certify that on the 4th day of December, 1974, personally appeared before me JOSEPH KELLMAN, who declares that he is the President of CENTRAL GLASS & TRIM SERVICE, INC., one of the corporations executing the foregoing documents, and being first duly sworn, acknowledged that he signed the foregoing articles of merger in the capacity herein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year before written. /s/ Patricia Stewart ------------------------------------- NOTARY PUBLIC 18 STATE OF ILLINOIS) COUNT OF COOK ) SS. I, Patricia S. Stewart, a Notary Public do hereby certify that on the 4th day of December, 1974, personally appeared before me JOSEPH KELLMAN, who declares that he is the President of ALLEN TRANSFER COMPANY, one of the corporations executing the foregoing documents, and being first duly sworn, acknowledged that he signed the foregoing articles of merger in the capacity herein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year before written. /s/ Patricia Stewart ------------------------------------- NOTARY PUBLIC STATE OF ILLINOIS) COUNT OF COOK ) SS. I, Patricia S. Stewart, a Notary Public do hereby certify that on the 4th day of December, 1974, personally appeared before me JOSEPH KELLMAN, who declares that he is the President of U.S. AUTO GLASS CENTERS OF OHIO, INC., one of the corporations executing the foregoing documents, and being first duly sworn, acknowledged that he signed the foregoing articles of merger in the capacity herein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year before written. /s/ Patricia Stewart ------------------------------------- NOTARY PUBLIC 19 STATE OF ILLINOIS) COUNT OF COOK ) SS. I, Patricia S. Stewart, a Notary Public do hereby certify that on the 4th day of December, 1974, personally appeared before me JOSEPH KELLMAN, who declares that he is the President of GLASCO OF BRISTOL, INC., one of the corporations executing the foregoing documents, and being first duly sworn, acknowledged that he signed the foregoing articles of merger in the capacity herein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year before written. /s/ Patricia Stewart ------------------------------------- NOTARY PUBLIC STATE OF ILLINOIS) COUNT OF COOK ) SS. I, Patricia S. Stewart, a Notary Public do hereby certify that on the 4th day of December, 1974, personally appeared before me JOSEPH KELLMAN, who declares that he is the President of ACME U.S. AUTO GLASS CENTERS, INC., one of the corporations executing the foregoing documents, and being first duly sworn, acknowledged that he signed the foregoing articles of merger in the capacity herein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year before written. /s/ Patricia Stewart ------------------------------------- NOTARY PUBLIC 20 STATE OF ILLINOIS) COUNT OF COOK ) SS. I, Patricia S. Stewart, a Notary Public do hereby certify that on the 4th day of December, 1974, personally appeared before me JOSEPH KELLMAN, who declares that he is the President of GLOBE GLASS CO. OF WISCONSIN, INC., one of the corporations executing the foregoing documents, and being first duly sworn, acknowledged that he signed the foregoing articles of merger in the capacity herein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year before written. /s/ Patricia Stewart ------------------------------------- NOTARY PUBLIC 21 Certificate Number: 63179 STATE OF ILLINOIS OFFICE OF THE SECRETARY OF STATE TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING WHEREAS, Articles of Incorporation duly signed and verified of U.S. AUTO GLASS CENTERS, INC. have been filed in the Office of the Secretary of State on the 10th day of January A.D. 1972, as provided by 'THE BUSINESS CORPORATION ACT" of Illinois in force July 13, A.D. 1933. Now therefore, I, John W. Lewis, Secretary of State of the State of Illinois, by virtue of the powers vested in me by law, do hereby issue this certificate of incorporation and attach thereto a copy of the Articles of Incorporation of the aforesaid corporation. IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois, done at the City of Springfield this 10th day of January A.D. 1972 and of the Independence of the United States the one hundred and 96th /s/ John W. Lewis ---------------------------------- Secretary of State (SEAL) 22 FORM B C A-47 BEFORE ATTEMPTING TO EXECUTE THESE BLANKS BE SURE TO READ CAREFULLY THE INSTRUCTIONS ON THE BACK THEREOF. (THESE ARTICLES MUST BE FILED IN DUPLICATE) STATE OF ILLINOIS, ) (Do not write in this space) ) Date Paid COOK COUNTY ) ss. Initial License Fee $ ) Franchise Tax $ TO PAUL POWELL, ) Filing Fee $ Secretary of State: ) Clerk $ The undersigned, - -------------------------------------------------------------------------------- Address Name Number Street City State - -------------------------------------------------------------------------------- JACK A. COHON 208 South La Salle Street Chicago Illinois - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- being one or more natural persons of the age of twenty-one years or more or a corporation, and having subscribed to shares of the corporation to be organized pursuant hereto, for the purpose of forming a corporation under "The Business Corporation Act" of the State of Illinois, do hereby adopt the following Articles of Incorporation: ARTICLE ONE The name of the corporation hereby incorporated is: U.S. AUTO GLASS CENTERS, INC. ARTICLE TWO The address of its initial registered office in the State of Illinois is: 208 South La Salle Street, in the City of Chicago (60604) County of Cook and the name of its initial Registered Agent at said address is: JACK A. COHON ARTICLE THREE The duration of the corporation is: Perpetual 23 ARTICLE FOUR The purpose or purposes for which the corporation is organized are: To engage in the business of buying, selling and installing glass, glass products and products related thereto. To enter into, make and perform contracts of any kind and description with any person, firm, association, corporation, municipality, state, government or dependency thereof. ARTICLE FIVE PARAGRAPH 1: The aggregate number of shares which the corporation is authorized to issue is 1,000 divided into one classes. The designation of each class, the number of shares of each class, and the par value, if any, of the shares of each class, or a statement that the shares of any class are without par value, are as follows: Class Series Number of Par value per share or statement that (If any) Shares shares are without par value Common None 1,000 $100.00 per share PARAGRAPH 2: The preferences, qualifications, limitations, restrictions and the special or relative rights in respect of the shares of each class are: None 24 ARTICLE SIX The class and number of shares which the corporation proposes to issue without further report to the Secretary of State, and the consideration (expressed in dollars) to be received by the corporation therefor, are: Class of shares Number of shares Total consideration to be received therefor: Common 10 $1,000.00 $ --------- ARTICLE SEVEN The corporation will not commence business until at least one thousand dollars has been received as consideration for the issuance of shares. ARTICLE EIGHT The number of directors to be elected at the first meeting of the shareholders is: one (1) ARTICLE NINE PARAGRAPH 1: It is estimated that the value of all property to be owned by the corporation for the following year wherever located will be $__________ PARAGRAPH 2: It is estimated that the value of the property to be located within the State of Illinois during the following year will be $__________ PARAGRAPH 3: It is estimated that the gross amount of business which will be transacted by the corporation during the following year will be $__________ PARAGRAPH 4: It is estimated that the gross amount of business which will be transacted at or from places of business in the State of Illinois during the following year will be $__________ NOTE: If all the property of the corporation is to be located in this State and all of its business is to be transacted at or from places of business in this State, or if the incorporators elect to pay the initial franchise tax on the basis of its entire stated capital and paid-in surplus, then the information called for in Article Nine need not be stated. 25 /s/ Jack A. Cohon ) ------------------------------ JACK A. COHON ) ------------------------------ ______________________________) Incorporators ______________________________) ______________________________) ______________________________) NOTE: There may be one or more incorporators. Each incorporator shall be either a corporation, domestic or foreign, or a natural person of the age of twenty-one years or more. If a corporation acts as incorporator, the name of the corporation and state of incorporation shall be shown and the execution must be by its President or Vice-President and verified by him, and the corporate seal shall be affixed and attested by its Secretary or an Assistant Secretary. OATH AND ACKNOWLEDGMENT STATE OF ILLINOIS ) ) SS. Cook County ) I, Beatrice Wolpe, A Notary Public, do hereby certify that on the 7th day of Jan. 1972 JACK A. COHON personally appeared before me and being first duly sworn by me acknowledged the signing of the foregoing document in the respective capacities therein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year above written. Place (NOTARIAL SEAL) Here /s/ Beatrice Wolpe ----------------------------------- Notary Public 26 FORM B C A-47 ================================================================================ ARTICLES OF INCORPORATION U. S. AUTO GLASS CENTERS, INC. ================================================================================ The following fees are required to be paid at the time of issuing Certificate of Incorporation: Filing fee $75.00; Initial license fee of 50(cent) per $1,000.00 or 1/20th of 1% of the amount of stated capital and paid-in surplus of the corporation proposes to issue without further report (Article Six); Initial franchise tax of 1/10th of 1% of the issued, as above noted. However, the minimum initial franchise tax is $25.00 and varies monthly on $25,000, or less, as follows: January, $37.50; February, $35.42; March, $33.33; April, $31.25; May, $29.17; June, $27.08; July, 1.00; Aug., .9167; Sept., .8334; Oct., .75; Nov., .6667; Dec., .5834. In excess of $25,000, the franchise tax per $1,000.00 is as follows: Jan., $1.50; Feb., 1.4167; March, 1.3334; April, 1.25; May, 1.1667; June, 1.0834; July, 1.00; Aug., .9167; Sept., .8334; Oct., .75; Nov., .6667; Dec., .5834. All shares issued in excess of the amount mentioned in article Six of this application must be reported within 60 days from date of issuance thereof, and franchise tax and license fee paid thereon; otherwise, the corporation is subject to a penalty of 1% for each month on the amount until reported and subject to a fine of not to exceed $500.00. The same fees are required for a subsequent issue of shares except the filing fee is $1.00 instead of $75.00. ================================================================================ 27 Certificate Number: 22063 STATE OF ILLINOIS OFFICE OF THE SECRETARY OF STATE TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING WHEREAS, Articles of amendment to the Articles of Incorporation duly signed and verified of U.S. AUTO GLASS CENTERS, INC. have been filed in the Office of the Secretary of State on the 25th day of November A.D. 1974, as provided by 'THE BUSINESS CORPORATION ACT" of Illinois in force July 13, A.D. 1933. Now therefore, I, Michael J. Howlett, Secretary of State of the State of Illinois, by virtue of the powers vested in me by law, do hereby issue this certificate of amendment and attach thereto a copy of the Articles of Amendment to the Articles of Incorporation of the aforesaid corporation. IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois, done at the City of Springfield this 25th day of November A.D. 1974 and of the Independence of the United States the one hundred and 99th /s/ Michael J. Howlett ----------------------------------- Secretary of State (SEAL) 28 FORM BCA-55 (Do not write in this space) Date Paid Initial License Fee $ Franchise Tax $ Filing Fee $ Clerk $ (File in Duplicate) ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF U.S. AUTO GLASS CENTERS, INC. ----------------------------- (Exact Corporate Name) To Michael J. Howlett Secretary of State Springfield, Illinois The undersigned corporation, for the purpose of amending its Articles of Incorporation and pursuant to the provisions of Section 55 of "The Business Corporation Act" of the State of Illinois, hereby executes the following Articles of Amendment: ARTICLE FIRST: The name of the corporation is: U.S. AUTO GLASS CENTERS, INC. ARTICLE SECOND: The following amendment or amendments were adopted in the manner prescribed by "The Business Corporation Act" of the State of Illinois: ARTICLE FOUR is hereby amended to read as follows: The purpose or purposes for which the corporation is organized are: To buy, sell, manufacture and exchange glass and glass products, and to engage in the general glass business; 29 to buy, sell, manufacture and deal with all materials and products of any character useful in the operation of a general glass business; to buy, sell, manufacture and deal with automobile parts and hardware. To manufacture, purchase or otherwise acquire, invest in, own, mortgage, pledge, sell, assign, and transfer or otherwise dispose of, trade, deal in and deal with goods, wares and merchandise and personal property of every class and description. To acquire, and pay for in cash, stock or bonds of this corporation or otherwise, the good will, rights, assets and property, and to undertake or assume the whole or any part of the obligations or liabilities of any person, firm, association, or corporation. To enter into, make and perform contracts of every kind and description with any person, firm, association, corporation, municipality, county, state, body politic or government or colony or dependency thereof. In general to carry on any other business in connection with the foregoing, and to have and exercise all the powers conferred by the laws of Illinois upon corporations formed under the Business Corporation Act of the State of Illinois, and to do all of the things hereinbefore set forth. To enter into the business of the transportation of property by motor vehicle for hire. To transport motor vehicles from the place of business of its customers to the various business locations of this corporation. to apply for and obtain from the proper governmental authorities any and all necessary certificates and licenses to enable this corporation to engage in the activities set forth in this paragraph. (Disregard separation into classes ARTICLE THIRD: The number of shares of if class voting does not apply to the corporation outstanding at the time the amendment voted on.) of the adoption of said amendment was Ten (10); and the number of shares of each class entitled to vote as a class on the adoption of said amendment or amendments, and the designation of each such class were as follows: CLASS NUMBER OF SHARES 30 (Disregard separation into classes ARTICLE FOURTH: The number of shares voted for said if class voting does not apply to amendment or amendments was ten (10); and the number of the amendment voted on.) shares voted against said amendment or amendments was None. The number of shares of each class entitled to vote as a class voted for and against said amendment or amendments, respectively, was: CLASS NUMBER OF SHARES VOTED FOR AGAINST (Disregard these items unless the Item 1. On the date of the adoption of this amendment, amendment restates the articles of restating the articles of incorporation, the corporation had incorporation.) ____ shares issued, itemized as follows: CLASS SERIES NUMBER OF PAR VALUE PER SHARE (IF ANY) SHARES OR STATEMENT THAT SHARES ARE WITHOUT PAR VALUE Item 2. On the date of the adoption of this amendment restating the articles of incorporation, the corporation had a stated capital of $__________ and a paid-in surplus of $__________ or a total of $__________.
31 (Disregard this Article where this ARTICLE FIFTH: The manner in which the exchange, amendment contains no such reclassification, or cancellation of issued shares, or a reduction provisions.) of the number of authorized shares of any class below the number of issued shares of that class, provided for in, or effected by, this amendment, is as follows: (Disregard this Paragraph where ARTICLE SIXTH: Paragraph 1: The manner in which said amendment does not affect stated amendment or amendments effect a change in the amount of capital or paid-in surplus.) stated capital or the amount of paid-in surplus, or both, is as follows: (Disregard this Paragraph where Paragraph 2: The amounts of stated capital and of paid-in amendment does not affect stated surplus as changed by this amendment are as follows: capital or paid-in surplus.) BEFORE AMENDMENT AFTER AMENDMENT STATED CAPITAL .........$ $ PAID-IN SURPLUS ........$ $
IN WITNESS WHEREOF, the undersigned corporation has caused these Articles of Amendment to be executed in its names by its __________ President, and its corporate seal to be hereto affixed, attested by its Secretary, this 8th day of November, 1974. U.S.A. AUTO GLASS CENTERS, INC. ----------------------------------- (Exact Corporate Name) By /s/ Joseph Kellman -------------------------------- President 32 Place (CORPORATE SEAL) Here ATTEST: [Illegible] - ----------------------------------- Its Secretary STATE OF Illinois --------------------------- ss. COUNTY OF Cook -------------------------- I, Beatrice Wolpe, a Notary Public, do hereby certify that on the 8th day of November, 1974, Joseph Kellman personally appeared before me and, being first duly sworn by me, acknowledged that he signed the foregoing document in the capacity therein set forth and declared that the statements therein contained are true. IN WITNESS WHEREOF, I have hereunto set my hand and seal the day and year before written. /s/ Beatrice Wolpe ----------------------------------- Notary Public Place (NOTARIAL SEAL) Here 33 Certificate Number: 15946 STATE OF ILLINOIS OFFICE OF THE SECRETARY OF STATE TO ALL TO WHOM THESE PRESENTS SHALL COME, GREETING WHEREAS, Articles of Merger, duly signed and verified of U.S. AUTO GLASS CENTERS, INC. incorporated under the laws of the State of Illinois have been filed in the Office of the Secretary of State provided by the "Business Corporation Act" of Illinois, in force July 13, A.D. 1933. Now therefore, I, Alan J. Dixon, Secretary of State of the State of Illinois, by virtue of the powers vested in me by law, do hereby issue this certificate of amendment and attach thereto a copy of the Application of the aforesaid corporation. IN TESTIMONY WHEREOF, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois, done at the City of Springfield this 21st day of January A.D. 1980 and of the Independence of the United States the one hundred and 4th /s/ Alan J. Dixon ----------------------------------- Secretary of State (SEAL) 34 FORM BCA-66A ARTICLES OF MERGER OF SUBSIDIARY CORPORATIONS (Strike out inapplicable words) To JOHN W. LEWIS, Secretary of State, The undersigned corporation, pursuant to Section 66A of "The Business Corporation Act" of the State of Illinois, hereby executed the following articles of merger: ARTICLE ONE The names of the corporations proposing to merge and the names of the States under the laws of which such corporations are organized, are as follows: Name of Corporation State of Incorporation U.S. Auto Glass Centers, Inc. Illinois - ------------------------------ ------------------------------ Acme Glass, Incorporated Michigan - ------------------------------ ------------------------------ - ------------------------------ ------------------------------ - ------------------------------ ------------------------------ ARTICLE TWO The laws of Illinois and Michigan the State under which such corporations are organized, permit such merger. ARTICLE THREE The name of the surviving corporation shall be U.S.A. Auto Glass Centers, Inc. and it shall be governed by the laws of the State of Illinois. 35 ARTICLE FOUR The plan of merger is as follows: The plan of merger is set forth in the Joint Plan of Merger and Agreement of Merger which is attached hereto and made a part hereof. EX-3.8 9 BY-LAWS OF USA AUTO GLASS CENTERS, INC. 1 Exhibit 3.8 BY-LAWS OF U.S. AUTO GLASS CENTERS, INC, ARTICLE I Offices The corporation shall continuously maintain in the State of Illinois a registered office and a registered agent whose office is identical with such registered office, and may have other offices within or without the state. ARTICLE II SHAREHOLDERS SECTION 1. ANNUAL MEETING. An annual meeting of the shareholders shall be held on the third Monday in March of each year for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be called either by the president, by the board of directors or by the holders of not less than one-fifth of all the outstanding shares of the corporation, for the purpose or purposes stated in the call of the meeting. SECTION 3. PLACE OF MEETING. The board of directors may designate any place, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be at Cohon, Raizes & Regal, 208 South LaSalle Street, Chicago, IL 60604. SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, date, and hour of the meeting, and in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than forty days before the date of the meeting, or in the case of a merger or consolidation not less than twenty nor more than forty days before the meeting, either personally or by mail, by or at the direction of the 2 president, or the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, addressed to the shareholder at his address as it appears on the records of the corporation, with postage thereon prepaid. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. SECTION 5. FIXING OF RECORD DATE. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or to receive payment of any dividend, or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion or exchange of shares or for the purpose of any other lawful action, the board of directors of the corporation may fix in advance a record date which shall not be more than forty days and, for a meeting of shareholders, not less than ten days, or in the case of a merger or consolidation not less than twenty days, before the date of such meeting. If no record date is fixed, the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, the date on which notice of the meeting is mailed shall be the record date for such determination of shareholders, and the record date for the determination of shareholders for any other purpose shall be the date on which the board of directors adopts the resolution relating thereto. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting. SECTION 6. VOTING LISTS. The officer or agent having charge of the transfer books for shares of the corporation shall make, at least ten days before each meeting of shareholders, a complete list of the share. holders entitled to vote at such meeting, arranged in alphabetical order, showing the address of and the number of shares registered in the name of the shareholder, which list, for a period of ten days prior to such meeting, shall be kept on file at the registered office of the corporation and shall be open to inspection by any shareholder for any purpose germane to the meeting, at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and may be inspected by any shareholder during the whole time of the meeting. The original share ledger or transfer book, or a duplicate thereof kept in this State, shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of shareholders. SECTION 7. QUORUM. The holders of a majority of the outstanding shares of the corporation, present in person or represented by proxy, shall constitute a quorum at any meeting of shareholders; provided that if less than a majority of the outstanding shares are represented at said meeting, a majority of the shares so represented may adjourn the meeting at any time without further notice. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by The Business Corporation Act, the articles - 2 - 3 of incorporation or these by-laws. At any adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting. Withdrawal of shareholders from any meeting shall not cause failure of a duly constituted quorum at that meeting. SECTION 8. PROXIES. Each shareholder entitled to vote at a meeting of shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy, but no such proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy. SECTION 9. VOTING OF SHARES. Each outstanding share, regardless of class, shall be entitled to one vote upon each matter submitted to vote at a meeting of shareholders. SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the name of another corporation, domestic or foreign, may be voted by such officer, agent, or proxy as the by-laws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Shares standing in the name of a deceased person, a minor ward or an incompetent person, may be voted by his administrators executor court appointed guardian, or conservator, either in person or by proxy without a transfer of such shares into the name of such administrator, executor, court appointed guardian, or conservator. Shares standing in the name of a trustee may be voted by him, either in person or by proxy. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Any number of shareholders may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote or otherwise represent their share, for a period not to exceed ten years, by entering into a written voting trust agreement specifying the terms and conditions of the voting trust, and by transferring their shares to such trustee or trustees for the purpose of the agreement. Any such trust agreement shall not become effective until a counterpart of the agreement is deposited with the corporation at its registered office. The counterpart of the voting trust agreement so deposited with the corporation shall be subject to the same right of examination by a shareholder of the corporation, in person or by agent or attorney, as are the books and records of the corporation, and shall be subject to examination - 3 - 4 by any holder of a beneficial interest in the voting trust, either in person or by agent or attorney, at any reasonable time for any proper purpose. Shares of its own stock belonging to this corporation shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time, but shares of its own stock held by it in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares at any given time. SECTION 11. CUMULATIVE VOTING. In all elections for directors every shareholder shall have the right to vote, in person or by proxy, the number of shares owned by him, for as many persons as there are directors to be elected, or to cumulate said shares, and give one candidate as many votes as the number of directors multiplied by the number of his shares shall equal, or to distribute them on the same principle among as many candidates as he shall see fit. SECTION 12. INSPECTORS. At any meeting of shareholders, the presiding officer may, or upon the request of any shareholder shall appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting, based upon their determination of the validity and effect of proxies; count all votes and report the results; and do such other acts as are proper to conduct the election and voting with impartiality and fairness to all the shareholders. Each report of an inspector shall be in writing and signed by him or by a majority of them if there be more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. SECTION 13. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof. SECTION 14. VOTING BY BALLOT. Voting on any question or in any election may be by voice unless the presiding officer shall order or any shareholder shall demand that voting be by ballot. - 4 - 5 ARTICLE III DIRECTORS SECTION 1. GENERAL POWERS. The business of the corporation shall be managed by its board of directors. SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of the corporation shall be One (1). Each director shall hold office until the next annual meeting of shareholders or until his successor shall have been elected and qualified. Directors need not be residents of Illinois or shareholders of the corporation. The number of directors may be increased or decreased from time to time by the amendment of this section; but no decrease shall have the effect of shortening the term of any incumbent director. SECTION 3. REGULAR MEETINGS. A regular meeting of the board of directors shall be held without other notice than this by-law, immediately after the annual meeting of shareholders. The board of directors may provide, by resolution, the time and place for the holding of additional regular meetings without other notice than such resolution. SECTION 4. SPECIAL MEETINGS. Special meetings of the board of directors may be called by or at the request of the president or any two directors. The person or persons authorized to call special meetings of the board of directors may fix any place as the place for holding any special meeting of the board of directors called by them. SECTION 5. NOTICE. Notice of any special meeting shall be given at least 5 days previous thereto by written notice to each director at his business address. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegram company. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. SECTION 6. QUORUM, A majority of the number of directors fixed by these by-laws shall constitute a quorum for transaction of business at any meeting of the board of directors, provided that if less than a majority of such number of directors are present at said meeting, a majority of the directors present may adjourn the meeting at any time without further notice. - 5 - 6 SECTION 7. MANNER OF ACTING. The act of the majority, of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by statute, these by-laws, or the articles of incorporation. SECTION 8. VACANCIES. Any vacancy occurring in the board of directors and any directorship to be filled by reason of an increase in the number of directors, may be filled by election at an annual meeting or at a special meeting of shareholders called for that purpose. SECTION 9. ACTION WITHOUT A MEETING. Unless specifically prohibited by the articles of incorporation or by-laws, any action required to be taken at a meeting of the board of directors, or any other action which may be taken at a meeting of the board of directors, or of any committee thereof may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all the directors entitled to vote with respect to the subject matter thereof, or by all the members of such committee, as the case may be. Any such consent signed by all the directors or all the members of the committee shall have the same effect as a unanimous vote, and may be stated as such in any document filed with the Secretary of State or with anyone else. SECTION 10. COMPENSATION. The board of directors, by the affirmative vote of a majority of directors then in office, and irrespective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers, or otherwise. By resolution of the board of directors the directors may be paid their expenses, if any, of attendance at each meeting of the board. No such payment previously mentioned in this section shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. SECTION 11. PRESUMPTION OF ASSENT. A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. SECTION 12. EXECUTIVE COMMITTEE. The board of directors, by resolution adopted by a majority of the number of directors fixed by the by-laws or otherwise, may designate two or more directors to constitute an executive committee, which committee, to the extent provided in such resolution, shall have and exercise all of the authority of the board of directors in the management of the corporation, except as otherwise required by law. Vacancies in the membership of the committee shall be filled by the board of directors at a - 6 - 7 regular or special meeting of the board of directors. The executive committee shall keep regular minutes of its proceedings and report the same to the board when required. ARTICLE IV OFFICERS SECTION 1. NUMBER. The officers of the corporation shall be a president, one or more vice-presidents (the number thereof to be determined by the board of directors), a treasurer, a secretary, and such assistant treasurers, assistant secretaries or other officers as may be elected by the board of directors. Any two or more offices may be held by the same person, except the offices of president and secretary. SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation shall be elected annually by the board of directors at the first meeting of the board of directors held after each annual meeting of shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the board of directors. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Election of an officer shall not of itself create contract rights. SECTION 3. REMOVAL. Any officer elected or appointed by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 4. PRESIDENT. The president shall be the principal executive officer of the corporation. Subject to the direction and control of the board of directors, he shall be in charge of the business of the corporation; he shall see that the resolutions and directions of the board of directors are carried into effect except in those instances in which that responsibility is specifically assigned to some other person by the board of directors; and, in general, he shall discharge all duties, incident to the office of president and such other duties as may be prescribed by the board of directors from time to time. He shall preside at all meetings of the shareholders and of the board of directors. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the board of directors or these by-laws, he may execute for the corporation certificates for its shares, and any contracts, deeds, mortgages, bonds, or other instruments which the board of directors has authorized to be executed, and he may accomplish such execution either under or without the seal of the corporation and either individually or with the secretary, any assistant secretary, or any other officer thereunto authorized by the board of directors, according to the requirements of the form of the instrument. He may vote all securities which the corporation is entitled to vote except as and - 7 - 8 to the extent such authority shall be vested in a different officer or agent of the corporation by the board of directors. SECTION 5. THE VICE-PRESIDENTS. The vice-president (or in the event there be more than one vice-president, each of the vice-presidents) shall assist the president in the discharge of his duties as the president may direct and shall perform such other duties as from time to time may be assigned to him by the president or by the board of directors In the absence of the president or in the event of his inability or refusal to act, the vice-president (or in the event there be more than one vice-president, the vice-presidents in the order designated by the board of directors, or by the president if the board of directors has not made such a designation, or in the absence of any designation, then in the order of seniority of tenure as vice-president) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the board of directors or these by-laws, the vice-president (or each of them if there are more than one) may execute for the corporation certificates for its shares and any contracts, deeds, mortgages, bonds or other instruments which the board of directors has authorized to be executed, and he may accomplish such execution either under or without the seal of the corporation and either individually or with the secretary, any assistant secretary, or any other officer thereunto authorized by the board of directors, according to the requirements of the form of the instrument. SECTION 6. THE TREASURER. The treasurer shall be the principal accounting and financial officer of the corporation, He shall: (a) have charge of and be responsible for the maintenance of adequate books of account for the corporation; (b) have charge and custody of all funds and securities of the corporation, and be responsible therefor and for the receipt and disbursement thereof; and (c) perform all the duties incident to the office of treasurer and such other duties as from time to time may be assigned to him by the president or by the board of directors. If required by the board of directors, the treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the board of directors may determine. SECTION 7. THE SECRETARY. The secretary shall: (a) record the minutes of the shareholders' and of the board of directors' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these by-laws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation; (d) keep a register of the post-office address of each shareholder which shall be furnished to the secretary by such shareholder; (e) sign with the president, or a vice-president, or any other officer thereunto authorized by the board of directors, certificates for shares of the corporation, the issue of which shall have been authorized by the board of directors, and any contracts, deeds, mortgages, bonds, or other instruments which the board of directors has authorized to be executed, according to the requirements of the form of the instrument, except - 8 - 9 when a different mode of execution is expressly prescribed by the board of directors or these by-laws; (f) have general charge of the stock transfer books of the corporation; (g) perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him by the president or by the board of directors. SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The assistant treasurers and assistant secretaries shall perform such duties as shall be assigned to them by the treasurer or the secretary, respectively, or by the president or the board of directors. The assistant secretaries may sign with the president, or a vice-president, or any other officer thereunto authorized by the board of directors, certificates for shares of the corporation, the issue of which shall have been authorized by the board of directors, and any contracts, deeds, mortgages, bonds, or other instruments which the board of directors has authorized to be executed, according to the requirements of the form of the instrument, except when a different mode of execution is expressly prescribed by the board of directors or these by-laws. The assistant treasurers shall respectively, if required by the board of directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the board of directors shall determine. SECTION 9. SALARIES. The salaries of the officers shall be fixed from time to time by the board of directors and no officer shall be prevented from receiving such salary by reason of the fact that he is also a director of the corporation. ARTICLE V CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. CONTRACTS. The board of directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. SECTION 2. LOANS. No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the board of directors. Such authority may be general or confined to specific instances. SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the board of directors. - 9 - 10 SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the board of directors may select. ARTICLE VI CERTIFICATES FOR SHARES AND THEIR TRANSFER SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the corporation shall be signed by the president or a vice-president or by such officer as shall be designated by resolution of the board of directors and by the secretary or an assistant secretary, and shall be sealed with the seal or a facsimile of the seal of the corporation. If both of the signatures of the officers be by facsimile, the certificate shall be manually signed by or on behalf of a duly authorized transfer agent or clerk. Each certificate representing shares shall be consecutively numbered or otherwise identified, and shall also state the name of the person to whom issued, the number and class of shares (with designation of series, if any), the date of issue, that the corporation is organized under Illinois law, and the par value or a statement that the shares are without par value. If the corporation is authorized and does issue shares of more than one class or of series within a class, the ??? shall also contain such information or statement as may be required by law. The name and address of each shareholder, the number and class of shares held and the date on which the certificates for the shares were issued shall be entered on the books of the corporation. The person in whose name shares stand on the books of the corporation shall be deemed the ??? thereof for all purposes as regards the corporation. SECTION 2. LOST CERTIFICATES. If a certificate represents shares has allegedly been lost or destroyed the board of directors may in its discretion, except as may be required by law, direct that a new ??? be issued upon such indemnification and other reasonable requirements ??? may impose. SECTION 3. TRANSFERS OF SHARES. Transfers of shares of the corporation shall be recorded on the books of the corporation and, except in the case of a lost or destroyed certificate, on surrender for cancellation of the certificate for such shares. A certificate presented for transfer must be duly endorsed and accompanied by proper guaranty of signature and other appropriate assurances that the endorsement is effective. - 10 - 11 ARTICLE VII FISCAL YEAR The fiscal year of the corporation shall be fixed by resolution of the board of directors. ARTICLE VIII DIVIDENDS The board of directors may from time to time declare, and the corporation may pay dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its articles of incorporation. ARTICLE IX SEAL The corporate seal shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Illinois". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any manner reproduced. ARTICLE X WAIVER OF NOTICE Whenever any notice is required to be given under the provisions of these by-laws or under the provisions of the articles of incorporation or under the provisions of The Business Corporation Act of the State of Illinois, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE XI AMENDMENTS The power to make, alter, amend, or repeal the by-laws of the corporation shall be vested in the board of directors, unless reserved to the shareholders by the articles of incorporation. The by-laws may contain any provisions for the regulation and management of the affairs of the corporation not inconsistent with law or the articles of incorporation. - 11 - EX-4.2 10 FIRST SUPPLEMENTAL INDENTURE DATED AS OF 12/12/97 1 EXHIBIT 4.2 FIRST SUPPLEMENTAL INDENTURE THIS FIRST SUPPLEMENTAL INDENTURE, dated as of December 12, 1997, between SAFELITE GLASS CORP., a Delaware corporation (hereinafter referred to as the "Company"), and STATE STREET BANK & TRUST COMPANY, a state chartered trust company under the laws of The Commonwealth of Massachusetts, as trustee (hereinafter referred to as the "Trustee"), amends and supplements the Indenture providing for the issuance of the Company's 9 7/8% Senior Subordinated Notes due 2006, dated as of December 20, 1996, among the Company, SGC Franchising Corp. (a former subsidiary of the Company) and Fleet National Bank (predecessor trustee to the Trustee) (the "Original Indenture"), and, to the extent inconsistent therewith, supersedes the Original Indenture. RECITALS WHEREAS, Section 9.2 of the Original Indenture provides that the Company and the Trustee may, among other things, amend the Original Indenture with the written consent of the Holders of at least a majority in principal amount of the Securities; and WHEREAS, in connection with certain transactions proposed to be entered into by the Company, including, but not limited to, the Vistar Merger (as defined below), the Company and the Trustee desire to amend and supplement the Original Indenture pursuant to the terms and conditions of the Original Indenture and with the written consent of the Holders of at least a majority in principal amount of the Securities, subject to the limitations on effectiveness of this First Supplemental Indenture as set forth herein. NOW, THEREFORE, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 Definitions. (a) Capitalized terms used and not defined in this First Supplemental Indenture shall have the meaning specified in or pursuant to the Original Indenture. (b) The definition of "Permitted Indebtedness" contained in Article I, Section 1.1 of the Original Indenture is hereby amended and restated in its entirety to read as follows: "Permitted Indebtedness" means, without duplication, (i) the Securities and the obligations under the Guarantees, (ii) Indebtedness incurred pursuant to the Bank Credit Agreement in an aggregate principal amount at any time outstanding not to exceed $450 million (A) less the aggregate amount of Indebtedness of a Receivables Entity in a 1 2 Qualified Receivables Transaction, (B) less the amount of all mandatory principal payments actually made by the Company in respect of term loans thereunder (excluding (1) any such payments to the extent refinanced at the time of payment under a replaced Bank Credit Agreement and (2) any such payments relating to the Sale of Excluded Assets in an aggregate amount not to exceed $30 million) and (C) in the case of a revolving facility, reduced by any required permanent repayments (which are accompanied by a corresponding permanent commitment reduction) thereunder, (iii) other Indebtedness of the Company and its Restricted Subsidiaries outstanding on the Issue Date reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions thereon, (iv) Interest Swap Obligations of the Company or any of its Restricted Subsidiaries covering Indebtedness of the Company or any of its Restricted Subsidiaries; provided that any Indebtedness to which any such Interest Swap Obligations correspond is otherwise permitted to be incurred under this Indenture; provided, further, that such Interest Swap Obligations are entered into, in the judgment of the Company, to protect the Company and its Restricted Subsidiaries from fluctuation in interest rates on their respective outstanding Indebtedness, (v) Indebtedness under Currency Agreements, (vi) intercompany Indebtedness owed by the Company to any Wholly Owned Restricted Subsidiary of the Company or by any Restricted Subsidiary of the Company to the Company or any Wholly Owned Restricted Subsidiary of the Company, (vii) Acquired Indebtedness of the Company or any Restricted Subsidiary of the Company to the extent the Company could have incurred such Indebtedness in accordance with Section 4.3 on the date such Indebtedness became Acquired Indebtedness; provided that, in the case of Acquired Indebtedness of a Restricted Subsidiary of the Company, such Acquired Indebtedness was not incurred in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company, (viii) guarantees by the Company and its Wholly Owned Restricted Subsidiaries of each other's Indebtedness; provided that such Indebtedness is permitted to be incurred hereunder, including, with respect to guarantees by Wholly Owned Restricted Subsidiaries of the Company, Section 4.11, (ix) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or other similar instrument inadvertently drawn against insufficient funds in the ordinary course of business; provided that such Indebtedness is extinguished within five business days of its incurrence, (x) any refinancing, modification, replacement, renewal, restatement, refunding, deferral, extension, substitution, supplement, reissuance or resale of existing or future Indebtedness, including any additional Indebtedness incurred to pay interest or premiums required by the instruments governing such existing or future Indebtedness as in effect at the time of issuance thereof )("Required Premiums") and fees in connection therewith; provided that any such event shall not (1) result in an increase in the aggregate principal amount of Permitted Indebtedness (except to the extent such increase is a result of a simultaneous incurrence of additional Indebtedness (A) to pay Required Premiums and related fees or (B) otherwise permitted to be incurred under this Indenture) of the Company and its Restricted Subsidiaries and (2) create Indebtedness with a Weighted Average Life to Maturity at the time such Indebtedness is incurred that 2 3 is less than the Weighted Average Life to Maturity at such time of the Indebtedness being refinanced, modified, replaced, renewed, restated, refunded, deferred, extended, substituted, supplemented, reissued or resold (except that this subclause (2) will not apply in the event the Indebtedness being refinanced, modified, replaced, renewed, restated, refunded, deferred, extended, substituted, supplemented, reissued or resold was originally incurred in reliance upon clause (vi) or (xvi) of this definition); provided that no Restricted Subsidiary of the Company that is not a Subsidiary Guarantor may refinance any Indebtedness pursuant to this clause (x) other than its own Indebtedness, (xi) Indebtedness (including Capitalized Lease Obligations) incurred by the Company or any of its Restricted Subsidiaries to finance the purchase, lease or improvement of property (real or personal) or equipment (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets) in an aggregate principal amount outstanding not to exceed $5 million at the time of any incurrence thereof (which amount may, but need not, be incurred in whole or in part under the Bank Credit Agreement), (xii) the incurrence by a Receivables Entity of Indebtedness in a Qualified Receivables Transaction that is not recourse to the Company or any Subsidiary of the Company (except for Standard Securitization Undertakings), (xiii) Indebtedness incurred by the Company or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including, without limitation, letters of credit in respect of workers' compensation claims or self-insurance, or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims, (xiv) Indebtedness arising from agreements of the Company or a Restricted Subsidiary of the Company providing for indemnification, adjustment of purchase price, earn out or other similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Restricted Subsidiary of the Company, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition, provided that the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Company and its Restricted Subsidiaries in connection with such disposition, (xv) obligations in respect of performance and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary of the Company in the ordinary course of business, (xvi) Indebtedness of Vistar constituting Capitalized Lease Obligations in an aggregate principal amount not to exceed $2 million and other Indebtedness of Vistar constituting unsecured Indebtedness in an aggregate principal amount not to exceed $8 million, in each case which is assumed by the Company upon consummation of the Vistar Merger, and (xvii) additional Indebtedness of the Company and its Restricted Subsidiaries in an aggregate principal amount not to exceed $10 million at any one time outstanding (which amount may, but need not, be incurred in whole or in part under the Bank Credit Agreement)." 3 4 (c) Article I, Section 1.1 is hereby amended to add the following definitions: "Distribution" means a dividend of up to $67.2 million on the Company's outstanding Class A Common Stock, a dividend of approximately $4.7 million representing accrued and unpaid dividends on the Company's 8% Cumulative Preferred Stock and a redemption of the Company's 8% Cumulative Preferred Stock for an amount equal to approximately $58.2 million, in each case to be paid no more than five business days prior to the Vistar Merger. "Non-Voting Preferred Stock" means the Company's 8% Non-Voting Preferred Stock, $.01 par value per share, to be issued by the Company as partial merger consideration in the Vistar Merger. "Vistar Merger" means the merger contemplated by the Vistar Merger Agreement. "Vistar Merger Agreement" means that certain Merger Agreement, dated as of October 10, 1997, by and between Vistar, Inc. and the Company. ARTICLE II COVENANTS SECTION 2.1 Limitation on Restricted Payments. Section 4.4 of the Original Indenture is hereby amended and restated in its entirety to read as follows: "(a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock) on or in respect of shares of Capital Stock of the Company to holders of such Capital Stock, (b) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock, other than the exchange of such Capital Stock for Qualified Capital Stock, or (c) make any Investment (other than Permitted Investments) (each of the foregoing actions set forth in clauses (a), (b) and (c) being referred to as a "Restricted Payment"), if at the time of such Restricted Payment or immediately after giving effect thereto, (i) a Default or an Event of Default shall have occurred and be continuing, (ii) the Company is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.3 or (iii) the aggregate amount of Restricted Payments made subsequent to the Issue Date shall exceed the sum of: (w) 50% of the cumulative Consolidated Net 4 5 Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company earned subsequent to the Issue Date and on or prior to the date the Restricted Payment occurs (the "Reference Date") (treating such period as a single accounting period); plus (x) 100% of the aggregate net cash proceeds received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to the Issue Date and on or prior to the Reference Date of Qualified Capital Stock of the Company (including Capital Stock issued upon the conversion of convertible Indebtedness or in exchange for outstanding Indebtedness); plus (y) without duplication of any amounts included in clause (iii)(x) above, 100% of the aggregate net cash proceeds of any equity contribution received by the Company from a holder of the Company's Capital Stock (excluding any net cash proceeds from such equity contribution to the extent used to redeem Securities in accordance with the optional redemption provisions of the Securities); plus (z) to the extent that any Investment (other than a Permitted Investment) that was made after the Issue Date is sold for cash or otherwise liquidated or repaid for cash, the lesser of (A) the cash received with respect to such sale, liquidation or repayment of such Investment (less the cost of such sale, liquidation or repayment, if any) and (B) the initial amount of such Investment. (b) Notwithstanding clause (a) above, the provisions set forth in the immediately preceding paragraph do not prohibit: (1) the payment of any dividend or the consummation of any irrevocable redemption within 60 days after the date of declaration of such dividend or notice of such redemption if the dividend or payment of the redemption price, as the case may be, would have been permitted on the date of declaration or notice; (2) if no Event of Default shall have occurred and be continuing as a consequence thereof, the acquisition of any shares of Capital Stock of the Company, either (i) solely in exchange for shares of Qualified Capital Stock of the Company, or (ii) through the application of net proceeds of a substantially concurrent sale (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company; (3) payments for the purpose of and in an amount equal to the amount required to permit the Company to redeem or repurchase shares of its Capital Stock or options in respect thereof, in each case in connection with the repurchase provisions under employee stock option or stock purchase agreements or other agreements to compensate management employees; provided that such redemptions or repurchases pursuant to this clause (3) shall not exceed $2 million (which amount shall be increased by the amount of any cash proceeds to the Company from (x) sales of its Capital Stock to management employees subsequent to the Issue Date and (y) any "key-man" life insurance policies which are used to make such redemptions or repurchases) in the aggregate; (4) the payment of fees and compensation as permitted under clause (i) of Section 4.7(b); (5) so long as no Default or Event of Default shall have occurred and be continuing, payments not to exceed $100,000 in the aggregate, to enable the Company to make payments to holders of its Capital Stock in lieu of issuance of fractional shares of its Capital Stock; (6) repurchases of Capital Stock deemed to occur upon the exercise of stock options if such Capital Stock represents a portion of the exercise price thereof; (7) payments made on the Issue Date pursuant to 5 6 the Recapitalization Agreement; and (8) payment of the Distribution. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (iii) of the immediately preceding paragraph, (a) amounts expended (to the extent such expenditure is in the form of cash or other property other than Qualified Capital Stock) pursuant to clauses (1), (2)(ii) and (3) of this Section 4.4(b) shall be included in such calculation, provided that such expenditures pursuant to clause (3) shall not be included to the extent of cash proceeds received by the Company from any "key-man" life insurance policies and (b) amounts expended pursuant to clauses (2)(i), (4), (5), (6), (7) and (8) shall be excluded from such calculation. (c) The Company shall not permit the payment of dividends in respect of its NonVoting Preferred Stock unless the Company exercises its optional right to redeem the Non-Voting-Preferred Stock (the payment of such dividends to occur at the time of redemption); provided that the payment of such dividends will only be permitted if such payment is in compliance with clauses (a) and (b) of this Section 4.4." SECTION 2.2 Limitation on Transactions with Affiliates. Section 4.7 of the Original Indenture is hereby amended and restated in its entirety to read as follows: "(a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (an "Affiliate Transaction"), other than (x) Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate Transactions on terms that are no less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate; provided, however, that for a transaction or series of related transactions with an aggregate value of $2 million or more, at the Company's option (i) such determination shall be made in good faith by a majority of the disinterested members of the Board of the Directors of the Company or (ii) the Board of Directors of the Company or any such Restricted Subsidiary party to such Affiliate Transaction shall have received a favorable opinion from a nationally recognized investment banking firm that such Affiliate Transaction is on terms not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate; provided, further, that for a transaction or series of related transactions with an aggregate value of $5 million or more, the Board of Directors of the Company shall have received a favorable opinion from a nationally recognized investment banking firm that such Affiliate Transaction is on terms not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate. 6 7 (b) The foregoing restrictions shall not apply to (i) reasonable fees and compensation paid to, and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any Subsidiary of the Company as determined in good faith by the Company's Board of Directors or senior management; (ii) transactions exclusively between or among the Company and any of its Wholly Owned Restricted Subsidiaries or exclusively between or among such Wholly Owned Restricted Subsidiaries, provided such transactions are not otherwise prohibited by this Indenture; (iii) transactions effected as part of a Qualified Receivables Transaction; (iv) any agreement as in effect as of the Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) in any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Issue Date; (v) Restricted Payments permitted by this Indenture; and (vi) payments made by the Company to, and agreements entered into by the Company with, Affiliates in connection with the Vistar Merger." ARTICLE III EFFECTIVENESS SECTION 3.1 Effectiveness of First Supplemental Indenture. Upon (i) the execution and delivery of this First Supplemental Indenture by the Company and the Trustee and (ii) the delivery of an Officers' Certificate and Opinion of Counsel as contemplated by Section 7.2 of the Indenture, this First Supplemental Indenture, including the amendments to the Indenture contained herein, shall become effective and operative. Notwithstanding anything herein to the contrary, in the event that the Vistar Merger is not consummated within five business days of the Distribution and on or before June 30, 1998, this First Supplemental Indenture shall terminate and be deemed void as of and from the date of effectiveness of this First Supplemental Indenture. ARTICLE IV MISCELLANEOUS SECTION 4.1 Ratification of Provisions of Original Indenture. All provisions of the Original Indenture not specifically herein supplemented or modified are hereby ratified and reaffirmed by the Company and the Trustee. SECTION 4.2 Counterparts. This First Supplemental Indenture may be executed in counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 7 8 SECTION 4.3 Governing Law. This First Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. SECTION 4.4 Trustee. The Trustee accepts the amendment and modification of the Original Indenture effected by this First Supplemental Indenture, but only upon the terms and conditions set forth in the Original Indenture. Without limiting the generality of the foregoing, the Trustee assumes no responsibility for the correctness of the recitals herein contained, which shall be taken as the statements of the Company. The Trustee makes no representation and shall have no responsibility as to the validity and sufficiency of this First Supplemental Indenture. SECTION 4.5 Trust Indenture Act Controls. If any provision of this First Supplemental Indenture limits, qualifies or conflicts with another provision which is required to be included herein by the TIA, the provision required by the TIA shall control. SECTION 4.6 Successors. All agreements of the Company and the Trustee in this First Supplemental Indenture shall bind their respective successors. 8 9 IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed, all as of the day and year first above written. SAFELITE GLASS CORP. By: /s/ D. A. Herron -------------------------------- Name: Douglas A. Herron Title: Sr. VP & CFO STATE STREET BANK & TRUST COMPANY By: /s/ Robert L. Bice II --------------------------------- Name: Robert L. Bice II Title: Vice President 9 EX-4.3 11 SECOND SUPPLEMENTAL INDENTURE DATED AS OF 12/18/97 1 EXHIBIT 4.3 SECOND SUPPLEMENTAL INDENTURE THIS SECOND SUPPLEMENTAL INDENTURE, dated as of December 18, 1997, among SAFELITE GLASS CORP., a Delaware corporation (the "Company"), U.S.A. GLAS, INC., an Illinois corporation ("USA Glas"), U.S. AUTO GLASS CENTERS, INC., an Illinois corporation ("US Auto Glas"), CARCOMP SERVICES INC., an Illinois corporation (together with USA Glas and US Auto Glass, the "New Subsidiary Guarantors), and STATE STREET BANK AND TRUST COMPANY, a state chartered trust company under the laws of The Commonwealth of Massachusetts, as successor trustee to Fleet National Bank (the "Trustee"), amends and supplements the Indenture, dated as of December 20, 1996 (the "Indenture"), among the Company, SGC Franchising Corp. (a former subsidiary of the Company) and Fleet National Bank, a national banking corporation, as trustee, as amended by the First Supplemental Indenture, dated as of December 12, 1997, between the Company and the Trustee. RECITALS WHEREAS, Section 9.1 of the Indenture provides that the Company and the Trustee may, among other things, amend the Indenture or the Securities without notice to or consent of any Securityholder to add Guarantees with respect to the Securities or to secure the Securities; WHEREAS, Section 11.1 of the Indenture provides that any Restricted Subsidiary of the Company that guarantees payment of the Bank Indebtedness must execute and deliver to the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary shall agree to be bound by the provisions of Article XI of the Indenture; and WHEREAS, each of the New Subsidiary Guarantors has guaranteed payment of the Bank Indebtedness and shall execute and deliver to the Trustee this Second Supplemental Indenture. NOW, THEREFORE, the parties hereto hereby agree as follows: 1. Defined Terms. Capitalized terms used and not defined herein shall have the meaning specified in or pursuant to the Indenture. 2. Guarantee. Each of the New Subsidiary Guarantors hereby agrees to unconditionally assume all obligations of a Subsidiary Guarantor under the Indenture as described therein. 3. Trustee. The Trustee accepts the modification of the Indenture effected by this Second Supplemental Indenture, but only upon the terms and conditions set forth in the Indenture. Without limiting the generality of the foregoing, the Trustee assumes no responsibility for the correctness of the recitals herein contained, which shall be taken as the 1 2 statements of the Company. The Trustee makes no representation and shall have no responsibility as to the validity and sufficiency of this Second Supplemental Indenture. 4. Effect on Indenture. As supplemented by this Second Supplemental Indenture, the Indenture, as amended by the First Supplemental Indenture, is hereby ratified and confirmed in all respects. 5. Counterparts. This Second Supplemental Indenture may be executed in counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 6. Governing Law. This Second Supplemental Indenture shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. 7. Trust Indenture Act Controls. If any provision of this Second Supplemental Indenture limits, qualifies or conflicts with another provision which is required to be included herein by the TIA, the provision required by the TIA shall control. 8. Successors. All agreements of the New Subsidiary Guarantors, the Company and the Trustee in this Second Supplemental Indenture shall bind their respective successors. 9. Effectiveness of Second Supplemental Indenture. This Second Supplemental Indenture shall become effective (i) upon the execution and delivery of this Second Supplemental Indenture by the Company, the New Subsidiary Guarantors and the Trustee, (ii) upon the delivery of an Officers' Certificate and Opinion of Counsel as contemplated by Section 7.2 of the Indenture and (iii) as of the Effective Time (as defined below) of the merger of Vistar, Inc., an Illinois corporation ("Vistar"), with and into the Company pursuant to the terms and conditions of the Merger Agreement, dated as of October 10, 1997, by and between Vistar and the Company (the "Merger Agreement"). "Effective Time" shall have the meaning ascribed to such term in the Merger Agreement. 2 3 SAFELITE GLASS CORP. SECOND SUPPLEMENTAL INDENTURE COUNTERPART SIGNATURE PAGE IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed, all as of the day and year first above written. SAFELITE GLASS CORP. [SEAL] By: /s/ Douglas A. Herron ----------------------------- Douglas A. Herron Senior Vice President and Chief Financial Officer U.S.A. GLAS, INC. [SEAL] By: /s/ Douglas A. Herron ----------------------------- Douglas A. Herron Vice President and Treasurer U.S. AUTO GLASS CENTERS, INC. [SEAL] By: /s/ Douglas A. Herron ----------------------------- Douglas A. Herron Vice President and Treasurer CARCOMP SERVICES, INC. [SEAL] By: /s/ Douglas A. Herron ----------------------------- Douglas A. Herron Vice President and Treasurer 3 4 SAFELITE GLASS CORP. SECOND SUPPLEMENTAL INDENTURE COUNTERPART SIGNATURE PAGE IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed, and their respective corporate seals to be hereunto affixed, all as of the day and year first above written. STATE STREET BANK & TRUST COMPANY [SEAL] By: /s/ Robert L. Bice II ----------------------------- Name: Robert L. Bice II Title: Vice President 4 EX-10.2 12 CREDIT AGREEMENT 1 EXHIBIT 10.2 CREDIT AGREEMENT among SAFELITE GLASS CORP., VARIOUS LENDING INSTITUTIONS, THE CHASE MANHATTAN BANK, AS ADMINISTRATIVE AGENT, BANKERS TRUST COMPANY, AS SYNDICATION AGENT, AND GOLDMAN SACHS CREDIT PARTNERS L.P., AS DOCUMENTATION AGENT, -------------------------------- Dated as of December 20, 1996, as amended and restated through December 17, 1997 -------------------------------- 2 TABLE OF CONTENTS
Page ---- SECTION 1. Amount and Terms of Credit.......................................................................... 1 1.01 Commitments...................................................................................... 1 1.02 Minimum Borrowing Amounts, etc. ................................................................. 5 1.03 Notice of Borrowing.............................................................................. 5 1.04 Disbursement of Funds............................................................................ 6 1.05 Evidence of Debt................................................................................. 7 1.06 Conversions...................................................................................... 7 1.07 Pro Rata Borrowings.............................................................................. 8 1.08 Interest......................................................................................... 8 1.09 Interest Periods................................................................................. 9 1.10 Increased Costs, Illegality, etc. ............................................................... 10 1.11 Compensation..................................................................................... 12 1.12 Change of Lending Office......................................................................... 13 1.13 Replacement of Banks............................................................................. 13 SECTION 2. Letters of Credit................................................................................... 14 2.01 Letters of Credit................................................................................ 14 2.02 Letter of Credit Requests; Notices of Issuance................................................... 15 2.03 Agreement to Repay Letter of Credit Drawings..................................................... 15 2.04 Letter of Credit Participations.................................................................. 16 2.05 Increased Costs.................................................................................. 18 SECTION 3. Fees; Commitments................................................................................... 19 3.01 Fees .......................................................................................... 19 3.02 Voluntary Termination or Reduction of Commitments................................................ 20 3.03 Mandatory Adjustments of Commitments, etc. ...................................................... 21 SECTION 4. Payments............................................................................................ 21 4.01 Voluntary Prepayments............................................................................ 21 4.02 Mandatory Prepayments............................................................................ 22 4.03 Method and Place of Payment...................................................................... 28 4.04 Net Payments..................................................................................... 29 SECTION 5. Conditions Precedent................................................................................ 30 5.01 Execution of Agreement; Notes.................................................................... 30 5.02 [RESERVED]....................................................................................... 30 5.03 Officer's Certificate............................................................................ 31 5.04 Opinions of Counsel.............................................................................. 31 5.05 Corporate Proceedings............................................................................ 31 5.06 Adverse Change, etc. ............................................................................ 31 5.07 Litigation....................................................................................... 31 5.08 Approvals........................................................................................ 32 5.09 Senior Subordinated Notes Consent Solicitation................................................... 32
(i) 3
Page ---- 5.10 Security Documents............................................................................... 32 5.11 Fees and Expenses................................................................................ 33 5.12 Mortgages; Title Insurance....................................................................... 33 5.13 Existing Indebtedness Agreements; Shareholders' Agreements; Management Agreements; Tax Allocation Agreements..................................................... 34 5.14 Solvency Opinions; Evidence of Insurance......................................................... 34 5.15 Pro Forma Balance Sheet.......................................................................... 35 5.16 Projections...................................................................................... 35 5.17 Existing Indebtedness of Borrower................................................................ 35 5.18 Payment of Accrued Interest, Fees; Continuation of Principal..................................... 35 5.20 Officer's Certificate............................................................................ 35 5.21 Opinions of Counsel.............................................................................. 36 5.22 Corporate Proceedings............................................................................ 36 5.23 Adverse Change, etc. ............................................................................ 36 5.24 Litigation....................................................................................... 36 5.25 Approvals........................................................................................ 37 5.26 Consummation of the Transaction.................................................................. 37 5.27 Security Documents............................................................................... 37 5.28 Fees and Expenses................................................................................ 38 5.29 [Reserved]....................................................................................... 38 5.30 Evidence of Insurance............................................................................ 38 5.31 Existing Indebtedness............................................................................ 39 5.32 Payment of Fees.................................................................................. 39 5.33 No Default; Representations and Warranties....................................................... 39 5.34 Notice of Borrowing; Letter of Credit Request.................................................... 39 SECTION 6. Representations, Warranties and Agreements.......................................................... 40 6.01 Corporate Status................................................................................. 40 6.02 Corporate Power and Authority.................................................................... 40 6.03 No Violation..................................................................................... 40 6.04 Litigation....................................................................................... 41 6.05 Use of Proceeds; Margin Regulations.............................................................. 41 6.06 Governmental Approvals........................................................................... 41 6.07 Investment Company Act........................................................................... 42 6.08 Public Utility Holding Company Act............................................................... 42 6.09 True and Complete Disclosure..................................................................... 42 6.10 Financial Condition; Financial Statements........................................................ 42 6.11 Security Interests............................................................................... 44 6.12 Representations and Warranties in Other Documents................................................ 44 6.13 Transaction...................................................................................... 44 6.14 .......................................................................................... 44 6.15 Compliance with ERISA............................................................................ 45 6.16 Capitalization................................................................................... 45 6.17 Subsidiaries..................................................................................... 46 6.18 Intellectual Property............................................................................ 46 6.19 Compliance with Statutes, etc. .................................................................. 46
(ii) 4
Page ---- 6.20 Environmental Matters............................................................................ 46 6.21 Properties....................................................................................... 47 6.22 Labor Relations.................................................................................. 47 6.23 Tax Returns and Payments......................................................................... 47 6.24 Existing Indebtedness............................................................................ 48 6.25 Senior Subordinated Notes........................................................................ 48 SECTION 7. Affirmative Covenants............................................................................... 48 7.01 Information Covenants............................................................................ 49 7.02 Books, Records and Inspections................................................................... 52 7.03 Insurance........................................................................................ 52 7.04 Payment of Taxes................................................................................. 52 7.05 Corporate Franchises............................................................................. 52 7.06 Compliance with Statutes, etc. .................................................................. 52 7.07 Compliance with Environmental Laws............................................................... 53 7.08 ERISA .......................................................................................... 53 7.09 Good Repair...................................................................................... 54 7.10 End of Fiscal Years; Fiscal Quarters............................................................. 54 7.11 Additional Security; Further Assurances.......................................................... 54 7.12 Interest Rate Protection......................................................................... 56 7.13 Foreign Subsidiaries Security.................................................................... 57 7.14 Pledge of Borrower's Stock....................................................................... 57 SECTION 8. Negative Covenants.................................................................................. 58 8.01 Changes in Business.............................................................................. 58 8.02 Consolidation, Merger, Sale or Purchase of Assets, etc. ......................................... 58 8.03 Liens .......................................................................................... 60 8.04 Indebtedness..................................................................................... 62 8.05 Designated Senior Debt........................................................................... 63 8.06 Advances, Investments and Loans.................................................................. 63 8.07 Dividends, etc. ................................................................................. 66 8.08 Transactions with Affiliates..................................................................... 67 8.09 Capital Expenditures............................................................................. 68 8.10 .......................................................................................... 69 8.11 Interest Coverage Ratio.......................................................................... 69 8.12 Leverage Ratio................................................................................... 70 8.14 Limitation on Certain Restrictions on Subsidiaries............................................... 72 8.15. Limitation on the Creation of Subsidiaries...................................................... 72 8.16. Limitation on LS Companies...................................................................... 72 8.17. Maintenance of Corporate Separateness; Etc...................................................... 73 SECTION 9. Events of Default................................................................................... 73 9.01 Payments......................................................................................... 73 9.02 Representations, etc. ........................................................................... 73 9.03 Covenants........................................................................................ 73 9.04 Default Under Other Agreements................................................................... 73
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Page ---- 9.05 Bankruptcy, etc. ................................................................................ 74 9.06 ERISA .......................................................................................... 74 9.07 Security Documents............................................................................... 75 9.08 Guaranties....................................................................................... 75 9.09 Judgments........................................................................................ 75 9.10 Ownership........................................................................................ 75 SECTION 10. Definitions........................................................................................ 76 SECTION 11. The Agents.........................................................................................100 11.01 Appointment.....................................................................................100 11.02 Delegation of Duties............................................................................100 11.03 Exculpatory Provisions..........................................................................100 11.04 Reliance by Administrative Agent................................................................101 11.05 Notice of Default...............................................................................101 11.06 Nonreliance on Administrative Agent and other Banks.............................................102 11.07 Indemnification.................................................................................102 11.08 Administrative Agent in its Individual Capacity.................................................103 11.09 Holders.........................................................................................103 11.10 Resignation of the Administrative Agent; Successor Administrative Agent.........................103 11.11 Documentation Agent, Syndication Agent and Co-Agents............................................103 11.12 Letter of Credit Issuer.........................................................................103 SECTION 12. Miscellaneous......................................................................................104 12.01 Payment of Expenses, etc. ......................................................................104 12.02 Right of Setoff.................................................................................104 12.03 Notices.........................................................................................105 12.04 Benefit of Agreement............................................................................105 12.05 No Waiver; Remedies Cumulative..................................................................107 12.06 Payments Pro Rata...............................................................................107 12.07 Calculations; Computations......................................................................108 12.08 Governing Law; Submission to Jurisdiction; Venue................................................108 12.09 Counterparts....................................................................................109 12.10 Effectiveness...................................................................................109 12.11 Headings Descriptive............................................................................109 12.12 Amendment or Waiver; etc. ......................................................................109 12.13 Survival........................................................................................111 12.14 Domicile of Loans...............................................................................111 12.15 Confidentiality.................................................................................111 12.16 Waiver of Jury Trial............................................................................112 12.17 Integration.....................................................................................112 12.18 Syndication.............................................................................112
(iv) 6 ANNEX I List of Banks and Commitments ANNEX II Bank Addresses SCHEDULE 2.01 Existing Letters of Credit SCHEDULE 5.16 Projections SCHEDULE 6.04 Litigation SCHEDULE 6.16 Capital Stock of the Borrower SCHEDULE 6.17 Subsidiaries SCHEDULE 6.21 Real Properties SCHEDULE 6.24 Existing Indebtedness SCHEDULE 8.03 Existing Liens SCHEDULE 8.06 Existing Investments EXHIBIT A-1 Form of Notice of Borrowing EXHIBIT A-2 Form of Letter of Credit Request EXHIBIT B-1 Form of A Term Note EXHIBIT B-2 Form of B Term Note EXHIBIT B-3 Form of C Term Note EXHIBIT B-4 Form of Revolving Note EXHIBIT B-5 Form of Swingline Note EXHIBIT C Form of Section 4.04(b)(ii) Certificate EXHIBIT D-1 Form of Opinion of Hutchins, Wheeler & Dittmar (Initial Borrowing Date) EXHIBIT D-2 Form of Opinion of Hutchins, Wheeler & Dittmar (Second Borrowing Date) EXHIBIT E Form of Officers' Certificate EXHIBIT F Form of Pledge Agreement EXHIBIT G Form of Security Agreement EXHIBIT H Form of Subsidiary Guaranty (v) 7 EXHIBIT I Form of Subordination Provisions EXHIBIT J Form of Assignment and Assumption Agreement EXHIBIT K Form of Intercompany Note EXHIBIT L Form of Shareholder Subordinated Note (vi) 8 CREDIT AGREEMENT, dated as of December 20, 1996, as amended and restated through December 17, 1997, among SAFELITE GLASS CORP., a Delaware corporation (the "Borrower"), the lenders from time to time party hereto (each a "Bank" and, collectively, the "Banks"), THE CHASE MANHATTAN BANK, as Administrative Agent (in such capacity, the "Administrative Agent"), BANKERS TRUST COMPANY, as Syndication Agent (in such capacity, the "Syndication Agent"), and GOLDMAN SACHS CREDIT PARTNERS L.P., as Documentation Agent (in such capacity, the "Documentation Agent"). Unless otherwise defined herein, all capitalized terms used herein and defined in Section 10 are used herein as so defined. W I T N E S S E T H : WHEREAS, the Borrower, certain of the Banks (the "Existing Banks"), the Administrative Agent, the Syndication Agent and the Documentation Agent are parties to the Credit Agreement dated as of December 20, 1996, as amended (as in effect immediately prior to the effectiveness of this Agreement, the "Existing Credit Agreement"), pursuant to which the Existing Banks extended credit to the Borrower; WHEREAS, pursuant to the Merger Agreement dated as of October 10, 1997 (as further defined herein, the "Merger Agreement") between Vistar, Inc., a Delaware corporation ("Vistar"), and the Borrower, it is anticipated that Vistar will merge (the "Merger") into the Borrower with the Borrower as the surviving corporation; and WHEREAS, the parties hereto have elected to amend and restate the Existing Credit Agreement pursuant to this Agreement rather than enter into a new credit agreement for their convenience; NOW, THEREFORE, IT IS AGREED: SECTION 1. Amount and Terms of Credit. 1.01 Commitments. (A) Subject to and upon the terms and conditions herein set forth, each Bank severally agrees to make a loan or loans to the Borrower which loans shall be drawn, to the extent such Bank has a commitment under such Facility, under the A Term Loan Facility, the B Term Loan Facility, the C Term Loan Facility and the Revolving Credit Facility, as set forth below: (a) Each loan under the A Term Loan Facility (each an "A Term Loan" and, collectively, the "A Term Loans") (i) shall be made pursuant to a drawing on either the Initial Borrowing Date or the Second Borrowing Date, (ii) shall be denominated in U.S. Dollars, (iii) shall be made as Base Rate Loans or Eurodollar Loans and, except as hereinafter provided, may, at the option of the Borrower, be maintained as and/or converted into Base Rate Loans or Eurodollar Loans, provided that (x) all A Term Loans made by all Banks pursuant to the same Borrowing shall, unless otherwise specifically provided herein, consist entirely of A Term Loans of the same Type, (y) unless the Administrative Agent has determined that the Syndication Date has occurred (at which time this clause (y) shall no longer be applicable), no more than three Borrowings of A Term 9 Loans to be maintained as Eurodollar Loans may be incurred prior to the 90th day after the Initial Borrowing Date (each of which Borrowings of Eurodollar Loans may only have an Interest Period of one month, and the first of which Borrowings may only be made on the Initial Borrowing Date, the second of which Borrowings may only be made on the last day of the Interest Period of the first such Borrowing and the third of which Borrowings may only be made on the last day of the Interest Period of the second such Borrowing), and (z) prior to the Second Borrowing Date, all A Term Loans shall be made as Base Rate Loans, and (iv) shall not exceed for any Bank at the time of incurrence thereof, and after giving effect to the repayment of the A Term Loans to be repaid with the proceeds of subsequent A Term Loans made on the Second Borrowing Date, that aggregate principal amount which equals the A Term Loan Commitment, if any, of such Bank at such time. Once repaid, A Term Loans may not be reborrowed (except as otherwise provided for the Initial Lending Banks in the immediately following provisions of this paragraph). Notwithstanding the foregoing, only the Initial Lending Banks shall make A Term Loans on the Initial Borrowing Date, and the aggregate amount of the A Term Loans made by each such Bank on the Initial Borrowing Date shall equal the amount thereof previously agreed upon by the Borrower and such Bank (which amount may exceed the amount of such Bank's A Term Loan Commitment set forth on Annex I). The aggregate amount of the A Term Loans made on the Initial Borrowing Date shall not exceed $150,000,000, and such amount shall be repaid with the proceeds of A Term Loans made on the Second Borrowing Date. Each Bank having an A Term Loan Commitment shall make an A Term Loan on the Second Borrowing Date in accordance with the preceding provisions of this paragraph. (b) Each loan under the B Term Loan Facility (each a "B Term Loan" and, collectively, the "B Term Loans") (i) shall be made pursuant to a drawing, on either the Initial Borrowing Date or the Second Borrowing Date, (ii) shall be denominated in U.S. Dollars, (iii) shall be made as Base Rate Loans or Eurodollar Loans and, except as hereinafter provided, may, at the option of the Borrower, be maintained as and/or converted into Base Rate Loans or Eurodollar Loans, provided that (x) all B Term Loans made by all Banks pursuant to the same Borrowing shall, unless otherwise specifically provided herein, consist entirely of B Term Loans of the same Type, (y) unless the Administrative Agent has determined that the Syndication Date has occurred (at which time this clause (y) shall no longer be applicable), no more than three Borrowings of B Term Loans to be maintained as Eurodollar Loans may be incurred prior to the 90th day after the Initial Borrowing Date (each of which Borrowings of Eurodollar Loans may only have an Interest Period of one month, and the first of which Borrowings may only be made on the same date as the initial Borrowing of A Term Loans that are maintained as Eurodollar Loans, the second of which Borrowings may only be made on the last day of the Interest Period of the first such Borrowing and the third of which Borrowings may only be made on the last day of the Interest Period of the second such Borrowing) and (z) prior to the Second Borrowing Date, all B Term Loans shall be made as Base Rate Loans, and (iv) shall not exceed for any Bank at the time of incurrence thereof, and after giving effect to the repayment of the B Term Loans to be repaid with the proceeds of subsequent B Term Loans made on the Second Borrowing Date, that aggregate principal amount which equals the B Term Loan Commitment, if any, of such Bank at such time. Once repaid, B Term Loans may not be reborrowed (except as otherwise provided for the Initial Lending Banks in the immediately following provisions of this paragraph). Notwithstanding the foregoing, -2- 10 only the Initial Lending Banks shall make B Term Loans on the Initial Borrowing Date, and the amount of the B Term Loans made by each such Bank on the Initial Borrowing Date shall equal the amount thereof previously agreed upon by the Borrower and such Bank (which amount may exceed the amount of such Bank's B Term Loan Commitment set forth on Annex I). The aggregate amount of the B Term Loans made on the Initial Borrowing Date shall not exceed $100,000,000, and such amount shall be repaid with the proceeds of B Term Loans made on the Second Borrowing Date. Each Bank having a B Term Loan Commitment shall make a B Term Loan on the Second Borrowing Date in accordance with the preceding provisions of this paragraph. (c) Each loan under the C Term Loan Facility (each a "C Term Loan" and, collectively, the "C Term Loans") (i) shall be made pursuant to a drawing on either the Initial Borrowing Date or the Second Borrowing Date, (ii) shall be denominated in U.S. Dollars, (iii) shall be made as Base Rate Loans or Eurodollar Loans and, except as hereinafter provided, may, at the option of the Borrower, be maintained as and/or converted into Base Rate Loans or Eurodollar Loans, provided that (x) all C Term Loans made by all Banks pursuant to the same Borrowing shall, unless otherwise specifically provided herein, consist entirely of C Term Loans of the same Type, (y) unless the Administrative Agent has determined that the Syndication Date has occurred (at which time this clause (y) shall no longer be applicable), no more than three Borrowings of C Term Loans to be maintained as Eurodollar Loans may be incurred prior to the 90th day after the Initial Borrowing Date (each of which Borrowings of Eurodollar Loans may only have an Interest Period of one month, and the first of which Borrowings may only be made on the same date as the initial Borrowing of A Term Loans that are maintained as Eurodollar Loans, the second of which Borrowings may only be made on the last day of the Interest Period of the first such Borrowing and the third of which Borrowings may only be made on the last day of the Interest Period of the second such Borrowing) and (z) prior to the Second Borrowing Date, all C Term Loans shall be made as Base Rate Loans and (iv) shall not exceed for any Bank at the time of incurrence thereof, and after giving effect to the repayment of the C Term Loans to be repaid with the proceeds of subsequent C Term Loans made on the Second Borrowing Date, that aggregate principal amount which equals the C Term Loan Commitment, if any, of such Bank at such time. Once repaid, C Term Loans may not be reborrowed (except as otherwise provided for the Initial Lending Banks in the immediately following provisions of this paragraph). Notwithstanding the foregoing, the Initial Lending Banks shall make C Term Loans on the Initial Borrowing Date, and the amount of the C Term Loan made by each such Bank on the Initial Borrowing Date shall equal the amount thereof previously agreed upon by the Borrower and such Bank (which amount may exceed the amount of such Bank's C Term Loan Commitment set forth on Annex I). The aggregate amount of the C Term Loans made on the Initial Borrowing Date shall not exceed $42,000,000, and such amount shall be repaid with the proceeds of C Term Loans made on the Second Borrowing Date. Each Bank having a C Term Loan Commitment shall make a C Term Loan on the Second Borrowing Date in accordance with the preceding provisions of this paragraph. (d) Each loan under the Revolving Credit Facility (each a "Revolving Loan" and, collectively, the "Revolving Loans") (i) shall be made at any time and from time to time on or after the Initial Borrowing Date and prior to the Revolving Loan Maturity Date, -3- 11 (ii) shall be denominated in U.S. Dollars, (iii) except as hereinafter provided, may, at the option of the Borrower, be incurred and maintained as and/or converted into Base Rate Loans or Eurodollar Loans, provided that (x) all Revolving Loans made as part of the same Borrowing shall, unless otherwise specifically provided herein, consist of Revolving Loans of the same Type and (y) unless the Administrative Agent has determined that the Syndication Date has occurred (at which time this clause (y) shall no longer be applicable), no more than three Borrowings of Revolving Loans to be maintained as Eurodollar Loans may be incurred prior to the 90th day after the Initial Borrowing Date (each of which Borrowings of Eurodollar Loans may only have an Interest Period of one month, and the first of which Borrowings may only be made on the same date as the initial Borrowing of A Term Loans that are maintained as Eurodollar Loans, the second of which Borrowings may only be made on the last day of the Interest Period of the first such Borrowing and the third of which Borrowings may only be made on the last day of the Interest Period of the second such Borrowing), (iv) may be repaid and reborrowed in accordance with the provisions hereof and (v) shall not exceed for any Bank at any time outstanding that aggregate principal amount which equals such Bank's Revolving Percentage of the Total Unutilized Revolving Credit Commitment at such time. (B) Subject to and upon the terms and conditions herein set forth, Chase in its individual capacity agrees to make at any time and from time to time after the Initial Borrowing Date and prior to the Swingline Expiry Date, a loan or loans to the Borrower (each a "Swingline Loan" and, collectively, the "Swingline Loans"), which Swingline Loans (i) shall be made and maintained as Base Rate Loans, (ii) shall be denominated in U.S. Dollars, (iii) may be repaid and reborrowed in accordance with the provisions hereof, (iv) shall not exceed in aggregate principal amount at any time outstanding, when combined with the aggregate principal amount of all Revolving Loans then outstanding and the Letter of Credit Outstandings (exclusive of Unpaid Drawings relating to Letters of Credit which are repaid with the proceeds of, and simultaneously with the incurrence of, the respective incurrence of such Swingline Loans) at such time, an amount equal to the Total Revolving Credit Commitment then in effect and (v) shall not exceed in aggregate principal amount at any time outstanding the Maximum Swingline Amount. Chase shall not be obligated to make any Swingline Loans at a time when a Bank Default exists unless Chase has entered into arrangements satisfactory to it and the Borrower to eliminate Chase's risk with respect to the Defaulting Bank's or Banks' participation in such Swingline Loans, including by cash collateralizing such Defaulting Bank's or Banks' Revolving Percentage of the outstanding Swingline Loans. Chase will not make a Swingline Loan after it has received written notice from the Borrower or the Required Banks stating that a Default or an Event of Default exists until such time as Chase shall have received a written notice of (i) rescission of such notice from the party or parties originally delivering the same or (ii) a waiver of such Default or Event of Default from the Majority Banks under the Revolving Credit Facility. (C) On any Business Day, Chase may, in its sole discretion, give notice to the Revolving Banks that its outstanding Swingline Loans shall be funded with a Borrowing of Revolving Loans (provided that each such notice shall be deemed to have been automatically given upon the occurrence of a Default or an Event of Default under Section 9.05 or upon the exercise of any of the remedies provided in the last paragraph of Section 9), in which case a Borrowing of Revolving Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory Borrowing") shall be made on the immediately succeeding Business Day by all Revolving Banks pro rata based -4- 12 on each Revolving Bank's Revolving Percentage, and the proceeds thereof shall be applied directly to repay Chase for such outstanding Swingline Loans. Each Revolving Bank hereby irrevocably agrees to make Base Rate Loans upon one Business Day's notice pursuant to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the date specified in writing by Chase notwithstanding (i) that the amount of the Mandatory Borrowing may not comply with the Minimum Borrowing Amount otherwise required hereunder, (ii) whether any conditions specified in Section 5 are then satisfied, (iii) whether a Default or an Event of Default has occurred and is continuing, (iv) the date of such Mandatory Borrowing and (v) any reduction in the Total Revolving Credit Commitment after any such Swingline Loans were made. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code in respect of the Borrower), each Revolving Bank (other than Chase) hereby agrees that it shall forthwith purchase from Chase (without recourse or warranty) such assignment of the outstanding Swingline Loans as shall be necessary to cause the Revolving Banks to share in such Swingline Loans ratably based upon their respective Revolving Percentages, provided that all interest payable on the Swingline Loans shall be for the account of Chase until the date the respective assignment is purchased and, to the extent attributable to the purchased assignment, shall be payable to the Revolving Bank purchasing same from and after such date of purchase. 1.02 Minimum Borrowing Amounts, etc. The aggregate principal amount of each Borrowing under a Facility shall not be less than the Minimum Borrowing Amount for such Facility. More than one Borrowing may be incurred on any day; provided that at no time shall there be outstanding more than twenty (20) Borrowings of Eurodollar Loans. 1.03 Notice of Borrowing. (a) Whenever the Borrower desires to incur Loans under any Facility (excluding Borrowings of Swingline Loans and Mandatory Borrowings), it shall give the Administrative Agent at its Notice Office, prior to 3:00 P.M. (New York time), at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Eurodollar Loans and at least one Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate Loans to be made hereunder. Each such notice (each a "Notice of Borrowing") shall, except as provided in Section 1.10, be irrevocable, and, in the case of each written notice and each confirmation of telephonic notice, shall be in the form of Exhibit A-1, appropriately completed to specify (i) the Facility pursuant to which such Borrowing is to be made, (ii) the aggregate principal amount of the Loans to be made pursuant to such Borrowing, (iii) the date of such Borrowing (which shall be a Business Day) and (iv) whether the respective Borrowing shall consist of Base Rate Loans or, to the extent permitted hereunder, Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall promptly give each Bank written notice (or telephonic notice promptly confirmed in writing) of each proposed Borrowing, of such Bank's proportionate share thereof, if any, and of the other matters covered by the Notice of Borrowing. (b) (i) Whenever the Borrower desires to borrow Swingline Loans hereunder, it shall give Chase not later than 12:00 Noon (New York time) on the day such Swingline Loan is to be made, written notice (or telephonic notice promptly confirmed in writing) of each Swingline Loan to be made hereunder. Each such notice shall be irrevocable and shall specify in each case -5- 13 (x) the date of such Borrowing (which shall be a Business Day) and (y) the aggregate principal amount of the Swingline Loan to be made pursuant to such Borrowing. (ii) Mandatory Borrowings shall be made upon the notice specified in Section 1.01(C), with the Borrower irrevocably agreeing, by its incurrence of any Swingline Loan, to the making of Mandatory Borrowings as set forth in such Section 1.01(C). (c) Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice permitted to be given hereunder, the Administrative Agent or Chase (in the case of a Borrowing of Swingline Loans) or the Letter of Credit Issuer (in the case of the issuance of Letters of Credit), as the case may be, may prior to receipt of written confirmation act without liability upon the basis of such telephonic notice, believed by the Administrative Agent, Chase or the Letter of Credit Issuer, as the case may be, in good faith to be from an Authorized Officer of the Borrower. In each such case, the Borrower hereby waives the right to dispute the Administrative Agent's, Chase's or the Letter of Credit Issuer's record of the terms of such telephonic notice (except in the case of gross negligence or bad faith). 1.04 Disbursement of Funds. (a) Not later than 1:00 P.M. (New York time) on the date specified in each Notice of Borrowing (or (x) in the case of Swingline Loans, not later than 2:00 P.M. (New York time) on the date specified in Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, not later than 12:00 Noon (New York time) on the date specified in Section 1.01(C)), each Bank with a Commitment under the respective Facility will make available its pro rata share, if any, of each Borrowing requested to be made on such date (or in the case of Swingline Loans, Chase shall make available the full amount thereof) in the manner provided below. All amounts shall be made available to the Administrative Agent in U.S. dollars and immediately available funds at the Payment Office and the Administrative Agent promptly will make available to the Borrower by depositing to its account at the Payment Office the aggregate of the amounts so made available in the type of funds received. Unless the Administrative Agent shall have been notified by any Bank prior to the date of Borrowing that such Bank does not intend to make available to the Administrative Agent its portion of the Borrowing or Borrowings to be made on such date, the Administrative Agent may assume that such Bank has made such amount available to the Administrative Agent on such date of Borrowing, and the Administrative Agent, in reliance upon such assumption, may (in its sole discretion and without any obligation to do so) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Administrative Agent by such Bank and the Administrative Agent has made available same to the Borrower, the Administrative Agent shall be entitled to recover such corresponding amount from such Bank. If such Bank does not pay such corresponding amount forthwith upon the Administrative Agent's demand therefor, the Administrative Agent shall promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Administrative Agent. The Administrative Agent shall also be entitled to recover from the Bank or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Administrative Agent to the Borrower to the date such corresponding amount is recovered by the Administrative Agent, at a rate per annum equal to (x) if paid by such Bank, the overnight Federal Funds rate or (y) if paid by the Borrower, the then applicable rate of interest, calculated in accordance with Section 1.08, for the respective Loans. -6- 14 (b) Nothing herein shall be deemed to relieve any Bank from its obligation to fulfill its commitments hereunder or to prejudice any rights which the Borrower may have against any Bank as a result of any default by such Bank hereunder. 1.05 Evidence of Debt. (a) Each Bank shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Bank resulting from each Loan of such Bank from time to time, including the amounts of principal and interest payable and paid to such Bank from time to time under this Agreement. (b) The Administrative Agent shall maintain the Register pursuant to subsection 12.04(c), and a subaccount therein for each Bank, in which shall be recorded (i) the amount of each Revolving Loan and Term Loan made hereunder, the Type thereof and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Bank hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Bank's share thereof. (c) The entries made in the Register and the accounts of each Bank maintained pursuant to subsection 1.05(a) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Bank or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to such Borrower by such Bank in accordance with the terms of this Agreement. (d) The Borrower agrees that, upon the request to the Administrative Agent by any Bank, the Borrower will execute and deliver to such Bank (i) a promissory note of the Borrower evidencing the Revolving Loans of such Bank, substantially in the form of Exhibit B-4 with appropriate insertions as to date and principal amount (a "Revolving Note"), (ii) a promissory note of the Borrower evidencing the A Term Loan of such Bank, substantially in the form of Exhibit B-1 with appropriate insertions as to date and principal amount (an "A-Term Note"), (iii) a promissory note of the Borrower evidencing the B Term Loan of such Bank, substantially in the form of Exhibit B-2 with appropriate insertions as to date and principal amount (a "B-Term Note"), (iv) a promissory note of the Borrower evidencing the C Term Loan of such Bank, substantially in the form of Exhibit B-3 with appropriate insertions as to date and principal (a "C-Term Note"), (v) a promissory note of the Borrower evidencing the Swingline Loan of such Bank, substantially in the form of Exhibit B-5 with appropriate insertions as to date and principal amount (a "Swingline Note"). 1.06 Conversions. The Borrower shall have the option to convert on any Business Day occurring on or after the Initial Borrowing Date, all or a portion at least equal to the applicable Minimum Borrowing Amount of the outstanding principal amount of the Loans (other than Swingline Loans and Loans made on the Initial Borrowing Date, which at all times shall be maintained as Base Rate Loans) owing by the Borrower pursuant to a single Facility into a Borrowing or Borrowings of another Type of Loan under such Facility; provided that (i) except as otherwise provided in Section 1.10(b), no partial conversion of a Borrowing of Eurodollar Loans shall reduce the outstanding principal amount of the Eurodollar Loans made pursuant to such Borrowing to less than the Minimum Borrowing Amount applicable thereto, (ii) Base Rate Loans -7- 15 may only be converted into Eurodollar Loans if no Default or Event of Default is in existence on the date of the conversion unless the Required Banks otherwise agree, (iii) unless the Administrative Agent has determined that the Syndication Date has occurred (at which time this clause (iii) shall no longer be applicable), prior to the 90th day after the Initial Borrowing Date, conversions of Base Rate Loans into Eurodollar Loans may only be made if any such conversion is effective on the first day of the first, second or third Interest Periods referred to in clause (y) of each of Sections 1.01(A)(a)(iii), 1.01(A)(b)(iii) and 1.01(A)(c)(iii) and so long as such conversion does not result in a greater number of Borrowings of Eurodollar Loans prior to the 90th day after the Initial Borrowing Date as are permitted under such Sections and (iv) Borrowings of Eurodollar Loans resulting from this Section 1.06 shall be limited in number as provided in Section 1.02. Each such conversion shall be effected by the Borrower by giving the Administrative Agent at its Notice Office, prior to 3:00 P.M. (New York time), at least three Business Days' (or one Business Day's in the case of a conversion into Base Rate Loans) prior written notice (or telephonic notice promptly confirmed in writing) (each a "Notice of Conversion") specifying the Loans to be so converted, the Type of Loans to be converted into and, if to be converted into a Borrowing of Eurodollar Loans, the Interest Period to be initially applicable thereto. The Administrative Agent shall give each Bank prompt notice of any such proposed conversion affecting any of its Loans. 1.07 Pro Rata Borrowings. All Borrowings of Loans (other than Swingline Loans) under this Agreement shall be made by the Banks pro rata on the basis of their A Term Loan Commitments, B Term Loan Commitments, C Term Loan Commitments or Revolving Credit Commitments, as the case may be, subject to the provisions of the last three sentences of each of Section 1.01(A)(a), 1.01(A)(b) and 1.01(A)(c). It is understood that no Bank shall be responsible for any default by any other Bank of its obligation to make Loans hereunder and that each Bank shall be obligated to make the Loans to be made by it hereunder regardless of the failure of any other Bank to fulfill its commitments hereunder. 1.08 Interest. (a) The unpaid principal amount of each Base Rate Loan shall bear interest from the date of the Borrowing thereof until the earlier of (i) the maturity (whether by acceleration or otherwise) of such Base Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan pursuant to Section 1.06, at a rate per annum which shall at all times be the Applicable Base Rate Margin plus the Base Rate in effect from time to time. (b) The unpaid principal amount of each Eurodollar Loan shall bear interest from the date of the Borrowing thereof until the earlier of (i) the maturity (whether by acceleration or otherwise) of such Eurodollar Loan and (ii) the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10(b), as applicable, at a rate per annum which shall at all times be the Applicable Eurodollar Margin plus the relevant Eurodollar Rate. (c) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan and other amounts (which other amounts are overdue more than five days) owed by any Credit Party under the Credit Documents shall bear interest at a rate per annum equal to (x) in the case of principal, the rate which is 2% in excess of the rate then borne by such Loans, (y) in the case of interest, the rate which is 2% in excess of the rate otherwise applicable to Base Rate Loans of the applicable Facility from time to time and (z) in the case of such other amounts, the rate which is 2% in excess of the rate otherwise applicable to Base Rate Loans of the Revolving -8- 16 Facility from time to time. Interest which accrues under this Section 1.08(c) shall be payable on demand. (d) Interest shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof and shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears on each Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, on (x) the date of any prepayment or repayment thereof (on the amount prepaid or repaid), (y) the date of any conversion into a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10(b), as applicable (on the amount converted) and (z) the last day of each Interest Period applicable thereto and, in the case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period and (iii) in respect of each Loan, at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. (e) All computations of interest hereunder shall be made in accordance with Section 12.07(b). (f) The Administrative Agent, upon determining the interest rate for any Borrowing of Eurodollar Loans for any Interest Period, shall promptly notify the Borrower and the Banks thereof. 1.09 Interest Periods. At the time the Borrower gives a Notice of Borrowing or Notice of Conversion in respect of the making of, or conversion into, a Borrowing of Eurodollar Loans (in the case of the initial Interest Period applicable thereto) or prior to 3:00 P.M. (New York time) on the third Business Day prior to the expiration of an Interest Period applicable to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving the Administrative Agent written notice (or telephonic notice promptly confirmed in writing) of the Interest Period applicable to such Borrowing, which Interest Period shall, at the option of the Borrower, be a one, two, three or six month period. Notwithstanding anything to the contrary contained above: (i) all Eurodollar Loans comprising a Borrowing shall have the same Interest Period; (ii) the initial Interest Period for any Borrowing of Eurodollar Loans shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of Base Rate Loans) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires; (iii) if any Interest Period begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iv) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, provided that if any Interest Period would otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; -9- 17 (v) no Interest Period for a Borrowing under a Facility may be elected if it would extend beyond the respective Maturity Date for such Facility; (vi) no Interest Period may be elected at any time when a Default or an Event of Default is then in existence unless the Required Banks otherwise agree; and (vii) no Interest Period with respect to any Borrowing of Term Loans shall extend beyond any date upon which a mandatory prepayment of such Term Loans is required to be made under Section 4.02(A)(b) (i), (ii) or (iii), as the case may be, if, after giving effect to the selection of such Interest Period, the aggregate principal amount of such Term Loans maintained as Eurodollar Loans with Interest Periods ending after such date of mandatory repayment would exceed the aggregate principal amount of such Term Loans permitted to be outstanding after such mandatory prepayment. If upon the expiration of any Interest Period, the Borrower has failed to elect, or is not permitted to elect by virtue of the application of clause (vi) above, a new Interest Period to be applicable to the respective Borrowing of Eurodollar Loans as provided above, the Borrower shall be deemed to have elected to convert such Borrowing into a Borrowing of Base Rate Loans effective as of the expiration date of such current Interest Period. 1.10 Increased Costs, Illegality, etc. (a) In the event that (x) in the case of clause (i) below, the Administrative Agent or (y) in the case of clauses (ii) and (iii) below, any Bank, shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto): (i) on any date for determining the Eurodollar Rate for any Interest Period, that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate; or (ii) at any time, that such Bank shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loans (other than any increased cost or reduction in the amount received or receivable resulting from the imposition of or a change in the rate of net income taxes, assessments or similar charges imposed in lieu of net income taxes) because of (x) any change since the date of this Agreement in any applicable law, governmental rule, regulation, guideline, order or request (whether or not having the force of law), or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, guideline, order or request (such as, for example, but not limited to, a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate) and/or (y) other circumstances affecting such Bank, the interbank Eurodollar market or the position of such Bank in such market; or (iii) at any time since the date of this Agreement, that the making or continuance of any Eurodollar Loan has become unlawful by compliance by such Bank in good faith with any law, governmental rule, regulation, guideline or order (or would conflict with any -10- 18 such governmental rule, regulation, guideline or order not having the force of law but with which such Bank customarily complies even though the failure to comply therewith would not be unlawful), or has become impracticable as a result of a contingency occurring after the date of this Agreement which materially and adversely affects the interbank Eurodollar market; then, and in any such event, such Bank (or the Administrative Agent in the case of clause (i) above) shall (x) on such date and (y) within five Business Days of the date on which such event no longer exists give notice (by telephone confirmed in writing) to the Borrower and (except in the case of clause (i)) to the Administrative Agent of such determination (which notice the Administrative Agent shall promptly transmit to each of the other Banks). Thereafter, (x) in the case of clause (i) above, Eurodollar Loans shall no longer be available until such time as the Administrative Agent notifies the Borrower and the Banks that the circumstances giving rise to such notice by the Administrative Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower with respect to Eurodollar Loans which have not yet been incurred shall be deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower agrees to pay to such Bank, upon written demand therefor (accompanied by the written notice referred to below), such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Bank in its sole discretion shall determine) as shall be required to compensate such Bank for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Bank, showing the basis for the calculation thereof, submitted to the Borrower by such Bank shall, absent manifest error, be presumed to be final and conclusive and binding upon all parties hereto) and (z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in Section 1.10(b) as promptly as possible and, in any event, within the time period required by law. (b) At any time that any Eurodollar Loan is affected by the circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii) the Borrower shall) either (i) if the affected Eurodollar Loan is then being made pursuant to a Borrowing, cancel said Borrowing by giving the Administrative Agent telephonic notice (confirmed promptly in writing) thereof on the same date that the Borrower was notified by a Bank pursuant to Section 1.10(a)(ii) or (iii)), or (ii) if the affected Eurodollar Loan is then outstanding, upon at least three Business Days' notice to the Administrative Agent, require the affected Bank to convert each such Eurodollar Loan into a Base Rate Loan (which conversion, in the case of the circumstances described in Section 1.10(a)(iii), shall occur no later than the last day of the Interest Period then applicable to such Eurodollar Loan (or such earlier date as shall be required by applicable law)); provided that if more than one Bank is affected at any time, then all affected Banks must be treated the same pursuant to this Section 1.10(b). (c) If any Bank shall have determined that after the date hereof, the adoption or effectiveness of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Bank or any corporation controlling such Bank with any request or directive regarding capital adequacy issued after the date hereof (whether or not having the force of -11- 19 law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Bank's or such other corporation's capital or assets as a consequence of such Bank's Commitments or obligations hereunder to a level below that which such Bank or such other corporation could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Bank's or such other corporation's policies with respect to capital adequacy), then from time to time, upon written demand by such Bank (with a copy to the Administrative Agent), accompanied by the notice referred to in the last sentence of this clause (c), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank or such other corporation for such reduction. Each Bank, upon determining in good faith that any additional amounts will be payable pursuant to this Section 1.10(c), will give prompt written notice thereof to the Borrower, which notice shall set forth the basis of the calculation of such additional amounts, although the failure to give any such notice shall not release or diminish the Borrower's obligations to pay additional amounts pursuant to this Section 1.10(c) upon the subsequent receipt of such notice. 1.11 Compensation. The Borrower shall compensate each Bank, upon its written request (which request shall set forth the basis for requesting such compensation), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Bank to fund its Eurodollar Loans but excluding loss of anticipated profit with respect to any Eurodollar Loans) which such Bank may sustain: (i) if for any reason (other than a default by such Bank or the Administrative Agent) a Borrowing of Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any repayment (including any repayment made pursuant to Section 4.01 or 4.02 or as a result of an acceleration of the Loans pursuant to Section 9) or conversion of any Eurodollar Loans occurs on a date which is not the last day of an Interest Period applicable thereto; (iii) if any prepayment of any Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any other default by the Borrower to repay its Eurodollar Loans when required by the terms of this Agreement or (y) an election made pursuant to Section 1.10(b). Calculation of all amounts payable to a Bank under this Section 1.11 shall be made as though that Bank had actually funded its relevant Eurodollar Loan through the purchase of a Eurodollar deposit bearing interest at the Eurodollar Rate in an amount equal to the amount of that Loan, having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of that Bank to a domestic office of that Bank in the United States of America; provided, however, that each Bank may fund each of its Eurodollar Loans in any manner it sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under this Section 1.11. It is further understood and agreed that if any repayment of Eurodollar Loans pursuant to Section 4.01 or any conversion of Eurodollar Loans pursuant to Section 1.06 in either case occurs on a date which is not the last day of an Interest Period applicable thereto, such repayment or conversion shall be accompanied by any amounts owing to any Bank pursuant to this Section 1.11. 1.12 Change of Lending Office. Each Bank agrees that, upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), 1.10(c), 2.05 or 4.04 with respect to such Bank, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Bank) to designate another lending office for any Loans or -12- 20 Letters of Credit affected by such event; provided that such designation is made on such terms that, in the sole judgment of such Bank, such Bank and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequences of the event giving rise to the operation of any such Section. Nothing in this Section 1.12 shall affect or postpone any of the obligations of the Borrower or the right of any Bank provided in Section 1.10, 2.05 or 4.04. 1.13 Replacement of Banks. (x) If any Bank becomes a Defaulting Bank, (y) upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect to any Bank which results in such Bank charging to the Borrower increased costs in excess of those being generally charged by the other Banks or (z) in the case of a refusal by a Bank to consent to a proposed change, waiver, discharge or termination with respect to this Agreement which has been approved by the Required Banks as provided in Section 12.12(b), the Borrower shall have the right, if no Default or Event of Default then exists or, in the case of clause (z) above, would exist after giving effect to such replacement, to replace such Bank (the "Replaced Bank") with one or more other Eligible Transferee or Eligible Transferees, none of whom shall constitute a Defaulting Bank at the time of such replacement (collectively, the "Replacement Bank") and each of whom shall be reasonably acceptable to the Administrative Agent, provided that (i) at the time of any replacement pursuant to this Section 1.13, the Replacement Bank shall enter into one or more Assignment and Assumption Agreements pursuant to Section 12.04(b) (and with all fees payable pursuant to said Section 12.04(b) to be paid by the Replacement Bank) pursuant to which the Replacement Bank shall acquire all of the Commitments and outstanding Loans of, and in each case participations in Letters of Credit and Swingline Loans by, the Replaced Bank and, in connection therewith, shall pay to (x) the Replaced Bank in respect thereof an amount equal to the sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Replaced Bank, (B) an amount equal to all Unpaid Drawings that have been funded by (and not reimbursed to) such Replaced Bank, together with all then unpaid interest with respect thereto at such time and (C) an amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced Bank pursuant to Section 3.01, (y) the Letter of Credit Issuer an amount equal to such Replaced Bank's Revolving Percentage of any Unpaid Drawing relating to a Letter of Credit (which at such time remains an Unpaid Drawing) to the extent such amount was not theretofore funded by such Replaced Bank and (z) Chase an amount equal to such Replaced Bank's Revolving Percentage of any Mandatory Borrowing to the extent such amount was not theretofore funded by such Replaced Bank, and (ii) all obligations of the Borrower owing to the Replaced Bank (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid) shall be paid in full to such Replaced Bank concurrently with such replacement. Upon the execution of the respective Assignment and Assumption Agreements, the payment of amounts referred to in clauses (i) and (ii) above, recordation of the assignment on the Register by the Administrative Agent pursuant to Section 7.13 and, if so requested by the Replacement Bank, delivery to the Replacement Bank of the appropriate Note or Notes executed by the Borrower, the Replacement Bank shall become a Bank hereunder and the Replaced Bank shall cease to constitute a Bank hereunder, except with respect to indemnification provisions under this Agreement, which shall survive as to such Replaced Bank. -13- 21 SECTION 2. Letters of Credit. 2.01 Letters of Credit. (a) The Existing Letters of Credit were issued prior to the Initial Borrowing Date pursuant to the Existing Credit Agreement. The Existing Letters of Credit shall be deemed to be reissued on the Initial Borrowing Date and shall become Letters of Credit hereunder. Subject to and upon the terms and conditions herein set forth, the Borrower may request the Letter of Credit Issuer at any time and from time to time on or after the Initial Borrowing Date and prior to the fifth Business Day (or the 30th day in the case of trade Letters of Credit) preceding the Revolving Loan Maturity Date to issue, for the account of the Borrower and in support of (i) trade obligations of the Borrower or any of its Subsidiaries that arise in the ordinary course of business and are in respect of general corporate purposes of the Borrower or any of its Subsidiaries, as the case may be, and/or (ii) on a standby basis, L/C Supportable Indebtedness of the Borrower or any of its Subsidiaries to any other Person, irrevocable letters of credit in such form as may be approved by the Letter of Credit Issuer, and subject to and upon the terms and conditions herein set forth, the Letter of Credit Issuer in each case agrees to issue from time to time Letters of Credit (each Existing Letter of Credit and each such letter of credit issued pursuant to this paragraph (a), a "Letter of Credit" and, collectively, the "Letters of Credit"). Notwithstanding the foregoing, the Letter of Credit Issuer shall not be under any obligation to issue any Letter of Credit if at the time of such issuance: (x) any order, judgment or decree of any governmental authority or arbitrator shall purport by its terms to enjoin or restrain the Letter of Credit Issuer from issuing such Letter of Credit or any requirement of law applicable to the Letter of Credit Issuer or any request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over the Letter of Credit Issuer shall prohibit, or request that the Letter of Credit Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Letter of Credit Issuer with respect to such Letter of Credit any restriction or reserve or capital requirement (for which the Letter of Credit Issuer is not otherwise compensated) not in effect on the date hereof, or any unreimbursed loss, cost or expense which was not applicable, in effect or known to the Letter of Credit Issuer as of the date hereof and which the Letter of Credit Issuer in good faith deems material to it; or (y) the Letter of Credit Issuer shall have received notice from the Borrower or the Required Banks prior to the issuance of such Letter of Credit of the type described in clause (vi) of Section 2.01(b). (b) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letter of Credit Outstandings (exclusive of Unpaid Drawings relating to Letters of Credit which are repaid on the date of, and prior to the issuance of, the respective Letter of Credit) at such time, would exceed either (x) $20,000,000 or (y) when added to the aggregate principal amount of all Revolving Loans and Swingline Loans then outstanding, the Total Revolving Credit Commitment at such time; (ii) (x) each standby Letter of Credit shall have an expiry date occurring not later than one year after such Letter of Credit's date of issuance, provided that any such Letter of Credit may be automatically extendable for periods of up to one year so long as such Letter of Credit provides that the Letter of Credit Issuer retains an option, satisfactory to the Letter of Credit Issuer, to terminate such Letter of Credit within a specified -14- 22 period of time prior to each scheduled extension date and (y) each trade Letter of Credit shall have an expiry date occurring not later than 180 days after such Letter of Credit's date of issuance; (iii)(x) no standby Letter of Credit shall have an expiry date occurring later than the fifth Business Day next preceding the Revolving Loan Maturity Date and (y) no trade Letter of Credit shall have an expiry date occurring later than 30 days prior to the Revolving Loan Maturity Date; (iv) each Letter of Credit shall be denominated in U.S. Dollars; (v) the Stated Amount of each Letter of Credit shall not be less than $100,000 or such lesser amount as is acceptable to the Letter of Credit Issuer; and (vi) the Letter of Credit Issuer will not issue any Letter of Credit after it has received written notice from the Borrower or the Required Banks stating that a Default or an Event of Default exists until such time as the Letter of Credit Issuer shall have received a written notice of (x) rescission of such notice from the party or parties originally delivering the same or (y) a waiver of such Default or Event of Default by the Majority Banks under the Revolving Credit Facility. (c) Notwithstanding the foregoing, in the event a Bank Default exists, the Letter of Credit Issuer shall not be required to issue any Letter of Credit unless the Letter of Credit Issuer has entered into arrangements satisfactory to it and the Borrower to eliminate the Letter of Credit Issuer's risk with respect to the participation in Letters of Credit of the Defaulting Bank or Banks, including by cash collateralizing such Defaulting Bank's or Banks' Revolving Percentage of the applicable Letter of Credit Outstandings. 2.02 Letter of Credit Requests; Notices of Issuance. (a) Whenever it desires that a Letter of Credit be issued, the Borrower shall give the Administrative Agent and the Letter of Credit Issuer written notice (or telephonic notice confirmed in writing) thereof prior to 12:00 Noon (New York time) at least five Business Days (or such shorter period as may be acceptable to the Letter of Credit Issuer) prior to the proposed date of issuance (which shall be a Business Day) which written notice shall be in the form of Exhibit A-2 (each, a "Letter of Credit Request"). Each Letter of Credit Request shall include any other documents as the Letter of Credit Issuer customarily requires in connection therewith. The Administrative Agent shall promptly transmit copies of each Letter of Credit Request to each Bank. (b) The Letter of Credit Issuer shall, on the date of each issuance of, or amendment or modification to, a Letter of Credit issued by it, give the Administrative Agent, each Bank and the Borrower written notice of the issuance of, or amendment or modification to, such Letter of Credit, accompanied by a copy to the Administrative Agent of the Letter of Credit or Letters of Credit issued by it and each such amendment or modification thereto. 2.03 Agreement to Repay Letter of Credit Drawings. (a) The Borrower hereby agrees to reimburse the Letter of Credit Issuer, by making payment to the Administrative Agent in immediately available funds at the Payment Office, for any payment or disbursement made by the Letter of Credit Issuer under any Letter of Credit issued by it (each such amount so paid or disbursed until reimbursed, an "Unpaid Drawing") no later than two Business Days following the date of such payment or disbursement, with interest on the amount so paid or disbursed by the Letter of Credit Issuer, to the extent not reimbursed prior to 1:00 P.M. (New York time) on the date of such payment or disbursement, from and including the date paid or disbursed to but not including the date the Letter of Credit Issuer is reimbursed therefor at a rate per annum which shall be the Applicable Base Rate Margin plus the Base Rate as in effect from time to time for Revolving Loans (plus an additional 2% per annum if not reimbursed by the third Business Day after the date -15- 23 of such payment or disbursement), such interest also to be payable on demand. The Letter of Credit Issuer shall provide the Borrower prompt notice of any payment or disbursement made by it under any Letter of Credit issued by it, although the failure of, or delay in, giving any such notice shall not release or diminish the obligations of the Borrower under this Section 2.03(a) or under any other Section of this Agreement. (b) The Borrower's obligation under this Section 2.03 to reimburse the Letter of Credit Issuer with respect to Unpaid Drawings (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower or any of its Subsidiaries may have or have had against the Letter of Credit Issuer, any Agent or any Bank, including, without limitation, any defense based upon the failure of any drawing under a Letter of Credit to conform to the terms of the Letter of Credit or any nonapplication or misapplication by the beneficiary of the proceeds of such drawing; provided, however, that the Borrower shall not be obligated to reimburse the Letter of Credit Issuer for any wrongful payment made by the Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of the Letter of Credit Issuer. 2.04 Letter of Credit Participations. (a) Effective on the Initial Borrowing Date (in the case of each Existing Letter of Credit) and effective immediately upon the issuance by the Letter of Credit Issuer of any Letter of Credit (in the case of any Letter of Credit issued on or after the Initial Borrowing Date), the Letter of Credit Issuer in respect of such Letter of Credit shall be deemed to have sold and transferred to each other Revolving Bank, and each such Revolving Bank (each a "Participant") shall be deemed irrevocably and unconditionally to have purchased and received from such Letter of Credit Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Participant's Revolving Percentage, in such Letter of Credit, each substitute letter of credit, each drawing made thereunder and the obligations of the Borrower under this Agreement with respect thereto (although Letter of Credit Fees shall be payable directly to the Administrative Agent for the account of the Revolving Banks as provided in Section 3.01(b) and the Participants shall have no right to receive any portion of any Facing Fees with respect to such Letters of Credit) and any security therefor or guaranty pertaining thereto. Upon any change in the Revolving Credit Commitments of the Revolving Banks pursuant to Section 1.13 or 12.04(b), it is hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings with respect thereto, there shall be an automatic adjustment to the participations pursuant to this Section 2.04 to reflect the new Revolving Percentages of the assigning and assignee Bank. (b) In determining whether to pay under any Letter of Credit, the Letter of Credit Issuer shall not have any obligation relative to the respective Participants other than to determine that any documents required to be delivered under such Letter of Credit have been delivered and that they appear to substantially comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by the Letter of Credit Issuer under or in connection with any Letter of Credit if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for the Letter of Credit Issuer any resulting liability. (c) In the event that the Letter of Credit Issuer makes any payment under any Letter of Credit and the Borrower shall not have reimbursed such amount in full to the Letter of Credit Issuer pursuant to Section 2.03(a), the Letter of Credit Issuer shall promptly notify the -16- 24 Administrative Agent, and the Administrative Agent shall promptly notify each Participant of such failure, and each such Participant shall promptly and unconditionally pay to the Administrative Agent for the account of the Letter of Credit Issuer, the amount of such Participant's Revolving Percentage of such payment in U.S. Dollars and in same day funds; provided, however, that no Participant shall be obligated to pay to the Administrative Agent its Revolving Percentage of such unreimbursed amount for any wrongful payment made by the Letter of Credit Issuer under a Letter of Credit as a result of acts or omissions constituting willful misconduct or gross negligence on the part of the Letter of Credit Issuer. If the Administrative Agent so notifies any Participant prior to 11:00 A.M. (New York time) on any Business Day, such Participant shall make available to the Administrative Agent for the account of the Letter of Credit Issuer such Participant's Revolving Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such Participant shall not have so made its Revolving Percentage of the amount of such payment available to the Administrative Agent for the account of the Letter of Credit Issuer, such Participant agrees to pay to the Administrative Agent for the account of the Letter of Credit Issuer, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent for the account of the Letter of Credit Issuer at the overnight Federal Funds rate. The failure of any Participant to make available to the Administrative Agent for the account of the Letter of Credit Issuer its Revolving Percentage of any payment under any Letter of Credit shall not relieve any other Participant of its obligation hereunder to make available to the Administrative Agent for the account of the Letter of Credit Issuer its Revolving Percentage of any payment under any Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to the Administrative Agent for the account of the Letter of Credit Issuer such other Participant's Revolving Percentage of any such payment. (d) Whenever the Letter of Credit Issuer receives a payment of a reimbursement obligation as to which the Administrative Agent has received for the account of the Letter of Credit Issuer any payments from the Revolving Participants pursuant to clause (c) above, the Letter of Credit Issuer shall pay to the Administrative Agent and the Administrative Agent shall promptly pay to each such Participant which has paid its Revolving Percentage thereof, in U.S. Dollars and in same day funds, an amount equal to such Participant's Revolving Percentage of the principal amount thereof and interest thereon accruing after the purchase of the respective participations. (e) The obligations of the Participants to make payments to the Administrative Agent for the account of the Letter of Credit Issuer with respect to Letters of Credit shall be irrevocable and not subject to counterclaim, set-off or other defense or any other qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Credit Documents; (ii) the existence of any claim, set-off, defense or other right which the Borrower or any of its Subsidiaries may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Administrative Agent, the Letter of Credit Issuer, any Bank, -17- 25 or other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower or any of its Subsidiaries and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents; or (v) the occurrence of any Default or Event of Default. 2.05 Increased Costs. If after the date hereof, the adoption or effectiveness of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by the Letter of Credit Issuer or any Participant with any request or directive issued after the date hereof (whether or not having the force of law) by any such authority, central bank or comparable agency shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against Letters of Credit issued by the Letter of Credit Issuer or such Participant's participation therein, or (ii) impose on the Letter of Credit Issuer or any Participant any other conditions affecting this Agreement, any Letter of Credit or such Participant's participation therein; and the result of any of the foregoing is to increase the cost to the Letter of Credit Issuer or such Participant of issuing, maintaining or participating in any Letter of Credit, or to reduce the amount of any sum received or receivable by the Letter of Credit Issuer or such Participant hereunder, then, upon written demand to the Borrower by the Letter of Credit Issuer or such Participant (a copy of which notice shall be sent by the Letter of Credit Issuer or such Participant to the Administrative Agent), accompanied by the certificate described in the last sentence of this Section 2.05, the Borrower shall pay to the Letter of Credit Issuer or such Participant such additional amount or amounts as will compensate the Letter of Credit Issuer or such Participant for such increased cost or reduction. A certificate submitted to the Borrower by the Letter of Credit Issuer or such Participant, as the case may be (a copy of which certificate shall be sent by the Letter of Credit Issuer or such Participant to the Administrative Agent), setting forth the basis for the determination of such additional amount or amounts necessary to compensate the Letter of Credit Issuer or such Participant as aforesaid shall be final and conclusive and binding on the Borrower absent manifest error, although the failure to deliver any such certificate shall not release or diminish the Borrower's obligations to pay additional amounts pursuant to this Section 2.05 upon subsequent receipt of such certificate. -18- 26 SECTION 3. Fees; Commitments. 3.01 Fees. (a) The Borrower shall pay to the Administrative Agent for distribution to each Bank a commitment fee (the "Commitment Fee") for the period from the Effective Date to but not including the date the Total Commitment has been terminated, computed at the rate of 1/2 of 1% per annum on the daily Aggregate Unutilized Commitment of such Bank. Accrued Commitment Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and the date upon which the Total Commitment is terminated. From and after the first day of any Margin Adjustment Period (the "Start Date") to and including the last day of such Margin Adjustment Period, the Commitment Fee shall be the respective percentage per annum set forth in clause (A) or (B) below if, but only if, as of the last day of the most recent fiscal quarter or year, as the case may be, ended immediately prior to such Start Date (the "Test Date"), the conditions set forth in clause (A) or (B) below are met: (A) 1/2 of 1% per annum if the Leverage Ratio on such Test Date is greater than 5.00:1.0; (B) 3/8 of 1% per annum if the Leverage Ratio on such Test Date is less than or equal to 5.00:1.0. Notwithstanding anything to the contrary contained in the immediately preceding sentence, (i) the Commitment Fee shall be 1/2 of 1% per annum at any time when an Event of Default shall exist and (ii) the Commitment Fee shall be 3/8 of 1% per annum prior to the date which is nine months after the Initial Borrowing Date. (b) The Borrower shall pay to the Administrative Agent for the account of the Revolving Banks pro rata on the basis of their Revolving Percentages, a fee in respect of each Letter of Credit (the "Letter of Credit Fee") computed at a rate per annum equal to the Applicable Eurodollar Margin then in effect with respect to Revolving Loans on the daily Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and upon the first day on or after the termination of the Total Revolving Credit Commitment upon which no Letters of Credit remain outstanding. (c) The Borrower shall pay to the Administrative Agent for the account of the Letter of Credit Issuer a fee in respect of each Letter of Credit issued by the Letter of Credit Issuer (the "Facing Fee") computed at the rate of 1/4 of 1% per annum on the daily Stated Amount of such Letter of Credit, provided that in no event shall the annual Facing Fee with respect to each Letter of Credit be less than $500; it being agreed that, on the date of issuance of any Letter of Credit and on each anniversary thereof prior to the termination of such Letter of Credit, if $500 will exceed the amount of Facing Fees that will accrue with respect to such Letter of Credit for the immediately succeeding 12-month period, the full $500 shall be payable on the date of issuance of such Letter of Credit and on each such anniversary thereof prior to the termination of such Letter of Credit. Except as provided in the immediately preceding sentence, accrued Facing Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and upon the first day on or after the termination of the Total Commitment upon which no Letters of Credit remain outstanding. -19- 27 (d) The Borrower shall pay directly to the Letter of Credit Issuer upon each issuance of, drawing under, and/or amendment of, a Letter of Credit such amount as shall at the time of such issuance, drawing or amendment be the administrative charge which the Letter of Credit Issuer is customarily charging for issuances of, drawings under or amendments of, letters of credit issued by it. (e) The Borrower shall pay to each Agent, for its own account, such fees as may be agreed to from time to time between the Borrower and such Agent, when and as due. (f) All computations of Fees shall be made in accordance with Section 12.07(b). 3.02 Voluntary Termination or Reduction of Commitments. (a) Upon at least two Business Days' prior written notice (or telephonic notice promptly confirmed in writing) to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Banks), the Borrower shall have the right, without premium or penalty, to terminate or partially reduce the Total Unutilized Revolving Credit Commitment, provided that (x) any such termination or partial reduction shall apply to proportionately and permanently reduce the Revolving Credit Commitment of each of the Revolving Banks and (y) any partial reduction pursuant to this Section 3.02 shall be in the amount of at least $500,000 and increments of $100,000 in excess thereof. (b) In the event of certain refusals by a Bank to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Banks as provided in Section 12.12(b), the Borrower shall have the right, upon five Business Days' prior written notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Banks), to (i) require such Bank to assign its entire Revolving Credit Commitment and all Loans, Fees and other amounts owing to such Bank to another Bank or Banks (which would agree to provide the consent refused by the assignor Bank) pursuant to subsection 12.04(b), if such other Bank or Banks consent to such assignment, or (ii) terminate the entire Revolving Credit Commitment of such Bank, so long as all Loans, together with accrued and unpaid interest, Fees and all other amounts, owing to such Bank are repaid concurrently with the effectiveness of such termination pursuant to Section 4.01(b) and the Borrower shall pay to the Administrative Agent at such time an amount in cash and/or Cash Equivalents equal to such Bank's Revolving Percentage of the outstanding Letters of Credit (which cash and/or Cash Equivalents shall be held by the Administrative Agent as security for the obligations of the Borrower hereunder in respect of the outstanding Letters of Credit pursuant to a cash collateral agreement to be entered into in form and substance reasonably satisfactory to the Administrative Agent, which shall permit certain investments in Cash Equivalents reasonably satisfactory to the Administrative Agent until the proceeds are applied to the secured obligations or are released to the Borrower upon termination of the respective Letter of Credit) (at which time Annex I shall be deemed modified to reflect such changed amounts), and at such time, such Bank shall no longer constitute a "Bank" for purposes of this Agreement, except with respect to indemnifications under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 12.01 and 12.06), which shall survive as to such repaid Bank. -20- 28 3.03 Mandatory Adjustments of Commitments, etc. (a) The Total Commitment shall terminate in its entirety on January 31, 1998 unless the Initial Borrowing Date has occurred on or before such date. (b) Each of the Total A Term Loan Commitment, the Total B Term Loan Commitment and the Total C Term Loan Commitment shall terminate in its entirety on the Second Borrowing Date, after giving effect to the making of the respective Term Loans on such date. (c) The Total Revolving Credit Commitment (and the Revolving Credit Commitment of each Revolving Bank) shall terminate in their entirety on the earlier of (i) the date on which a Change of Control Event occurs and (ii) the Revolving Loan Maturity Date. (d) From and after payment in full of the Term Loans, on each date upon which a mandatory repayment of Term Loans pursuant to Section 4.02(A)(c), (d), (e) or (f) would otherwise be required, the Total Revolving Credit Commitment shall be permanently reduced by the amount, if any, required to be applied pursuant to said Sections. (e) Each reduction of the Total A Term Loan Commitment, the Total B Term Loan Commitment, the Total C Term Loan Commitment or the Total Revolving Credit Commitment pursuant to this Section 3.03 shall apply proportionately to the A Term Loan Commitment, the B Term Loan Commitment, the C Term Loan Commitment or the Revolving Credit Commitment, as the case may be, of each Bank. SECTION 4. Payments. 4.01 Voluntary Prepayments. (a) The Borrower shall have the right to prepay the Loans, in whole or in part, without premium or penalty except as otherwise provided in this Agreement, from time to time on the following terms and conditions: (i) the Borrower shall give the Administrative Agent at its Notice Office written notice (or telephonic notice promptly confirmed in writing) of its intent to prepay the Loans, whether such Loans are A Term Loans, B Term Loans, C Term Loans, Revolving Loans or Swingline Loans, the amount of such prepayment and (in the case of Eurodollar Loans) the specific Borrowing(s) pursuant to which made, which notice shall be given by the Borrower prior to 3:00 P.M. (New York time) (x) at least one Business Day prior to the date of such prepayment in the case of Term Loans or Revolving Loans and (y) on the date of such prepayment in the case of Swingline Loans, which notice shall, except in the case of Swingline Loans, promptly be transmitted by the Administrative Agent to each of the Banks; (ii) each prepayment shall be in an aggregate principal amount of at least $500,000 (or $25,000 in the case of Swingline Loans) and in increments of $100,000 (or $10,000, in the case of Swingline Loans) in excess thereof, provided that no partial prepayment of Eurodollar Loans made pursuant to a Borrowing shall reduce the aggregate principal amount of the Loans outstanding pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount applicable thereto; (iii) each prepayment in respect of any Loans made pursuant to a Borrowing shall be applied pro rata among such Loans, provided that at the Borrower's election in connection with any prepayment of Revolving Loans pursuant to this Section 4.01(a), such prepayment shall not be applied to any Revolving Loans of a Defaulting Bank at any time when the aggregate amount of Revolving Loans of any Non-Defaulting Bank exceeds such Non-Defaulting Bank's Revolving Percentage of all Revolving Loans then outstanding; (iv) each prepayment of Term Loans pursuant -21- 29 to this Section 4.01(a) must consist of a prepayment of A Term Loans (in an amount equal to the A TL Percentage of such prepayment), B Term Loans (in an amount equal to the B TL Percentage of such prepayment) and C Term Loans (in an amount equal to the C TL Percentage of such prepayment); (v) each prepayment of A Term Loans pursuant to this Section 4.01(a) shall reduce the then remaining Scheduled A Repayments on a pro rata basis (based upon the then remaining principal amount of each such Scheduled A Repayment); (vi) each prepayment of B Term Loans pursuant to this Section 4.01(a) shall reduce the then remaining Scheduled B Repayments on a pro rata basis (based upon the then remaining principal amount of each such Scheduled B Repayment); and (vii) each prepayment of C Term Loans pursuant to this Section 4.01(a) shall reduce the then remaining Scheduled C Repayments on a pro rata basis (based upon the then remaining principal amount of each such Scheduled C Repayment). (b) In the event of certain refusals by a Bank to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Banks as provided in Section 12.12(b), the Borrower shall have the right, upon five Business Days' prior written notice to the Administrative Agent at its Notice Office (which notice the Administrative Agent shall promptly transmit to each of the Banks) to repay all Loans, together with accrued and unpaid interest, Fees and all other amounts owing to such Bank in accordance with said Section 12.12(b) so long as (A) in the case of the repayment of Revolving Loans of any Revolving Bank pursuant to this paragraph (b) the Revolving Credit Commitment of such Revolving Bank is terminated concurrently with such repayment pursuant to Section 3.02(b) (at which time Annex I shall be deemed modified to reflect the changed Revolving Credit Commitments) and (B) in the case the repayment of Loans of any Bank the consents required by Section 12.12(b) in connection with the repayment pursuant to this paragraph (b) shall have been obtained. 4.02 Mandatory Prepayments. (A) Requirements: (a) If on any date the sum of (i) the aggregate outstanding principal amount of Revolving Loans and Swingline Loans (after giving effect to all other repayments thereof on such date) plus (ii) the Letter of Credit Outstandings on such date exceeds the Total Revolving Credit Commitment as then in effect, the Borrower shall repay on such date the principal of Swingline Loans, and if no Swingline Loans are or remain outstanding, Revolving Loans in an aggregate amount equal to such excess. If, after giving effect to the prepayment of all outstanding Swingline Loans and Revolving Loans, the aggregate amount of Letter of Credit Outstandings exceeds the Total Revolving Credit Commitment as then in effect, the Borrower shall pay to the Administrative Agent on such date an amount in cash and/or Cash Equivalents equal to such excess (up to the aggregate amount of Letter of Credit Outstandings at such time) and the Administrative Agent shall hold such payment as security for the obligations of the Borrower hereunder pursuant to a cash collateral agreement to be entered into in form and substance reasonably satisfactory to the Administrative Agent (which shall permit certain investments in Cash Equivalents reasonably satisfactory to the Administrative Agent until the proceeds are applied to the secured obligations or are released to the Borrower upon termination of the applicable Letter of Credit). -22- 30 (b) (i) The Borrower shall be required to repay the principal amount of A Term Loans on each date set forth below in the amount set forth opposite such date below (each such repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(B)(b), a "Scheduled A Repayment"):
Scheduled A Repayment Date Amount -------------------------- ------ the last Business Day in September, 1999 $5,000,000.00 the last Business Day in December, 1999 5,000,000.00 the last Business Day in March, 2000 5,000,000.00 the last Business Day in June, 2000 5,000,000.00 the last Business Day in September, 2000 5,000,000.00 the last Business Day in December, 2000 5,000,000.00 the last Business Day in March, 2001 7,500,000.00 the last Business Day in June, 2001 7,500,000.00 the last Business Day in September, 2001 7,500,000.00 the last Business Day in December, 2001 7,500,000.00 the last Business Day in March, 2002 10,000,000.00 the last Business Day in June, 2002 10,000,000.00 the last Business Day in September, 2002 10,000,000.00 the last Business Day in December 2002 10,000,000.00 the last Business Day in March, 2003 12,500,000.00 the last Business Day in June, 2003 12,500,000.00 the last Business Day in September, 2003 12,500,000.00 A Term Loan Maturity Date 12,500,000.00
(ii) The Borrower shall be required to repay the principal amount of B Term Loans on each date set forth below in the amount set forth opposite such date below (each such repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(B)(b), a "Scheduled B Repayment"):
Scheduled B Repayment Date Amount -------------------------- ------ the last Business Day in September, 1999 $250,000.00 the last Business Day in December, 1999 250,000.00 the last Business Day in March, 2000 250,000.00 the last Business Day in June, 2000 250,000.00 the last Business Day in September, 2000 250,000.00 the last Business Day in December, 2000 250,000.00 the last Business Day in March, 2001 250,000.00 the last Business Day in June, 2001 250,000.00
-23- 31 the last Business Day in September, 2001 250,000.00 the last Business Day in December, 2001 250,000.00 the last Business Day in March, 2002 250,000.00 the last Business Day in June, 2002 250,000.00 the last Business Day in September, 2002 250,000.00 the last Business Day in December, 2002 250,000.00 the last Business Day in March, 2003 12,062,500.00 the last Business Day in June, 2003 12,062,500.00 the last Business Day in September, 2003 12,062,500.00 the last Business Day in December, 2003 12,062,500.00 the last Business Day in March, 2004 12,062,500.00 the last Business Day in June, 2004 12,062,500.00 the last Business Day in September, 2004 12,062,500.00 B Term Loan Maturity Date 12,062,500.00
(iii) The Borrower shall be required to repay the principal amount of C Term Loans on each date set forth below in the amount set forth opposite such date below (each such repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(B)(b), a "Scheduled C Repayment"):
Scheduled C Repayment Date Amount -------------------------- ------ the last Business Day in September, 1999 $250,000.00 the last Business Day in December, 1999 250,000.00 the last Business Day in March, 2000 250,000.00 the last Business Day in June, 2000 250,000.00 the last Business Day in September, 2000 250,000.00 the last Business Day in December, 2000 250,000.00 the last Business Day in March, 2001 250,000.00 the last Business Day in June, 2001 250,000.00 the last Business Day in September, 2001 250,000.00 the last Business Day in December, 2001 250,000.00 the last Business Day in March, 2002 250,000.00 the last Business Day in June, 2002 250,000.00 the last Business Day in September, 2002 250,000.00 the last Business Day in December, 2002 250,000.00 the last Business Day in March, 2003 250,000.00 the last Business Day in June, 2003 250,000.00 the last Business Day in September, 2003 250,000.00 the last Business Day in December, 2003 250,000.00
-24- 32 the last Business Day in March, 2004 11,937,500.00 the last Business Day in June, 2004 11,937,500.00 the last Business Day in September, 2004 11,937,500.00 the last Business Day in December, 2004 11,937,500.00 the last Business Day in March, 2005 11,937,500.00 the last Business Day in June, 2005 11,937,500.00 the last Business Day in September, 2005 11,937,500.00 C Term Loan Maturity Date 11,937,500.00
(c) On the Business Day after the date of receipt thereof by the Borrower and/or any of its Subsidiaries of Cash Proceeds from any Asset Sale, an amount equal to 100% of the Net Cash Proceeds from such Asset Sale shall be applied as a mandatory repayment of principal of the Term Loans (with the A TL Percentage of such amount to be applied as a repayment of the A Term Loans, the B TL Percentage of such amount to be applied as a repayment of the B Term Loans and the C TL Percentage of such amount to be applied as a repayment of the C Term Loans, in each case subject to modification of such application as set forth in Section 4.02(C)), provided that with respect to no more than $10,000,000 in the aggregate of such Net Cash Proceeds in any fiscal year of the Borrower, such Net Cash Proceeds shall not be required to be so applied on such date to the extent that no Default or Event of Default then exists and the Borrower delivers a certificate to the Administrative Agent on or prior to such date stating that such Net Cash Proceeds shall be used to purchase assets used or to be used in the businesses referred to in Section 8.01(a) (including without limitation (but only to the extent permitted by Section 8.02), capital stock of a corporation engaged in any such business) within 180 days following the date of such Asset Sale (which certificate shall set forth the estimates of the proceeds to be so expended), and provided further, that (1) if all or any portion of such Net Cash Proceeds not so applied to the repayment of Term Loans are not so used (or contractually committed to be used) within such 180 day period, such remaining portion shall be applied on the last day of such period as a mandatory repayment of principal of outstanding Term Loans as provided above in this Section 4.02(A)(c) and (2) if all or any portion of such Net Cash Proceeds are not required to be applied on the 180th day referred to in clause (1) above because such amount is contractually committed to be used and subsequent to such date such contract is terminated or expires without such portion being so used, then such remaining portion shall be applied on the date of such termination of expiration as a mandatory repayment of principal of outstanding Term Loans as provided above in this Section 4.02(A)(c). Notwithstanding the foregoing, and in addition to the exemption from repayment described in the immediately preceding sentence, Net Cash Proceeds from any Asset Sale in the ordinary course of business shall not be required to be applied to the making of mandatory repayments pursuant to this paragraph (c) as long as no Default or Event of Default then exists or would exist after giving effect thereto. (d) On the Business Day after the date of the receipt thereof by the Borrower and/or any of its Subsidiaries, an amount equal to 100% of the cash proceeds (net of underwriting discounts and commissions and other reasonable costs associated therewith) of the incurrence of Indebtedness or the issuance or sale of equity securities by the Borrower and/or any of its Subsidiaries (other than Indebtedness permitted to be incurred by Section 8.04 as such section is in effect on the Effective Date) shall be applied as a mandatory repayment of principal of the Term Loans (with the A TL Percentage of such amount to be applied as a repayment of the A Term -25- 33 Loans, the B TL Percentage of such amount to be applied as a repayment of the B Term Loans and the C TL Percentage of such amount to be applied as a repayment of the C Term Loans, in each case subject to modification of such application as set forth in Section 4.02(C)); provided that proceeds of equity applied in accordance with Section 8.07(iii) and/or Section 8.13 shall not be required to be applied as a mandatory prepayment pursuant to this Section 4.02(A)(d). (e) On each Excess Cash Payment Date, an amount equal to 50% of Excess Cash Flow of the Borrower and its Subsidiaries for the most recent Excess Cash Flow Period ending prior to such Excess Cash Payment Date shall be applied as a mandatory repayment of principal of the Term Loans (with the A TL Percentage of such amount to be applied as a repayment of the A Term Loans, the B TL Percentage of such amount to be applied as a repayment of the B Term Loans and the C TL Percentage of such amount to be applied as a repayment of the C Term Loans, in each case subject to modification of such application as set forth in Section 4.02(C)). (f) Within 10 days following each date on which the Borrower or any of its Subsidiaries receives any proceeds from any Recovery Event, an amount equal to 100% of the proceeds of such Recovery Event (net of reasonable costs and taxes incurred in connection with such Recovery Event) shall be applied as a mandatory repayment of principal of the Term Loans (with the A TL Percentage of such amount to be applied as a repayment of the A Term Loans, the B TL Percentage of such amount to be applied as a repayment of the B Term Loans and the C TL Percentage of such amount to be applied as a repayment of the C Term Loans, in each case subject to modification of such application as set forth in Section 4.02(C)), provided that so long as no Default or Event of Default then exists, such proceeds shall not be required to be so applied on such date to the extent that the Borrower has delivered a certificate to the Administrative Agent on or prior to such date stating that such proceeds shall be used to replace or restore any properties or assets in respect of which such proceeds were paid within 360 days following the date of the receipt of such proceeds (which certificate shall set forth the estimates of the proceeds to be so expended), and provided further, that (i) if all or any portion of such proceeds not required to be applied to the repayment of Term Loans pursuant to the preceding proviso are not so used (or contractually committed to be used) within 360 days after the date of the receipt of such proceeds, such remaining portion shall be applied on the last day of such period as a mandatory repayment of principal of the Term Loans as provided above in this Section 4.02(A)(f) and (ii) if all or any portion of such proceeds are not required to be applied on the 360th day referred to in clause (i) above because such amount is contractually committed to be used and subsequent to such date such contract is terminated or expires without such portion being so used, then such remaining portion shall be applied on the date of such termination or expiration as a mandatory repayment of principal of outstanding Term Loans as provided in this Section 4.02(A)(f). (g) Notwithstanding anything to the contrary contained elsewhere in this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full on the Swingline Expiry Date and (ii) all other then outstanding Loans of the respective Facility shall be repaid in full on the Maturity Date for such Facility. (h) Notwithstanding anything to the contrary contained elsewhere in this Agreement, all A Term Loans, B Term Loans and C Term Loans made on the Initial Borrowing Date shall be repaid with the proceeds of the A Term Loans, B Term Loans and C Term Loans, respectively, made on the Second Borrowing Date. -26- 34 (i) In the event the amount of any prepayment required to be made pursuant to paragraph (c) or (d) above shall exceed the aggregate principal amount of the Base Rate Loans outstanding under the Facilities required to be prepaid (the amount of any such excess being called the "Excess Amount"), the Borrower shall have the right, in lieu of making such prepayment in full, to prepay all the outstanding applicable Base Rate Loans and to deposit an amount equal to the Excess Amount with the Administrative Agent in a cash collateral account maintained (pursuant to documentation reasonably satisfactory to the Administrative Agent) by and in the sole dominion and control of the Administrative Agent. Any amounts so deposited shall be held by the Administrative Agent as collateral for the Obligations and applied to the prepayment of the applicable Eurodollar Loans at the end of the current Interest Periods applicable thereto. On any Business Day on which (x) collected amounts remain on deposit in or to the credit of such cash collateral account after giving effect to the payments made on such day pursuant to this paragraph (i) and (y) the Borrower shall have delivered to the Administrative Agent a written request or a telephonic request (which shall be promptly confirmed in writing) that such remaining collected amounts be invested in the Cash Equivalents specified in such request, the Administrative Agent shall use its reasonable efforts to invest such remaining collected amounts in such Cash Equivalents; provided, however, that the Administrative Agent shall have continuous dominion and full control over any such investments (and over any interest that accrues thereon) to the same extent that it has dominion and control over such cash collateral account and no Cash Equivalent shall mature after the end of the Interest Period for which it is to be applied. The Borrower shall not have the right to withdraw any amount from such cash collateral account until the applicable Eurodollar Loans and accrued interest thereon are paid in full or if a Default or Event of Default then exists or would result. Notwithstanding the foregoing, no prepayment (or portion thereof) required pursuant to paragraph (c) or (d) above may be deferred pursuant to this paragraph (i) by more than 30 days. (B) Application: (a) Any amount required to be applied to A Term Loans, B Term Loans or C Term Loans, as the case may be, shall apply to the repayment of the outstanding principal amount of A Term Loans, B Term Loans and C Term Loans, respectively, of the respective Facility. (b) All repayments of A Term Loans, B Term Loans and C Term Loans pursuant to Section 4.02(A)(c), (d), (e) or (f) shall be applied to reduce the then remaining Scheduled Repayments of the respective Facility pro rata based on the then remaining Scheduled Repayments of the respective Facility. (c) With respect to each repayment of Loans required by this Section 4.02, the Borrower may designate the Types of Loans which are to be repaid and the specific Borrowing(s) under the affected Facility pursuant to which made; provided that (i) Eurodollar Loans made pursuant to a specific Facility may be designated for repayment pursuant to this Section 4.02 only on the last day of an Interest Period applicable thereto unless all Eurodollar Loans made pursuant to such Facility with Interest Periods ending on such date of required prepayment and all Base Rate Loans made pursuant to such Facility have been paid in full; (ii) if any repayment of Eurodollar Loans made pursuant to a single Borrowing shall reduce the outstanding Loans made pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount, such Borrowing shall be immediately converted into Base Rate Loans; and (iii) each repayment of any Loans made pursuant -27- 35 to a Borrowing shall be applied pro rata among such Loans; provided that no repayment pursuant to Section 4.02(A)(a) shall be applied to any Revolving Loans of a Defaulting Bank at any time when the aggregate amount of the Revolving Loans of any Non-Defaulting Bank exceeds such Non-Defaulting Bank's Revolving Percentage of Revolving Loans then outstanding. In the absence of a designation by the Borrower as described in the preceding sentence, the Administrative Agent shall, subject to the above, make such designation in its sole discretion with a view, but no obligation, to minimize breakage costs owing under Section 1.11. (C) Waiver of Certain Mandatory Repayments by B Banks and C Banks Notwithstanding anything to the contrary contained in this Section 4.02 or elsewhere in this Agreement (including, without limitation, in Section 12.12), Banks with outstanding B Term Loans (the "B Banks") or outstanding C Term Loans (the "C Banks") may waive a mandatory repayment of such Loans pursuant to Section 4.02(A)(c), (d), (e) and/or (f) (each such repayment, a "Waivable Mandatory Repayment") upon the terms and provisions set forth in this Section 4.02(C). The Borrower shall give to the Administrative Agent written notice of its intention to make a Waivable Mandatory Repayment at least five Business Days prior to such repayment, which notice the Administrative Agent shall promptly forward to all B Banks and C Banks (indicating in such notice the amount of such repayment to be applied to each such Bank's outstanding Term Loans under such Facilities). Any B Bank and C Bank may waive all or any part of any such Waivable Mandatory Repayment. In the event any such B Bank or C Bank desires to waive such Bank's right to receive any such Waivable Mandatory Repayment in whole or in part, such Bank shall so advise the Administrative Agent no later than the close of business two Business Days after the date of such notice from the Administrative Agent, which notice shall also include the amount such Bank desires to receive in respect of such repayment. If any Bank does not reply to the Administrative Agent within the two Business Days, it will be deemed not to have waived any part of such repayment. If any Bank does not specify an amount it wishes to receive, it will be deemed to have accepted 100% of the total payment. In the event that any such Bank waives all or part of such right to receive any such Waivable Mandatory Repayment, the Administrative Agent shall apply 100% of the amount so waived by such Bank to the A Term Loans in accordance with Section 4.02(B). 4.03 Method and Place of Payment. Except as otherwise specifically provided herein, all payments under this Agreement shall be made to the Administrative Agent for the ratable account of the Banks entitled thereto, not later than 12:00 Noon (New York time) on the date when due and shall be made in immediately available funds and in U.S. Dollars at the Payment Office, it being understood that written, telex or facsimile transmission notice by the Borrower to the Administrative Agent to make a payment from the funds in the Borrower's account at the Payment Office shall constitute the making of such payment to the extent of such funds held in such account. Any payments under this Agreement which are made later than 12:00 Noon (New York time) shall be deemed to have been made on the next succeeding Business Day. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable during such extension at the applicable rate in effect immediately prior to such extension. -28- 36 4.04 Net Payments. (a) All payments made by the Borrower hereunder or under any Note will be made without setoff, counterclaim or other defense. Except as provided in Section 4.04(b), all such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding, except as provided in the second succeeding sentence, any tax imposed on or measured by the net income or net profits of a Bank pursuant to the laws of the jurisdiction in which it is organized or the jurisdiction in which the principal office or applicable lending office of such Bank is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect thereto (all such nonexcluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. If any amounts are payable in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to reimburse each Bank, upon the written request of such Bank, for taxes imposed on or measured by the net income or net profits of such Bank pursuant to the laws of the jurisdiction in which the principal office or applicable lending office of such Bank is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which the principal office or applicable lending office of such Bank is located and for any withholding of taxes as such Bank shall determine are payable by, or withheld from, such Bank in respect of such amounts so paid to or on behalf of such Bank pursuant to the preceding sentence and in respect of any amounts paid to or on behalf of such Bank pursuant to this sentence. The Borrower will furnish to the Administrative Agent within 45 days after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by the Borrower. The Borrower agrees to indemnify and hold harmless each Bank, and reimburse such Bank upon its written request, for the amount of any Taxes so levied or imposed and paid by such Bank. (b) Each Bank that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower and the Administrative Agent on or prior to the Effective Date, or in the case of a Bank that is an assignee or transferee of an interest under this Agreement pursuant to Section 1.13 or 12.04 (unless the respective Bank was already a Bank hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such Bank, (i) two accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying to such Bank's entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note, or (ii) if the Bank is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate substantially in the form of Exhibit C (any such certificate, a "Section 4.04(b)(ii) Certificate") and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8 (or successor form) certifying to such Bank's entitlement to a complete exemption from United States withholding tax with respect to payments of interest to be made under this Agreement and under any Note. In addition, each Bank agrees that from time to time after the Effective Date, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, it will deliver to -29- 37 the Borrower and the Administrative Agent two new accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Section 4.04(b)(ii) Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Bank to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and any Note, or it shall immediately notify the Borrower and the Administrative Agent of its inability to deliver any such Form or Certificate. Notwithstanding anything to the contrary contained in Section 4.04(a), but subject to Section 12.04(b) and the immediately succeeding sentence, (x) the Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or similar taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from interest, fees or other amounts payable hereunder for the account of any Bank which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that such Bank has not provided to the Borrower U.S. Internal Revenue Service Forms that establish a complete exemption from such deduction or withholding and (y) the Borrower shall not be obligated pursuant to Section 4.04(a) hereof to gross-up payments to be made to a Bank in respect of income or similar taxes imposed by the United States if (I) such Bank has not provided to the Borrower the Internal Revenue Service Forms required to be provided to the Borrower pursuant to this Section 4.04(b). Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 4.04 and except as set forth in Section 12.04(b), the Borrower agrees to pay additional amounts and to indemnify each Bank in the manner set forth in Section 4.04(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any amounts deducted or withheld by it as described in the immediately preceding sentence as a result of any changes after the Effective Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of income or similar Taxes. SECTION 5. Conditions Precedent. The obligation of each Bank to make each Loan to the Borrower hereunder, and the obligation of the Letter of Credit Issuer to issue each Letter of Credit hereunder, is subject, at the time of each such Credit Event (except as otherwise hereinafter indicated), to the satisfaction of the following conditions: (a) Conditions to Initial Borrowing Date. 5.01 Execution of Agreement; Notes. On or prior to the Initial Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall have been delivered to the Administrative Agent for the account of each Bank which has requested such Notes, the appropriate A Term Note, B Term Note, C Term Note and Revolving Note, if any, and to Chase, the Swingline Note, in each case executed by the Borrower and in the amount, maturity and as otherwise provided herein. 5.02 [RESERVED] 5.03 Officer's Certificate. On the Initial Borrowing Date, the Administrative Agent shall have received a certificate dated such date signed by an appropriate officer of the Borrower stating that all of the applicable conditions set forth in Sections 5.07, 5.08, 5.09 and 5.33 exist as of such date. -30- 38 5.04 Opinions of Counsel. On the Initial Borrowing Date, the Administrative Agent shall have received opinions, addressed to the Administrative Agent and each of the Banks and dated the Initial Borrowing Date, from (i) Hutchins, Wheeler & Dittmar, counsel to the Credit Parties, which opinion shall cover the matters contained in Exhibit D-1 and such other matters incident to the transactions contemplated herein as the Administrative Agent may reasonably request and (ii) local and other counsel to the Credit Parties and/or the Administrative Agent reasonably satisfactory to the Administrative Agent, which opinions shall cover such matters incident to the transactions contemplated herein and in the other Credit Documents as the Administrative Agent may reasonably request and shall be in form and substance reasonably satisfactory to the Administrative Agent. 5.05 Corporate Proceedings. (a) On the Initial Borrowing Date, the Administrative Agent shall have received from each Credit Party a certificate, dated the Initial Borrowing Date, signed by the chairman, a vice chairman, the president or any vice-president of such Credit Party, and attested to by the secretary or any assistant secretary of such Credit Party, in the form of Exhibit E with appropriate insertions, together with copies of the Certificate of Incorporation and By-Laws of such Credit Party and the resolutions of such Credit Party referred to in such certificate and all of the foregoing (including each such Certificate of Incorporation and By-Laws) shall be reasonably satisfactory to the Administrative Agent. (b) On the Initial Borrowing Date, all corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Documents to be consummated on and as of the Initial Borrowing Date shall be reasonably satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received all information and copies of all certificates, documents and papers, including good standing certificates, bring-down certificates and any other records of corporate proceedings and governmental approvals, if any, which the Administrative Agent reasonably may have requested in connection therewith, such documents and papers, where appropriate, to be certified by proper corporate or governmental authorities. 5.06 Adverse Change, etc. Since September 27, 1997, nothing shall have occurred that has had or could reasonably be expected to have a Material Adverse Effect. Since September 30, 1997, nothing shall have occurred that has had or could reasonably be expected to have a material adverse effect on the business, properties, assets, liabilities or condition (financial or otherwise) of Vistar and its Subsidiaries taken as a whole. 5.07 Litigation. On the Initial Borrowing Date, there shall be no actions, suits or proceedings pending or threatened (a) with respect to this Agreement or any other Document or (b) which the Administrative Agent or the Required Banks shall determine could reasonably be expected to (i) have a Material Adverse Effect or (ii) have a material adverse effect on the Transaction, the rights or remedies of the Banks or the Administrative Agent hereunder or under any other Credit Document or on the ability of any Credit Party to perform its respective obligations to the Banks or the Administrative Agent hereunder or under any other Credit Document. 5.08 Approvals. On or prior to the Initial Borrowing Date, all necessary governmental (domestic and foreign) and third party approvals in connection with the Transaction, -31- 39 the transactions contemplated by the Documents and otherwise referred to herein or therein shall have been obtained and remain in effect (other than any such approvals with respect to the Merger which the Borrower reasonably believes both individually and in the aggregate are not material to the operations of the Borrower and its Subsidiaries taken as a whole), and all applicable waiting periods shall have expired without any action being taken by any competent authority which restrains, prevents or imposes materially adverse conditions upon the consummation of the Transaction, the transactions contemplated by the Documents and otherwise referred to herein or therein. Additionally, there shall not exist any judgment, order, injunction or other restraint issued or filed or a hearing seeking injunctive relief or other restraint pending or notified prohibiting or imposing materially adverse conditions upon the consummation of the Transaction or the making of Loans or the issuance of the Letters of Credit. 5.09 Senior Subordinated Notes Consent Solicitation. On the Initial Borrowing Date, the Senior Subordinated Note Indenture shall have been amended in accordance with the Senior Subordinated Notes Consent Solicitation in order to permit the Transaction. 5.10 Security Documents. (a) On the Initial Borrowing Date the Borrower shall have duly authorized, executed and delivered a Pledge Agreement in the form of Exhibit F (as modified, amended or supplemented from time to time in accordance with the terms thereof and hereof, the "Pledge Agreement") and shall have delivered to the Collateral Agent, as pledgee thereunder, all of the Pledged Securities referred to therein, endorsed in blank in the case of promissory notes or accompanied by executed and undated stock powers in the case of capital stock, and the Pledge Agreement shall be in full force and effect. (b) On the Initial Borrowing Date, the Borrower and each of its material Subsidiaries, if any, shall have duly authorized, executed and delivered a Security Agreement in the form of Exhibit G (as modified, amended or supplemented from time to time in accordance with the terms thereof and hereof, the "Security Agreement") covering all of the Security Agreement Collateral, together with: (A) executed copies of Financing Statements (Form UCC-1) or appropriate local equivalent in appropriate form for filing under the UCC or appropriate local equivalent of each jurisdiction as may be necessary to perfect the security interests purported to be created by the Security Agreement; (B) certified copies of Requests for Information or Copies (Form UCC-11), or equivalent reports, each of a recent date listing all effective financing statements that name the Borrower or any of its Domestic Subsidiaries or Vistar or any of its Domestic Subsidiaries as debtor and that are filed in the jurisdictions referred to in clause (A) above or as otherwise identified by the Administrative Agent, together with copies of such financing statements that name the Borrower or any of its Domestic Subsidiaries or Vistar or any of its Domestic Subsidiaries as debtor (none of which shall cover the Collateral except (x) those with respect to which appropriate termination statements executed by the secured lender thereunder have been delivered to the Administrative Agent and (y) to the extent evidencing Permitted Liens); -32- 40 (C) evidence of the completion of all other recordings and filings of, or with respect to, the Security Agreement as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable, to perfect the security interests purported to be created by the Security Agreement; and (D) evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable, to perfect the security interests purported to be created by the Security Agreement have been taken; and the Security Agreement shall be in full force and effect. (c) On the Initial Borrowing Date, each of the Borrower's material Subsidiaries, if any then exist, shall have duly authorized, executed and delivered a Subsidiary Guaranty in the form of Exhibit H (as modified, amended or supplemented from time to time in accordance with the terms thereof and hereof, the "Subsidiary Guaranty"). 5.11 Fees and Expenses. The aggregate amount of all fees and expenses to be paid in connection with the Transaction on or prior to the Initial Borrowing Date shall not exceed $15,000,000. 5.12 Mortgages; Title Insurance. (a) On the Initial Borrowing Date, the Collateral Agent shall have received fully executed counterparts of each Mortgage delivered in connection with the Existing Credit Agreement (the "Original Mortgages"), as amended and restated as of the Initial Borrowing Date in form and substance satisfactory to the Collateral Agent (as the same may be further amended, restated, supplemented or otherwise modified from time to time, the "Restated Mortgages"), covering each of the Mortgaged Properties (other than Mortgaged Properties owned by Vistar or any of its Subsidiaries), and arrangements reasonably satisfactory to the Collateral Agent shall be in place to provide that counterparts of the Restated Mortgages shall be recorded in all places to the extent necessary or desirable, in the judgment of the Collateral Agent, effectively to continue a valid and enforceable first priority mortgage Lien, subject only to Permitted Encumbrances, on each such Mortgaged Property in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the ratable benefit of the Secured Creditors. (b) On the Initial Borrowing Date, the Collateral Agent shall have received in respect of each of the mortgagee title insurance policies issued to the Collateral Agent in connection with the Original Mortgages (the "Original Mortgage Policies"), either (i) a mortgage modification endorsement thereto or (ii) a title policy "datedown" or update thereof, in the reasonable discretion of the Collateral Agent, and in each case indicating no new Liens or other encumbrances of record against such Mortgaged Property (other than Permitted Liens) after the effective date of the Original Mortgage Policies. 5.13 Existing Indebtedness Agreements; Shareholders' Agreements; Management Agreements; Tax Allocation Agreements. On or prior to the Initial Borrowing Date, there shall have been delivered to the Administrative Agent copies, certified as true and correct by an appropriate officer of the Borrower, of: -33- 41 (a) all agreements evidencing or relating to the Existing Indebtedness that are to remain in effect after giving effect to the consummation of the Transaction (collectively, the "Existing Indebtedness Agreements"); (b) all agreements entered into by the Borrower or any of its Subsidiaries or Vistar or any of its Subsidiaries governing the terms and relative rights of its capital stock, and any agreements entered into by shareholders relating to any such entity with respect to their capital stock, in each case that are to remain in effect after giving effect to the consummation of the Transaction (collectively, the "Shareholders' Agreements"); (c) any material agreements (or the forms thereof) with members of, or with respect to, the management of the Borrower or any of its Subsidiaries that are to remain in effect after giving effect to the consummation of the Transaction (collectively, the "Management Agreements"); (d) any tax sharing or tax allocation agreements entered into by the Borrower or any of its Subsidiaries (collectively, the "Tax Allocation Agreements"); all of which Existing Indebtedness Agreements, Shareholders' Agreements, Management Agreements and Tax Allocation Agreements shall be in form and substance reasonably satisfactory to the Administrative Agent and shall be in full force and effect on the Initial Borrowing Date. 5.14 Solvency Opinions; Evidence of Insurance. On the Initial Borrowing Date, the Administrative Agent shall have received: (a) a solvency opinion from Murray, Devine & Co, addressed to the Agents and each of the Banks and dated the Initial Borrowing Date and supporting the conclusions, that, after giving effect to the Transaction and the incurrence of all financings contemplated herein, the Borrower (on a stand alone basis) and the Borrower and its Subsidiaries are solvent; and (b) evidence of insurance complying with the requirements of Section 7.03 for the business and properties of the Borrower and its Subsidiaries, in scope, form and substance reasonably satisfactory to the Administrative Agent and the Required Banks and naming the Collateral Agent as an additional insured and/or loss payee, and stating that such insurance shall not be cancelled or revised without at least 30 days' (or 10 days' in the case of non-payment of premium) prior written notice by the insurer to the Collateral Agent. 5.15 Pro Forma Balance Sheet. On or prior the Initial Borrowing Date, there shall have been delivered to the Administrative Agent, an unaudited pro forma consolidated balance sheet of the Borrower and its Subsidiaries (including the Vistar Subsidiaries) after giving effect to the Transaction and prepared in accordance with GAAP, together with a related statement of operations, which pro forma balance sheets and statement of operations shall be reasonably satisfactory in form and substance to the Administrative Agent and the Required Banks. 5.16 Projections. On or prior to the Initial Borrowing Date, the Banks shall have received the financial projections (the "Projections") set forth on Schedule 5.16, which include the -34- 42 projected results of the Borrower and its Subsidiaries for the five fiscal years ended after the Initial Borrowing Date. 5.17 Existing Indebtedness of Borrower. On the Initial Borrowing Date and after giving effect to those portions of the Transaction which are expected to be consummated on the Initial Borrowing Date and the Loans incurred on the Initial Borrowing Date, neither the Borrower nor any of its Subsidiaries shall have any preferred stock or Indebtedness outstanding except for the Obligations and the Existing Indebtedness of the Borrower. On and as of the Initial Borrowing Date, all of the Existing Indebtedness of the Borrower shall remain outstanding after giving effect to those portions of the Transaction which are expected to be consummated on the Initial Borrowing Date and the other transactions contemplated hereby without any default or event of default existing thereunder or arising as a result of the Transaction and the other transactions contemplated hereby, and there shall not be any amendments or modifications to the Existing Indebtedness Agreements other than as requested or approved by the Administrative Agent or the Required Banks. 5.18 Payment of Accrued Interest, Fees; Continuation of Principal. (a) All unpaid principal, interest, fees and other amounts (other than principal) accrued through the Initial Borrowing Date and other amounts payable pursuant to the Existing Credit Agreement shall have been paid. (b) On the Initial Borrowing Date, all costs, fees and expenses, and all other compensation contemplated by this Agreement, due to the Agents or the Banks (including, without limitation, legal fees and expenses) shall have been paid to the extent due. (b) Conditions to Second Borrowing Date. 5.19 Confirmation. The Borrower (after giving effect to the Merger) shall have delivered a written confirmation, in form satisfactory to the Administrative Agent, of all of its payment and performance obligations under the Credit Documents. The Initial Borrowing Date shall have occurred. 5.20 Officer's Certificate. On the Second Borrowing Date, the Administrative Agent shall have received a certificate dated such date signed by an appropriate officer of the Borrower stating that all of the applicable conditions set forth in Sections 5.24, 5.25, 5.26 and 5.33 exist as of such date. 5.21 Opinions of Counsel. On the Second Borrowing Date, the Administrative Agent shall have received opinions, addressed to the Administrative Agent and each of the Banks and dated the Initial Borrowing Date, from (i) Hutchins, Wheeler & Dittmar, counsel to the Credit Parties, which opinion shall cover the matters contained in Exhibit D-2 and such other matters incident to the transactions contemplated herein as the Administrative Agent may reasonably request, and (ii) local and other counsel to the Credit Parties and/or the Administrative Agent reasonably satisfactory to the Administrative Agent, which opinions shall cover such matters incident to the transactions contemplated herein and in the other Credit Documents as the Administrative Agent may reasonably request and shall be in form and substance reasonably satisfactory to the Administrative Agent. In addition, on the Second Borrowing Date, the -35- 43 Administrative Agent shall have received copies of the opinions delivered pursuant to the Merger Agreement, either addressed to the Administrative Agent and each of the Banks or accompanied by a reliance letter from the counsel delivering any such opinion stating that the Administrative Agent and the Banks may rely on such opinion as if it were addressed to them. 5.22 Corporate Proceedings. (a) On the Second Borrowing Date, the Administrative Agent shall have received from each Vistar Subsidiary which is a Credit Party a certificate, dated the Second Borrowing Date, signed by the chairman, a vice chairman, the president or any vice-president of such Credit Party, and attested to by the secretary or any assistant secretary of such Credit Party, in the form of Exhibit E with appropriate insertions, together with copies of the Certificate of Incorporation and By-Laws of such Credit Party and the resolutions of such Credit Party referred to in such certificate and all of the foregoing (including each such Certificate of Incorporation and By-Laws) shall be reasonably satisfactory to the Administrative Agent. (b) On the Second Borrowing Date, all corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Documents shall be reasonably satisfactory in form and substance to the Administrative Agent, and the Administrative Agent shall have received all information and copies of all certificates, documents and papers, including good standing certificates, bring-down certificates and any other records of corporate proceedings and governmental approvals, if any, which the Administrative Agent reasonably may have requested in connection therewith, such documents and papers, where appropriate, to be certified by proper corporate or governmental authorities. 5.23 Adverse Change, etc. Since September 27, 1997, nothing shall have occurred that has had or could reasonably be expected to have a Material Adverse Effect (other than the effect of consummating portions, but not all, of the Transaction on the Initial Borrowing Date). Since September 30, 1997, nothing shall have occurred that has had or could reasonably be expected to have a material adverse effect on the business, properties, assets, liabilities or condition (financial or otherwise) of Vistar and its Subsidiaries taken as a whole. 5.24 Litigation. On the Second Borrowing Date, there shall be no actions, suits or proceedings pending or threatened (a) with respect to this Agreement or any other Document or (b) which the Administrative Agent or the Required Banks shall determine could reasonably be expected to (i) have a Material Adverse Effect or (ii) have a material adverse effect on the Transaction, the rights or remedies of the Banks or the Administrative Agent hereunder or under any other Credit Document or on the ability of any Credit Party to perform its respective obligations to the Banks or the Administrative Agent hereunder or under any other Credit Document. 5.25 Approvals. On or prior to the Second Borrowing Date, all necessary governmental (domestic and foreign) and third party approvals in connection with the Transaction, the transactions contemplated by the Documents and otherwise referred to herein or therein shall have been obtained and remain in effect (other than any such approvals with respect to the Merger which the Borrower reasonably believes both individually and in the aggregate are not material to the operations of the Borrower and its Subsidiaries taken as a whole), and all applicable waiting -36- 44 periods shall have expired without any action being taken by any competent authority which restrains, prevents or imposes materially adverse conditions upon the consummation of the Transaction, the transactions contemplated by the Documents and otherwise referred to herein or therein. Additionally, there shall not exist any judgment, order, injunction or other restraint issued or filed or a hearing seeking injunctive relief or other restraint pending or notified prohibiting or imposing materially adverse conditions upon the consummation of the Transaction or the making of Loans or the issuance of the Letters of Credit. 5.26 Consummation of the Transaction. (a) On the Second Borrowing Date, the Merger shall have been consummated in accordance with the Merger Documents and all applicable laws, and each of the conditions precedent to the consummation of the Merger (including, without limitation, the accuracy in all material respects of the representations and warranties contained in the Merger Agreement) shall have been satisfied and no material provision of the Merger Documents shall have been waived, amended, supplemented or otherwise modified, except in each case with the consent of the Administrative Agent and the Required Banks, to the satisfaction of the Administrative Agent and the Required Banks. The aggregate consideration to be received by the shareholders of Vistar from the Borrower in connection with the Merger shall consist of (i) $65,000,000 in cash, (ii) the Borrower Preferred Stock and (iii) Borrower Common Stock having an aggregate value on the Second Borrowing Date of approximately 8,649,000 shares of the Borrower's Class A Voting Common Stock and Class B Non-Voting Common Stock. (b) On or prior to the Second Borrowing Date, there shall have been delivered to the Administrative Agent true and correct copies of all Documents entered into on or prior to such date in connection with the Transaction, and all of the terms and conditions of such Documents (including Documents with respect to the Borrower Preferred Stock), as well as the structure of the Transaction and the ownership interests in the Borrower prior to and after giving effect to the Transaction, shall be in form and substance reasonably satisfactory to the Agents and the Required Banks (it being acknowledged that the terms and conditions of the Merger Agreement as in effect on the date hereof are satisfactory to the Agents). (c) On the Second Borrowing Date, the Agents shall have received evidence in form, scope and substance reasonably satisfactory to them that the matters set forth in this Section 5.26 have been satisfied on such date. 5.27 Security Documents. (a) On the Second Borrowing Date the Vistar Subsidiaries which own any Capital Stock in any Domestic Subsidiary of or first-tier Foreign Subsidiary of Vistar shall have duly authorized, executed and delivered the Pledge Agreement and shall have delivered to the Collateral Agent, as pledgee thereunder, all of the Pledged Securities referred to therein, endorsed in blank in the case of promissory notes or accompanied by executed and undated stock powers in the case of capital stock, and the Pledge Agreement shall be in full force and effect. On the Second Borrowing Date the Borrower shall have duly authorized, executed and delivered an amendment to the Pledge Agreement in order to add as Collateral thereunder any capital stock in any Subsidiary acquired by it in connection with the Vistar Merger and shall have delivered to the Collateral Agent, as pledgee under the Pledge Agreement, all of such capital stock, accompanied by executed and undated stock powers. -37- 45 (b) On the Second Borrowing Date, the material Vistar Subsidiaries, if any, shall have duly authorized, executed and delivered the Security Agreement covering all of the Security Agreement Collateral owned by them, together with: (A) executed copies of Financing Statements (Form UCC-1) or appropriate local equivalent in appropriate form for filing under the UCC or appropriate local equivalent of each jurisdiction as may be necessary to perfect the security interests purported to be created by the Security Agreement; (B) evidence of the completion of all other recordings and filings of, or with respect to, the Security Agreement as may be necessary or, in the reasonable opinion of the Collateral Agent, desirable, to perfect the security interests in the Security Agreement Collateral of such Subsidiary purported to be created by the Security Agreement; and (C) evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable, to perfect the security interests in the Security Agreement Collateral of such Subsidiary purported to be created by the Security Agreement have been taken; and the Security Agreement and such Financing Statements shall be in full force and effect. On the Second Borrowing Date the Borrower shall have duly authorized, executed and delivered an amendment to the Security Agreement in order to add as Collateral thereunder any Security Agreement Collateral acquired by it in connection with the Vistar Merger and to perfect the security interests therein. (c) On the Second Borrowing Date, each of the material Vistar Subsidiaries, if any, shall have duly authorized, executed and delivered a Subsidiary Guaranty in the form of Exhibit H (as modified, amended or supplemented from time to time in accordance with the terms thereof and hereof, the "Subsidiary Guaranty"). 5.28 Fees and Expenses. The aggregate amount of all fees and expenses to be paid in connection with the Transaction shall not exceed $32,000,000. 5.29 [Reserved]. 5.30 Evidence of Insurance. On the Second Borrowing Date, the Administrative Agent shall have received evidence of insurance complying with the requirements of Section 7.03 for the business and properties of the Borrower and its Subsidiaries, in scope, form and substance reasonably satisfactory to the Administrative Agent and the Required Banks and naming the Collateral Agent as an additional insured and/or loss payee, and stating that such insurance shall not be cancelled or revised without at least 30 days' (or 10 days' in the case of non-payment of premium) prior written notice by the insurer to the Collateral Agent. 5.31 Existing Indebtedness. On the Second Borrowing Date and after giving effect to the Transaction and the Loans incurred on the Second Borrowing Date, neither the Borrower nor any of its Subsidiaries shall have any preferred stock or Indebtedness outstanding except for the Borrower Preferred Stock, the Obligations and the Existing Indebtedness. Vistar's existing credit -38- 46 agreement shall have been repaid in full from the proceeds of the Term Loans and, together with any security interests granted in connection therewith, terminated pursuant to documentation in form and substance satisfactory to the Administrative Agent. On and as of the Second Borrowing Date, all of the Existing Indebtedness shall remain outstanding after giving effect to the Transaction and the other transactions contemplated hereby without any default or event of default existing thereunder or arising as a result of the Transaction and the other transactions contemplated hereby, and there shall not be any amendments or modifications to the Existing Indebtedness Agreements other than as requested or approved by the Administrative Agent or the Required Banks. On and as of the Second Borrowing Date, the Administrative Agent and the Required Banks shall be satisfied with the terms and conditions of the Borrower Preferred Stock and the amount of and the terms and conditions of all Existing Indebtedness. 5.32 Payment of Fees. On the Second Borrowing Date, all costs, fees and expenses, and all other compensation contemplated by this Agreement, due to the Agents or the Banks (including, without limitation, legal fees and expenses) shall have been paid to the extent due. (c) Conditions to each Credit Event. 5.33 No Default; Representations and Warranties. At the time of each Credit Event and also after giving effect thereto (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein and in the other Credit Documents in effect at such time shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Credit Event, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date. 5.34 Notice of Borrowing; Letter of Credit Request. The Administrative Agent shall have received a Notice of Borrowing satisfying the requirements of Section 1.03 with respect to each incurrence of Loans; and the Administrative Agent and the Letter of Credit Issuer shall have received a Letter of Credit Request satisfying the requirements of Section 2.02 with respect to each issuance of a Letter of Credit. The acceptance of the benefits of each Credit Event shall constitute a representation and warranty by each Credit Party to the Administrative Agent and each of the Banks that all of the applicable conditions specified above exist as of the date of such Credit Event. All of the certificates, legal opinions and other documents and papers referred to in this Section 5, unless otherwise specified, shall be delivered to the Administrative Agent at its Notice Office for the account of each of the Banks and, except for the Notes, in sufficient counterparts for each of the Banks and shall be satisfactory in form and substance to the Administrative Agent and the Required Banks. SECTION 6. Representations, Warranties and Agreements. In order to induce the Banks to enter into this Agreement and to make the Loans and issue and/or participate in the Letters of Credit provided for herein, the Borrower makes the following representations, warranties and agreements with the Banks in each case after giving effect to the Transaction, all of which shall survive the execution and delivery of this Agreement, the making of the Loans and the -39- 47 issuance of the Letters of Credit (with the occurrence of each Credit Event being deemed to constitute a representation and warranty that the matters specified in this Section 6 are true and correct in all material respects on and as of the date of each such Credit Event, unless stated to relate to a specific earlier date, in which case all representations and warranties specifically relating to an earlier date shall be true and correct in all material respects as of such earlier date and provided that references to the Borrower and its Subsidiaries shall exclude Vistar and its Subsidiaries prior to the Second Borrowing Date except to the extent otherwise specifically provided and except the representation made in Section 6.10(c) is made only on and after the Second Borrowing Date): 6.01 Corporate Status. Each of the Borrower and each of its Subsidiaries (i) is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its organization, (ii) has the corporate power and authority to own its property and assets and to transact the business in which it is engaged and presently proposes to engage and (iii) is duly qualified and is authorized to do business and is in good standing in all jurisdictions where it is required to be so qualified and where the failure to be so qualified would have a Material Adverse Effect. 6.02 Corporate Power and Authority. Each Credit Party has the corporate power and authority to execute, deliver and carry out the terms and provisions of the Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of the Documents to which it is a party. Each Credit Party has duly executed and delivered each Document to which it is a party and each such Document constitutes the legal, valid and binding obligation of such Credit Party enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 6.03 No Violation. Neither the execution, delivery or performance by any Credit Party of the Documents to which it is a party nor compliance by any Credit Party with the terms and provisions thereof, nor the consummation of the transactions contemplated herein or therein, (i) will materially contravene any applicable provision of any law, statute, rule or regulation, or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) will materially conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or (other than pursuant to the Security Documents) result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of the Borrower or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, credit agreement or any other material agreement or instrument to which the Borrower or any of its Subsidiaries is a party or by which it or any of its property or assets are bound or to which it may be subject, except for such conflicts, inconsistencies, breaches or defaults which, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, or (iii) will violate any provision of the Certificate of Incorporation or By-Laws of the Borrower or any of its Subsidiaries. 6.04 Litigation. There are no actions, suits or proceedings pending or, to the knowledge of the Borrower or any of its Subsidiaries, threatened, with respect to the Borrower or any of its Subsidiaries (i) that are likely to have a Material Adverse Effect or (ii) that could -40- 48 reasonably be expected to have a material adverse effect on the rights or remedies of any Agent or the Banks or on the ability of any Credit Party to perform its respective obligations to the Agents or the Banks hereunder and under the other Credit Documents to which it is, or will be, a party. Additionally, there does not exist any judgment, order or injunction prohibiting or imposing material adverse conditions upon the occurrence of any Credit Event. 6.05 Use of Proceeds; Margin Regulations. (a) The proceeds of all Term Loans incurred on the Initial Borrowing Date shall be utilized to finance the Pre-Merger Stock Payments, to refinance certain existing indebtedness of the Borrower and its Subsidiaries in an aggregate principal amount not to exceed $150,000,000 and to pay fees and expenses incurred in connection therewith and the financing thereof. (b) The proceeds of all Term Loans incurred on the Second Borrowing Date will be utilized to refinance Term Loans made on the Initial Borrowing Date, to finance the cash consideration price to be paid to the shareholders of Vistar in connection with the Merger, to refinance certain existing indebtedness of Vistar and its Subsidiaries in an aggregate amount not to exceed $20,000,000 and to pay the fees and expenses incurred in connection therewith and the financing thereof. (c) The proceeds of all Revolving Loans and Swingline Loans shall be utilized for working capital purposes and general corporate purposes of the Borrower and its Subsidiaries. Letters of Credit shall be utilized solely in the ordinary course of business of the Borrower and its Subsidiaries. Up to $45,000,000 of Revolving Loans may be incurred on the Second Borrowing Date. (d) Neither the making of any Loan, nor the use of the proceeds thereof, will violate the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System and no part of the proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock. 6.06 Governmental Approvals. All orders, consents, approvals, licenses, authorizations, or validations of, or filings, recordings or registrations with, or exemptions by, any foreign or domestic governmental or public body or authority, or any subdivision thereof, which may be required to authorize (i) the execution, delivery and performance by the Borrower or any Subsidiary of any Document or (ii) the legality, validity, binding effect or enforceability of any Document have been obtained or made, except that the Documentation relating to the Merger must be filed contemporaneously with the Second Borrowing Date. 6.07 Investment Company Act. Neither the Borrower nor any of its Subsidiaries is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 6.08 Public Utility Holding Company Act. Neither the Borrower nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. -41- 49 6.09 True and Complete Disclosure. All factual information (taken as a whole) heretofore or contemporaneously furnished by or on behalf of the Borrower or any of its Subsidiaries in writing to any Agent or any Bank (including, without limitation, all information contained in the Documents) for purposes of or in connection with this Agreement or any transaction contemplated herein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of any such Persons in writing to any Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time in light of the circumstances under which such information was provided. 6.10 Financial Condition; Financial Statements. (a) On and as of each of the Initial Borrowing Date and the Second Borrowing Date, on a pro forma basis after giving effect to the portion of the Transaction consummated on or prior to the Initial Borrowing Date or the Second Borrowing Date, as the case may be, and to all Indebtedness incurred, and to be incurred, and Liens created, and to be created, by each Credit Party in connection therewith on the Initial Borrowing Date or the Second Borrowing Date, as the case may be, with respect to the Borrower and its Subsidiaries (on a consolidated basis) and of the Borrower (on a stand alone basis) (x) the sum of the assets, at a fair valuation, of each of the Borrower and its Subsidiaries and of the Borrower (on a stand alone basis) will exceed its debts, (y) it has not incurred nor intended to, nor believes that it will, incur debts beyond its ability to pay such debts as such debts mature and (z) it will have sufficient capital with which to conduct its business. For purposes of this Section 6.10, "debt" means any liability on a claim, and "claim" means (i) right to payment whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. (b) The consolidated balance sheets of the Borrower and its Subsidiaries at each of FYE 1996, 1995, 1994 and at September 27, 1997 and the related consolidated statements of income, stockholders' equity and cash flows of the Borrower and its Subsidiaries for the fiscal year or nine-month period, as the case may be, ended as of said dates (all of which FYE financial statements have been audited by Deloitte & Touche LLP and all of which September 27, 1997 financial statements have been certified by the chief financial officer of the Borrower), copies of which have heretofore been furnished to each Bank, are true and correct in all material respects and present fairly in all material respects the combined financial position of Safelite and its Subsidiaries at the dates of said statements and the results for the periods covered thereby. All such financial statements have been prepared in accordance with GAAP consistently applied except to the extent provided in the notes to said financial statements and subject, in the case of the September 27, 1997 statements, to normal year-end audit adjustments and the absence of footnotes. (c) The consolidated balance sheets of Vistar and its Subsidiaries at fiscal year ending March 31, 1997, March 31, 1996 and March 31, 1995 and at September 30, 1997 and the related statements of income and cash flows of Vistar and its Subsidiaries for the fiscal year or six-month period, as the case may be, ended as of said dates (all of which FYE financial statements have been audited by Arthur Andersen LLP and all of which September 30, 1997 financial -42- 50 statements have been certified by the chief financial officer of Vistar), copies of which have heretofore been furnished to each Bank, are true and correct in all material respects and present fairly in all material respects the consolidated financial position of Vistar and its Subsidiaries at the dates of said statements and the results for the periods covered thereby. All such financial statements have been prepared in accordance with GAAP consistently applied except to the extent provided in the notes to said financial statements and subject, in the case of the September 30, 1997 statements, to normal year-end audit adjustments and the absence of footnotes. (d) The pro forma consolidated balance sheet of the Borrower and its Subsidiaries at September 27, 1997 and the related pro forma consolidated statements of income for the fiscal nine-month period ended September 27, 1997 and the fiscal year ended December 28, 1996 (all of which financial statements have been certified by the chief financial officer of the Borrower), copies of which have heretofore been furnished to each Bank, reflect the pro forma financial position of the Borrower and its Subsidiaries after giving effect to (i) the Transaction, including the Merger, and (y) the sale of Lear Siegler by the Borrower on September 12, 1997, as if such transaction had occurred on September 27, 1997 for such balance sheet and as of December 31, 1995 for such income statements. Such financial statements are based on available information and on assumptions that the Borrower believes are reasonable. (e) Since September 27, 1997, except as permitted or contemplated by the Transaction, nothing has occurred that has had or could reasonably be expected to have a Material Adverse Effect. (f) Except as fully reflected in the financial statements described in Sections 5.15(a) and 6.10(b), (c) and (d) and the Indebtedness incurred under this Agreement, there were as of each of the Initial Borrowing Date and the Second Borrowing Date (and after giving effect to any Loans made on either such date), no liabilities or obligations (excluding current obligations incurred in the ordinary course of business) with respect to the Borrower or any of its Subsidiaries or Vistar or any of its Subsidiaries (whether absolute, accrued, contingent or otherwise and whether or not due), and neither the Borrower nor any of its Subsidiaries know of any basis for the assertion against the Borrower or any of its Subsidiaries or Vistar or any of its Subsidiaries, as the case may be, of any such liability or obligation, which, either individually or in the aggregate, are or would be reasonably likely to have, a Material Adverse Effect. (g) The Projections are based on good faith estimates and assumptions made by the management of the Borrower, and on each of the Initial Borrowing Date and the Second Borrowing Date such management believed that the Projections were reasonable and attainable, it being recognized by the Banks, however, that projections as to future events are not to be viewed as facts and that the actual results during the period or periods covered by the Projections probably will differ from the projected results and that the differences may be material. 6.11 Security Interests. On and after the Initial Borrowing Date, each of the Security Documents creates (or after the execution and delivery thereof will create), as security for the Obligations, a valid and enforceable perfected security interest in and Lien on all of the Collateral subject thereto, superior to and prior to the rights of all third Persons, and subject to no other Liens (except that the Security Agreement Collateral, the Mortgaged Properties and the Collateral covered by the Additional Security Documents may be subject to Permitted Liens -43- 51 relating thereto), in favor of the Collateral Agent. No filings or recordings are required in order to perfect the security interests created under any Security Document except for filings or recordings required in connection with any such Security Document which shall have been made on or prior to the Initial Borrowing Date as contemplated by Section 5.10(b) or the Second Borrowing Date as contemplated by Section 5.27(b) or on or prior to the execution and delivery thereof as contemplated by Sections 7.11, 7.13 and 8.15. 6.12 Representations and Warranties in Other Documents. All representations and warranties of the Credit Parties set forth in the other Documents, and, to the knowledge of the Borrower, all representations and warranties of the other parties set forth in the other Documents, were true and correct in all material respects as of the time such representations and warranties were made and shall be true and correct in all material respects as of each of the Initial Borrowing Date and the Second Borrowing Date as if such representations and warranties were made on and as of such date, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date. 6.13 Transaction. At the time of consummation thereof, the Transaction shall have been consummated in accordance with the terms of the respective Documents and all applicable laws. At the time of consummation thereof, all consents and approvals of, and filings and registrations with, and all other actions in respect of, all governmental agencies, authorities or instrumentalities required to make or consummate the Transaction have been obtained, given, filed or taken or waived and are or will be in full force and effect (or effective judicial relief with respect thereto has been obtained) except where the failure to obtain, give, file, or take would not reasonably be expected to have a Material Adverse Effect. All applicable waiting periods with respect thereto have or, prior to the time when required, will have, expired without, in all such cases, any action being taken by any competent authority which restrains, prevents, or imposes material adverse conditions upon the Transaction. Additionally, there does not exist any judgment, order or injunction prohibiting or imposing material adverse conditions upon the Transaction, or the occurrence of any Credit Event or the performance by any Credit Party of their obligations under the Documents and all applicable laws. The Transaction has been consummated in accordance with the respective Documents and all applicable laws. 6.14 [Reserved] 6.15 Compliance with ERISA. (a) Except for any noncompliance, liabilities and obligations that would not individually or in the aggregate have a Material Adverse Effect: each Plan is in substantial compliance with ERISA and the Code; no Reportable Event has occurred with respect to a Plan during the five year period prior to the date on which this representation is made or deemed made with respect to any Plan; no Multiemployer Plan is insolvent or in reorganization; no Plan has an Unfunded Current Liability; no Plan has an accumulated or waived funding deficiency, has permitted decreases in its funding standard account or has applied for a waiver of the minimum funding standard or an extension of any amortization period within the meaning of Section 412 of the Code during the five year period prior to the date on which this representation is made or deemed made with respect to any Plan; all contributions required to be made with respect to each Plan, Multiemployer Plan and Foreign Pension Plan have been timely made; neither the Borrower nor any of its Subsidiaries nor any ERISA Affiliate has incurred any material liability to or on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, -44- 52 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code or reasonably expects to incur any material liability (including any indirect, contingent or secondary liability) under any of the foregoing Sections with respect to any Plan (other than liabilities of any ERISA Affiliate which could not, by operation of law or otherwise, become a liability of the Borrower or any of its Subsidiaries); no proceedings have been instituted to terminate, or to appoint a trustee to administer, any Plan; no condition exists which presents a material risk to the Borrower or any of its Subsidiaries or any ERISA Affiliate of incurring a liability to or on account of a Plan pursuant to the foregoing provisions of ERISA and the Code; using actuarial assumptions and computation methods consistent with subpart 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of the Borrower and its Subsidiaries and its ERISA Affiliates to all Plans which are multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Plan ended prior to the date of the most recent Credit Event, would not result in a Material Adverse Effect; no lien imposed under the Code or ERISA on the assets of the Borrower or any of its Subsidiaries or any ERISA Affiliate exists or is likely to arise on account of any Plan; and the Borrower and its Subsidiaries do not maintain or contribute to any Retiree Welfare Plan. (b) Except for any noncompliance, liabilities and obligations that would not individually or in the aggregate have a Material Adverse Effect: any Foreign Pension Plan has been maintained in substantial compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities. Neither the Borrower nor any of its Subsidiaries has incurred any material obligation in connection with the termination of or withdrawal from any Foreign Pension Plan. The present value of the accrued benefit liabilities (whether or not vested) under any Foreign Pension Plan which is funded, determined as of the end of the most recently ended fiscal year of the Borrower on the basis of actuarial assumptions, each of which is reasonable, did not exceed the current value of the assets of such Foreign Pension Plan, and for any Foreign Pension Plan which is not funded, the obligations of such Foreign Pension Plan are properly accrued. 6.16 Capitalization. On each of the Initial Borrowing Date and the Second Borrowing Date and after giving effect to the portion of the Transaction expected to be consummated on each such date and the other transactions contemplated hereby, the authorized and issued capital stock of the Borrower shall be as set forth on Schedule 6.16. All outstanding shares of capital stock of the Borrower have been duly and validly issued, and are fully paid and nonassessable. The Borrower does not have outstanding any securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock, except as set forth on Schedule 6.16. 6.17 Subsidiaries. (a) Prior to the consummation of the Transaction the Borrower has no Subsidiaries. (b) On and as of the Second Borrowing Date and after giving effect to the consummation of the Transaction, Vistar shall have been merged into the Borrower in accordance with the Merger Documents and the Borrower shall have no Subsidiaries other than the -45- 53 Subsidiaries listed on Schedule 6.17 as Subsidiaries remaining after the Second Borrowing Date; the net book value of each such Subsidiary is set forth on Schedule 6.17. Schedule 6.17 correctly sets forth, as of the Second Borrowing Date and after giving effect to the Transaction, the percentage ownership (direct and indirect) of the Borrower in each class of capital stock of each of its Subsidiaries and also identifies the direct owner thereof. 6.18 Intellectual Property. Each of the Borrower and each of its Subsidiaries owns or holds a valid license to use all the material patents, trademarks, permits, service marks, trade names, technology, know-how and formulas or other rights with respect to the foregoing, free from restrictions that are materially adverse to the use thereof, that are used in the operation of the business of the Borrower and each of its Subsidiaries as presently conducted. 6.19 Compliance with Statutes, etc. The Borrower and each of its Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including compliance with all applicable Environmental Laws with respect to any Real Property or governing its business and the requirements of any permits issued under such Environmental Laws with respect to any such Real Property or the operations of the Borrower or any of its Subsidiaries), except such non-compliance as is not likely to, individually or in the aggregate, have a Material Adverse Effect. 6.20 Environmental Matters. (a) Each of the Borrower and each of its Subsidiaries has complied with, and on the date of each Credit Event is in compliance with, all applicable Environmental Laws and the requirements of any permits issued under such Environmental Laws. There are no pending or, to the best knowledge of the Borrower, past or threatened Environmental Claims against the Borrower or any of its Subsidiaries or any Real Property owned or operated by the Borrower or any of its Subsidiaries. There are no facts, circumstances, conditions or occurrences on any Real Property owned or operated by the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, on any property adjoining or in the vicinity of any such Real Property that would reasonably be expected (i) to form the basis of an Environmental Claim against the Borrower or any of its Subsidiaries or any such Real Property or (ii) to cause any such Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability of such Real Property by the Borrower or any of its Subsidiaries under any applicable Environmental Law. (b) Hazardous Materials have not at any time been generated, used, treated or stored on, or transported to or from, any Real Property owned or operated by the Borrower or any of its Subsidiaries where such generation, use, treatment or storage has violated or would reasonably be expected to violate any Environmental Law. Hazardous Materials have not at any time been Released on or from any Real Property owned or operated by the Borrower or any of its Subsidiaries in a manner that would reasonably be expected to form the basis for an Environmental Claim against the Borrower or any of its Subsidiaries. There are not now any underground storage tanks located on any Real Property owned or operated by the Borrower or any of its Subsidiaries which could reasonably be expected to form the basis for an Environmental Claim against the Borrower or any of its Subsidiaries. -46- 54 (c) Notwithstanding anything to the contrary in this Section 6.20, the representations made in this Section 6.20 shall only be untrue if the aggregate effect of all conditions, failures, noncompliances, Environmental Claims, Releases and presence of underground storage tanks, in each case of the types described above, would reasonably be expected to have a Material Adverse Effect. 6.21 Properties. All Real Property owned by the Borrower or any of its Subsidiaries and all material Leaseholds leased by the Borrower or any of its Subsidiaries, in each case as of each of the Initial Borrowing Date and the Second Borrowing Date and after giving effect to the Transaction, and the nature of the interest therein, is correctly set forth in Schedule 6.21. Each of the Borrower and each of its Subsidiaries has good and marketable title to, or a validly subsisting leasehold interest in, all material properties owned or leased by it, including all Real Property reflected in Schedule 6.21 or in the financial statements referred to in Section 6.10(b), free and clear of all Liens, other than Permitted Liens. 6.22 Labor Relations. Neither the Borrower nor any of its Subsidiaries is engaged in any unfair labor practice that could reasonably be expected to have a Material Adverse Effect. There is (i) no unfair labor practice complaint pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened against any of them, before the National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against the Borrower or any of its Subsidiaries or, to the best knowledge of the Borrower, threatened against the Borrower or any of its Subsidiaries and (iii) to the best knowledge of the Borrower, no union representation question existing with respect to the employees of the Borrower or any of its Subsidiaries and, to the best knowledge of the Borrower, no union organizing activities are taking place, except (with respect to any matter specified in clause (i), (ii) or (iii) above, either individually or in the aggregate) such as is not reasonably likely to have a Material Adverse Effect. 6.23 Tax Returns and Payments. All Federal, material state and other material returns, statements, forms and reports for taxes (the "Returns") required to be filed by or with respect to the income, properties or operations of the Borrower and/or any of its Subsidiaries have been timely filed (taking into account all extensions of due dates) with the appropriate taxing authority. The Returns accurately reflect all liability for taxes of the Borrower and its Subsidiaries for the periods covered thereby. The Borrower and each of its Subsidiaries have paid all taxes payable by them other than immaterial taxes and other taxes which are not yet due and payable, and other than taxes contested in good faith and for which adequate reserves have been established in accordance with GAAP. Except as disclosed in the financial statements referred to in Section 6.10(b), there is no material action, suit, proceeding, investigation, audit, or claim now pending or, to the knowledge of the Borrower, threatened by any authority regarding any material taxes relating to the Borrower or any of its Subsidiaries. As of each of the Initial Borrowing Date and the Second Borrowing Date, and neither the Borrower nor any of its Subsidiaries has entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of material taxes of the Borrower or any of its Subsidiaries, or is aware of any circumstances that would cause the taxable years or other taxable periods of the Borrower or any of its Subsidiaries not to be subject to the normally -47- 55 applicable statute of limitations. Neither the Borrower nor any of its Subsidiaries has provided, with respect to themselves or property held by them, any consent under Section 341 of the Code. Neither the Borrower nor any of its Subsidiaries has incurred, or will incur, any material tax liability in connection with the Transaction and the other transactions contemplated hereby. 6.24 Existing Indebtedness. Schedule 6.24 sets forth a true and complete list of all Indebtedness of the Borrower and its Subsidiaries (other than Indebtedness which in the aggregate does not exceed $100,000) as of each of the Initial Borrowing Date and the Second Borrowing Date and which is to remain outstanding after giving effect to the Transaction and the incurrence of Loans on each such date (excluding the Loans and the Letters of Credit, the "Existing Indebtedness"), in each case showing the aggregate principal amount thereof and the name of the respective borrower and any other entity which directly or indirectly guaranteed such debt. 6.25 Senior Subordinated Notes. The subordination provisions contained in the Senior Subordinated Note Documents are enforceable against the Borrower, the respective Guarantors and the holders thereof, and all Obligations and Guaranteed Obligations (as defined herein and in the Subsidiary Guaranty) are within the definition of "Senior Indebtedness" or "Guarantor Senior Indebtedness," as the case may be, included in such subordination provisions. This Agreement is the Bank Credit Agreement under the Senior Subordinated Note Indenture. SECTION 7. Affirmative Covenants. The Borrower hereby covenants and agrees that as of the Effective Date and thereafter for so long as this Agreement is in effect and until the Commitments have terminated, no Letters of Credit (other than Letters of Credit, together with all Fees that have accrued and will accrue thereon through the stated termination date of such Letters of Credit, which have been cash collateralized in a manner reasonably satisfactory to the Letter of Credit Issuer) or Notes are outstanding and the Loans and Unpaid Drawings, together with interest, Fees and all other Obligations (other than any indemnities described in Section 12.13 which are not then due and payable) incurred hereunder, are paid in full: 7.01 Information Covenants. The Borrower will furnish to each Bank: (a) Monthly Reports. Within 45 days (or for each fiscal month ending on or prior to December 31, 1998 the earlier of (i) 60 days and (ii) the date, if any, on which the applicable financial statements described in this paragraph are required to be delivered to the holders of the Senior Subordinated Notes pursuant to the Senior Subordinated Note Indenture) after the end of each fiscal month of the Borrower (commencing with the fiscal month ending on FYE 1997), the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal month and the related consolidated statements of income and retained earnings and of cash flows for such fiscal month and for the elapsed portion of the fiscal year ended with the last day of such fiscal month, in each case setting forth comparative figures for the corresponding fiscal month in the prior fiscal year and comparable budgeted figures for such fiscal month, all of which shall be certified by the chief financial officer or other Authorized Officer of the Borrower, subject to normal year-end audit adjustments and the absence of footnotes. (b) Quarterly Financial Statements. (i) Within 45 days (or for each fiscal quarter ending on or prior to December 31, 1998 the earlier of (i) 60 days and (ii) the date, if any, -48- 56 on which the applicable financial statements described in this paragraph are required to be delivered to the holders of the Senior Subordinated Notes pursuant to the Senior Subordinated Note Indenture) after the close of each quarterly accounting period in each fiscal year of the Borrower, the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such quarterly accounting period and the related consolidated statements of income and retained earnings and of cash flows for such quarterly accounting period and for the elapsed portion of the fiscal year ended with the last day of such quarterly accounting period; all of which shall be in reasonable detail and certified by the chief financial officer or other Authorized Officer of the Borrower that they fairly present in all material respects the financial condition of the Borrower and its Subsidiaries as of the dates indicated and the results of their operations and changes in their cash flows for the periods indicated, subject to normal year-end audit adjustments and the absence of footnotes. (ii) Within 45 days after the close of each quarterly accounting period in each fiscal year of the Borrower, Consolidated EBITDA for such quarterly accounting period and for the elapsed portion of the fiscal year ended with the last day of such quarterly accounting period; all of which shall be in reasonable detail and certified by the chief financial officer or other Authorized Officer of the Borrower that they fairly represent the information contained therein for the periods indicated, subject to normal year-end audit adjustments and the absence of footnotes. (c) Annual Financial Statements. (i) Within 90 days after the close of each fiscal year of the Borrower, the consolidated balance sheet of the Borrower and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income and retained earnings and of cash flows for such fiscal year and setting forth comparative consolidated figures for the preceding fiscal year (except for the financial statements delivered for FYE 1997) and comparable budgeted figures for such fiscal year and (except for such comparable budgeted figures) certified by Deloitte & Touche LLP or such other independent certified public accountants of recognized national standing as shall be reasonably acceptable to the Administrative Agent, in each case to the effect that such statements fairly present the financial condition of the Borrower and its Subsidiaries as of the dates indicated and the results of their operations and changes in cash flows, together with a certificate of such accounting firm stating that in the course of its regular audit of the business of the Borrower and its Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, no Default or Event of Default which has occurred and is continuing has come to their attention or, if such a Default or an Event of Default has come to their attention a statement as to the nature thereof. (ii) Within 90 days after the close of each fiscal year of the Borrower, Consolidated EBITDA for such fiscal year; all of which shall be in reasonable detail and certified by the chief financial officer or other Authorized Officer of the Borrower that they fairly present the information contained therein for the periods indicated. (d) Budgets, etc. Not more than 60 days (90 days in the case of FYE 1998) after the commencement of each fiscal year of the Borrower, budgets of the Borrower and its Subsidiaries in reasonable detail for each of the four fiscal quarters of such fiscal year and -49- 57 for the immediately succeeding fiscal year taken as a whole, in each case as customarily prepared by management for its internal use setting forth, with appropriate discussion, the principal assumptions upon which such budgets are based. Together with each delivery of financial statements pursuant to Section 7.01(b) and (c), a comparison of the current year to date financial results (other than in respect of the balance sheets included therein) against the budgets required to be submitted pursuant to this clause (d) shall be presented. (e) Officer's Certificates. At the time of the delivery of the financial statements provided for in Section 7.01(b) and (c), (i) a certificate of the chief financial officer or other Authorized Officer of the Borrower to the effect that no Default or Event of Default exists or, if any Default or Event of Default does exist, specifying the nature and extent thereof, which certificate shall set forth the calculations required to establish whether the Borrower and its Subsidiaries were in compliance with the provisions of Sections 8.04(e), 8.06 and 8.09 through and including 8.12, as at the end of such fiscal quarter or year, as the case may be and (ii) a narrative discussion and analysis of the financial condition and results of operations of the Borrower and its Subsidiaries for the period covered by such financial statements, as compared to the portion of the Projections covering such period and to the comparable period of the previous year. In addition, at the time of the delivery of the financial statements provided for in Section 7.01(c)(i), a certificate of the chief financial officer or other Authorized Officer of the Borrower setting forth (i) the amount of, and calculations required to establish the amount of, Excess Cash Flow for the Excess Cash Flow Period ending on the last day of the respective fiscal year and (ii) the calculations required to establish whether the Borrower was in compliance with Section 4.02(A)(c) for the respective fiscal year. (f) Notice of Default or Litigation. Promptly, and in any event within three Business Days (or 10 Business Days in the case of clause (y) below) after any officer of the Borrower obtains knowledge thereof, notice of (x) the occurrence of any event which constitutes a Default or an Event of Default, which notice shall specify the nature thereof, the period of existence thereof and what action the Borrower proposes to take with respect thereto and (y) the commencement of, or threat of, or any significant development in, any litigation or governmental proceeding pending against the Borrower or any of its Subsidiaries (i) in which the amount involved is $5,000,000 or more or (ii) which is likely to have a Material Adverse Effect, or a material adverse effect on the ability of any Credit Party to perform its respective obligations hereunder or under any other Credit Document. (g) Auditors' Reports. Promptly upon receipt thereof, a copy of each report or "management letter" submitted to the Borrower or any of its Subsidiaries by its independent accountants in connection with any annual, interim or special audit made by them of the books of the Borrower or any of its Subsidiaries. (h) Environmental Matters. Promptly after obtaining knowledge of any of the following, written notice of: (i) any pending or threatened material Environmental Claim against the Borrower or any of its Subsidiaries or any Real Property owned or operated by the Borrower or any of its Subsidiaries; -50- 58 (ii) any condition or occurrence on any Real Property owned or operated by the Borrower or any of its Subsidiaries that (x) results in material noncompliance by the Borrower or any of its Subsidiaries with any applicable Environmental Law or (y) could reasonably be anticipated to form the basis of a material Environmental Claim against the Borrower or any of its Subsidiaries or any such Real Property; (iii) any condition or occurrence on any Real Property owned or operated by the Borrower or any of its Subsidiaries that could reasonably be anticipated to cause such Real Property to be subject to any material restrictions on the ownership, occupancy, use or transferability by the Borrower or its Subsidiary, as the case may be, of its interest in such Real Property under any Environmental Law; and (iv) the taking of any material removal or remedial action in response to the actual or alleged presence of any Hazardous Material on any Real Property owned or operated by the Borrower or any of its Subsidiaries. All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and the Borrower's response thereto. In addition, the Borrower agrees to provide the Banks with copies of all material written communications by the Borrower or any of its Subsidiaries with any Person, government or governmental agency relating to any of the matters set forth in clauses (i)-(iv) above, and such detailed reports relating to any of the matters set forth in clauses (i)-(iv) above as may reasonably be requested by the Administrative Agent or the Required Banks. (i) Other Information. Promptly upon transmission thereof, copies of any filings and registrations with, and reports to, the SEC by the Borrower or any of its Subsidiaries and copies of all financial statements, proxy statements, notices and reports as the Borrower or any of its Subsidiaries shall send generally to analysts, the holders of their capital stock or of the Senior Subordinated Notes in their capacity as such holders (in each case to the extent not theretofore delivered to the Banks pursuant to this Agreement) and, with reasonable promptness, such other information or documents (financial or otherwise) as the Administrative Agent on its own behalf or on behalf of the Required Banks may reasonably request from time to time. 7.02 Books, Records and Inspections. The Borrower will, and will cause each of its Subsidiaries to, permit, upon two Business Days' prior notice to the chief financial officer or other Authorized Officer of the Borrower (except when a Default or Event of Default has occurred and is continuing, in which case, no notice shall be required), officers and designated representatives of any Agent or any Bank to visit and inspect any of the properties or assets of the Borrower and any of its Subsidiaries in whomsoever's possession, and to examine the books of account of the Borrower and any of its Subsidiaries and discuss the affairs, finances and accounts of the Borrower and of any of its Subsidiaries with, and be advised as to the same by, their officers and independent accountants, all at such reasonable times and intervals and to such reasonable extent as any Agent or any Bank may desire, provided that all such visits and inspections shall be coordinated through an Agent. -51- 59 7.03 Insurance. The Borrower will, and will cause each of its Subsidiaries to, at all times from and after the Effective Date maintain in full force and effect insurance with reputable and solvent insurance carriers in such amounts, covering such risks and liabilities and with such deductibles or self-insured retentions as are in accordance with normal industry practice, and shall furnish to the Administrative Agent upon written request full information as to the insurance so carried. 7.04 Payment of Taxes. The Borrower will pay and discharge, and will cause each of its Subsidiaries to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which material penalties attach thereto, and all lawful claims for sums that have become due and payable which, if unpaid, might become a Lien not otherwise permitted under Section 8.03(a) or charge upon any properties of the Borrower or any of its Subsidiaries; provided that neither the Borrower nor any of its Subsidiaries shall be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with GAAP. 7.05 Corporate Franchises. The Borrower will do, and will cause each of its Subsidiaries to do, or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises and authority to do business; provided, however, that any transaction permitted by Section 8.02 will not constitute a breach of this Section 7.05. 7.06 Compliance with Statutes, etc. The Borrower will, and will cause each of its Subsidiaries to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including applicable statutes, regulations, orders and restrictions relating to environmental standards and controls) except for such noncompliance as would not have a Material Adverse Effect or a material adverse effect on the ability of any Credit Party to perform its obligations under any Credit Document to which it is a party. 7.07 Compliance with Environmental Laws. (a) The Borrower will pay, and will cause each of its Subsidiaries to pay, all costs and expenses incurred by it in keeping in compliance with all Environmental Laws, and will keep or cause to be kept all Real Properties owned or operated by the Borrower or any of its Subsidiaries free and clear of any Liens imposed pursuant to such Environmental Laws; and (b) neither the Borrower nor any of its Subsidiaries will generate, use, treat, store, release or dispose of, or permit the generation, use, treatment, storage, release or disposal of, Hazardous Materials on any Real Property owned or operated by the Borrower or any of its Subsidiaries, or transport or permit the transportation of Hazardous Materials to or from any such Real Property, unless the failure to comply with the requirements specified in clause (a) or (b) above, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. If the Borrower or any of its Subsidiaries, or any tenant or occupant of any Real Property owned or operated by the Borrower or any of its Subsidiaries, cause or permit any intentional or unintentional act or omission resulting in the presence or Release of any Hazardous Material (except in compliance with applicable Environmental Laws), the Borrower agrees to undertake, and/or to cause any of its Subsidiaries, tenants or occupants to undertake, at their sole expense, any clean up, removal, remedial or other action required pursuant to Environmental Laws -52- 60 to remove and clean up any Hazardous Materials from any Real Property except where the failure to do so would not reasonably be expected to have a Material Adverse Effect; provided that neither the Borrower nor any of its Subsidiaries shall be required to comply with any such order or directive which is being contested in good faith and by proper proceedings so long as it has maintained adequate reserves with respect to such compliance to the extent required in accordance with GAAP. 7.08 ERISA. As soon as possible and, in any event, within 10 days after the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate knows or has reason to know of the occurrence of any of the following events to the extent that one or more of such events is reasonably likely to result in a material liability to the Borrower or any Subsidiary of the Borrower, the Borrower will deliver to each of the Banks a certificate of the chief financial officer or other Authorized Officer of the Borrower setting forth details as to such occurrence and the action, if any, which the Borrower, such Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by the Borrower, the Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto: that a Reportable Event has occurred, that an accumulated funding deficiency has been incurred or an application may be or has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code with respect to a Plan; that a contribution required to be made to a Plan, Multiemployer Plan or Foreign Pension Plan has not been timely made; that a Plan has been or may be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability giving rise to a lien under ERISA or the Code; that proceedings may be or have been instituted by the PBGC to terminate or appoint a trustee to administer a Plan; that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Multiemployer Plan; that the Borrower, any Subsidiary of the Borrower or any ERISA Affiliate will or could reasonably be expected to incur any material liability (including any contingent or secondary liability) to or on account of the termination of or withdrawal from a Plan or Multiemployer Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409, 502(i) or 502(l) of ERISA; or that the Borrower or any Subsidiary of the Borrower has or may incur any material liability under any Retiree Welfare Plan or Foreign Pension Plan. At the request of any Bank, the Borrower will deliver to such Bank a complete copy of the annual report (Form 5500) of each Plan required to be filed with the Internal Revenue Service. In addition to any certificates or notices delivered to the Banks pursuant to the first sentence hereof, copies of annual reports and any notices received by the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate with respect to any Plan or Foreign Pension Plan shall be delivered to the Banks no later than 10 days after the date such report has been filed with the Internal Revenue Service or received by the Borrower or the Subsidiary or the ERISA Affiliate. 7.09 Good Repair. The Borrower will, and will cause each of its Subsidiaries to, ensure that its material properties and equipment used in its business are kept in good repair, working order and condition, normal wear and tear and damage by casualty excepted, and, subject to Section 8.09, that from time to time there are made in such properties and equipment all needful and proper repairs, renewals, replacements, extensions, additions, betterments and improvements thereto, to the extent and in the manner useful or customary for companies in similar businesses. -53- 61 7.10 End of Fiscal Years; Fiscal Quarters. The Borrower will, for financial reporting purposes, cause (i) each of its, and each of its Subsidiaries', fiscal years to end on FYE of each year and (ii) each of its, and each of its Subsidiaries', fiscal quarters to end on FQE1, FQE2, FQE3 and FYE of each year. Notwithstanding the foregoing, the Borrower may change its FYE and FQE1, FQE2 and FQE3 to correspond to a March 31 or similar fiscal year end as long as in connection therewith this Agreement is amended in a manner reasonably requested by the Administrative Agent and mutually available to the Borrower and the Administrative Agent and mutually acceptable to the Borrower and the Administrative Agent in order to appropriately adjust the covenants set forth herein as a result of such change. 7.11 Additional Security; Further Assurances. (a) The Borrower will, and will cause each of its Domestic Subsidiaries (and subject to Section 7.13, each of its Foreign Subsidiaries) to, grant to the Collateral Agent security interests and mortgages in such assets and properties of the Borrower and its Subsidiaries as are not covered by the original Security Documents, and as may be requested from time to time by the Administrative Agent or the Required Banks (collectively, the "Additional Security Documents"). All such security interests and mortgages shall be granted pursuant to documentation reasonably satisfactory in form and substance to the Administrative Agent and shall constitute valid and enforceable perfected security interests and mortgages superior to and prior to the rights of all third Persons and subject to no other Liens except for Permitted Liens. The Additional Security Documents or instruments related thereto shall have been duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent required to be granted pursuant to the Additional Security Documents and all taxes, fees and other charges payable in connection therewith shall have been paid in full. (b) The Borrower will, and will cause each of its Subsidiaries to, at the expense of the Borrower, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, real property surveys, reports and other assurances or instruments and take such further steps relating to the collateral covered by any of the Security Documents as the Collateral Agent may reasonably require. Furthermore, the Borrower shall cause to be delivered to the Collateral Agent such opinions of counsel, title insurance and other related documents as may be reasonably requested by the Administrative Agent to assure themselves that this Section 7.11 has been complied with. (c) If the Administrative Agent or the Required Banks determine that they are required by law or regulation to have appraisals prepared in respect of the Real Property of the Borrower and its Subsidiaries constituting Collateral, the Borrower shall provide to the Administrative Agent appraisals which satisfy the applicable requirements of the Real Estate Appraisal Reform Amendments of the Financial Institution Reform, Recovery and Enforcement Act of 1989 and which shall be in form and substance reasonably satisfactory to the Administrative Agent. (d) The Borrower agrees that each action required above by this Section 7.11 shall be completed within 90 days after such action is either requested to be taken by the Administrative Agent or the Required Banks or required to be taken by the Borrower and its Subsidiaries pursuant to the terms of this Section 7.11; provided that in no event shall the Borrower be required to take -54- 62 any action, other than using its reasonable commercial efforts, to obtain consents from third parties with respect to its compliance with this Section 7.11. (e) Within 60 days following the Initial Borrowing Date, the Borrower shall cause to be delivered to the Collateral Agent a current ALTA/ACSM surveys in form and substance reasonably satisfactory to the Collateral Agent of each Mortgaged Property mortgaged pursuant to paragraph (f) below, certified in a manner reasonably satisfactory to the Collateral Agent by a licensed professional surveyor reasonably satisfactory to the Collateral Agent. At the time of the delivery of such surveys for such Mortgaged Properties, the Mortgage Policies with respect to such Mortgaged Properties shall be amended in a manner reasonably satisfactory to the Collateral Agent to remove therefrom any "survey exception" noted therein or cause the title company providing such Mortgage Policies to insure over the same in a manner reasonably satisfactory to the Collateral Agent. (f) Within 60 days following the Initial Borrowing Date, the Borrower shall cause to be delivered to the Collateral Agent fully executed counterparts of (i) a Mortgage in form and substance satisfactory to the Collateral Agent with respect to each of the Mortgaged Properties acquired by the Borrower in connection with the Merger or owned by the Vistar Subsidiaries, and arrangements reasonably satisfactory to the Collateral Agent shall be in place to provide that counterparts of such Mortgages shall be recorded within such period in all places to the extent necessary or desirable, in the judgment of the Collateral Agent, effectively to create a valid and enforceable first priority mortgage Lien, subject only to Permitted Liens, on each such Mortgaged Property in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors; and (ii) a Uniform Commercial Code financing statement (form UCC-1) and/or fixture filing (the "Financing Statements") in form and substance satisfactory to the Collateral Agent with respect to the personal property and fixtures located on or arising from each of the Mortgaged Properties acquired by the Borrower in connection with the Merger or owned by the Vistar Subsidiaries, and arrangements reasonably satisfactory to the Collateral Agent shall be in place to provide that counterparts of the Financing Statements shall be recorded within such period in all places to the extent necessary or desirable, in the judgment of the Collateral Agent, effectively to perfect the security interest Lien, subject only to Permitted Liens, on such personal property and fixtures in favor of the Collateral Agent for the ratable benefit of the Secured Creditors. (g) Within 60 days following the Initial Borrowing Date, the Borrower shall cause to be delivered to the Collateral Agent mortgagee title insurance policies (or binding commitments to issue such title insurance policies) issued by title insurers reasonably satisfactory to the Collateral Agent (the "Mortgage Policies") in amounts reasonably satisfactory to the Collateral Agent and assuring the Collateral Agent that the Mortgages referred to in paragraph (f) above are valid and enforceable first priority mortgage Liens on the respective Mortgaged Properties, free and clear of all defects and encumbrances except Permitted Liens. Such Mortgage Policies shall be in form and substance reasonably satisfactory to the Collateral Agent and (i) shall include (to the extent available in the respective jurisdiction of each such Mortgaged Property) an endorsement for future advances under this Agreement, the Notes and the Mortgages, and for such other matters that the Collateral Agent in its discretion may reasonably request, (ii) shall not include an exception for mechanics' liens, and (iii) shall provide for affirmative insurance (including direct -55- 63 vehicular access to a public road) and such reinsurance as the Collateral Agent in its discretion may reasonably request. (h) Within 60 days following the Second Borrowing Date, the Borrower shall cause Glass Express, Inc., a Michigan corporation, to be dissolved and its assets transferred to the Borrower and its other Subsidiaries. During such period (i) Glass Express, Inc. shall not be required to become a Credit Party and shall not own assets having an aggregate value in excess of $100,000, and (ii) the capital stock of Glass Express Inc. shall not be required to be pledged pursuant to the Pledge Agreement. (i) Notwithstanding any other provisions of the Credit Documents to the contrary, the Borrower shall not be required to deliver the stock certificate(s) evidencing the shares of CarComp to the Collateral Agent in pledge pursuant to the Pledge Agreement until the Borrower obtains possession of such certificate(s), which it agrees to use its best efforts to do. Prior to the time of such delivery the Borrower will not permit the aggregate value of the assets of CarComp to exceed $100,000 and will not transfer, or permit any Subsidiary to transfer, assets to CarComp. 7.12 Interest Rate Protection. No later than (i) 90 days following the Initial Borrowing Date at least 40% of the sum of outstanding Term Loans and other Indebtedness of the Borrower (other than the Revolving Loans) shall be subject to Interest Rate Protection Agreements, satisfactory to the Administrative Agent, with a term of at least three years from the Initial Borrowing Date (or, with respect to Interest Rate Protection Agreements entered into in connection with the Existing Credit Agreement, such shorter term as shall exist on the Initial Borrowing Date as long as such Interest Rate Protection Agreements are at their expiry renewed to, or replaced by other Interest Rate Protection Agreements satisfactory to the Administrative Agent which extend to, a date which is at least three years from the Initial Borrowing Date), or shall be subject to a fixed or maximum interest rate (with a term of at least three years from the Initial Borrowing Date) acceptable to the Administrative Agent and (ii) the first anniversary of the Initial Borrowing Date at least 50% of the sum of outstanding Term Loans and other Indebtedness of the Borrower (other than the Revolving Loans) shall be subject to Interest Rate Protection Agreements, satisfactory to the Administrative Agent, with a term of at least three years from the Initial Borrowing Date, or shall be subject to a fixed or maximum interest rate (with a term of at least three years from the Initial Borrowing Date) acceptable to the Administrative Agent. The Administrative Agent acknowledges that the fixed interest rate applicable to the Senior Subordinated Notes is satisfactory to the Administrative Agent. 7.13 Foreign Subsidiaries Security. If following a change in the relevant sections of the Code or the regulations, rules, rulings, notices or other official pronouncements issued or promulgated thereunder, counsel for the Borrower reasonably acceptable to the Administrative Agent does not within 30 days after a request from the Administrative Agent or the Required Banks deliver evidence, in form and substance mutually satisfactory to the Administrative Agent and the Borrower, with respect to any Foreign Subsidiary of the Borrower which has not already had all of its stock pledged pursuant to the Pledge Agreement that (i) a pledge (x) of 66-2/3% or more of the total combined voting power of all classes of capital stock of such Foreign Subsidiary entitled to vote, and (y) of any promissory note issued by such Foreign Subsidiary to the Borrower or any of its Domestic Subsidiaries, (ii) the entering into by such Foreign Subsidiary of a security agreement in substantially the form of the Security Agreement and (iii) the entering into by such -56- 64 Foreign Subsidiary of a guaranty in substantially the form of the Subsidiary Guaranty, in any such case would cause the undistributed earnings of such Foreign Subsidiary as determined for Federal income tax purposes to be treated as a deemed dividend to such Foreign Subsidiary's United States parent for Federal income tax purposes, then in the case of a failure to deliver the evidence described in clause (i) above, that portion of such Foreign Subsidiary's outstanding capital stock or any promissory notes so issued by such Foreign Subsidiary, in each case not theretofore pledged pursuant to the Pledge Agreement shall be pledged to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Pledge Agreement (or another pledge agreement in substantially similar form, if needed), and in the case of a failure to deliver the evidence described in clause (ii) above, such Foreign Subsidiary shall execute and deliver the Security Agreement (or another security agreement in substantially similar form, if needed), granting the Secured Creditors a security interest in all of such Foreign Subsidiary's assets and securing the Obligations of the Borrower under the Credit Documents and under any Interest Rate Protection Agreement or Other Hedging Agreement and, in the event the Subsidiary Guaranty shall have been executed by such Foreign Subsidiary, the obligations of such Foreign Subsidiary thereunder, and in the case of a failure to deliver the evidence described in clause (iii) above, such Foreign Subsidiary shall execute and deliver the Subsidiary Guaranty (or another guaranty in substantially similar form, if needed), guaranteeing the Obligations of the Borrower under the Credit Documents and under any Interest Rate Protection Agreement or Other Hedging Agreement, in each case to the extent that the entering into such Security Agreement or Subsidiary Guaranty is permitted by the laws of the respective foreign jurisdiction and with all documents delivered pursuant to this Section 7.13 to be in form and substance reasonably satisfactory to the Administrative Agent. 7.14 Pledge of Borrower's Stock. In the event that at any time after the Initial Borrowing Date a holding company shall be formed to own the voting stock of the Borrower, the Borrower will promptly cause such holding company to pledge to the Collateral Agent, for the benefit of the Secured Creditors, all voting stock of the Borrower pursuant to documentation (including legal opinions related thereto) reasonably satisfactory to the Collateral Agent. SECTION 8. Negative Covenants. The Borrower hereby covenants and agrees that as of the Effective Date and thereafter for so long as this Agreement is in effect and until the Commitments have terminated, no Letters of Credit (other than Letters of Credit, together with all Fees that have accrued and will accrue thereon through the stated termination date of such Letters of Credit, which have been cash collateralized in a manner reasonably satisfactory to the Letter of Credit Issuer) or Notes are outstanding and the Loans, together with interest, Fees and all other Obligations (other than any indemnities described in Section 12.13 which are not then due and payable) incurred hereunder, are paid in full: 8.01 Changes in Business. The Borrower and its Subsidiaries will not engage in any businesses which are not the same, similar, related or ancillary to (a) the businesses in which the Borrower and its Subsidiaries are engaged on the Initial Borrowing Date or (b) from and after the Second Borrowing Date, the businesses in which the Borrower and its Subsidiaries are engaged on the Second Borrowing Date. 8.02 Consolidation, Merger, Sale or Purchase of Assets, etc. The Borrower will not, and will not permit any of its Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of (or -57- 65 agree to do any of the foregoing at any future time) all or any part of its property or assets (other than inventory in the ordinary course of business), or enter into any partnerships, joint ventures or sale-leaseback transactions, or purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets (other than purchases or other acquisitions of inventory, materials, equipment and databases in the ordinary course of business) of any Person, except that the following shall be permitted: (a) the consummation of the Transaction; (b) the Borrower and its Subsidiaries may, as lessee, enter into operating leases in the ordinary course of business with respect to real or personal property; (c) Capital Expenditures by the Borrower and its Subsidiaries to the extent not in violation of Section 8.09; (d) the advances, investments and loans permitted pursuant to Section 8.06; (e) the Borrower and its Subsidiaries may sell assets, provided that (i) the aggregate sale proceeds from all assets subject to such sales pursuant to this clause (e) (other than in the ordinary course of business, the Net Cash Proceeds of which are not required to be applied to the making of mandatory prepayments pursuant to the last sentence of Section 4.02(A)(c)) shall not exceed $10,000,000 in any fiscal year of the Borrower and (ii) the Net Cash Proceeds from sales described in (i) above are either applied to repay Term Loans as provided in Section 4.02(A)(c) or reinvested in replacement assets to the extent permitted by Section 4.02(A)(c); (f) the Borrower and its Subsidiaries may sell other assets, provided that the aggregate sale proceeds from all such asset sales pursuant to this clause (f) does not exceed $250,000 in any fiscal year of the Borrower; (g) the Borrower and its Subsidiaries may sell or discount, in each case without recourse, accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof; (h) the Borrower and its Subsidiaries may sell or exchange any item of equipment, so long as the purpose of each such sale or exchange is to acquire (and results within 90 days before or after such sale or exchange in the acquisition of) replacement items of equipment which are the functional equivalent of the item of equipment so sold or exchanged; (i) the Borrower and its Subsidiaries may, in the ordinary course of business, license patents, trademarks, copyrights and know-how to third Persons and to one another, so long as each such license is permitted to be assigned pursuant to the Security Agreement (to the extent that a security interest in such patents, trademarks, copyrights and know-how is granted thereunder) and does not otherwise prohibit the granting of a Lien by the Borrower or any of its Subsidiaries pursuant to the Security Agreement in the intellectual property covered by such license; -58- 66 (j) any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving corporation) or with or into any one or more wholly owned Subsidiary Guarantors (provided that the wholly owned Subsidiary or Subsidiaries shall be the continuing or surviving corporation); (k) any wholly owned Subsidiary may sell, lease, transfer or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any other wholly owned Subsidiary Guarantor; (l) the Borrower may dissolve any Subsidiary that is inactive and holds minimal assets and the continued existence of which is of no value to the Borrower, any other Credit Party or the interests of the Banks; (m) so long as no Default or Event of Default then exists or would result therefrom, the Borrower may acquire assets or the capital stock of any Person (any such acquisition permitted by this clause (m), a "Permitted Acquisition"), other than any of the LS Companies, provided that (i) such Person (or the assets so acquired) was, immediately prior to such acquisition, engaged (or used) primarily in the business permitted pursuant to Section 8.01, (ii) if such acquisition is structured as a stock acquisition, then either (A) the Person so acquired becomes a Wholly-Owned Domestic Subsidiary of the Borrower or (B) such Person is merged with and into a Wholly-Owned Domestic Subsidiary of the Borrower (with such Wholly-Owned Domestic Subsidiary being the surviving corporation of such merger), and in any case, all of the provisions of Section 8.14 have been complied with in respect of such Person, (iii) any Liens or Indebtedness assumed or issued in connection with such acquisition are otherwise permitted under Section 8.03 or 8.04, as the case may be, and (iv) the aggregate amount expended (including any deferred compensation or payment arrangements) by the Borrower for all such acquisitions shall not exceed $15,000,000; and (n) leases or subleases granted by the Borrower or any of its Subsidiaries to third Persons not interfering in any material respect with the business of the Borrower or any of its Subsidiaries. To the extent the Required Banks waive the provisions of this Section 8.02 with respect to the sale or other disposition of any Collateral, or any Collateral is sold or otherwise disposed of as permitted by this Section 8.02, such Collateral in each case shall be sold or otherwise disposed of free and clear of the Liens created by the Security Documents and the Administrative Agent shall take such actions (including, without limitation, directing the Collateral Agent to take such actions) as are appropriate in order to effectuate the release and discharge of such Liens as to such Collateral. 8.03 Liens. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets of any kind (real or personal, tangible or intangible) of the Borrower or any of its Subsidiaries, whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable or notes with recourse to the Borrower or any of its -59- 67 Subsidiaries) or assign any right to receive income, except for the following (collectively, the "Permitted Liens"): (a) inchoate Liens for taxes, assessments or governmental charges or levies not yet due or Liens for taxes, assessments or governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves have been established in accordance with GAAP; (b) Liens in respect of property or assets of the Borrower or any of its Subsidiaries imposed by law which were incurred in the ordinary course of business and which have not arisen to secure Indebtedness for borrowed money, such as carriers', warehousemen's and mechanics' Liens, statutory landlord's Liens, and other similar Liens arising in the ordinary course of business, and which either (x) do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Borrower or any of its Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to such Lien; (c) Liens created by or pursuant to this Agreement and the Security Documents; (d) Liens in existence on the Initial Borrowing Date which are listed, and the property subject thereto described, in Schedule 8.03, without giving effect to any extensions or renewals thereof; (e) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 9.09; (f) Liens incurred or deposits made (x) in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, government contracts, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (exclusive of obligations in respect of the payment for borrowed money); and (y) to secure the performance of leases of Real Property, to the extent incurred or made in the ordinary course of business; (g) licenses, leases or subleases granted to third Persons not interfering in any material respect with the business of the Borrower or any of its Subsidiaries; (h) easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; (i) Liens arising from precautionary UCC financing statements regarding operating leases permitted by this Agreement; (j) any interest or title of a licensor, lessor or sublessor under any license or lease permitted by this Agreement; -60- 68 (k) Liens created pursuant to Capital Leases permitted pursuant to Section 8.04(e); (l) Permitted Encumbrances; (m) Liens arising pursuant to purchase money mortgages or security interests securing Indebtedness representing the purchase price (or financing of the purchase price within 90 days after the respective purchase) of assets acquired after the Initial Borrowing Date, provided that (i) any such Liens attach only to the assets so purchased, (ii) the Indebtedness secured by any such Lien does not exceed 100%, nor is less than 70%, of the lesser of the fair market value or the purchase price of the property being purchased at the time of the incurrence of such Indebtedness and (iii) the Indebtedness secured thereby is permitted to be incurred pursuant to Section 8.04(e); (n) Liens on property or assets acquired pursuant to a Permitted Acquisition, or on property or assets of a Subsidiary of the Borrower in existence at the time such Subsidiary is acquired pursuant to a Permitted Acquisition, provided that (i) any Indebtedness that is secured by such Liens is permitted to exist under Section 8.04(k), and (ii) such Liens are not incurred in connection with, or in contemplation or anticipation of, such Permitted Acquisition and do not attach to any other asset of the Borrower or any of its Subsidiaries; and (o) additional Liens incurred by the Borrower and its Subsidiaries so long as the value of the property subject to such Liens, and the Indebtedness and other obligations secured thereby, do not exceed $500,000 in the aggregate at any time. 8.04 Indebtedness. The Borrower will not, and will not permit any of its Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement and the other Credit Documents; (b) Existing Indebtedness outstanding on the Initial Borrowing Date and listed on Schedule 6.24, without giving effect to any subsequent extension, renewal or refinancing thereof; (c) Indebtedness of the Borrower and the Subsidiary Guarantors incurred under one or more Senior Subordinated Note Indentures and Senior Subordinated Notes and the other Senior Subordinated Note Documents delivered in connection therewith so long as (A) all of the terms and conditions (and the documentation) in connection therewith (including, without limitation, the issuer, amortization, maturities, interest rates, limitations on cash interest payable, covenants, defaults, remedies, sinking fund provisions, subordination provisions and other terms), taken as a whole, are not materially less favorable to the Borrower, and the subordination provisions thereof are not less favorable to the Banks, than those set forth in the Senior Subordinated Note Indenture as in effect on the Initial Borrowing Date and (B) the aggregate principal amount of outstanding Senior Subordinated Notes under the Senior Subordinated Note Indenture shall not exceed $100,000,000 at any -61- 69 time plus the amount of additional Senior Subordinated Notes issued to pay interest in lieu of payment of interest in cash; (d) Indebtedness under Interest Rate Protection Agreements entered into to protect the Borrower against fluctuations in interest rates in respect of the Obligations; (e) Capitalized Lease Obligations and Indebtedness of the Borrower and its Subsidiaries incurred pursuant to purchase money Liens permitted under Section 8.03(m), provided that (i) all such Capitalized Lease Obligations are permitted under Section 8.09, and (ii) the sum of (x) the aggregate Capitalized Lease Obligations outstanding at any time plus (y) the aggregate principal amount of such purchase money Indebtedness outstanding at such time shall not exceed $10,000,000; (f) Indebtedness constituting Intercompany Loans to the extent permitted by Section 8.06(h); (g) Indebtedness of the Borrower under the Shareholder Subordinated Notes to the extent permitted by Section 8.07(ii); (h) Indebtedness under Other Hedging Agreements providing protection against fluctuations in currency values in connection with the Borrower's or any of its Subsidiaries' operations so long as management of the Borrower or such Subsidiary, as the case may be, has determined that the entering into of such Other Hedging Agreements are bona fide hedging activities; (i) Indebtedness of Foreign Subsidiaries to the Borrower or any of its Domestic Subsidiaries as a result of any investment made pursuant to Section 8.06(l); (j) Indebtedness consisting of guaranties (x) by the Borrower of Indebtedness, leases and any other obligation or liability permitted to be incurred by Wholly-Owned Domestic Subsidiaries of the Borrower, (y) by Domestic Subsidiaries of the Borrower of Indebtedness, leases and any other obligation or liability permitted to be incurred by the Borrower or other Wholly-Owned Domestic Subsidiaries of the Borrower, and (z) by Foreign Subsidiaries of the Borrower of Indebtedness, leases and any other obligation or liability permitted to be incurred by other Wholly-Owned Foreign Subsidiaries of the Borrower; (k) Indebtedness of a Subsidiary acquired pursuant to a Permitted Acquisition (or Indebtedness assumed at the time of a Permitted Acquisition of an asset securing such Indebtedness), provided that (i) such Indebtedness was not incurred in connection with, or in anticipation or contemplation of, such Permitted Acquisition and (ii) at the time of such Permitted Acquisition such Indebtedness does not exceed 10% of the total value of the assets of the Subsidiary so acquired, or of the asset so acquired, as the case may be; (l) Insurance Debt; -62- 70 (m) additional Indebtedness of the Borrower and its Subsidiaries not otherwise permitted hereunder not exceeding $10,000,000 in aggregate principal amount at any time outstanding; (n) additional Indebtedness of the Borrower not exceeding $10,000,000 in aggregate principal amount at any time outstanding provided that such Indebtedness matures no earlier than the first anniversary of the C Term Loan Maturity Date and is subordinated to the Obligations to at least the same extent as are the Shareholder Subordinated Notes; and (o) Indebtedness consisting of reimbursement obligations in respect of letters of credit to the extent payment of such reimbursement obligations is supported by a Letter of Credit. 8.05 Designated Senior Debt. The Borrower will not, and will not permit any of its Subsidiaries to, designate any Indebtedness (other than the Obligations) as "Designated Senior Debt" for purposes of, and as defined in, the Senior Subordinated Note Documents. 8.06 Advances, Investments and Loans. The Borrower will not, and will not permit any of its Subsidiaries to, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any Person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract, or hold any cash, Cash Equivalents or Foreign Cash Equivalents, except: (a) the Borrower and its Subsidiaries may invest in cash and Cash Equivalents, and Foreign Subsidiaries of the Borrower may invest in Foreign Cash Equivalents; (b) the Borrower and its Subsidiaries may acquire and hold receivables owing to them, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms (including the dating of receivables and extensions of payment in the ordinary course of business consistent with past practices) of the Borrower or such Subsidiary; (c) the Borrower and its Subsidiaries may acquire and own investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (d) Interest Rate Protection Agreements entered into in compliance with Section 8.04(d) shall be permitted; (e) advances, loans and investments in existence on the Initial Borrowing Date and listed on Schedule 8.06 shall be permitted, without giving effect to any additions thereto or replacements thereof; -63- 71 (f) (i) the Borrower may acquire and hold obligations of one or more officers or other employees of the Borrower or its Subsidiaries in connection with such officers' or employees' acquisition of shares of the Borrower Common Stock so long as no cash is paid by the Borrower or any of its Subsidiaries in connection with the acquisition of any such obligations, (ii) the Borrower may extend loans to officers and employees of the Borrower and its Subsidiaries on or after the date on which any such officers and employees exercise their options to purchase capital stock of the Borrower issued to them in connection with the Transaction so long as the proceeds of such loans are promptly used by such officers and employees to pay taxes payable by them as a result of such exercise and (iii) investments consisting of loans by the Borrower or its Subsidiaries to employees of the Borrower or its Subsidiaries made solely for the purpose of funding purchases by such employees of Borrower Common Stock; provided that the aggregate principal amount at any time outstanding of the obligations and loans extended pursuant to clauses (i), (ii) and (iii) shall not exceed $3,000,000; (g) deposits made in the ordinary course of business consistent with past practices to secure the performance of leases shall be permitted; (h) the Borrower may make intercompany loans and advances to any of its Subsidiaries and any Subsidiary of the Borrower may make intercompany loans and advances to the Borrower or any other Subsidiary of the Borrower (collectively, "Intercompany Loans"), provided that (w) at no time shall the aggregate outstanding principal amount of all Intercompany Loans made pursuant to this clause (h) when added to the amount of contributions, capitalizations and forgiveness theretofore made pursuant to Section 8.06(n), exceed $3,000,000 (determined without regard to any write-downs or write-offs of such loans and advances), (x) each Intercompany Loan made by a Foreign Subsidiary or a non-Wholly-Owned Domestic Subsidiary to the Borrower or a Wholly-Owned Domestic Subsidiary of the Borrower shall contain the subordination provisions set forth on Exhibit I, (y) each Intercompany Loan shall be evidenced by an Intercompany Note and (z) each such Intercompany Note (other than (1) Intercompany Notes issued by Foreign Subsidiaries of the Borrower to the Borrower or any of its Domestic Subsidiaries and (2) Intercompany Notes held by Foreign Subsidiaries of the Borrower, in each case except to the extent provided in Section 7.13) shall be pledged to the Collateral Agent pursuant to the Pledge Agreement; (i) loans and advances by the Borrower and its Subsidiaries to employees of the Borrower and its Subsidiaries for moving and travel expenses and other similar expenses, in each case incurred in the ordinary course of business, in an aggregate outstanding principal amount not to exceed $5,000,000 at any time (determined without regard to any write-downs or write-offs of such loans and advances), shall be permitted; (j) Other Hedging Agreements entered into in compliance with Section 8.04(h) shall be permitted; (k) Permitted Acquisitions shall be permitted; -64- 72 (l) the Borrower and its Subsidiaries may make investments in their respective Subsidiaries in connection with the transfers of those assets permitted to be transferred pursuant to Section 8.02(k), it being understood that the Borrower and its Subsidiaries may convert any investment initially made as an equity investment to intercompany Indebtedness held by the Borrower or such Subsidiary; (m) [Reserved] (n) the Borrower and its Wholly-Owned Domestic Subsidiaries may make cash capital contributions to non-Wholly-Owned Domestic Subsidiaries and Foreign Subsidiaries of the Borrower, and may capitalize or forgive any Indebtedness owed to them by a non-Wholly-Owned Domestic Subsidiary or Foreign Subsidiary of the Borrower, and outstanding under clause (h) of this Section 8.06, provided that the aggregate amount of such contributions, capitalizations and forgiveness, when added to the aggregate outstanding principal amount of Intercompany Loans made under such clause (h) (determined without regard to any write-downs or write-offs thereof), shall not exceed $3,000,000; (o) the Borrower may contribute cash to one or more of its Wholly-Owned Domestic Subsidiaries, formed after the Initial Borrowing Date in accordance with Section 8.14, so long as the aggregate amount of such cash so contributed to all such Wholly-Owned Domestic Subsidiaries does not exceed $500,000; (p) the Borrower and its Subsidiaries may own the capital stock of their respective Subsidiaries created or acquired in accordance with the terms of this Agreement; and (q) the Borrower may consummate the Transaction. 8.07 Dividends, etc. The Borrower will not, and will not permit any of its Subsidiaries to, declare or pay any dividends (other than dividends payable solely in common stock of the Borrower or any such Subsidiary, as the case may be) or return any capital to, its stockholders or authorize or make any other distribution, payment or delivery of property or cash to its stockholders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for a consideration, any shares of any class of its capital stock, now or hereafter outstanding (or any warrants for or options or stock appreciation rights in respect of any of such shares), or set aside any funds for any of the foregoing purposes, and the Borrower will not permit any of its Subsidiaries to purchase or otherwise acquire for consideration any shares of any class of the capital stock of the Borrower or any Subsidiary, as the case may be, now or hereafter outstanding (or any options or warrants or stock appreciation rights issued by such Person with respect to its capital stock) (all of the foregoing "Dividends"), except that: (i) any Subsidiary of the Borrower may pay Dividends to the Borrower or any Wholly-Owned Subsidiary of the Borrower; (ii) the Borrower may redeem or purchase shares of Borrower Common Stock and Additional Permitted Preferred Stock or options to purchase Borrower Common Stock or Additional Permitted Preferred Stock, as the case may be, held by former employees of -65- 73 the Borrower or any of its Subsidiaries following the termination of their employment and/or by existing employees of the Borrower or any of its Subsidiaries who satisfy the "deemed hardship distribution standards" within the meaning of Treas. Reg. Section 1.401(k)-1(d)(2)(iv) and who the Borrower designates, in its discretion, as eligible for such redemption or purchase; provided that (w) the only consideration paid by the Borrower in respect of such redemptions and/or purchases shall be cash and Shareholder Subordinated Notes, (x) the sum of (A) the aggregate amount paid by the Borrower in cash in respect of all such redemptions and/or purchases plus (B) the aggregate amount of all principal and interest payments made (other than payments solely in the form of additional Shareholder Subordinated Notes) on Shareholder Subordinated Notes shall not exceed $1,500,000 in any fiscal year of the Borrower, provided that such amount shall be increased by an amount (not to exceed $5,000,000 for purposes of this clause (ii)) equal to the proceeds received by the Borrower after the Initial Borrowing Date and during such fiscal year from the sale or issuance of Borrower Common Stock or Additional Permitted Preferred Stock, as the case may be, to management of the Borrower or any of its Subsidiaries and (y) at the time of any cash payment permitted to be made pursuant to this Section 8.07(ii), including any cash payment under a Shareholder Subordinated Note, no Default or Event of Default shall then exist or result therefrom; (iii) so long as no Default or Event of Default then exists or would result therefrom, the Borrower may redeem shares of Preferred Stock (together with unpaid dividends thereon which have accumulated in accordance with the terms of such Preferred Stock (as such terms are in effect on the Closing Date or as otherwise permitted by this Agreement) to the date fixed for such redemption) (x) with the proceeds of Borrower Common Stock, if, after giving pro forma effect to such sale of common stock and such redemption of Preferred Stock as if such events had occurred on the last day of the most recently ended Test Period, the Leverage Ratio would be less than or equal to 4.5 to 1.0 and (y) with the proceeds of Additional Permitted Preferred Stock; (iv) Borrower Preferred Stock issued as a dividend on other Borrower Preferred Stock; (v) so long as no Default or Event of Default then exists or would result therefrom, the Borrower may make the Pre-Merger Stock Payments; and (vi) so long as no Default or Event of Default then exists or would result therefrom, the Borrower may pay the cash portion of the consideration for the Merger in accordance with the Merger Agreement. 8.08 Transactions with Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any transaction or series of transactions with any Affiliate other than on terms and conditions substantially as favorable to the Borrower or such Subsidiary as would be reasonably expected to be obtainable by the Borrower or such Subsidiary at the time in a comparable arm's-length transaction with a Person other than an Affiliate; provided that the following shall in any event be permitted: (i) the Transaction; (ii) the payment on the Second Borrowing Date of one time fees to Lee and/or the Lee Affiliates in an aggregate amount (for all such Persons taken together) not to exceed $4,000,000 (plus reasonable out-of-pocket expenses -66- 74 incurred by such Persons in providing services to the Borrower); (iii) the payment, on a quarterly basis, of management fees to Lee and/or Lee Affiliates and Belron and/or Belron Affiliates in an aggregate amount (for all such Persons taken together) not to exceed $500,000 in any fiscal quarter of the Borrower, provided that if during any fiscal quarter of the Borrower a Default or an Event of Default exists, only one-half of such fee for such fiscal quarter may be paid and the remaining one-half of such fee may be paid at such time as all Defaults and Events of Default have been cured or waived; (iv) the reimbursement of Lee and/or Lee Affiliates and Belron and/or Belron Affiliates for their reasonable out-of-pocket expenses incurred by them in connection with performing management services to the Borrower and its Subsidiaries; (v) the payment of fees to and expenses of Belron and the Belron Affiliates in connection with the Transaction as long as the payment of such fees and expenses does not result in the aggregate amount of fees and expenses paid in connection with the Transaction to exceed the amount set forth in Section 5.28; (vi) the Transaction Bonuses; (vii) the payment of fees and expenses of The Windsor Park Group in connection with the Transaction so long as the payment of such fees and expenses does not result in the aggregate amount of fees and expenses paid in connection with the Transaction to exceed the amount set forth in Section 5.28; and (viii) payments to Vistar employees in connection with the Merger pursuant to severance agreements, long-term incentive plans and executive bonus plans. Notwithstanding anything to the contrary contained in this Section 8.08, at no time will the Borrower or any of its Subsidiaries make any payments to Lee and/or any of its Affiliates and Belron and/or Belron Affiliates in an amount which would exceed that amount permitted to be paid pursuant to the Senior Subordinated Note Indenture at such time. 8.09 Capital Expenditures. (a) The Borrower will not, and will not permit any of its Subsidiaries to, make any Capital Expenditures, except that during any fiscal year set forth below, the Borrower and its Subsidiaries may make Capital Expenditures so long as the aggregate amount of such Capital Expenditures does not exceed in any fiscal year set forth below the amount set forth opposite such fiscal year below:
Fiscal Year Ending Amount ------------------ ------ FYE 1998 $27,000,000.00 FYE 1999 27,000,000.00 FYE 2000 22,000,000.00 FYE 2001 23,000,000.00 FYE 2002 24,000,000.00 FYE 2003 25,000,000.00 FYE 2004 26,000,000.00 FYE 2005 27,000,000.00
-67- 75 (b) Notwithstanding the foregoing (i) the amount of Capital Expenditures permitted to be made by the Borrower and its Subsidiaries pursuant to clause (a) above in any fiscal year may be increased by the amount of Capital Expenditures which the Borrower and its Subsidiaries are permitted by clause (a) above to make in the next succeeding fiscal year (and the amount permitted for the next fiscal year shall be correspondingly reduced) and (ii) in the event that the amount of Capital Expenditures permitted to be made by the Borrower and its Subsidiaries pursuant to clause (a) above in any fiscal year (before giving effect to any increase in such permitted expenditure amount pursuant to this clause (b) and after giving effect to any reduction in such permitted capital expenditure amount pursuant to this clause (b)) is greater than the amount of such Capital Expenditures made by the Borrower and its Subsidiaries during such fiscal year, such excess (the "Rollover Amount") may be carried forward and utilized to make Capital Expenditures in succeeding fiscal years; provided that in no event shall the aggregate amount of Capital Expenditures made by the Borrower and its Subsidiaries during any fiscal year pursuant to Section 8.09(a) exceed 125% of the amount set forth opposite such fiscal year as set forth in the table in such Section 8.09(a). (c) Notwithstanding the foregoing, the Borrower and its Subsidiaries may make Capital Expenditures (which Capital Expenditures will not be included in any determination under the foregoing clause (a)) with the Net Cash Proceeds of Asset Sales to the extent such proceeds are not required to be applied to repay Term Loans pursuant to Section 4.02(A)(c). (d) Notwithstanding the foregoing, the Borrower and its Subsidiaries may make Capital Expenditures (which Capital Expenditures will not be included in any determination under the foregoing clause (a)) with the insurance proceeds received by the Borrower or any of its Subsidiaries from any Recovery Event so long as such Capital Expenditures are to replace or restore any properties or assets in respect of which such proceeds were paid within 360 days following the date of the receipt of such insurance proceeds to the extent such insurance proceeds are not required to be applied to repay Term Loans pursuant to Section 4.02(A)(f). (e) Notwithstanding the foregoing, the Borrower may make Capital Expenditures (which Capital Expenditures will not be included in any determination under the foregoing clause (a)) constituting Permitted Acquisitions. (f) Notwithstanding the foregoing, the Borrower may make Capital Expenditures (which Capital Expenditures will not be included in any determination under the foregoing clause (a)) in an amount equal to the net cash proceeds of any equity offering by the Borrower not required to be prepaid pursuant to Section 4.02(A)(d). 8.10 [Reserved] 8.11 Interest Coverage Ratio. The Borrower will not permit the Interest Coverage Ratio for any Test Period ending on a date set forth below to be less than the ratio set forth opposite such date:
Date Ratio ---- ----- FQE3 1998 2.00:1.00
-68- 76 FYE 1998 2.00:1.00 FQE1 1999 2.00:1.00 FQE2 1999 2.00:1.00 FQE3 1999 2.00:1.00 FYE 1999 2.00:1.00 FQE1 2000 2.00:1.00 FQE2 2000 2.25:1.00 FQE3 2000 2.25:1.00 FYE 2000 2.50:1.00 FQE1 2001 2.50:1.00 FQE2 2001 2.50:1.00 FQE3 2001 2.50:1.00 FYE 2001 2.75:1.00 FQE1 2002 2.75:1.00 FQE2 2002 2.75:1.00 FQE3 2002 2.75:1.00 FYE 2002 3.00:1.00 FQE1 2003 3.00:1.00 FQE2 2003 3.00:1.00 FQE3 2003 3.00:1.00 FYE 2003 3.00:1.00 FQE1 2004 3.00:1.00 FQE2 2004 3.00:1.00 FQE3 2004 3.00:1.00 FYE 2004 3.00:1.00 FQE1 2005 3.00:1.00 FQE2 2005 3.00:1.00 FQE3 2005 3.00:1.00 FYE 2005 3.00:1.00
8.12 Leverage Ratio. The Borrower will not permit the Leverage Ratio on the last day of any fiscal quarter ending on or about any date set forth below to be more than the ratio set forth opposite such date:
Period Ratio ------ ----- FQE3 1998 5.75:1.00 FYE 1998 5.75:1.00 FQE1 1999 5.75:1.00 FQE2 1999 5.50:1.00 FQE3 1999 5.25:1.00 FYE 1999 5.25:1.00 FQE1 2000 5.00:1.00 FQE2 2000 5.00:1.00 FQE3 2000 4.75:1.00 FYE 2000 4.75:1.00
-69- 77 FQE1 2001 4.50:1.00 FQE2 2001 4.50:1.00 FQE3 2001 4.25:1.00 FYE 2001 4.25:1.00 FQE1 2002 4.00:1.00 FQE2 2002 4.00:1.00 FQE3 2002 4.00:1.00 FYE 2002 3.75:1.00 FQE1 2003 3.50:1.00 FQE2 2003 3.50:1.00 FQE3 2003 3.50:1.00 FYE 2003 3.25:1.00 FQE1 2004 3.00:1.00 FQE2 2004 3.00:1.00 FQE3 2004 3.00:1.00 FYE 2004 3.00:1.00 FQE1 2005 3.00:1.00 FQE2 2005 3.00:1.00 FQE3 2005 3.00:1.00 FYE 2005 3.00:1.00
8.13 Limitation on Voluntary Payments and Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; Issuances of Capital Stock; etc. The Borrower will not, and will not permit any of its Subsidiaries to: (i) make (or give any notice in respect of) any voluntary or optional payment or prepayment on or redemption or defeasance or acquisition for value of (including, without limitation, by way of depositing with the trustee with respect thereto or any other Person money or securities before due for the purpose of paying when due) any Existing Indebtedness or any Senior Subordinated Note; (ii) make (or give any notice in respect of) any prepayment or redemption or acquisition for value or defeasance as a result of any asset sale, change of control or similar event (including, without limitation, by way of depositing with the trustee with respect thereto or any other Person money or securities before due for the purpose of paying when due) with respect to any Senior Subordinated Note; or pay interest in cash on any Senior Subordinated Note to the extent the relevant obligor has an option to make such payment by the issuance of additional Senior Subordinated Notes; (iii) make (or give any notice in respect of) any principal or interest payment on, or any redemption or acquisition for value of, any Shareholder Subordinated Note, except to the extent permitted by Section 8.07(ii); (iv) amend or modify, or permit the amendment or modification of, any provision of any Senior Subordinated Note Document or any Shareholder Subordinated Notes which is in any way adverse to the interest of the Banks in the opinion of the Administrative Agent in its sole discretion; provided that this clause (iv) shall not prohibit -70- 78 or restrict the Senior Subordinated Notes Consent Solicitation or the amendment of the Senior Subordinated Note Documents pursuant thereto; (v) amend, modify or change in any way adverse to the interests of the Banks, any Tax Allocation Agreement, any Management Agreement, any Recapitalization Document, any Merger Document, its Certificate of Incorporation (including, without limitation, by the filing or modification of any certificate of designation) or By-Laws, or any agreement entered into by it, with respect to its capital stock (including any Shareholders' Agreement), or enter into any new agreement with respect to its capital stock which in any way could be adverse to the interests of the Banks; and (vi) issue any class of capital stock other than non-redeemable common stock, the Borrower Preferred Stock and Additional Permitted Preferred Stock. Notwithstanding the foregoing (a) the Senior Subordinated Notes may be refinanced in accordance with the provisions of Section 8.04(c) without limitation by this Section 8.13 and (b) so long as no Default or Event of Default exists or would result after giving effect thereto, (i) the Senior Subordinated Notes and accrued interest thereon may be repaid with the proceeds of the issuance of common stock by the Borrower and (ii) the Senior Subordinated Notes issued under the Senior Subordinated Note Indenture and accrued interest thereon may be repaid with the proceeds of the sale of common stock by the Borrower to the extent permitted by the "equity clawback" provisions of the Senior Subordinated Note Indenture; provided that in the case of any repayment with proceeds of common stock under the foregoing clauses (i) or (ii), after giving pro forma effect to the sale of such common stock and such repayment as if such events had occurred on the last day of the most recently ended Test Period, the Leverage Ratio would have been less than or equal to 4.5 to 1.0. 8.14 Limitation on Certain Restrictions on Subsidiaries. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Subsidiary to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by the Borrower or any Subsidiary of the Borrower or pay any Indebtedness owed to the Borrower or a Subsidiary of the Borrower, (b) make loans or advances to the Borrower or any of the Borrower's Subsidiaries or (c) transfer any of its properties or assets to the Borrower or any of its Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) this Agreement and the other Credit Documents, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or a Subsidiary of the Borrower, (iv) customary provisions restricting assignment of any licensing agreement entered into by the Borrower or a Subsidiary of the Borrower in the ordinary course of business, (v) the Senior Subordinated Note Documents, (vi) the Existing Indebtedness Agreements and (vii) customary provisions restricting the transfer of assets subject to Liens permitted under Sections 8.03(k) and (m). 8.15. Limitation on the Creation of Subsidiaries. Notwithstanding anything to the contrary contained in this Agreement, the Borrower will not, and will not permit any of its Subsidiaries to, establish, create or acquire after the Second Borrowing Date any Subsidiary; provided that the Borrower and its Wholly-Owned Subsidiaries shall be permitted to establish or -71- 79 create (x) Subsidiaries as a result of investments made pursuant to Section 8.06(n), (o), (p) and (r) and (y) Wholly-Owned Subsidiaries so long as (i) at least 30 days' prior written notice thereof is given to the Administrative Agent, (ii) the capital stock of such new Subsidiary is pledged pursuant to, and to the extent required by, the Pledge Agreement and the certificates representing such stock, together with stock powers duly executed in blank, are delivered to the Collateral Agent, (iii) such new Subsidiary (other than a Foreign Subsidiary except to the extent otherwise required pursuant to Section 7.13) executes a counterpart of the Subsidiary Guaranty, the Pledge Agreement and the Security Agreement, and (iv) to the extent requested by the Administrative Agent or the Required Banks, takes all actions required pursuant to Section 7.11. In addition, each new Wholly-Owned Subsidiary shall execute and deliver, or cause to be executed and delivered, all other relevant documentation of the type described in Section 5 as such new Subsidiary would have had to deliver if such new Subsidiary were a Credit Party on the Initial Borrowing Date. 8.16. Limitation on LS Companies. Notwithstanding anything to the contrary contained in this Agreement, and except (i) for the LS Tax Sharing Agreement, (ii) the performance by the Borrower of its obligations in connection with its existing assumption of pension plan obligations of the LS Companies and (iii) the purchase of insurance for the LS Companies as required pursuant to the terms of the Recapitalization Agreement, the Borrower will not, and will not permit any of its Subsidiaries to, engage in any of the following transactions, activities or relationships with any of the LS Companies: (a) any transaction of merger or consolidation, (b) any conveyance, sale, lease, grant of a security or other interest in or other disposition of (or agree to do any of the foregoing at any future time) all or part of its property, assets or liabilities, (c) enter into any partnership, joint venture, or sale-leaseback transaction, (d) any acquisition of any property, assets or liabilities, (e) borrow from or loan any money or credit or make advances to, (f) purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to or investment in, (g) capitalize or forgive any Indebtedness or other obligation owed, (h) pay any dividends to, (i) guaranty any obligations of or (j) enter into or engage in any other transactions, relationship or activity. 8.17. Maintenance of Corporate Separateness; Etc. The Borrower will not, and will not permit any of its Subsidiaries to, (a) fail to satisfy customary corporate formalities, including, without limitation, (i) the holding of regular board of directors' and shareholders' meetings, (ii) the maintenance of separate corporate offices and records and (iii) the maintenance of separate bank accounts in its own name; (b) fail to act solely in its own corporate name and through its authorized officers and agents; (c) permit any individual who is an officer, employee, director or shareholder of the Borrower or any of its Subsidiaries to be an officer, employee, director or shareholder of any LS Company; (d) commingle any money or other assets of the Borrower or any of its Subsidiaries with any money or other assets of any LS Company; (e) distribute financial statements to any creditor which fail to clearly establish the separateness of each LS Company from the Borrower and each of its Subsidiaries; or (f) take any action, or conduct its affairs in a manner, which could reasonably be expected to result in the separate corporate existence of each of the Borrower and each of its Subsidiaries from the LS Companies being ignored, or the assets and liabilities of the Borrower of any of its Subsidiaries being substantively consolidated with those of any LS Company in a bankruptcy, reorganization or other insolvency proceeding. -72- 80 SECTION 9. Events of Default. Upon the occurrence of any of the following specified events (each an "Event of Default"): 9.01 Payments. The Borrower shall (i) default in the payment when due of any principal of the Loans or (ii) default, and such default shall continue for three or more days, in the payment when due of any Unpaid Drawing, any interest on the Loans or any Fees or any other amounts owing hereunder or under any other Credit Document; 9.02 Representations, etc. Any representation, warranty or statement made by any Credit Party herein or in any other Credit Document or in any statement or certificate delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or 9.03 Covenants. Any Credit Party shall (a) default in the due performance or observance by it of any term, covenant or agreement contained in Section 7.11, 7.14 or 8, or (b) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in Section 9.01, 9.02 or clause (a) of this Section 9.03) contained in this Agreement and such default shall continue unremedied for a period of at least 30 days after notice to the defaulting party by any Agent or the Required Banks; or 9.04 Default Under Other Agreements. (a) The Borrower or any of its Subsidiaries shall (i) default in any payment with respect to any Indebtedness (other than the Obligations) beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created or (ii) default in the observance or performance of any agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause any such Indebtedness to become due prior to its stated maturity; or (b) any Indebtedness (other than the Obligations) of the Borrower or any of their Subsidiaries shall be declared to be due and payable, or shall be required to be prepaid other than by a regularly scheduled required prepayment or as a mandatory prepayment (unless such required prepayment or mandatory prepayment results from a default thereunder or an event of the type that constitutes an Event of Default), prior to the stated maturity thereof; provided that it shall not constitute an Event of Default pursuant to clause (a) or (b) of this Section 9.04 unless the principal amount of any one issue of such Indebtedness, or the aggregate amount of all such Indebtedness referred to in clauses (a) and (b) above, exceeds $5,000,000 at any one time; or 9.05 Bankruptcy, etc. The Borrower or any of its Subsidiaries shall commence a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced against the Borrower or any of its Subsidiaries and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of the Borrower or any of its Subsidiaries; or the Borrower or any of its Subsidiaries commences any other proceeding under any reorganization, bankruptcy, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar -73- 81 law of any jurisdiction whether now or hereafter in effect relating to the Borrower or any of its Subsidiaries; or there is commenced against the Borrower or any of its Subsidiaries any such proceeding which remains undismissed for a period of 60 days; or the Borrower or any of its Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Borrower or any of its Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or the Borrower or any of its Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is taken by the Borrower or any of its Subsidiaries for the purpose of effecting any of the foregoing; or 9.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding standard required for any plan year or part thereof or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code, any Plan shall have had or is likely to have a trustee appointed to administer such Plan, any Plan is, shall have been or is likely to be terminated or the subject of termination proceedings under ERISA, any Plan shall have an Unfunded Current Liability, a contribution required to be made to a Plan or a Foreign Pension Plan has not been timely made, the Borrower or any of its Subsidiaries or any ERISA Affiliate has incurred or is likely to incur a liability to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code, or the Borrower or any of its Subsidiaries has incurred or is likely to incur liabilities pursuant to one or more Retiree Welfare Plans or Foreign Pension Plans; (b) there shall result from any such event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability; and (c) which lien, security interest or liability which arises from such event or events will have a Material Adverse Effect; or 9.07 Security Documents. (a) Except in each case to the extent resulting from the failure of the Collateral Agent to retain possession of the applicable Pledged Securities, any Security Document shall cease to be in full force and effect, or shall cease to give the Collateral Agent the Liens, rights, powers and privileges purported to be created thereby in favor of the Collateral Agent, (including, without limitation, a perfected security interest in, and Lien on, all of the Collateral, other than Collateral with an aggregate value of less than or equal to $100,000), or (b) any Credit Party shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any such Security Document and such default (except to the extent that same will adversely affect the continued perfection and priority of the Liens created by any such Security Document in Collateral with an aggregate value in excess of $100,000, in which case clause (a) of this Section 9.07 will be applicable) shall continue unremedied for a period of 30 days; or 9.08 Guaranties. The Guaranties or any provision thereof shall cease to be in full force and effect, or any Guarantor or any Person acting by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under any Guaranty or any Guarantor shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any Guaranty; or 9.09 Judgments. One or more judgments or decrees shall be entered against the Borrower or any of its Subsidiaries involving a liability (to the extent not paid or not fully covered by insurance) in excess of $5,000,000 for all such judgments and decrees and all such judgments or -74- 82 decrees shall not have been vacated, discharged or stayed or bonded pending appeal within 60 days from the entry thereof; or 9.10 Ownership. A Change of Control Event shall have occurred; then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Administrative Agent shall, upon the written request of the Required Banks, by written notice to the Borrower, take any or all of the following actions, without prejudice to the rights of any Agent or any Bank to enforce its claims against any Guarantor or the Borrower, except as otherwise specifically provided for in this Agreement (provided, that if an Event of Default specified in Section 9.05 shall occur with respect to the Borrower or a Subsidiary Guarantor, the result which would occur upon the giving of written notice by the Administrative Agent as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i) declare the Total Commitment terminated, whereupon the Commitment of each Bank shall forthwith terminate immediately and any Commitment Fees shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans and all Obligations owing hereunder (including Unpaid Drawings) to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; (iii) enforce, as Collateral Agent (or direct the Collateral Agent to enforce), any or all of the Liens and security interests created pursuant to the Security Documents; (iv) terminate any Letter of Credit which may be terminated in accordance with its terms; and (v) direct the Borrower to pay (and the Borrower hereby agrees upon receipt of such notice, or upon the occurrence of any Event of Default specified in Section 9.05, to pay) to the Collateral Agent at the Payment Office such additional amounts of cash, to be held as security for the Borrower's reimbursement obligations in respect of Letters of Credit then outstanding, equal to the aggregate Stated Amount of all Letters of Credit then outstanding. SECTION 10. Definitions. As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires. Defined terms in this Agreement shall include in the singular number the plural and in the plural the singular: "A Term Loan" shall have the meaning provided in Section 1.01(A)(a). "A Term Loan Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name in Annex I directly below the column entitled "A Term Loan Commitment," as the same may be terminated pursuant to Section 3.03 and/or Section 9. "A Term Loan Facility" shall mean the Facility evidenced by the Total A Term Loan Commitment. "A Term Loan Maturity Date" shall mean the sixth anniversary of the Initial Borrowing Date. "A Term Note" shall have the meaning provided in Section 1.05(a). -75- 83 "A TL Percentage" shall mean, at any time, a fraction (expressed as a percentage) the numerator of which is equal to the sum of the aggregate principal amount of all A Term Loans outstanding at such time and the denominator of which is equal to the sum of the aggregate principal amount of all Term Loans outstanding at such time. "Additional Permitted Preferred Stock" shall mean preferred stock of the Borrower the terms of which shall be required to be reasonably acceptable to the Administrative Agent. "Additional Security Documents" shall have the meaning provided in Section 7.11(a). "Administrative Agent" shall have the meaning provided in the first paragraph of this Agreement and shall include any successor to the Agent appointed pursuant to Section 11.10. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by, or under direct or indirect common control with such Person. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power (i) to vote 10% or more of the securities having ordinary voting power for the election of directors of such corporation or (ii) to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise. In addition, for the purpose of this Agreement, an Affiliate of Lee shall include any Lee Investor or any investment fund under common control with the Lee Investors, and an Affiliate of Belron shall include any Belron Investor or any investment fund under common control with the Belron Investors. Notwithstanding the foregoing, none of the Banks or any of their respective affiliates shall be deemed to be Affiliates of the Borrower or its Subsidiaries. "Agents" shall mean the Administrative Agent, the Collateral Agent, the Documentation Agent and the Syndication Agent. "Aggregate Unutilized Commitment" with respect to any Bank at any time shall mean the sum of (i) such Bank's A Term Loan Commitment at such time, if any, (ii) such Bank's B Term Loan Commitment at such time, if any, (iii) such Bank's C Term Loan Commitment at such time, if any, and (iv) such Bank's Revolving Credit Commitment at such time, if any, less the sum of (x) the aggregate outstanding principal amount of all Revolving Loans made by such Bank and (y) such Bank's Revolving Percentage of the Letter of Credit Outstandings at such time. "Agreement" shall mean this Credit Agreement, as the same may be from time to time modified, amended and/or supplemented. "Applicable Base Rate Margin" shall mean initially (i) in the case of A Term Loans, Revolving Loans and Swingline Loans, .50%, (ii) in the case of B Term Loans, 1.00% and (iii) in the case of C Term Loans, 1.25%; provided that from and after the day which is nine months after the Initial Borrowing Date, the Applicable Base Rate Margin will be determined pursuant to the Pricing Grid. -76- 84 "Applicable Eurodollar Margin" shall mean initially (i) in the case of A Term Loans and Revolving Loans, 1.50%, (ii) in the case of B Term Loans, 2.00% and (iii) in the case of C Term Loans, 2.25%; provided that from and after the day that is nine months after the Initial Borrowing Date, the Applicable Eurodollar Margin will be determined pursuant to the Pricing Grid. "Arranger" shall mean Chase Securities Inc. "Asset Sale" shall mean any sale, transfer or other disposition by the Borrower or any of its Subsidiaries to any Person other than the Borrower or any Wholly-Owned Subsidiary of the Borrower of any asset (including, without limitation, any capital stock or other securities of another Person, but excluding the sale by such Person of its own capital stock) of the Borrower or any such Subsidiary other than (i) sales, transfers or other dispositions of inventory made in the ordinary course of business and (ii) sales of assets pursuant to Sections 8.02(f), (g), (h), (i) and (k). "Assignment and Assumption Agreement" shall mean the Assignment and Assumption Agreement substantially in the form of Exhibit J (appropriately completed). "Authorized Officer" shall mean any senior officer of the Borrower designated as such in writing to the Administrative Agent by the Borrower, in each case to the extent reasonably acceptable to the Agent. "B Banks" shall have the meaning provided in Section 4.02(C). "B Term Loan" shall have the meaning provided in Section 1.01(A)(b). "B Term Loan Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name in Annex I directly below the column entitled "B Term Loan Commitment," as the same may be terminated pursuant to Section 3.03 and/or Section 9. "B Term Loan Facility" shall mean the Facility evidenced by the Total B Term Loan Commitment. "B Term Loan Maturity Date" shall mean the seventh anniversary of the Initial Borrowing Date. "B Term Note" shall have the meaning provided in Section 1.05(a). "B TL Percentage" shall mean, at any time, a fraction (expressed as a percentage) the numerator of which is equal to the aggregate principal amount of all B Term Loans outstanding at such time and the denominator of which is equal to the sum of the aggregate principal amount of all Term Loans outstanding at such time. "Bank" shall have the meaning provided in the first paragraph of this Agreement. -77- 85 "Bank Default" shall mean (i) the refusal (which has not been retracted) of a Revolving Bank to make available its portion of any Borrowing (including any Mandatory Borrowing) or to fund its portion of any unreimbursed payment under Section 2.04(c) or (ii) a Revolving Bank having notified the Administrative Agent and/or the Borrower that it does not intend to comply with the obligations under Section 1.01(A)(d), 1.01(C) or 2.04(c), in the case of either clause (i) or (ii) above as a result of the appointment of a receiver or conservator with respect to such Bank at the direction or request of any regulatory agency or authority. "Bankruptcy Code" shall have the meaning provided in Section 9.05. "Base Rate" for any day shall mean the higher of (x) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate in effect on such day and (y) the Prime Rate in effect on such day. "Base Rate Loan" shall mean each Loan bearing interest at the rates provided in Section 1.08(a). "Belron" shall mean Belron (USA) BV, a Dutch corporation. "Belron Affiliates" shall mean any Affiliate of Belron, provided that for purposes of the definition of "Change of Control Event", the term Belron Affiliate shall not include any portfolio company of either Belron or any Affiliate of Belron. "Borrower" shall have the meaning provided in the first paragraph of this Agreement. "Borrower Common Stock" shall be as described in Schedule 6.16. "Borrower Preferred Stock" shall be as described in Schedule 6.16, provided that such preferred stock shall only pay non-cash dividends (except to the extent accumulated dividends may be redeemed pursuant to subsection 8.07(iii)). "Borrowing" shall mean the incurrence of one Type of Loan pursuant to a single Facility by the Borrower from all of the Banks having Commitments with respect to such Facility on a pro rata basis on a given date (or resulting from conversions on a given date), having in the case of Eurodollar Loans the same Interest Period; provided that Base Rate Loans incurred pursuant to Section 1.10(b) shall be considered part of any related Borrowing of Eurodollar Loans. "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which shall be in the City of New York a legal holiday or a day on which banking institutions are authorized by law or other governmental actions to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in U.S. dollar deposits in the interbank Eurodollar market. "C Banks" shall have the meaning provided in Section 4.02(C). -78- 86 "C Term Loan" shall have the meaning provided in Section 1.01(A)(c). "C Term Loan Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name in Annex I directly below the column entitled "C Term Loan Commitment," as the same may be terminated pursuant to Section 3.03 and/or Section 9. "C Term Loan Facility" shall mean the Facility evidenced by the Total C Term Loan Commitment. "C Term Loan Maturity Date" shall mean the eighth anniversary of the Initial Borrowing Date. "C Term Note" shall have the meaning provided in Section 1.05(a). "C TL Percentage" shall mean, at any time, a fraction (expressed as a percentage) the numerator of which is equal to the aggregate principal amount of all C Term Loans outstanding at such time and the denominator of which is equal to the sum of the aggregate principal amount of all Term Loans outstanding at such time. "Capital Expenditures" shall mean, with respect to any Person, all expenditures by such Person for plant, property and equipment which should be capitalized in accordance with GAAP (including, without limitation, expenditures for maintenance and repairs which should be capitalized in accordance with GAAP). "Capital Lease," as applied to any Person, shall mean any lease of any property (whether real, personal or mixed) by that Person as lessee which, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "Capitalized Lease Obligations" shall mean all obligations under Capital Leases of the Borrower or any of its Subsidiaries in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP. "CarComp" shall mean CarComp Services, Inc., an Illinois corporation. "Cash Equivalents" shall mean (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than one year from the date of acquisition, (ii) U.S. dollar denominated time deposits, certificates of deposit and bankers acceptances of (x) any Bank or (y) any bank, or holding company of such bank, whose short-term commercial paper rating or that of its parent company from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof (any such bank or Bank, an "Approved Bank"), in each case with maturities of not more than one year from the date of acquisition, (iii) commercial paper issued by any Approved Bank or by the parent company of any Approved Bank and commercial paper issued by, or guaranteed by, any industrial or financial company with a short-term commercial paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's, -79- 87 or guaranteed by any industrial company with a long term unsecured debt rating of at least A or A2, or the equivalent of each thereof, from S&P or Moody's, as the case may be, and in each case maturing within one year after the date of acquisition, (iv) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody's and (v) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (i) through (iv) above. "Cash Proceeds" shall mean, with respect to any Asset Sale, the aggregate cash payments (including any cash received by way of deferred payment pursuant to a note receivable issued in connection with such Asset Sale, other than the portion of such deferred payment constituting interest, but only as and when so received) received by the Borrower and/or any of its Subsidiaries from such Asset Sale. "Change of Control Event" shall mean the occurrence of any of the following: (i) prior to the Second Borrowing Date (a) prior to the date of an initial registered public offering by the Borrower of Borrower Common Stock, the Permitted Holders shall cease to own on a fully diluted basis in the aggregate at least 51% of the economic and voting interest in the Borrower's capital stock free of Liens except Liens, if any, created by the Pledge Agreement or (b) on or after the date of an initial registered public offering by the Borrower of Borrower Common Stock, (A) any other Person or "group" (within the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in effect on the Initial Borrowing Date) shall own more than 20% of the voting and/or economic interest in the Borrower's capital stock, (B) the Board of Directors of the Borrower shall cease to consist of a majority of Continuing Directors or (C) the Permitted Holders shall cease to own on a fully diluted basis in the aggregate at least 50.5% of the voting interest and at least 50.5% of the economic interest in the Borrower's capital stock free of Liens except Liens, if any, created by the Pledge Agreement; (ii) from and after the Second Borrowing Date (a) prior to the date of an initial registered public offering by the Borrower of Borrower Common Stock, the Permitted Holders shall cease to own on a fully diluted basis in the aggregate at least 50.5% of the voting interest and at least 50.5% of the economic interest in the Borrower's capital stock free of Liens except Liens, if any, created by the Pledge Agreement or shall cease to own on a fully diluted basis sufficient shares of capital stock of the Borrower as entitle it to elect at least a majority of the members of the Board of Directors of the Borrower, (b) on or after the date of an initial registered public offering by the Borrower of Borrower Common Stock, (A) any other Person or "group" (within the meaning of Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in effect on the Initial Borrowing Date) shall own more than 20% of the voting and/or economic interest in the Borrower's capital stock (other than the Permitted Holders who are not Qualified Permitted Holders), (B) the Board of Directors of the Borrower shall cease to consist of a majority of Continuing Directors or (C) the Permitted Holders shall cease to own on a fully diluted basis in the aggregate at least 40% of the economic or voting interest in the Borrower's capital stock free of Liens except Liens, if any, created by the Pledge Agreement; or (iii) a "change of control" or similar event shall occur as provided in the Senior Subordinated Note Indenture. "Chase" shall mean The Chase Manhattan Bank, in its individual capacity, and any successor corporation thereto by merger, consolidation or otherwise. -80- 88 "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement and any subsequent provisions of the Code amendatory thereof, supplemental thereto or substituted therefor. "Collateral" shall mean all of the Collateral as defined in each of the Security Documents. "Collateral Agent" shall mean the Administrative Agent acting as collateral agent for the Secured Creditors. "Commitment" shall mean, with respect to each Bank, such Bank's A Term Loan Commitment, B Term Loan Commitment, C Term Loan Commitment and Revolving Credit Commitment. "Commitment Fee" shall have the meaning provided in Section 3.01(a). "Confidential Information Memorandum" shall mean the Confidential Information Memorandum dated December 1997 relating to the Facilities. "Consolidated Current Assets" shall mean, at any time, the current assets (other than cash, Cash Equivalents and deferred income taxes to the extent included in current assets) of the Borrower and its Subsidiaries at such time determined on a consolidated basis. "Consolidated Current Liabilities" shall mean, at any time, the current liabilities of the Borrower and its Subsidiaries determined on a consolidated basis, but excluding deferred income taxes and the current portion of and accrued but unpaid interest on any Indebtedness under this Agreement and any other long-term Indebtedness which would otherwise be included therein. "Consolidated Debt" shall mean, at any time, all Indebtedness (excluding Indebtedness of the type described in clause (vii) of the definition of Indebtedness) of the Borrower and its Subsidiaries determined on a consolidated basis which would be reflected on a consolidated balance sheet at such time in accordance with GAAP. "Consolidated EBIT" shall mean, for any period, Consolidated Net Income of the Borrower and its Subsidiaries, before total interest expense (whether cash or non-cash) and provisions for taxes based on income, and determined (i) without giving effect to any extraordinary gains or losses but with giving effect to gains or losses from sales of assets sold in the ordinary course of business, (ii) without giving effect to any impact from the LIFO method of inventory accounting, (iii) without giving effect to any noncash charge (other than depreciation or amortization) deducted in determining Consolidated Net Income for such period, including non-cash charges related to the issuance by the Borrower or any of its Subsidiaries of stock, warrants or options to management (or any exercise of any such warrants or options), (iv) without giving effect to any compensation expense incurred in connection with the Merger or the Recapitalization (including, without limitation, the Transaction Bonuses), (v) without giving effect to nonrecurring charges, noncash charges or documented cash charges, in each case deducted in determining Consolidated Net Income for such period and related to the Transaction (including, for example, -81- 89 one-time expenses associated with the integration of corporate systems, temporary service fees and training, moving, relocation and other costs and expenses in connection with the Merger) and (vi) without giving effect to management fees permitted to be paid to Lee and the Lee Affiliates and Belron and the Belron Affiliates pursuant to Section 8.08. "Consolidated EBITDA" shall mean, for any period, Consolidated EBIT, adjusted by adding thereto the amount of all depreciation expense and amortization expense that were deducted in determining Consolidated EBIT for such period. "Consolidated Interest Expense" shall mean, for any period, total interest expense (including that attributable to Capital Leases in accordance with GAAP) of the Borrower and its Subsidiaries determined on a consolidated basis with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries, including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs or benefits under Interest Rate Protection Agreements, but excluding, however, amortization of original issue discount, any payments made to obtain any Interest Rate Protection Agreement, deferred financing costs and any interest expense on deferred compensation arrangements and any other non-cash interest to the extent included in total interest expense. "Consolidated Net Income" shall mean, for any period, the net income (or loss), after provision for taxes and before any pay-in-kind or non-cash accumulating dividend on Preferred Stock, of the Borrower and its Subsidiaries on a consolidated basis for such period taken as a single accounting period, but excluding any unrealized losses and gains for such period resulting from mark-to-market of Other Hedging Agreements. "Contingent Obligations" shall mean as to any Person any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of such primary obligation against loss in respect thereof; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection or standard contractual indemnities entered into, in each case in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Continuing Directors" shall mean (i) prior to the Second Borrowing Date, the directors of the Borrower on the Initial Borrowing Date and (ii) on and after the Second Borrowing Date, the directors of the Borrower on the Second Borrowing Date and each other director if such -82- 90 director's nomination for the election to the Board of Directors of the Borrower is recommended by a majority of the then Continuing Directors. "Credit Documents" shall mean this Agreement, the Notes, the Guaranties and each Security Document. "Credit Event" shall mean the making of a Loan (other than a Revolving Loan made pursuant to a Mandatory Borrowing) or the issuance of a Letter of Credit. "Credit Party" shall mean the Borrower and each Subsidiary Guarantor. "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Bank" shall mean any Bank with respect to which a Bank Default is in effect. "Deficiency" shall have the meaning provided in Section 8.09(b). "Dividends" shall have the meaning provided in Section 8.07. "Documentation Agent" shall have the meaning provided in the first paragraph of this Agreement. "Documents" shall mean the Credit Documents, the Merger Documents and the Senior Subordinated Note Documents. "Domestic Subsidiary" shall mean each Subsidiary of the Borrower (and, prior to the Second Borrowing Date, of Vistar) incorporated or organized in the United States or any State or territory thereof. "Effective Date" shall have the meaning provided in Section 12.10. "Eligible Transferee" shall mean and include (i) a commercial bank, financial institution, fund which is regularly engaged in making, purchasing or investing in loans of the type provided for herein or other "qualified institutional buyer" (as defined in Rule 144A of the Securities Act) and (ii) any other Person approved by the Borrower (such approval not to be unreasonably withheld). "Environmental Claims" shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of non-compliance or violation, investigations or proceedings relating in any way to any violation (or alleged violation) by the Borrower or any of its Subsidiaries under any Environmental Law (hereafter "Claims") or any permit issued to the Borrower or any of its Subsidiaries under any such law, including, without limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, -83- 91 indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Law" shall mean any federal, state or local policy, statute, law, rule, regulation, ordinance, code or rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment (for purposes of this definition ("collectively, Laws")), relating to the environment, or Hazardous Materials or health and safety to the extent such health and safety issues arise under the Occupational Safety and Health Act of 1970, as amended, or any such similar Laws. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. Section references to ERISA are to ERISA as in effect at the date of this Agreement and any subsequent provisions of ERISA amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean each person (as defined in Section 3(9) of ERISA) which together with the Borrower or any of its Subsidiaries would be deemed, at any time following the Initial Borrowing Date, to be a "single employer" within the meaning of Section 414(b), (c), (m) or (o) of the Code. "Eurodollar Loans" shall mean each Loan bearing interest at the rates provided in Section 1.08(b). "Eurodollar Rate" shall mean with respect to each Interest Period for a Eurodollar Loan, (i) the rate per annum equal to the rate at which Chase is offered Dollar deposits at or about 10:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period in the interbank eurodollar market where the eurodollar and foreign currency and exchange operations in respect of its Eurodollar Loans are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein and in an amount comparable to the amount of its Eurodollar Loan to be outstanding during such Interest Period (and rounded upward to the next whole multiple of 1/16 of 1%) divided by (ii) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any basic, marginal, emergency, supplemental, special or other reserves under any regulations of the Board of Governors of the Federal Reserve System or other Governmental Authority having jurisdiction with respect thereto) dealing with reserve requirements prescribed for eurocurrency funding (currently referred to a "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a member bank of such System. "Event of Default" shall have the meaning provided in Section 9. "Excess Cash Flow" shall mean, for any period cash flows from operating activities, as defined by GAAP, minus an amount equal to the sum of (i) all Capital Expenditures (other than Capital Expenditures made pursuant to Section 8.09(d), (e) or (f) made during such period that are not financed by Indebtedness (including Capitalized Lease Obligations but excluding Loans hereunder), (ii) the amount expended with respect to Permitted Acquisitions during such period, except to the extent constituting Capital Expenditures, (iii) the aggregate principal amount -84- 92 of permanent principal payments of Indebtedness for borrowed money of the Borrower and its Subsidiaries (other than repayments of Loans, provided that repayments of Loans shall be deducted in determining Excess Cash Flow if such repayments were (x) required as a result of a Scheduled A Repayment, a Scheduled B Repayment or a Scheduled C Repayment under Section 4.02(A)(b) or (y) made as a voluntary prepayment with internally generated funds (but in the case of a voluntary prepayment of Revolving Loans, only to the extent accompanied by a voluntary reduction to the Total Revolving Credit Commitment)), and (iv) the amount of unusual or non-recurring charges that decreased Working Capital during such period. "Excess Cash Flow Period" shall mean each fiscal year of the Borrower commencing with the fiscal year ending FYE 1998. "Excess Cash Payment Date" shall mean the date occurring 90 days after the last day of a fiscal year of the Borrower (beginning with its fiscal year ending FYE 1998). "Existing Indebtedness" shall have the meaning provided in Section 6.24. "Existing Indebtedness Agreements" shall have the meaning provided in Section 5.13. "Existing Letters of Credit" shall mean the letters of credit described in Schedule 2.01. "Expenditures for Intangible Assets" shall mean, with respect to any Person, the amount of expenditures which are not classified as Capital Expenditures but which were capitalized and not expensed during such period, including the expenditures for the acquisition or development of data bases and for research and development. "FQE1", "FQE2" or "FQE3" shall mean, respectively, the last day of the Borrower's first, second and third fiscal quarters. The first fiscal quarter of each fiscal year begins on the Saturday closest to the last day of the prior calendar year, and continues for 13 calendar weeks. The second and third fiscal quarters continue for successive periods of 13 weeks each, and the fourth fiscal quarter continues for the period of 13 or 14 weeks, as the case may be, until the end of such fiscal year. "FYE" shall mean the end of the designated fiscal year of the Borrower. Each fiscal year ends on the Saturday following closest to the last day of the designated year (which Saturday may fall in the succeeding calendar year). "Facility" shall mean any of the credit facilities established under this Agreement, i.e., the A Term Loan Facility, the B Term Loan Facility, the C Term Loan Facility or the Revolving Credit Facility. "Facing Fee" shall have the meaning provided in Section 3.01(c). "Federal Funds Effective Rate" shall mean, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System -85- 93 arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for the day of such transactions received by the Administrative Agent from three federal funds brokers of recognized standing selected by it. Any change in the Base Rate due to a change in the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Federal Funds Effective Rate. "Fees" shall mean all amounts payable pursuant to, or referred to in, Section 3.01. "Foreign Cash Equivalents" shall mean certificates of deposit or bankers acceptances of any bank organized under the laws of Canada, Japan or any country that is a member of the European Economic Community whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof, in each case with maturities of not more than six months from the date of acquisition. "Foreign Pension Plan" shall mean any plan, fund (including, without limitation, any superannuation fund) or other similar program established or maintained outside the United States of America by the Borrower or any one or more of its Subsidiaries primarily for the benefit of employees of the Borrower or such Subsidiaries residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code. "Foreign Subsidiary" shall mean each Subsidiary of the Borrower other than a Domestic Subsidiary. "GAAP" shall mean generally accepted accounting principles in the United States of America as promulgated by FASB and as in effect from time to time; it being understood and agreed that determinations in accordance with GAAP for purposes of Section 8, including defined terms as used therein, are subject (to the extent provided therein) to Section 12.07(a). "Guaranteed Creditors" shall mean and include each of the Administrative Agent, the Documentation Agent, the Collateral Agent, the Banks and each party (other than any Credit Party) party to an Interest Rate Protection Agreement or Other Hedging Agreement to the extent that such party constitutes a Secured Creditor under the Security Documents. "Guaranteed Obligations" shall mean (i) the principal and interest on each Note issued by the Borrower to each Bank, and Loans made, under this Agreement and all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit, together with all the other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities (including, without limitation, indemnities, fees and interest thereon) of the Borrower to such Bank, the Administrative Agent, the Documentation Agent and the Collateral Agent now existing or hereafter incurred under, arising out of or in connection with this Agreement or any other Credit Document and the due performance and compliance with all the terms, conditions and agreements contained in the Credit Documents by the Borrower and (ii) all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of -86- 94 the Borrower or any of its Subsidiaries owing under any Interest Rate Protection Agreement or Other Hedging Agreement entered into by the Borrower or any of its Subsidiaries with any Bank or any affiliate thereof (even if such Bank subsequently ceases to be a Bank under this Agreement for any reason) so long as such Bank or affiliate participates in such Interest Rate Protection Agreement or Other Hedging Agreement, and their subsequent assigns, if any, whether now in existence or hereafter arising, and the due performance and compliance with all terms, conditions and agreements contained therein. "Guarantor" shall mean each Subsidiary Guarantor. "Guaranty" shall mean each Subsidiary Guaranty. "Hazardous Materials" shall mean (a) any petrochemical or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; and (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous wastes," "restrictive hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar meaning and regulatory effect. "Indebtedness" of any Person shall mean, without duplication, (i) all indebtedness of such Person for borrowed money, (ii) the deferred purchase price of assets or services payable to the sellers thereof or any of such seller's assignees which in accordance with GAAP would be shown on the liability side of the balance sheet of such Person but excluding deferred rent as determined in accordance with GAAP, (iii) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any property owned by such first Person, whether or not such Indebtedness has been assumed, (v) all Capitalized Lease Obligations of such Person, (vi) all obligations of such Person to pay a specified purchase price for goods or services whether or not delivered or accepted, i.e., take-or-pay and similar obligations, (vii) all obligations under Interest Rate Protection Agreements and Other Hedging Agreements and (viii) all Contingent Obligations of such Person, provided that Indebtedness shall not include trade payables and accrued expenses, in each case arising in the ordinary course of business. "Initial Borrowing Date" shall mean the date upon which the initial Term Loans are incurred hereunder. "Initial Lending Bank" shall mean each Bank set forth on Annex I identified as an Initial Lending Bank. "Insurance Debt" shall mean Indebtedness of the Borrower, in an aggregate amount not exceeding $14,000,000, in respect of deferred premium payments under liability, casualty or other insurance policies of the Borrower. "Intercompany Loan" shall have the meaning provided in Section 8.06(h). -87- 95 "Intercompany Notes" shall mean promissory notes, in the form of Exhibit K, evidencing Intercompany Loans. "Interest Coverage Ratio" shall mean, for any period, the ratio of Consolidated EBITDA to Consolidated Interest Expense for such period; provided that for purposes of calculating such ratio, Consolidated Interest Expense shall not include interest expense incurred in respect of Insurance Debt. "Interest Period" with respect to any Eurodollar Loan, shall mean the interest period applicable thereto, as determined pursuant to Section 1.09. "Interest Rate Protection Agreement" shall mean any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedging agreement or other similar agreement or arrangement. "L/C Supportable Indebtedness" shall mean (i) obligations of the Borrower or its Subsidiaries incurred in the ordinary course of business with respect to insurance obligations and workers' compensation, surety bonds and other similar statutory obligations and (ii) such other obligations of the Borrower or any of its Subsidiaries as are reasonably acceptable to the Administrative Agent and the Letter of Credit Issuer and otherwise permitted to exist pursuant to the terms of this Agreement. "Lear Siegler" shall mean Lear Siegler Holdings Corp., a Delaware corporation. "Leasehold" of any Person shall mean all of the right, title and interest of such Person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures. "Lee" shall mean Thomas H. Lee Company, a sole proprietorship located in Massachusetts. "Lee Affiliates" shall mean any Affiliate of Lee, provided that for purposes of the definition of "Change of Control Event", the term Lee Affiliate shall not include any portfolio company of either Lee or any Affiliate of Lee. "Lee Investor" shall mean and include Thomas H. Lee Equity Fund, III L.P., Thomas H. Lee Foreign Fund III, L.P. and THL-CCI Limited Partnership, or any limited or general partner, stockholder, officer, employee or consultant of such Lee Investor or any officer, employee or consultant of Lee; provided that for the purposes of making calculations under the definition of "Change of Control Event", the aggregate amount of equity of the Borrower attributable to consultants of Lee and consultants of Lee Investors may not exceed $3,000,000. "Letter of Credit" shall have the meaning provided in Section 2.01(a). "Letter of Credit Fees" shall have the meaning provided in Section 3.01(b)(i). -88- 96 "Letter of Credit Issuer" shall mean (i) in respect of the Existing Letters of Credit, PNC Bank (but not in respect of any renewal or extension of any Existing Letter of Credit), The Chase Manhattan Bank or Chase Manhattan Bank Delaware and (ii) in respect of other Letters of Credit, Chase Manhattan Bank Delaware. "Letter of Credit Outstandings" shall mean, at any time, the sum of, without duplication, (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all Letters of Credit. "Letter of Credit Request" shall have the meaning provided in Section 2.02(a). "Leverage Ratio" shall mean, at any time, the ratio of (x) Consolidated Debt at such time (excluding Insurance Debt) to (y) Consolidated EBITDA for the Test Period then last ended (or, for the Test Period ending FQE3 1998, Consolidated EBITDA for such Test Period multiplied by 4/3). "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any similar recording or notice statute, and any lease having substantially the same effect as the foregoing). "Loan" shall mean each and every Loan made by any Bank hereunder, including A Term Loans, B Term Loans, C Term Loans, Revolving Loans or Swingline Loans. "LSAC" shall mean L.S. Acquisition Corp., a Delaware corporation. "LS Companies" shall mean Lear Siegler and its subsidiaries. "LSNWY" shall mean LSNWY Corp., a Delaware corporation. "LS Tax Sharing Agreement" shall mean the Tax Sharing Agreement between the Borrower and Lear Siegler in a form reasonably satisfactory to the Administrative Agent. "Majority Banks" of any Facility shall mean those Non-Defaulting Banks which would constitute the Required Banks under, and as defined in, this Agreement if all outstanding Obligations of the other Facilities under this Agreement were repaid in full and all Commitments with respect thereto were terminated. "Management Agreements" shall have the meaning provided in Section 5.13. "Mandatory Borrowing" shall have the meaning provided in Section 1.01(C). "Margin Adjustment Period" shall mean each period which shall commence on a date on which the financial statements are delivered pursuant to Section 7.01(b)(i) or (c)(i), as the case may be, and which shall end on the earlier of (i) the date of actual delivery of the next financial statements pursuant to Section 7.01(b)(i) or (c)(i), as the case may be, and (ii) the latest -89- 97 date on which the next financial statements are required to be delivered pursuant to Section 7.01(b)(i) or (c)(i), as the case may be. "Margin Stock" shall have the meaning provided in Regulation U. "Material Adverse Effect" shall mean a material adverse effect on the business, properties, assets, liabilities or condition (financial or otherwise) of the Borrower and its Subsidiaries taken as a whole. "Maturity Date" with respect to any Facility shall mean either the A Term Loan Maturity Date, the B Term Loan Maturity Date, the C Term Loan Maturity Date or the Revolving Loan Maturity Date, as the case may be. "Maximum Swingline Amount" shall mean $20,000,000. "Merger" shall have the meaning specified in the recitals to this Agreement. "Merger Agreement" shall mean the Merger Agreement dated as of October 10, 1997 as in effect in the Initial Borrowing Date between Vistar and the Borrower. "Merger Documents" shall mean the Merger Agreement and all other agreements and documents relating to the Merger. "Minimum Borrowing Amount" shall mean (i) for Term Loans, $5,000,000; (ii) for Revolving Loans, $500,000; and (iii) for Swingline Loans, $50,000. "Moody's" shall mean Moody's Investors Service, Inc. "Mortgage" shall mean each of the mortgages, deeds of trust, deeds to secure debt or other substantially similar instrument granting a Lien on any Mortgaged Property to secure the Obligations, as the same may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms of this Agreement. "Mortgage Policies" shall have the meaning provided in Section 7.11(g). "Mortgaged Properties" shall mean and include the Real Properties owned by the Borrower and its Domestic Subsidiaries to the extent designated as such on Schedule 6.21. "Multiemployer Plan" shall mean any multiemployer plan (within the meaning of section 4001(a)(3) of ERISA) to which the Company or any of its Subsidiaries has any liability or contributes (or has at any time within the past five years contributed to or had any liability to contribute). "Net Cash Proceeds" shall mean, with respect to any Asset Sale, the Cash Proceeds resulting therefrom net of (a) cash expenses of sale (including brokerage fees, if any, transfer taxes and payment of principal, premium and interest of Indebtedness other than the Loans required to be -90- 98 repaid as a result of such Asset Sale) and (b) incremental income taxes paid or payable as a result thereof. "Non-Defaulting Bank" shall mean each Bank other than a Defaulting Bank. "Note" shall mean each A Term Note, each B Term Note, each C Term Note, each Revolving Note and the Swingline Note. "Notice of Borrowing" shall have the meaning provided in Section 1.03(a). "Notice of Conversion" shall have the meaning provided in Section 1.06. "Notice Office" shall mean the office of the Administrative Agent located at 270 Park Avenue, New York, New York 10017 or such other office as the Administrative Agent may designate to the Borrower and the Banks from time to time. "Obligations" shall mean all amounts, direct or indirect, contingent or absolute, of every type or description, and at any time existing, owing to any Agent or any Bank pursuant to the terms of this Agreement or any other Credit Document. "Other Hedging Agreements" shall mean any foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect against fluctuations in currency values. "Participant" shall have the meaning provided in Section 2.04(a). "Payment Office" shall mean the office of the Administrative Agent located at 270 Park Avenue, New York, New York 10017 or such other office as the Administrative Agent may designate to the Borrower and the Banks from time to time. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. "Permitted Acquisition" shall have the meaning provided in Section 8.02(m). "Permitted Encumbrances" shall mean (i) those liens, encumbrances and other matters affecting title to any Mortgaged Property listed in the Mortgage Policies in respect thereof and found reasonably acceptable by the Administrative Agent, (ii) as to any particular Mortgaged Property at any time, such easements, encroachments, covenants, rights of way, minor defects, irregularities or encumbrances on title which do not, in the reasonable opinion of the Administrative Agent, materially impair such Mortgaged Property for the purpose for which it is held by the mortgagor thereof, or the lien held by the Collateral Agent, (iii) zoning and other municipal ordinances which are not violated in any material respect by the existing improvements and the present use made by the mortgagor thereof of the Premises (as defined in the respective Mortgage), (iv) general real estate taxes and assessments not yet delinquent, and (v) such other items as the Administrative Agent may consent to (such consent not to be unreasonably withheld). -91- 99 "Permitted Holders" shall mean (a) Lee and the Lee Affiliates, (b) the Lee Investors, (c) each other holder of common stock on the Initial Borrowing Date (each Person which is a Permitted Holder solely by virtue of this clause (c), "a Qualified Permitted Holder"), (d) from and after the Second Borrowing Date, Belron and the Belron Affiliates and (e) senior management employees and directors of the Borrower who acquire common stock of the Borrower within 90 days after the Initial Borrowing Date for an aggregate purchase price not in excess of $5,000,000; provided, however, that (x) to the extent that the aggregate economic interest or voting interest in the Borrower's capital stock legally or beneficially owned by the Qualified Permitted Holders exceeds 20% of the economic or voting interest, as the case may be, in the Borrower's capital stock, such excess shall be deemed not to be owned by the Qualified Permitted Holders for purposes of determining a Change of Control (except for a Change of Control under clause (ii)(b)(A) of the definition thereof). "Permitted Liens" shall have the meaning provided in Section 8.03. "Person" shall mean any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" shall mean any employee pension benefit plan (within the meaning of section 3(2) of ERISA) which is maintained or contributed to by the Borrower or any of its Subsidiaries, or for which the Company or any of its Subsidiaries has any liability or contingent liability, other than a Multiemployer Plan. "Pledge Agreement" shall have the meaning provided in Section 5.10(a). "Pledge Agreement Collateral" shall mean all "Collateral" as defined in the Pledge Agreement. "Pledged Securities" shall mean all the Pledged Securities as defined the Pledge Agreement. "Pre-Merger Stock Payments" shall mean the (i) the declaration and payment by the Borrower of a cash dividend of approximately $67,200,000 on its Class A Common Stock, (ii) the declaration and payment by the Borrower of a cash dividend of approximately $4,800,000 (which equals the accrued and unpaid dividends on the Pre-Merger Borrower Preferred Stock) on the Borrower Pre-Merger Preferred Stock and (iii) the redemption in full of the Borrower Pre-Merger Preferred Stock for a redemption price of approximately $58,248,500, all prior to the Second Borrowing Date. "Pre-Merger Borrower Preferred Stock" shall mean the Borrower's 8% Cumulative Preferred Stock which will be redeemed in full prior to the Merger Closing Date. "Preferred Stock" shall mean the Borrower Preferred Stock and any Additional Permitted Preferred Stock. "Pricing Grid" shall mean the pricing grid attached hereto as Annex III. -92- 100 "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by Chase as its prime rate in effect at its principal office in New York City, the Prime Rate to change when and as such publicly announced rate changes. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. Chase may make commercial loans or other loans at rates of interest at, above or below the Prime Rate. "Projections" shall have the meaning provided in Section 5.16. "Qualified Permitted Holders" shall have the meaning specified in the definition of "Permitted Holders." "Quarterly Payment Date" shall mean the last Business Day of each March, June, September and December. "Real Property" of any Person shall mean all of the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds. "Recapitalization" shall mean the recapitalization of the Borrower pursuant to, and in accordance with the terms of, the Recapitalization Documents. "Recapitalization Agreement" shall mean the Recapitalization Agreement and Plan of Merger and Stock Purchase Agreement dated as of November 8, 1996, as amended and as in effect on the Initial Borrowing Date by and among Lear Siegler, the LS Selling Stockholders (as defined therein), the Borrower, LSNWY and LSAC. "Recapitalization Documents" shall mean the Recapitalization Agreement and all other agreements and documents relating to the Recapitalization. "Recovery Event" shall mean the receipt by the Borrower or any of its Subsidiaries of any insurance or condemnation proceeds payable (i) by reason of theft, physical destruction or damage or any other similar event with respect to any properties or assets of the Borrower or any of its Subsidiaries, (ii) by reason of any condemnation, taking, seizing or similar event with respect to any properties or assets of the Borrower or any of its Subsidiaries and (iii) under any policy of insurance required to be maintained under Section 7.03. "Register" shall have the meaning provided in subsection 12.04(c). "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. "Regulation G" shall mean Regulation G of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or any portion thereof. "Regulation T" shall mean Regulation T of the Board of Governors of the Federal Reserve System as from to time in effect and any successor to all or any portion thereof. -93- 101 "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof. "Regulation X" shall mean Regulation X of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or any portion thereof. "Release" means disposing, discharging, injecting, spilling, pumping, leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing, pouring and the like, into or upon any land or water or air, or otherwise entering into the environment. "Replaced Bank" shall have the meaning provided in Section 1.13. "Replacement Bank" shall have the meaning provided in Section 1.13. "Reportable Event" shall mean an event described in Section 4043(c) of ERISA with respect to a Plan as to which the 30-day notice requirement has not been waived by the PBGC. "Required Banks" shall mean collectively (and not individually) Non-Defaulting Banks the sum of whose outstanding Term Loans, Term Loan Commitments, Revolving Credit Commitments (or, if after the Total Revolving Credit Commitment has been terminated, outstanding Revolving Loans and Revolving Percentages of outstanding Swingline Loans and Letter of Credit Outstandings) constitute greater than 50% of the sum of (i) the total outstanding Term Loans of Non-Defaulting Banks, or the Total Term Loan Commitment then in effect and (ii) the Total Revolving Credit Commitment less the aggregate Revolving Credit Commitments of Defaulting Banks (or, if after the Total Revolving Credit Commitment has been terminated, the total outstanding Revolving Loans of Non-Defaulting Banks and the aggregate Revolving Percentages of all Non-Defaulting Banks of the total outstanding Swingline Loans and Letter of Credit Outstandings at such time). "Retiree Welfare Plan" shall mean any employee welfare benefit plan (within the meaning of section 3(1) of ERISA) which provides benefits to retired or other former employees of the Borrower or any of its Subsidiaries (other than continuation of group health plan coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or pursuant to applicable State law). "Returns" shall have the meaning provided in Section 6.23. "Revolving Bank" shall mean at any time each Bank with a Revolving Credit Commitment or with outstanding Revolving Loans. "Revolving Credit Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name in Annex I directly below the column entitled "Revolving Credit Commitment," as the same may be reduced from time to time pursuant to Section 3.02, Section 3.03 and/or Section 9. -94- 102 "Revolving Credit Facility" shall mean the Facility evidenced by the Total Revolving Credit Commitment. "Revolving Loan" shall have the meaning provided in Section 1.01(A)(d). "Revolving Loan Maturity Date" shall mean the sixth anniversary of the Initial Borrowing Date. "Revolving Note" shall have the meaning provided in Section 1.05(a). "Revolving Percentage" shall mean at any time for each Revolving Bank, with respect to Revolving Loans, Swingline Loans and Letters of Credit, the percentage obtained by dividing such Revolving Bank's Revolving Credit Commitment by the Total Revolving Credit Commitment, provided that if the Total Revolving Credit Commitment has been terminated, the Revolving Percentage of each Revolving Bank shall be determined by dividing such Revolving Bank's Revolving Credit Commitment immediately prior to such termination by the Total Revolving Credit Commitment immediately prior to such termination. "Rollover Amount" shall have the meaning provided in Section 8.09(b). "Safelite" shall mean the Borrower prior to the effectiveness of the Merger. "Scheduled A Repayment" shall have the meaning provided in Section 4.02(A)(b)(i). "Scheduled B Repayment" shall have the meaning provided in Section 4.02(A)(b)(ii). "Scheduled C Repayment" shall have the meaning provided in Section 4.02(A)(b)(iii). "Scheduled Repayment" shall mean any Scheduled A Repayment, any Scheduled B Repayment or any Scheduled C Repayment. "SEC" shall mean the Securities and Exchange Commission or any successor thereto. "Second Borrowing Date" shall mean the first Borrowing Date after the Initial Borrowing Date, on which date the conditions set forth in part (b) of Section 5 shall be satisfied. "Section 4.04(b)(ii) Certificate" shall have the meaning provided in Section 4.04(b)(ii). "Secured Creditors" shall have the meaning provided in the Security Documents. "Security Agreement" shall have the meaning provided in Section 5.10(b). -95- 103 "Security Agreement Collateral" shall mean all "Collateral" as defined in the Security Agreement. "Security Documents" shall mean and include the Security Agreement, the Pledge Agreement, each Mortgage, and each Additional Security Document, if any. "Senior Subordinated Note Documents" shall mean and include each of the Senior Subordinated Note Indenture and the Senior Subordinated Notes, as the same may be entered into, modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Senior Subordinated Note Indenture" shall mean the Indenture dated as of December 20, 1996 among the Borrower and the Subsidiary Guarantors and Fleet National Bank, as trustee, as amended in connection with the Senior Subordinated Notes Consent Solicitation, and any other Indentures that may be entered into by and between the Borrower and the Subsidiary Guarantors and the trustee for the holders of the Senior Subordinated Notes or the purchaser, of the Senior Subordinated Notes, as applicable, in the form referred to in, or having the terms permitted by, Section 8.04(c), as the same may be entered into, modified, amended or supplemented from time to time in accordance with the terms hereof and thereof. "Senior Subordinated Notes" shall mean the 9-7/8% Senior Subordinated Notes due 2006 of the Borrower and any other senior subordinated notes of the Borrower that may be issued pursuant to a Senior Subordinated Note Indenture and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Senior Subordinated Notes Consent Solicitation" shall mean the solicitation by the Borrower of consents from holders of the Subordinated Notes to amend the Subordinated Indenture pursuant to the Consent Solicitation Statement dated November 28, 1997. "Shareholder Subordinated Note" shall mean an unsecured junior subordinated note issued by the Borrower or any of its Subsidiaries in the form of Exhibit L. "Shareholders' Agreements" shall have the meaning set forth in Section 5.13. "S&P" shall mean Standard & Poor's Corporation Ratings Services, a division of McGraw-Hill. "Stated Amount" of each Letter of Credit shall mean the maximum amount available to be drawn thereunder (regardless of whether any conditions for drawing could then be met). "Subsidiary" of any Person shall mean and include (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (ii) any partnership, association, joint venture or other entity (other than a -96- 104 corporation) in which such Person directly or indirectly through Subsidiaries, has more than a 50% equity interest at the time. "Subsidiary Guarantor" shall mean each Subsidiary of the Borrower (other than a Foreign Subsidiary except to the extent otherwise provided in Section 7.13) that is or becomes a party to the Subsidiary Guaranty. "Subsidiary Guaranty" shall mean each subsidiary guaranty, in the form of Exhibit H (as modified, amended or supplemented from time to time in accordance with the terms thereof and hereof). "Swingline Expiry Date" shall mean the date which is five Business Days prior to the Revolving Loan Maturity Date. "Swingline Loan" shall have the meaning provided in Section 1.01(B). "Swingline Note" shall have the meaning provided in Section 1.05(a). "Syndication Agent" shall have the meaning provided in the first paragraph of this Agreement. "Syndication Date" shall mean that date upon which the Agents determine (and notify the Borrower) that the primary syndication (and resultant addition of Persons as Banks pursuant to Section 12.04(b)) has been completed. "Tax Allocation Agreements" shall have the meaning provided in Section 5.13. "Taxes" shall have the meaning provided in Section 4.04. "Term Loan" shall mean each A Term Loan, each B Term Loan and each C Term Loan. "Term Loan Commitment" shall mean, with respect to each Bank at any time, the sum of the A Term Loan Commitment, the B Term Loan Commitment and the C Term Loan Commitment of such Bank at such time. "Term Loan Facilities" shall mean the A Term Loan Facility, the B Term Loan Facility and the C Term Loan Facility. "Test Period" shall mean for any determination made on a specific date, the four consecutive fiscal quarters of the Borrower then last ended (taken as one accounting period); provided that the Test Period for FQE3 1998 shall mean the period beginning on January 1, 1998 and ending on the last day of FQE3 1998. "Total A Term Loan Commitment" shall mean the sum of the A Term Loan Commitments of each of the Banks. -97- 105 "Total B Term Loan Commitment" shall mean the sum of the B Term Loan Commitments of each of the Banks. "Total C Term Loan Commitment" shall mean the sum of the C Term Loan Commitment of each of the Banks. "Total Commitment" shall mean the sum of the Total Term Loan Commitment and the Total Revolving Credit Commitment. "Total Revolving Credit Commitment" shall mean the sum of the Revolving Credit Commitments of each of the Banks. "Total Term Loan Commitment" shall mean the sum of the Total A Term Loan Commitment, the Total B Term Loan Commitment and the Total C Term Loan Commitment. "Total Unutilized Revolving Credit Commitment" shall mean, at any time, (i) the Total Revolving Credit Commitment at such time less (ii) the sum of the aggregate principal amount of all Revolving Loans and Swingline Loans at such time plus the Letter of Credit Outstandings at such time. "Transaction" shall mean, collectively, (i) the Merger, (ii) the incurrence of Loans and the issuance of Letters of Credit on the Initial Borrowing Date and the Second Borrowing Date, (iii) the Senior Subordinated Notes Consent Solicitation and the amendment of the Senior Subordinated Note Indenture in connection therewith, (iv) the refinancing on the Initial Borrowing Date of substantially all Indebtedness of the Borrower and its Subsidiaries (other than the Senior Subordinated Notes, the Insurance Debt and the Existing Indebtedness), (v) the refinancing on the Second Borrowing Date of substantially all Indebtedness of Vistar and its Subsidiaries, (vi) the payment of the consideration for the Merger to the Vistar shareholders in accordance with the Merger Agreement on the Second Borrowing Date, (vii) the making on the Initial Borrowing Date of the Pre-Merger Stock Payments and (viii) the payment of fees and expenses in connection with the foregoing. "Transaction Bonuses" shall mean, collectively, (i) the cash bonuses in an aggregate amount of up to $1,000,000 paid to members of management of the Borrower in connection with the Transaction, (ii) the acceleration of the vesting of stock options held by certain members of management of the Borrower to purchase an aggregate 160,000 shares of the Company's pre-Merger Class A Common Stock and (iii) in connection with the consummation of the Merger, the forgiveness by the Borrower of up to $4,000,000 of payments owed to the Borrower and Vistar by certain stockholders and members of management of the Borrower and Vistar. "Type" shall mean any type of Loan determined with respect to the interest option applicable thereto, i.e., a Base Rate Loan or a Eurodollar Loan. "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction. -98- 106 "Unfunded Current Liability" of any Plan shall mean the amount, if any, by which the actuarial present value of the accumulated plan benefits under the Plan as of the close of its most recent plan year exceeds the fair market value of the assets allocable thereto, each determined in accordance with Statement of Financial Accounting Standards No. 35, based upon the actuarial assumptions used by the Plan's actuary in the most recent annual valuation of the Plan. "Unpaid Drawing" shall have the meaning provided in Section 2.03(a). "U.S. Dollars" and the sign "$" shall each mean freely transferable lawful money of the United States of America. "Vistar" shall have the meaning specified in the recitals to this Agreement. "Vistar Subsidiaries" shall mean Subsidiaries of Vistar immediately prior to the Second Borrowing Date. "Waivable Mandatory Repayment" shall have the meaning provided in Section 4.02(C). "Wholly-Owned Domestic Subsidiary" shall mean, as to any Person, any Wholly-Owned Subsidiary of such Person which is a Domestic Subsidiary. "Wholly-Owned Foreign Subsidiary" shall mean, as to any Person, any Wholly-Owned Subsidiary of such Person which is a Foreign Subsidiary. "Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any corporation 100% of whose capital stock (other than director's qualifying shares and/or other nominal amounts of shares required to be held other than by such Person under applicable law) is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such time. "Working Capital" shall mean the excess of Consolidated Current Assets over Consolidated Current Liabilities. "Written" (whether lower or upper case) or "in writing" shall mean any form of written communication or a communication by means of telex, facsimile device, telegraph or cable. SECTION 11. The Agents. 11.01 Appointment. Each Bank hereby irrevocably designates and appoints Chase as Administrative Agent of such Bank (such term to include for purposes of this Section 11, Chase acting as Collateral Agent) to act as specified herein and in the other Credit Documents, and each such Bank hereby irrevocably authorizes Chase as the Administrative Agent to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are -99- 107 reasonably incidental thereto. The Administrative Agent agrees to act as such upon the express conditions contained in this Section 11. Notwithstanding any provision to the contrary elsewhere in this Agreement or in any other Credit Document, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein or in the other Credit Documents, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Administrative Agent. The provisions of this Section 11 are solely for the benefit of the Administrative Agent and the Banks, and neither the Borrower nor any of its Subsidiaries shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, the Administrative Agent shall act solely as agent of the Banks and the Administrative Agent does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for the Borrower or any of its Subsidiaries. 11.02 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement or any other Credit Document by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care except to the extent otherwise required by Section 11.03. 11.03 Exculpatory Provisions. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or the other Credit Documents (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by the Borrower, any of its Subsidiaries or any of their respective officers contained in this Agreement or the other Credit Documents, any other Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Document or for any failure of the Borrower or any of its Subsidiaries or any of their respective officers to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or the other Documents, or to inspect the properties, books or records of the Borrower or any of its Subsidiaries. The Administrative Agent shall not be responsible to any Bank for the effectiveness, genuineness, validity, enforceability, collectability or sufficiency of this Agreement or any other Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Administrative Agent to the Banks or by or on behalf of the Borrower or any of its Subsidiaries to the Administrative Agent or any Bank or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default. 11.04 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, -100- 108 consent, certificate, affidavit, letter, cablegram, telegram, facsimile, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower or any of its Subsidiaries), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Banks as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Required Banks, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks. 11.05 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has actually received notice from a Bank or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give prompt notice thereof to the Banks. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Banks; provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks. 11.06 Nonreliance on Administrative Agent and other Banks. Each Bank expressly acknowledges that neither the Administrative Agent nor any of its respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Borrower or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Bank. Each Bank represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other condition, prospects and creditworthiness of the Borrower and its Subsidiaries and made its own decision to make its Loans hereunder and enter into this Agreement. Each Bank also represents that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other condition, prospects and creditworthiness of the Borrower and its Subsidiaries. The Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, assets, property, financial and other condition, prospects or creditworthiness of the Borrower or any of its Subsidiaries which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. -101- 109 11.07 Indemnification. The Banks agree to indemnify the Administrative Agent in its capacity as such ratably according to their respective "percentages" as used in determining the Required Banks at such time (with such "percentages" to be determined as if there are no Defaulting Banks), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, reasonable expenses or disbursements of any kind whatsoever which may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, incurred by or asserted against the Administrative Agent in its capacity as such in any way relating to or arising out of this Agreement or any other Credit Document, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted to be taken by the Administrative Agent under or in connection with any of the foregoing, but only to the extent that any of the foregoing is not paid by the Borrower or any of its Subsidiaries; provided that no Bank shall be liable to the Administrative Agent for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Administrative Agent. To the extent any Bank would be required to indemnify the Administrative Agent pursuant to the immediately preceding sentence but for the fact that it is a Defaulting Bank, such Defaulting Bank shall not be entitled to receive any portion of any payment or other distribution hereunder until each other Bank shall have been reimbursed for the excess, if any, of the aggregate amount paid by such Bank under this Section 11.07 over the aggregate amount such Bank would have been obligated to pay had such first Bank not been a Defaulting Bank. If any indemnity furnished to the Administrative Agent for any purpose shall, in the opinion of the Administrative Agent be insufficient or become impaired, the Administrative Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this Section 11.07 shall survive the payment of all Obligations. 11.08 Administrative Agent in its Individual Capacity. The Administrative Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower and its Subsidiaries as though the Administrative Agent were not the Administrative Agent hereunder. With respect to the Loans made by it and all Obligations owing to it, the Administrative Agent shall have the same rights and powers under this Agreement as any Bank and may exercise the same as though it were not the Administrative Agent and the terms "Bank" and "Banks" shall include the Administrative Agent in its individual capacity. 11.09 Holders. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Administrative Agent. Any request, authority or consent of any Person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or indorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. 11.10 Resignation of the Administrative Agent; Successor Administrative Agent. The Administrative Agent may resign as the Administrative Agent upon 20 days' notice to the Banks. Upon the resignation of the Administrative Agent, the Required Banks shall appoint from among the Banks a successor Administrative Agent which is a bank or a trust company for the Banks subject to prior approval by the Borrower (such approval not to be unreasonably withheld), -102- 110 whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall include such successor agent effective upon its appointment, and the resigning Agent's rights, powers and duties as the Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement. After the resignation of the Administrative Agent hereunder, the provisions of this Section 11 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. 11.11 Documentation Agent, Syndication Agent and Co-Agents. The Documentation Agent and the Syndication Agent shall have no duties or liabilities under the Credit Documents in such capacity. 11.12 Letter of Credit Issuer. The provisions of this Section 11 shall apply to the Letter of Credit Issuer in its capacity as such, mutatis mutandis. SECTION 12. Miscellaneous. 12.01 Payment of Expenses, etc. The Borrower agrees to: (i) whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of each Agent (including, without limitation, the reasonable fees and disbursements of Simpson Thacher & Bartlett and local counsel) in connection with the negotiation, preparation, execution and delivery of the Credit Documents and the documents and instruments referred to therein and any amendment, waiver or consent relating thereto and requested by the Borrower and in connection with the Agents' syndication efforts with respect to this Agreement; (ii) pay all reasonable out-of-pocket costs and expenses of each Agent and each of the Banks in connection with the enforcement of the Credit Documents and the documents and instruments referred to therein and, after an Event of Default shall have occurred and be continuing, the protection of the rights of each of the Agents and each of the Banks thereunder (including, without limitation, the reasonable fees and disbursements of counsel for the Agents and the Banks), provided that the Borrower shall be obligated to pay the fees and disbursements of only one counsel to the Agents and the Banks pursuant to this clause (ii) unless an Agent or Bank notifies the Borrower that it reasonably believes that its legal position differs from the other Agents or Banks or that it may be subject to different claims or defenses than the other Agents and Banks, in which case the Borrower will also pay the reasonable fees and disbursements of counsel (including in-house counsel) of such Agent or Bank; (iii) pay and hold each of the Banks harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Banks harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Bank) to pay such taxes; and (iv) indemnify each Agent and each Bank, their respective officers, directors, trustees, employees, representatives and agents from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, (a) any investigation, litigation or other proceeding (whether or not any Agent or any Bank is a party thereto) related to the entering into and/or performance of this Agreement or any other Document or the use of the proceeds of any Loans hereunder or the Transaction or the consummation of any other transactions contemplated in -103- 111 any Document (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified), or (b) the actual or alleged presence of Hazardous Materials in the air, surface water or groundwater or on the surface or subsurface of any Real Property or any Environmental Claim, in each case, including, without limitation, the reasonable fees and disbursements of counsel and independent consultants incurred in connection with any such investigation, litigation or other proceeding. 12.02 Right of Setoff. In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Agent and each Bank is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to the Borrower or any of its Subsidiaries or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Agent or such Bank (including, without limitation, by branches and agencies of such Agent and such Bank wherever located) to or for the credit or the account of the Borrower or any of its Subsidiaries against and on account of the Obligations and liabilities of the Borrower or any of its Subsidiaries to such Agent or such Bank under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations of the Borrower or any of its Subsidiaries purchased by such Bank pursuant to Section 12.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Bank shall have made any demand hereunder and although said Obligations, liabilities or claims, or any of them, shall be contingent or unmatured. Notwithstanding anything to the contrary contained in this Section 12.02, no Bank shall exercise any such right of set-off without the prior consent of the Administrative Agent or the Required Banks so long as the Obligations shall be secured by any Real Property located in the State of California, it being understood and agreed, however, that this sentence is for the sole benefit of the Banks and may be amended, modified or waived in any respect by the Required Banks without the requirement of prior notice to or consent by any Credit Party and does not constitute a waiver of any rights against any Credit Party or against any Collateral. 12.03 Notices. Except as otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, facsimile or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered, if to any Credit Party, at the address specified opposite its signature below or in the other relevant Credit Documents, as the case may be; if to any Bank, at its address specified for such Bank on Annex II; or, at such other address as shall be designated by any party in a written notice to the other parties hereto. All such notices and communications shall be mailed, telegraphed, telexed, telecopied or cabled or sent by overnight courier, and shall be effective when received. 12.04 Benefit of Agreement. (a) This Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided, however, the Borrower may not assign or transfer any of its rights, obligations or interest hereunder or under any other Credit Document without the prior written consent of all of the Banks and, provided further, that, although any Bank may transfer, assign or grant participations in its rights hereunder, such Bank shall remain a "Bank" for all purposes hereunder -104- 112 (and may not transfer or assign all or any portion of its Commitments hereunder except as provided in Section 12.04(b)) and the transferee, assignee or participant, as the case may be, shall not constitute a "Bank" hereunder and, provided further, that no Bank shall transfer or grant any participation under which the participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the final scheduled maturity of any Loan, Note or Letter of Credit (unless such Letter of Credit is not extended beyond the Revolving Loan Maturity Date) in which such participant is participating, or reduce the rate or extend the time of payment of interest or Fees thereon (except in connection with a waiver of applicability of any post-default increase in interest rates) or reduce the principal amount thereof, or increase the amount of the participant's participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a mandatory reduction in the Total Commitment shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant's participation is not increased as a result thereof), (ii) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement or (iii) release all or substantially all of the Collateral under all of the Security Documents (except as expressly provided in the Credit Documents) supporting the Loans hereunder in which such participant is participating. In the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant's rights against such Bank in respect of such participation to be those set forth in the agreement executed by such Bank in favor of the participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Bank had not sold such participation. (b) Notwithstanding the foregoing, any Bank (or any Bank together with one or more other Banks) may (x) assign all or a portion of its Revolving Credit Commitment (and related outstanding Obligations hereunder) and/or its outstanding Term Loans to its parent company and/or any affiliate of such Bank which is at least 50% owned by such Bank or its parent company or to one or more other Banks or (y) assign all, or if less than all, a portion equal to at least $5,000,000 (or at least $1,000,000 in the case of any assignment by Chase within fourteen Business Days of the Initial Borrowing Date) in the aggregate for the assigning Bank or assigning Banks, of such Revolving Credit Commitments and/or outstanding principal amount of Term Loans hereunder to one or more Eligible Transferees, each of which assignees shall become a party to this Agreement as a Bank by execution of an Assignment and Assumption Agreement, provided that (i) at such time Annex I shall be deemed modified to reflect the Commitments (and/or outstanding Term Loans, as the case may be) of such new Bank and of the existing Banks, (ii) upon surrender of the old Notes, new Notes will be issued, at the Borrower's expense, to such new Bank and to the assigning Bank to the extent it is retaining any Commitments or Loans, such new Notes to be in conformity with the requirements of Section 1.05 (with appropriate modifications) to the extent needed to reflect the revised Commitments (and/or outstanding Term Loans, as the case may be), (iii) the consent of the Administrative Agent shall be required in connection with any such assignment pursuant to clause (y) of this Section 12.04(b) (which consent shall not be unreasonably withheld) and (iv) the Administrative Agent shall receive at the time of each such assignment, from the assigning or assignee Bank, the payment of a non-refundable assignment fee of $3,500 and, provided further, that such transfer or assignment will not be effective until recorded by the Administrative Agent on the Register pursuant to Section 12.04(c). To the extent of any assignment pursuant to this Section 12.04(b), the assigning Bank shall be relieved of its -105- 113 obligations hereunder with respect to its assigned Commitments and/or Loans but shall continue to be entitled to the benefit of all indemnities hereunder with respect to matters arising out of the prior involvement of such assignor as a Bank hereunder. At the time of each assignment pursuant to this Section 12.04(b) to a Person which is not already a Bank hereunder and which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Bank shall provide to the Borrower and the Administrative Agent the appropriate Internal Revenue Service Forms (and, if applicable a Section 4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent that an assignment of all or any portion of a Bank's Commitments and related outstanding Obligations pursuant to Section 1.13 or this Section 12.04(b) would, at the time of such assignment, result in increased costs under Section 1.10, 1.11, 2.05 or 4.04 from those being charged by the respective assigning Bank prior to such assignment, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective assignment). (c) The Borrower hereby designates the Administrative Agent to serve as the Borrower's agent, solely for purposes of this Section 12.04(c), to maintain a register (the "Register") on which it will record the names and addresses of the Banks and the Commitments from time to time of each of the Banks, the Loans made by each of the Banks and each repayment in respect of the principal amount of the Loans of each Bank. Failure to make any such recordation, or any error in such recordation, shall not affect the Borrower's obligations in respect of such Loans. With respect to any Bank, the transfer of the Commitments of such Bank and the rights to the principal of, and interest on, any Loan made pursuant to such Commitments shall not be effective until such transfer is recorded on the Register maintained by the Administrative Agent with respect to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitments and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Commitments and Loans shall be recorded by the Administrative Agent on the Register only upon the acceptance by the Administrative Agent of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 12.04(b). Coincident with the delivery of such an Assignment and Assumption Agreement to the Administrative Agent for acceptance and registration of assignment or transfer of all or part of a Loan, or as soon thereafter as practicable, the assigning or transferor Bank shall surrender the Note evidencing such Loan, and thereupon one or more new Notes in the same aggregate principal amount shall be issued to the assigning or transferor Bank and/or the new Bank. The Borrower agrees to indemnify the Administrative Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Administrative Agent in performing its duties under this Section 12.04(c) except when caused by the gross negligence or willful misconduct of the Administrative Agent. (d) Nothing in this Agreement shall prevent or prohibit any Bank from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Bank from such Federal Reserve Bank. 12.05 No Waiver; Remedies Cumulative. No failure or delay on the part of any Agent or any Bank in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between any Credit Party and any Agent or any Bank shall -106- 114 operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which any Agent or any Bank would otherwise have. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agents or the Banks to any other or further action in any circumstances without notice or demand. 12.06 Payments Pro Rata. (a) The Administrative Agent agrees that promptly after its receipt of each payment from or on behalf of any Credit Party in respect of any Obligations of such Credit Party, it shall, except as otherwise provided in this Agreement, distribute such payment to the Banks (other than any Bank that has consented in writing to waive its pro rata share of such payment) pro rata based upon their respective shares, if any, of the Obligations with respect to which such payment was received. (b) Each of the Banks agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the related sum or sums received by other Banks is in a greater proportion than the total of such Obligation then owed and due to such Bank bears to the total of such Obligation then owed and due to all of the Banks immediately prior to such receipt, then such Bank receiving such excess payment shall purchase for cash without recourse or warranty from the other Banks an interest in the Obligations of the respective Credit Party to such Banks in such amount as shall result in a proportional participation by all of the Banks in such amount; provided that if all or any portion of such excess amount is thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. 12.07 Calculations; Computations. (a) The financial statements to be furnished to the Banks pursuant hereto shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Banks); provided that except as otherwise specifically provided herein, all computations determining compliance with Sections 4.02 and 8, including definitions used therein, shall utilize accounting principles and policies in effect at the time of the preparation of, and in conformity with those used to prepare, the FYE 1997 financial statements delivered to the Banks pursuant to Section 7.01(c) except that such computations shall not in any event (i) give effect to purchase accounting adjustments required or permitted by APB 16 (including non-cash write-ups and non-cash charges relating to inventory and fixed assets, in each case arising in connection with the Borrower) and APB 17 (including non-cash charges relating to intangibles and goodwill arising in connection with the Borrower) or (ii) give effect to any charges in connection with accounting for the Merger or the Recapitalization. (b) All computations of interest and Fees hereunder shall be made on the actual number of days elapsed over a year of 360 days, provided that interest on Base Rate Loans based -107- 115 on the Prime Rate shall be computed on the actual number of days elapsed over a year of 365 or 366 days, as the case may be. 12.08 Governing Law; Submission to Jurisdiction; Venue. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding with respect to this Agreement or any other Credit Document may be brought in the courts of the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Agreement, each Credit Party hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each Credit Party hereby further irrevocably waives any claim that any such courts lack jurisdiction over such Credit Party, and agrees not to plead or claim, in any legal action or proceeding with respect to this Agreement or any other Credit Document brought in any of the aforesaid courts, that any such court lacks jurisdiction over such Credit Party. Each Credit Party irrevocably consents to the service of process in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such Credit Party, at its address for notices pursuant to Section 12.03, such service to become effective 30 days after such mailing. Each Credit Party hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any action or proceeding commenced hereunder or under any other Credit Document that service of process was in any way invalid or ineffective. Nothing herein shall affect the right of any Agent, any Bank or the holder of any Note to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against any Credit Party in any other jurisdiction. (b) Each Credit Party hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Credit Document brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. 12.09 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Administrative Agent. 12.10 Effectiveness. This Agreement shall become effective on the date (the "Effective Date") on which the Borrower, the Administrative Agent, the Documentation Agent and each of the Banks shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered the same to the Administrative Agent at the Notice Office or, in the case of the Banks, shall have given to the Administrative Agent telephonic (confirmed in writing), written, telex or facsimile notice (actually received) at such office that the same has been signed and mailed to it. The Administrative Agent will give the Borrower and each Bank prompt written notice of the occurrence of the Effective Date. -108- 116 12.11 Headings Descriptive. The headings of the several sections and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 12.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the respective Credit Parties party thereto and the Required Banks, provided that no such change, waiver, discharge or termination shall, without the consent of each Bank (other than a Defaulting Bank) (with Obligations being directly affected thereby in the case of the following clause (i)), (i) extend the final scheduled maturity of any Loan or Note or extend the stated maturity of any Letter of Credit beyond the Revolving Loan Maturity Date, or reduce the rate or extend the time of payment of interest or Fees thereon, or reduce the principal amount thereof, (ii) release all or substantially all of the Collateral (except as expressly provided in the Security Documents) under all the Security Documents, (iii) amend, modify or waive any provision of this Section 12.12, (iv) reduce the percentage specified in the definition of Required Banks (it being understood that, with the consent of the Required Banks, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Banks on substantially the same basis as the extensions of Term Loans and Revolving Credit Commitments are included on the Effective Date) or (v) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement; provided further, that no such change, waiver, discharge or termination shall (u) increase the Commitments of any Bank over the amount thereof then in effect without the consent of such Bank (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the Total Commitment shall not constitute an increase of the Commitment of any Bank, and that an increase in the available portion of any Commitment of any Bank shall not constitute an increase in the Commitment of such Bank), (v) without the consent of Chase or the Letter of Credit Issuer, as the case may be, amend, modify or waive any provision of Section 2 or alter its rights or obligations with respect to Letters of Credit or Swingline Loans, (w) without the consent of any Agent, amend, modify or waive any provision of Section 11 as same applies to such Agent or any other provision as same relates to the rights or obligations of such Agent, (x) without the consent of the Collateral Agent, amend, modify or waive any provision relating to the rights or obligations of the Collateral Agent, (y) without the consent of the Majority Banks of each Facility which is being allocated a lesser prepayment or commitment reduction as a result of the actions described below, alter the required application of any prepayments (or commitment reduction), as between the various Facilities pursuant to Section 4.01(a) and 4.02(B)(b) (although the Required Banks may waive, in whole or in part, any such prepayment, repayment or commitment reduction so long as the application, as amongst the various Facilities, of any such prepayment, repayment or commitment reduction which is still required to be made is not altered), (z) without the consent of the Majority Banks of the respective Facility, amend the definition of Majority Banks or amend, modify or waive the order of the application of any payment or prepayment or (aa) without the consent of the Majority Banks of each Facility, amend, modify or waive any Scheduled Repayment of any Facility (without extending the final scheduled maturity thereof); and provided further, that any amendment of this Agreement entered into pursuant to Section 7.10 shall require the consent of only the Borrower and the Administrative Agent. A waiver or amendment to cure any Default or Event of Default shall not be effective for purposes of Section 5.33 unless such waiver or amendment has been consented to by the Majority Banks under the Revolving Credit Facility. -109- 117 (b) If, in connection with any proposed change, waiver, discharge or termination to any of the provisions of this Agreement as contemplated by clause (a)(i) through (v), inclusive, of the first proviso to Section 12.12(a), the consent of the Required Banks is obtained but the consent of one or more of such other Banks whose consent is required is not obtained, then the Borrower shall have the right, so long as all non-consenting banks whose individual consent is required are treated as described in either clause (A) or (B) below, to either (A) replace each such non-consenting Bank or Banks with one or more Replacement Banks pursuant to Section 1.13 so long as at the time of such replacement, each such Replacement Bank consents to the proposed change, waiver, discharge or termination or (B) terminate such non-consenting Bank's Commitments and repay in full its outstanding Loans, in accordance with Sections 3.02(b) and/or 4.01(b), provided that, unless the Commitments terminated and Loans repaid pursuant to preceding clause (B) are immediately replaced in full at such time through the addition of new Banks or the increase of the Commitments and/or outstanding Loans of existing Banks (who in each case must specifically consent thereto), then in the case of any action pursuant to preceding clause (B) the Required Banks (determined before giving effect to the proposed action) shall specifically consent thereto, provided further, that the Borrower shall not have the right to replace a Bank solely as a result of the exercise of such Bank's rights (and the withholding of any required consent by such Bank) pursuant to the second proviso to Section 12.12(a). 12.13 Survival. All indemnities set forth herein including, without limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.07 or 12.01, shall survive the execution and delivery of this Agreement and the making, repayment and assignment of the Loans. 12.14 Domicile of Loans. Each Bank may transfer and carry its Loans at, to or for the account of any branch office, subsidiary or affiliate of such Bank; provided, that the Borrower shall not be responsible for costs arising under Section 1.10, 1.11, 2.05 or 4.04 resulting from any such transfer (other than a transfer pursuant to Section 1.12) to the extent such costs would not otherwise be applicable to such Bank in the absence of such transfer. 12.15 Confidentiality. (a) Each of the Banks agrees that it will use its reasonable efforts not to disclose without the prior consent of the Borrower (other than to its employees, auditors, counsel or other professional advisors, to affiliates or to another Bank if the Bank or such Bank's holding or parent company in its sole discretion determines that any such party should have access to such information) any information with respect to the Borrower or any of its Subsidiaries which is furnished pursuant to this Agreement; provided, that any Bank may disclose any such information (a) as has become generally available to the public, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Bank or to the Federal Reserve Board or the Federal Deposit Insurance Corporation or similar organizations (whether in the United States or elsewhere) or their successors or to the National Association of Insurance Commissioners (to the extent necessary to receive the benefits of any law or regulation governing such Bank's investments), (c) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation, (d) to comply with any law, order, regulation or ruling applicable to such Bank, (e) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information abut such Bank's investment portfolio in connection with ratings issued with respect to such Bank, (f) to any prospective transferee or participant in connection with any contemplated assignment, -110- 118 grant of a participation or transfer of any of the Commitments and/or Loans or any interest therein by such Bank and (g) any direct or indirect counterparty with a Bank or its affiliate in a swap agreement with respect to such Bank's Loans; provided, that, in the case of clauses (f) and (g), such prospective transferee or contractual counterparty executes an agreement with such Bank, for the benefit of such Bank and the Borrower, containing provisions substantially identical to those contained in this Section. (b) The Borrower hereby acknowledges and agrees that each Bank may share with any of its affiliates any information related to the Borrower or any of its Subsidiaries (including, without limitation, any nonpublic customer information regarding the creditworthiness of the Borrower and its Subsidiaries, provided that such Persons shall be subject to the provisions of this Section 12.15 to the same extent as such Bank). 12.16 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 12.17 Integration. This Agreement and the other Credit Documents represent the entire agreement of the Credit Parties, the Agents and the Banks with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by any Credit Party, any Agent or any Bank relative to subject matter hereof or thereof not expressly set forth or referred to herein or in the other Credit Documents. 12.18 Syndication. The parties acknowledge that the Initial Borrowing Date and the Second Borrowing Date occurred on December 17, 1997 and December 18, 1997, respectively. In order to consummate the syndication of the Facilities, each Bank (other than the Initial Banks) which signs this Agreement on or before December 23, 1997 will be deemed to become a party hereto as a Bank hereunder on December 23, 1997 having the Commitment set forth on Annex I. On December 23, 1997, the Borrower and the Banks shall make such payments as shall be requested by the Administrative Agent with the result that, after giving effect thereto, the Loans outstanding under each Facility are held by Banks lending under such Facility in accordance with the respective commitment amounts for such Facility set forth as Annex I. -111- 119 IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written. SAFELITE GLASS CORP. By: /s/ Douglas A. Herron ------------------------------------ Title: Vice President Address for Notices: Safelite Glass Corp. 1105 Schrock Road Columbus, OH 43229 Facsimile No.: (614) 842-3323 Attn: Douglas A. Herron THE CHASE MANHATTAN BANK, as Administrative Agent and as a Bank By: /s/ Bruce Borden ------------------------------------ Title: Vice President BANKERS TRUST COMPANY, as Syndication Agent and as a Bank By: /s/ Anthony LoGrippo ------------------------------------ Title: Vice President GOLDMAN SACHS CREDIT PARTNERS L.P., as Documentation Agent and as a Bank By: /s/ Ed Kearns ------------------------------------ Title: Vice President -112- 120 THE BANK OF NOVA SCOTIA, as Co-Agent and as a Bank By: /s/ F.C.H. Ashby -------------------------------------- Title: Senior Manager Loan Operation BANK ONE, NA, as Co-Agent and as a Bank By: /s/ Thomas D. Igoe -------------------------------------- Title: Senior Vice President BANK OF TOKYO-MITSUBISHI TRUST COMPANY, as Co-Agent and as a Bank By: /s/ Paul Maleck -------------------------------------- Title: Vice President CREDITANSTALT CORPORATE FINANCE, INC., as Co-Agent and as a Bank By: /s/ Chirstina T. Shoen / David E. Yewer --------------------------------------- Title: Senior Vice President / Vice President CREDIT LYONNAIS CHICAGO BRANCH, as Co-Agent and as a Bank By: /s/ Attila Koc -------------------------------------- Title: First Vice President FIRST UNION NATIONAL BANK, as Co-Agent and as a Bank By: /s/ George L. Woolsey ------------------------------------ Title: Vice President -113- 121 FLEET NATIONAL BANK, as Co-Agent and as a Bank By: /s/ Eugenie Sullivan ------------------------------------ Title: Senior Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, New York Branch, as Co-Agent and as a Bank By: /s/ Shuicui Tajima ------------------------------------ Title: ABN AMRO BANK, N.V. By: /s/ Louis K. McLinden Jr. ------------------------------------ Title: Vice President By: /s/ Curis Helmeci ------------------------------------ Title: Vice President ALLSTATE INSURANCE COMPANY By: /s/ Charlie Mires ------------------------------------ Title: Assistant Vice President By: /s/ Ronald Mendel ------------------------------------ Title: Portfolio Manager -114- 122 THE BANK OF NEW YORK By: /s/ Douglas A. Ober ------------------------------------ Title: Vice President BANQUE NATIONALE DE PARIS By: /s/ Arnaud Collin du Bocage ------------------------------------ Title: Executive Vice President and General Manager BANQUE PARIBAS By: /s/ Karen E. Coons ------------------------------------ Title: Vice President By: /s/ Rowena P. Festin ------------------------------------ Title: Vice President PRIME INCOME TRUST By: /s/ Rafael Scolari ------------------------------------ Title: S.V.P. and Portfolio Manager THE FUJI BANK, LIMITED By: /s/ Peter L. Chinnici ------------------------------------ Title: Joint General Manager ING HIGH INCOME PRINCIPAL PRESERVATION FUND HOLDINGS, LDC By: /s/ Kathleen A. Lenacic ------------------------------------ Title: Vice President and Portfolio Manager -115- 123 LEHMAN COMMERCIAL PAPER INC. By: /s/ Michele Swanson ------------------------------------ Title: Authorized Signatory METROPOLITAN LIFE INSURANCE COMPANY By: /s/ James Dingler ------------------------------------ Title: Director NEW YORK LIFE INSURANCE COMPANY By: /s/ Adam G. Clemens ------------------------------------ Title: Managing Director NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION By: NEW YORK LIFE INSURANCE COMPANY By: /s/ Adam Clemens ------------------------------------ Title: Managing Director PILGRIM AMERICA PRIME RATE TRUST By: /s/ Howard Tiffen ------------------------------------ Title: Senior Vice President PNC BANK, OHIO, NATIONAL ASSOCIATION By: /s/ Toby B. Rau ------------------------------------ Title: Assistant Vice President -116- 124 THE TRAVELERS INSURANCE COMPANY By: /s/ Robert M. Mills ---------------------------------------- Title: Investment Officer KZH-SOLEIL CORPORATION By: /s/ Virginia Conway ---------------------------------------- Title: Authorized Agent THE SUMITOMO BANK, LIMITED, CHICAGO BRANCH By: /s/ John H. Kenper ---------------------------------------- Title: Senior Vice President VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By: /s/ Jeffrey W. Maillet ---------------------------------------- Title: Sr. Vice President and Director MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By: /s/ Gilles Marchand, CFA ---------------------------------------- Title: Authorized Signatory -117- 125 MERRILL LYNCH GLOBAL INVESTMENT SERIES: INCOME STRATEGIES PORTFOLIO By: MERRILL LYNCH ASSET MANAGEMENT, L.P., as Investment Adviser By: /s/ Gilles Marchand, CFA ------------------------------------ Title: Authorized Signatory CYPRESS TREE BOSTON PARTNERS By: /s/ Alexander Aikenes ------------------------------------ Title: Partner -118- EX-10.7 13 SAFELITE GLASS CORP 1998 STOCK OPTION PLAN 1 EXHIBIT 10.7 SAFELITE GLASS CORP. 1998 STOCK OPTION PLAN 1. Purpose of the Plan. This stock option plan (the "Plan") is intended to encourage ownership of the stock of Safelite Glass Corp. (the "Company") by employees of the Company and its subsidiaries, to induce qualified personnel to enter and remain in the employ of the Company or its subsidiaries and otherwise to provide additional incentive for optionees to promote the success of its business. 2. Stock Subject to the Plan. (a) The total number of shares of the authorized but unissued or Treasury shares of the Class B Non-Voting Common Stock, $0.01 par value, of the Company ("Common Stock") for which options may be granted under the Plan shall not exceed three hundred fifty thousand (350,000) shares, subject to adjustment as provided in Section 12 hereof. (b) If an option granted hereunder shall expire or terminate for any reason without having vested fully or having been exercised in full, the unvested and/or unpurchased shares subject thereto shall again be available for subsequent option grants under the Plan. (c) Stock issuable upon exercise of an option granted under the Plan may be subject to such restrictions on transfer, repurchase rights or other restrictions as shall be determined by the Board of Directors. 2 3. Administration of the Plan. At the discretion of the Company's Board of Directors, the Plan shall be administered either (i) by the full Board of Directors of the Company or (ii) by a committee (the "Committee") consisting of two or more members of the Company's Board of Directors. In the event the full Board of Directors is the administrator of the Plan, references herein to the Committee shall be deemed to include the full Board of Directors. The Board of Directors may from time to time appoint a member or members of the Committee in substitution for or in addition to the member or members then in office and may fill vacancies on the Committee however caused. The Committee shall choose one of its members as Chairman and shall hold meetings at such times and places as it shall deem advisable. A majority of the members of the Committee shall constitute a quorum and any action may be taken by a majority of those present and voting at any meeting. Any action may also be taken without the necessity of a meeting by a written instrument signed by a majority of the Committee. The decision of the Committee as to all questions of interpretation and application of the Plan shall be final, binding and conclusive on all persons. The Committee shall have the authority to adopt, amend and rescind such rules and regulations as, in its opinion, may be advisable in the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any option agreement or Award agreement granted hereunder in the manner and to the extent it shall deem expedient to carry the Plan into effect and shall be the sole and final judge of such expediency. No Committee member shall be liable for any action or determination made in good faith. - 2 - 3 4. Type of Options. Options granted pursuant to the Plan shall be authorized by action of the Board of Directors and may be designated as either incentive stock options meeting the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or non-qualified options which are not intended to meet the requirements of such Section 422 of the Code, the designation to be in the sole discretion of the Board of Directors. The Plan shall be administered by the Board of Directors in such manner as to permit options to qualify as incentive stock options under the Code. 5. Eligibility. Options designated as incentive stock options shall be granted only to key employees (including officers and directors who are also employees) of the Company or any of its subsidiaries, including subsidiaries who become such after adoption of the Plan. Options designated as non-qualified options may be granted to officers, key employees and non-employee directors of the Company or of any of its subsidiaries. "Subsidiary" or "subsidiaries" shall be as defined in Section 424 of the Code and the Treasury Regulations promulgated thereunder (the "Regulations"). The Committee shall, from time to time, at its sole discretion, select from such eligible individuals those to whom options shall be granted and shall determine the number of shares to be subject to each option. In determining the eligibility of an individual to be granted an option, as well as in determining the number of shares to be granted to any individual, the Board of Directors in its sole discretion shall take into account the position and responsibilities of the individual being considered, the nature and value to the Company or its subsidiaries of - 3 - 4 his or her service and accomplishments, his or her present and potential contribution to the success of the Company or its subsidiaries, and such other factors as the Board of Directors may deem relevant. No option designated as an incentive stock option shall be granted to any employee of the Company or any subsidiary if such employee owns, immediately prior to the grant of an option, stock representing more than 10% of the voting power or more than 10% of the value of all classes of stock of the Company or a parent or a subsidiary, unless the purchase price for the stock under such option shall be at least 110% of its fair market value at the time such option is granted and the option, by its terms, shall not be exercisable more than five years from the date it is granted. In determining the stock ownership under this paragraph, the provisions of Section 424(d) of the Code shall be controlling. In determining the fair market value under this paragraph, the provisions of Section 7 hereof shall apply. The maximum number of shares of the Company's Common Stock with respect to which an option or options may be granted to any employee in any calendar year shall not exceed one hundred fifty thousand (150,000) shares, taking into account shares subject to options granted and terminated, or repriced, during such calendar year. 6. Option Agreement. Each option shall be evidenced by an option agreement (the "Agreement") duly executed on behalf of the Company and by the optionee to whom such option is granted, which Agreement shall comply with and be subject to the terms and conditions of the Plan. The Agreement may contain such other terms, provisions and conditions which are not inconsistent with the Plan as may be determined by the Board of Directors, provided that options - 4 - 5 designated as incentive stock options shall meet all of the conditions for incentive stock options as defined in Section 422 of the Code. The date of grant of an option shall be as determined by the Board of Directors. More than one option may be granted to an individual. 7. Option Price. The option price or prices of shares of the Company's Common Stock for options designated as non-qualified stock options shall be as determined by the Board of Directors, but in no event shall the option price of a non-qualified stock option be less than 50% of the fair market value of such Common Stock at the time the option is granted, as determined by the Board of Directors. The option price or prices of shares of the Company's Common Stock for incentive stock options shall be the fair market value of such Common Stock at the time the option is granted as determined by the Board of Directors in accordance with the Regulations promulgated under Section 422 of the Code. If such shares are then listed on any national securities exchange, the fair market value shall be the mean between the high and low sales prices, if any, on the largest such exchange on the business day immediately preceding the date of the grant of the option or, if none, shall be determined by taking a weighted average of the means between the highest and lowest sales prices on the nearest date before and the nearest date after the date of grant in accordance with Treasury Regulations Section 25.2512-2. If the shares are not then listed on any such exchange, the fair market value of such shares shall be the mean between the high and low sales prices, if any, as reported in the National Association of Securities Dealers Automated Quotation National Market ("NASDAQ/NM") for the business day immediately preceding the date of the grant of the option, or, if none, shall be determined by taking a weighted average of the means between the - 5 - 6 highest and lowest sales on the nearest date before and the nearest date after the date of grant in accordance with Treasury Regulations Section 25.2512-2. If the shares are not then either listed on any such exchange or quoted in NASDAQ/NM, the fair market value shall be the mean between the average of the "Bid" and the average of the "Ask" prices, if any, as reported in the National Daily Quotation Service for the business day immediately preceding the date of the grant of the option, or, if none, shall be determined by taking a weighted average of the means between the highest and lowest sales prices on the nearest date before and the nearest date after the date of grant in accordance with Treasury Regulations Section 25.2512-2. If the fair market value cannot be determined under the preceding three sentences, it shall be determined in good faith by the Board of Directors. 8. Manner of Payment; Manner of Exercise. (a) Options granted under the Plan may provide for the payment of the exercise price, as determined by the Board of Directors, by delivery of (i) cash or a check payable to the order of the Company in an amount equal to the exercise price of such options, (ii) shares of Common Stock of the Company owned by the optionee having a fair market value equal in amount to the exercise price of the options being exercised, (iii) any combination of (i) and (ii), provided, however, that payment of the exercise price by delivery of shares of Common Stock of the Company owned by such optionee may be made only if such payment does not result in a charge to earnings for financial accounting purposes as determined by the Board of Directors or (iv) payment may also be made by delivery of a properly executed exercise notice to the Company, together with a copy of irrevocable instruments to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price. The - 6 - 7 fair market value of any shares of the Company's Common Stock which may be delivered upon exercise of an option shall be determined by the Board of Directors in accordance with Section 7 hereof. (b) To the extent that the right to purchase shares under an option has accrued and is in effect, options may be exercised in full at one time or in part from time to time, by giving written notice, signed by the person or persons exercising the option, to the Company, stating the number of shares with respect to which the option is being exercised, accompanied by payment in full for such shares as provided in subparagraph (a) above. Upon such exercise, delivery of a certificate for paid-up non-assessable shares shall be made at the principal office of the Company to the person or persons exercising the option at such time, during ordinary business hours, after five (5) but not more than ten (10) business days from the date of receipt of the notice by the Company, as shall be designated in such notice, or at such time, place and manner as may be agreed upon by the Company and the person or persons exercising the option. Upon exercise of the option and payment as provided above, the optionee shall become a shareholder of the Company as to the Shares acquired upon such exercise. 9. Exercise of Options. Except as otherwise determined from time to time by the Board of Directors, options granted under the Plan shall, subject to Section 10(b) and Section 12 hereof, not be exercisable during the first twelve (12) months after the date of grant. Thereafter, options shall become exercisable as to twenty-five percent (25%) of the shares covered thereby upon the expiration of twelve (12) months after the date of grant and as to an additional 2.08333% upon the expiration of each month during the next three (3) succeeding twelve (12) month periods. - 7 - 8 To the extent that an option to purchase shares is not exercised by an optionee when it becomes initially exercisable, it shall not expire but shall be carried forward and shall be exercisable, on a cumulative basis, until the expiration of the exercise period. No partial exercise may be made for less than one hundred (100) full shares of Common Stock. Notwithstanding the foregoing, the Board of Directors may in its discretion (i) specifically provide for another time or times of exercise or (ii) accelerate the exercisability of any option subject to such terms and conditions as the Board of Directors deems necessary and appropriate. 10. Term of Options; Exercisability. (a) Term. (1) Each option shall expire not more than ten (10) years from the date of the granting thereof, but shall be subject to earlier termination as herein provided. (2) Except as otherwise provided in this Section 10, an option granted to any employee optionee who ceases to be an employee of the Company or one of its subsidiaries shall terminate immediately on the date such optionee ceases to be an employee of the Company or one of its subsidiaries, or on the date on which the option expires by its terms, whichever occurs first. (3) If such termination of employment is because the optionee has become permanently disabled (within the meaning of Section 22(e)(3) of the Code), such option shall terminate on the last day of the third month from the date such optionee ceases to be an employee, or on the date on which the option expires by its terms, whichever occurs first. - 8 - 9 (4) In the event of the death of any optionee, any option granted to such optionee shall terminate on the last day of the sixth month from the date of death, or on the date on which the option expires by its terms, whichever occurs first. (5) If an optionee ceases to be an employee of the Company or one of its subsidiaries due to a termination of such employment by the Company without "Cause", as such term is defined in the particular employment agreement with such optionee, any option granted to such optionee shall terminate on the last day of the second month from the date of such termination, or on the date on which the option expires by its terms, whichever occurs first. (6) Notwithstanding subparagraphs (2), (3), (4) and (5) above, the Board of Directors shall have the authority to extend the expiration date of any outstanding option in circumstances in which it deems such action to be appropriate, provided that no such extension shall extend the term of an option beyond the date on which the option would have expired if no termination of the optionee's employment had occurred. (b) Exercisability; Vesting. An option granted to an employee optionee who ceases to be an employee of the Company or one of its subsidiaries shall be exercisable only to the extent that the right to purchase shares under such option has accrued, is vested and is in effect on the date such optionee ceases to be an employee of the Company or one of its subsidiaries. 11. Options Not Transferable. The right of any optionee to exercise any option granted to him or her shall not be assignable or transferable by such optionee otherwise than by will or the laws of descent and distribution, and any such option shall be exercisable during the lifetime of such optionee only - 9 - 10 by him. Any option granted under the Plan shall be null and void and without effect upon the bankruptcy of the optionee to whom the option is granted, or upon any attempted assignment or transfer, except as herein provided, including without limitation any purported assignment, whether voluntary or by operation of law, pledge, hypothecation or other disposition, attachment, divorce, trustee process or similar process, whether legal or equitable, upon such option. 12. Recapitalizations, Reorganizations and the Like. (a) In the event that the outstanding shares of the Common Stock of the Company are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation by reason of any reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, combination of shares, or dividends payable in capital stock, appropriate adjustment shall be made in the number and kind of shares as to which options may be granted under the Plan and as to which outstanding options or portions thereof then unexercised shall be exercisable, to the end that the proportionate interest of the optionee shall be maintained as before the occurrence of such event; such adjustment in outstanding options shall be made without change in the total price applicable to the unexercised portion of such options and with a corresponding adjustment in the option price per share. (b) In addition, unless otherwise determined by the Board of Directors in its sole discretion, in the case of any (i) sale or conveyance to another entity of all or substantially all of the property and assets of the Company, including, without limitation, by way of merger or consolidation, or (ii) Change in Control (as hereinafter defined) of the Company, the - 10 - 11 purchaser(s) of the Company's assets or stock may, in his, her or its discretion, deliver to the optionee the same kind of consideration that is delivered to the shareholders of the Company as a result of such sale, conveyance or Change in Control, or the Board of Directors may cancel all outstanding options in exchange for consideration in cash or in kind which consideration in both cases shall be equal in value to the value of those shares of stock or other securities the optionee would have received had the option been exercised (to the extent then exercisable) and no disposition of the shares acquired upon such exercise been made prior to such sale, conveyance or Change in Control, less the option price therefor. Upon receipt of such consideration by the optionee, his or her option shall immediately terminate and be of no further force and effect. The value of the stock or other securities the optionee would have received if the option had been exercised shall be determined in good faith by the Board of Directors of the Company, and in the case of shares of the Common Stock of the Company, in accordance with the provisions of Section 7 hereof. The Board of Directors shall also have the power and right to accelerate the exercisability of any options, notwithstanding any limitations in this Plan or in the Agreement upon such a sale, conveyance or Change in Control. Upon such acceleration, any options or portion thereof originally designated as incentive stock options that no longer qualify as incentive stock options under Section 422 of the Code as a result of such acceleration shall be redesignated as non-qualified stock options. A "Change in Control" shall be deemed to have occurred if any person, or any two or more persons acting as a group, and all affiliates of such person or persons, who prior to such time owned less than ten percent (10%) of the then outstanding Common Stock of the Company, shall acquire, whether by purchase, exchange, tender offer, merger, consolidation or otherwise, such - 11 - 12 additional shares of the Company's Common Stock in one or more transactions, or series of transactions, such that following such transaction or transactions, such person or group and affiliates beneficially own fifty percent (50%) or more of the Company's Common Stock outstanding. (c) Upon dissolution or liquidation of the Company, all options granted under this Plan shall terminate, but each optionee (if at such time in the employ of or otherwise associated with the Company or any of its subsidiaries) shall have the right, immediately prior to such dissolution or liquidation, to exercise his or her option to the extent then exercisable. (d) No fraction of a share shall be purchasable or deliverable upon the exercise of any option, but in the event any adjustment hereunder of the number of shares covered by the option shall cause such number to include a fraction of a share, such fraction shall be adjusted to the nearest smaller whole number of shares. 13. No Special Employment Rights. Nothing contained in the Plan or in any option granted under the Plan shall confer upon any option holder any right with respect to the continuation of his or her employment by the Company (or any subsidiary) or interfere in any way with the right of the Company (or any subsidiary), subject to the terms of any separate employment agreement to the contrary, at any time to terminate such employment or to increase or decrease the compensation of the option holder from the rate in existence at the time of the grant of an option. Whether an authorized leave of absence, or absence in military or government service, shall constitute termination of employment shall be determined by the Board of Directors at the time. - 12 - 13 14. Withholding. The Company's obligation to deliver shares upon the exercise of any option granted under the Plan shall be subject to the option holder's satisfaction of all applicable Federal, state and local income, excise, employment and any other tax withholding requirements. On or after the date of the first registration of an equity security of the Company under Section 12 of the Securities Exchange Act of 1934 (the "1934 Act"), if an optionee is an officer of the Company within the meaning of Section 16 of the 1934 Act, such optionee may elect to pay such withholding tax obligations in accordance with rules prescribed by the Board of Directors by having the Company withhold shares of Common Stock having a value equal to the amount required to be withheld. The value of the shares to be withheld shall equal the fair market value of the shares on the day the option is exercised as determined by the Board of Directors. The following provisions shall apply to such elections by persons who are directors or officers of the Company within the meaning of Section 16(b) of the 1934 Act: (i) if an optionee has received multiple options, a separate election must be made for each option; (ii) the election may be a "standing election," i.e., upon making an election, a fixed date need not be set for the exercise of the option to which the election relates; (iii) the election will be subject to the approval or disapproval of the Board of Directors, which approval or disapproval may be given at any time after the election to which it relates; (iv) the election may not be made within six months following the date of grant of the option to which it relates; (v) the election must be made six months prior to the date the option is exercised, or both the election and exercise must be made in the ten-day "window period" beginning on the third day following the release of the Company's quarterly or annual summary statement of sales and earnings; and (vi) an - 13 - 14 election may be revoked, or may be reinstituted after a revocation, only upon six months' prior notice. 15. Restrictions on Issue of Shares. (a) Notwithstanding the provisions of Section 8, the Company may delay the issuance of shares covered by the exercise of an option and the delivery of a certificate for such shares until one of the following conditions shall be satisfied: (i) The shares with respect to which such option has been exercised are at the time of the issue of such shares effectively registered or qualified under applicable Federal and state securities acts now in force or as hereafter amended; or (ii) Counsel for the Company shall have given an opinion, which opinion shall not be unreasonably conditioned or withheld, that such shares are exempt from registration and qualification under applicable Federal and state securities acts now in force or as hereafter amended. (b) It is intended that all exercises of options shall be effective, and the Company shall use its best efforts to bring about compliance with the above conditions within a reasonable time, except that the Company shall be under no obligation to qualify shares or to cause a registration statement or a post-effective amendment to any registration statement to be prepared for the purpose of covering the issue of shares in respect of which any option may be exercised, except as otherwise agreed to by the Company in writing. 16. Purchase for Investment; Rights of Holder on Subsequent Registration. Unless the shares to be issued upon exercise of an option granted under the Plan have been effectively registered under the Securities Act of 1933, as now in force or hereafter - 14 - 15 amended, the Company shall be under no obligation to issue any shares covered by any option unless the person who exercises such option, in whole or in part, shall give a written representation and undertaking to the Company which is satisfactory in form and scope to counsel for the Company and upon which, in the opinion of such counsel, the Company may reasonably rely, that he or she is acquiring the shares issued pursuant to such exercise of the option for his or her own account as an investment and not with a view to, or for sale in connection with, the distribution of any such shares, and that he or she will make no transfer of the same except in compliance with any rules and regulations in force at the time of such transfer under the Securities Act of 1933, or any other applicable law, and that if shares are issued without such registration, a legend to this effect may be endorsed upon the securities so issued. In the event that the Company shall, nevertheless, deem it necessary or desirable to register under the Securities Act of 1933 or other applicable statutes any shares with respect to which an option shall have been exercised, or to qualify any such shares for exemption from the Securities Act of 1933 or other applicable statutes, then the Company may take such action and may require from each optionee such information in writing for use in any registration statement, supplementary registration statement, prospectus, preliminary prospectus or offering circular as is reasonably necessary for such purpose and may require reasonable indemnity to the Company and its officers and directors and controlling persons from such holder against all losses, claims, damages and liabilities arising from such use of the information so furnished and caused by any untrue statement of any material fact therein or caused by the omission to state a material fact required to be stated therein or necessary to - 15 - 16 make the statements therein not misleading in the light of the circumstances under which they were made. 17. Loans. The Company may make loans to optionees to permit them to exercise options. If loans are made, the requirements of all applicable Federal and state laws and regulations regarding such loans must be met. 18. Modification of Outstanding Options. The Board of Directors may authorize the amendment of any outstanding option with the consent of the optionee when and subject to such conditions as are deemed to be in the best interests of the Company and in accordance with the purposes of this Plan. 19. Approval of Stockholders. The Plan shall be subject to approval by the vote of stockholders holding at least a majority of the voting stock of the Company present, or represented, and entitled to vote at a duly held stockholders' meeting, or by written consent of the stockholders as provided for under applicable state law, within twelve (12) months after the adoption of the Plan by the Board of Directors and shall take effect as of the date of adoption by the Board of Directors upon such approval. The Board of Directors may grant options under the Plan prior to such approval, but any such option shall become effective as of the date of grant only upon such approval and, accordingly, no such option may be exercisable prior to such approval. 20. Termination and Amendment. Unless sooner terminated as herein provided, the Plan shall terminate ten (10) years from the date upon which the Plan was duly adopted by the Board of Directors of the - 16 - 17 Company. The Board of Directors may at any time terminate the Plan or make such modification or amendment thereof as it deems advisable; provided, however, that except as provided in this Section 20, the Board of Directors may not, without the approval of the stockholders of the Company obtained in the manner stated in Section 19, increase the maximum number of shares for which options may be granted or change the designation of the class of persons eligible to receive options under the Plan, or make any other change in the Plan which requires stockholder approval under applicable law or regulations, including any approval requirement which is a prerequisite for exemptive relief under Section 16 of the 1934 Act. The Board of Directors may terminate, amend or modify any outstanding option without the consent of the option holder, provided, however, that, except as provided in Section 12, without the consent of the optionee, the Board of Directors shall not change the number of shares subject to an option, nor the exercise price thereof, nor extend the term of such option. 21. Compliance with Rule 16b-3. It is intended that the provisions of the Plan and any option granted thereunder to a person subject to the reporting requirements of Section 16(a) of the 1934 Act shall comply in all respects with the terms and conditions of Rule 16b-3 under the 1934 Act, or any successor provisions. Any agreement granting options shall contain such provisions as are necessary or appropriate to assure such compliance. To the extent that any provision hereof is found not to be in compliance with such Rule, such provision shall be deemed to be modified so as to be in compliance with such Rule, or if such modification is not possible, shall be deemed to be null and void, as it relates to a recipient subject to Section 16(a) of the 1934 Act. - 17 - 18 22. Reservation of Stock. The Company shall at all times during the term of the Plan reserve and keep available such number of shares of stock as will be sufficient to satisfy the requirements of the Plan and shall pay all fees and expenses necessarily incurred by the Company in connection therewith. 23. Limitation of Rights in the Option Shares. An optionee shall not be deemed for any purpose to be a stockholder of the Company with respect to any of the options except to the extent that the option shall have been exercised with respect thereto and, in addition, a certificate shall have been issued theretofore and delivered to the optionee. 24. Notices. Any communication or notice required or permitted to be given under the Plan shall be in writing, and mailed by registered or certified mail or delivered by hand, if to the Company, to its principal place of business, attention: President, and, if to an optionee, to the address as appearing on the records of the Company. APPROVED BY BOARD OF DIRECTORS: December 12, 1997 APPROVED BY SHAREHOLDERS: December 12, 1997 - 18 - EX-10.8 14 AMENDED AND RESTATED MANAGEMENT AGREEMENT 1 EXHIBIT 10.8 AMENDED AND RESTATED THL MANAGEMENT AGREEMENT This Management Agreement (this "Agreement") is entered into as of the 18th day of December, 1997 by and between Safelite Glass Corp., a Delaware corporation (the "Company"), and Thomas H. Lee Company, a sole proprietorship ("THL"). All capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Merger Agreement (as defined below). WHEREAS, this Agreement amends and restates that certain THL Management Agreement by and between the Company and THL dated as of December 20, 1996 (the "Prior Agreement"), subject to Section 4 herein; WHEREAS, on the date hereof the Company has consummated certain transactions (such transactions being referred to herein as the "Merger"), pursuant to that certain Merger Agreement, dated as of October 10, 1997, by and between Vistar, Inc., an Illinois corporation, and the Company (the "Merger Agreement"); WHEREAS, THL is providing advisory and other services to the Company in connection with the senior secured financing (the "Senior Financing") being provided in connection with the Merger pursuant to a Credit Agreement dated on the date hereof (the "Credit Agreement") among the Company, The Chase Manhattan Bank and Bankers Trust Company, as agents, and the lending institutions from time to time party thereto; WHEREAS, THL has staff specifically skilled in corporate finance, strategic corporate planning, and other management skills and services; WHEREAS, the Company will require THL's special skills and management advisory services in connection with its general business operations; and WHEREAS, THL is willing to provide such skills and services to the Company. NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: 1. SERVICES. THL hereby agrees that, during the term of this Agreement (the "Term"), it will: a. provide the Company with advice in connection with the negotiation and consummation of agreements, contracts, documents and instruments necessary to provide the Company with financing from banks or other financial institutions or other entities on terms and conditions satisfactory to the Company; and 2 b. provide the Company with financial, managerial and operational advice in connection with its day-to-day operations, including, without limitation: i. advice with respect to the investment of funds; and ii. advice with respect to the development and implementation of strategies for improving the operating, marketing and financial performance of the Company. 2. PAYMENT OF FEES. The Company hereby agrees to: during the Term, pay to THL (or its designee) a management fee in an amount equal to $1,000,000 per annum in exchange for the services provided to the Company by THL, such fee being payable by the Company quarterly in advance, the first such payment to be made at or after the closing of the Merger (provided, however, that if during any fiscal quarter of the Company a Default or Event of Default (as such terms are defined in the Credit Agreement) exists, only one-half of such fee for such fiscal quarter may be paid and the remaining one-half of such fee shall be paid at such time as all Defaults and Events of Default (as defined in the Credit Agreement) have been cured or waived). Each payment made pursuant to this Section 2 shall be paid by wire transfer of immediately available federal funds to the account(s) specified by THL (or its designee). 3. TERM. This Agreement shall continue in full force and effect, unless and until terminated by mutual consent of the parties, for so long as THL (or any successor or permitted assign, as the case may be) continues to carry on the business of providing services of the type described in Section 1 above; provided, however, that (a) either party may terminate this Agreement following a material breach of the terms of this Agreement by the other party hereto and a failure to cure such breach within 30 days following written notice thereof and (b) this Agreement shall automatically terminate upon the sale in an initial public offering registered under the Securities Act of 1933, as amended (the "Securities Act"), of shares of the Company's common stock; and provided further that each of (i) the obligations of the Company under Section 5 below, (ii) any and all accrued and unpaid obligations of the Company owed under Section 2 above and (iii) the provisions of Section 8 shall survive any termination of this Agreement to the maximum extent permitted under applicable law. 4. EFFECT OF AGREEMENT. This Agreement replaces the Prior Agreement, and the Prior Agreement is no longer of any force or effect, by agreement of the parties hereto and thereto, as evidenced by the signature of such parties below; provided, however, that the parties agree and acknowledge that pursuant to the Prior Agreement the Company shall pay to THL (or to its designees) the amounts as set forth on Exhibit A attached hereto for the purposes set forth on Exhibit A and in the manner as set forth in Section 2 hereof and shall remain obligated, as set forth in Section 5.b. hereof, to the 3 Indemnities (as defined in Section 5.b. hereof) with respect to the Prior Agreement and the transactions consummated (such transactions being referred to herein as the "Recapitalization") pursuant to the Recapitalization Agreement and Plan of Merger and Stock Purchase Agreement, dated as of the 8th day of November, 1996, by and among Lear Siegler Holdings Corp., a Delaware corporation, the LS Selling Stockholders (as defined therein), the Company, LSNWY Corp., a Delaware corporation, Lite Acquisition Corp., a Delaware corporation, and L.S. Acquisition Corp., a Delaware corporation. 5. EXPENSES; INDEMNIFICATION. a. Expenses. The Company agrees to pay on demand all expenses incurred by THL and its affiliates (or any of them) in connection with this Agreement, the Merger and such other transactions and all operations hereunder or otherwise incurred in connection therewith, including but not limited to (i) the fees and disbursements of: (A) Hutchins, Wheeler & Dittmar A Professional Corporation, counsel to THL, (B) KPMG Peat Marwick, accountant to THL, and (C) any other consultants or advisors retained by THL or either of the parties identified in clauses (A) and (B) arising in connection therewith (including but not limited to the preparation, negotiation and execution of this Agreement and any other agreement executed in connection herewith or in connection with the Merger, the Senior Financing or the consummation of the other transactions contemplated hereby (and any and all amendments, modifications, restructurings and waivers, and exercises and preservations of rights and remedies hereunder or thereunder) and the operations of the Company and any of its subsidiaries), and (ii) any out-of-pocket expenses incurred by THL in connection with the provision of services hereunder or the attendance at any meeting of the board of directors (or any committee thereof) of the Company or any of its affiliates. b. Indemnity and Liability. In consideration of the execution and delivery of this Agreement by THL, the Company hereby agrees to indemnify, exonerate and hold each of THL, and its affiliates, and each of their respective partners, shareholders, affiliates, directors, officers, fiduciaries, employees and agents and each of the partners, shareholders, affiliates, directors, officers, fiduciaries, employees and agents of each of the foregoing (collectively, the "Indemnitees") free and harmless from and against any and all actions, causes of action, suits, losses, liabilities and damages, and expenses in connection therewith, including without limitation reasonable attorneys' fees and disbursements (collectively, the "Indemnified Liabilities"), incurred by the Indemnitees or any of them as a result of, or arising out of, or relating to the Recapitalization, the Merger, the execution, delivery, performance, enforcement or existence of the Prior Agreement, this Agreement or the transactions contemplated hereby or thereby, except for any such Indemnified Liabilities arising on account of such Indemnitee's gross negligence or willful misconduct, and if and to the extent 4 that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. None of the Indemnitees shall be liable to the Company or any of its affiliates for any act or omission suffered or taken by such Indemnitee that does not constitute gross negligence or willful gross negligence or misconduct. 6. ASSIGNMENT, ETC. Except as provided below, neither party shall have the right to assign this Agreement. THL acknowledges that its services under this Agreement are unique. Accordingly, any purported assignment by THL shall be void. Notwithstanding the foregoing, THL may assign all or part of its rights and obligations hereunder to any affiliate of THL which provides services similar to those called for by this Agreement, in which event THL shall be released of all of its rights and obligations hereunder. 7. AMENDMENTS AND WAIVERS. No amendment or waiver of any term, provision or condition of this Agreement shall be effective, unless in writing and executed by each of THL and the Company. No waiver on any one occasion shall extend to or effect or be construed as a waiver of any right or remedy on any future occasion. No course of dealing of any person nor any delay or omission in exercising any right or remedy shall constitute an amendment of this Agreement or a waiver of any right or remedy of any party hereto. 8. MISCELLANEOUS. a. Choice of Law. This Agreement shall be governed by and construed in accordance with the domestic substantive laws of The Commonwealth of Massachusetts without giving effect to any choice or conflict of law provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction. b. Consent to Jurisdiction. Each of the parties agrees that all actions, suits or proceedings arising out of or based upon this Agreement or the subject matter hereof shall be brought and maintained exclusively in the federal and state courts of The Commonwealth of Massachusetts. Each of the parties hereto by execution hereof (i) hereby irrevocably submits to the jurisdiction of the federal and state courts in The Commonwealth of Massachusetts for the purpose of any action, suit or proceeding arising out of or based upon this Agreement or the subject matter hereof and (ii) hereby waives to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, suit or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that it is immune from extraterritorial injunctive relief or other injunctive relief, that its property is exempt or immune from attachment or execution that any such action, suit or proceeding may not be brought or maintained in one of the above-named courts, 5 that any such action, suit or proceeding brought or maintained in one of the above-named courts should be dismissed on grounds of forum non conveniens, should be transferred to any court other than one of the above-named courts, should be stayed by virtue of the pendency of any other action, suit or proceeding in any court other than one of the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by any of the above-named courts. Each of the parties hereto hereby consents to service of process in any such suit, action or proceeding in any manner permitted by the laws of The Commonwealth of Massachusetts, agrees that service of process by registered or certified mail, return receipt requested, at the address specified in or pursuant to Section 10 is reasonably calculated to give actual notice and waives and agrees not to assert by way of motion, as a defense or otherwise, in any such action, suit or proceeding any claim that service of process made in accordance with Section 10 does not constitute good and sufficient service of process. The provisions of this Section 8.b. shall not restrict the ability of any party to enforce in any court any judgment obtained in a federal or state court of The Commonwealth of Massachusetts. c. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, CAUSE OF ACTION, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT HEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. Each of the parties hereto acknowledges that it has been informed by each other party that the provisions of this Section 8.c. constitute a material inducement upon which such party is relying and will rely in entering into this Agreement and the transactions contemplated hereby. Any of the parties hereto may file an original counterpart or a copy of this Agreement with any court as written evidence of the consent of each of the parties hereto to the waiver of its right to trial by jury. 9. MERGER/ENTIRE AGREEMENT. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes any prior communication or agreement with respect thereto. 10. NOTICES. All notices, demands, and communications of any kind which any party may require or desire to serve upon any other party under this Agreement shall be in writing and shall be served upon such other party and such other party's copied persons as specified below by personal delivery to the address set forth for it below or to such other address as such party shall have specified by notice to each other party or by 6 mailing a copy thereof by certified or registered mail, or by Federal Express or any other reputable overnight courier service, postage prepaid, with return receipt requested, addressed to such party and copied persons at such addresses. In the case of service by personal delivery, it shall be deemed complete on the first business day after the date of actual delivery to such address. In case of service by mail or by overnight courier, it shall be deemed complete, whether or not received, on the third day after the date of mailing as shown by the registered or certified mail receipt or courier service receipt. Notwithstanding the foregoing, notice to any party or copied person of change of address shall be deemed complete only upon actual receipt by an officer or agent of such party or copied person. If to the Company, to it at: Safelite Glass Corp. 1105 Schrock Road, 7th Floor Columbus, OH 43229 Attention: Secretary If to THL, to it at: Thomas H. Lee Company 75 State Street Boston, MA 02109 Attention: Mr. Scott M. Sperling Mr. Anthony J. DiNovi with a copy to: Hutchins, Wheeler & Dittmar A Professional Corporation 101 Federal Street Boston, Massachusetts 02110 Attention: Charles W. Robins, Esq. 11. SEVERABILILY. If in any judicial or arbitral proceedings a court or arbitrator shall refuse to enforce any provision of this Agreement, then such unenforceable provision shall be deemed eliminated from this Agreement for the purpose of such proceedings to the extent necessary to permit the remaining provisions to be enforced. To the full extent, however, that the provisions of any applicable law may be waived, they are hereby waived to the end that this Agreement be, deemed to be valid and binding agreement enforceable in accordance with its terms, and in the event that any provision hereof shall be found to be invalid or unenforceable, such provision shall be construed by limiting it so as to be valid and enforceable to the maximum extent consistent with and possible under applicable law. 7 12. COUNTERPARTS. This Agreement may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which together shall constitute one and the same agreement. 8 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf as an instrument under seal as of the date first above written by its officer or representative thereunto duly authorized. THE COMPANY: SAFELITE GLASS CORP. By: /s/ John F. Barlow ------------------------------ Name: John F. Barlow Title: President THL: THOMAS H. LEE COMPANY By: /s/ Scott M. Sperling ------------------------------ Name: Scott M. Sperling Title: Vice President EX-10.9 15 AMENDED AND RESTATED MANAGEMENT AGREEMENT 1 EXHIBIT 10.9 AMENDED AND RESTATED BELRON MANAGEMENT AGREEMENT This Management Agreement (this "Agreement") is entered into as of the 18th day of December, 1997 by and between Safelite Glass Corp., a Delaware corporation (the "Company"), and Belron International BV, a company organized under the laws of the Netherlands ("Belron") All capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Merger Agreement (as defined below). WHEREAS, on the date hereof the Company has consummated certain transactions (such transactions being referred to herein as the "Merger"), pursuant to that certain Merger Agreement, dated as of October 10, 1997, by and between Vistar, Inc. an Illinois corporation ("Vistar") and the Company (the "Merger Agreement") and, as a result of the Merger, Vistar will be merged into Safelite and Safelite will be the surviving entity and successor to Vistar; WHEREAS, this Agreement amends and restates that certain Management Agreement by and between Belron and Vistar, Inc., an Illinois corporation ("Vistar") dated March 1, 1996 (the "Prior Agreement") subject to Section 4 herein; WHEREAS, Belron has itself or has access to considerable experience and expertise in the fields of international finance, purchasing, management, and manufacturing and trading in automotive glass and products ancillary thereto, and other management skills and services; WHEREAS, the Company will require Belron's special skills and management advisory services in connection -with its general business operations; and WHEREAS, Belron is willing to provide such skills and services to the Company. NOW, THEREFORE, in consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: 1. SERVICES. Belron hereby agrees that, during the term of this Agreement (the "Term"), it will: a. provide the Company with advice and assistance in obtaining the full benefits of Belron's international associations and expertise including, without limitation (to the extent not contractually prohibited), making available to the Company: (i) its relationships in the international financial community; (ii) its worldwide purchasing influence and relationships; and 2 (iii) its marketing, legal, taxation, accounting and credit control expertise; b. provide the Company with advice and assistance with respect to marketing and communications; and c. provide the Company with such other services as may reasonably be agreed between the parties from time to time. Nothing in this Agreement requires or shall be construed to require Belron to provide the Company with or procure the use of any of its or its affiliates' intellectual property, including but not limited to, its inventions, processes, patents, trademarks, trade names, service marks, or copyrights, and any applications and registrations pertaining thereto, other than on an arms' length basis. 2. PAYMENT OF FEES. The Company hereby agrees during the Term, pay to Belron (or its designee) a management fee in an amount equal to $1,000,000 per annum. in exchange for the services provided to the Company by Belron, such fee being payable by the Company quarterly in advance, the first such payment to be made at or after the closing of the Merger (provided, however, that if during any fiscal quarter of the Company a Default or Event of Default (as such terms are defined in the Credit Agreement) exists, only one-half of such fee for such fiscal quarter may be paid and the remaining one-half of such fee shall be paid at such time as all Defaults and Events of Default (as defined in the Credit Agreement) have been cured or waived). Each payment made pursuant to this Section 2 shall be paid by wire transfer of immediately available federal funds to the account(s) specified by Belron (or its designee). 3. TERM. This Agreement shall continue in full force and effect, unless and until terminated by mutual consent of the parties, for so long as Belron (or any successor or permitted assign, as the case may be) continues to carry on the business of providing services of the type described in Section 1 above; provided, however, that (a) either party may terminate this Agreement following a material breach of the terms of this Agreement by the other party hereto and a failure to cure such breach within 30 days following written notice thereof and (b) this Agreement shall automatically terminate upon the sale in an initial public offering registered under the Securities Act of 1933, as amended (the "Securities Act"), of shares of the Company's common stock\; and provided further that each of (i) the obligations of the Company under Section 5 below, (ii) any and all accrued and unpaid obligations of the Company owed under Section 2 above and (iii) the provisions of Section 8 shall survive any termination of this Agreement to the maximum extent permitted under applicable law. 4. EFFECT OF AGREEMENT. This Agreement replaces the Prior Agreement, and the Prior Agreement is no longer of any force or effect, by agreement of the parties hereto and thereto, as evidenced by the signature of such parties below; provided, however, that the parties agree and acknowledge that pursuant to the Prior Agreement the Company shall pay - 2 - 3 to Belron (or to its designees) the amounts as set forth on Exhibit A attached hereto for the purposes set forth on Exhibit A and in the manner as set forth in Section 2 hereof. 5. EXPENSES; INDEMNIFICATION. a. Expenses. The Company agrees to pay on demand all expenses incurred by Belron and its affiliates (or any of them) in connection with this Agreement, the Merger and such other transactions and all operations hereunder or otherwise incurred in connection therewith, including but not limited to (i) the fees and disbursements of: (A) Katten Muchin & Zavis, counsel to Belron, (B) Arthur Andersen, accountant to Belron, and (C) any other consultants or advisors retained by Belron or either of the parties identified in clauses (A) and (B) arising in connection therewith (including but not limited to the preparation, negotiation and execution of this Agreement and any other agreement executed in connection herewith or in connection with the Merger or the consummation of the other transactions contemplated hereby (and any and all amendments, modifications, restructurings and waivers, and exercises and preservations of rights and remedies hereunder or thereunder) and the operations of the Company and any of its subsidiaries), and (ii) any out-of-pocket expenses incurred by Belron in connection with the provision of services hereunder or the attendance at any meeting of the board of directors (or any committee thereof) of the Company or any of its affiliates. b. Indemnity and Liability. In consideration of the execution and delivery of this Agreement by Belron, the Company hereby agrees to indemnify, exonerate and hold each of Belron, and its affiliates, and each of their respective partners, shareholders, affiliates, directors, officers, fiduciaries, employees and agents and each of the partners, shareholders, affiliates, directors, officers, fiduciaries, employees and agents of each of the foregoing (collectively, the "Indemnitees") free and harmless from and against any and all actions, causes of action, suits, losses, liabilities and damages, and expenses in connection therewith, including without limitation reasonable attorneys' fees and disbursements (collectively, the "Indemnified Liabilities"), incurred by the Indemnitees or any of them as a result of, or arising out of, or relating to the Merger, the execution, delivery, performance, enforcement or existence of the Prior Agreement, this Agreement or the transactions contemplated hereby or thereby, except for any such Indemnified Liabilities arising on account of such Indemnitee's gross negligence or willful misconduct, and if and to the extent that the foregoing undertaking may be unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. None of the Indemnitees shall be liable to the Company or any of its affiliates for any act or omission suffered or taken by such Indemnitee that does not constitute gross negligence or willful gross negligence or misconduct. - 3 - 4 6. ASSIGNMENT, ETC. Except as provided below, neither party shall have the right to assign this Agreement. Belron acknowledges that its services under this Agreement are unique. Accordingly, any purported assignment by Belron shall be void. Notwithstanding the foregoing, Belron may assign all or part of its rights and obligations hereunder to any affiliate of Belron which provides services similar to those called for by this Agreement, in which event Belron shall be released of all of its rights and obligations hereunder. 7. AMENDMENTS AND WAIVERS. No amendment or waiver of any term, provision or condition of this Agreement shall be effective, unless in writing and executed by each of Belron and the Company. No waiver on any one occasion shall extend to or effect or be construed as a waiver of any right or remedy on any future occasion. No course of dealing of any person nor any delay or omission in exercising any right or remedy shall constitute an amendment of this Agreement or a waiver of any right or remedy of any party hereto. 8. MISCELLANEOUS. a. Choice of Law. This Agreement shall be governed by and construed in accordance with the domestic substantive laws of the State of New York without giving effect to any choice or conflict of law provision or rule that would cause the application of the domestic substantive laws of any other jurisdiction. b. Consent to Jurisdiction. Each of the parties agrees that all actions, suits or proceedings arising out of or based upon this Agreement or the subject matter hereof shall be brought and maintained exclusively in the federal and state courts of the State of New York. Each of the parties hereto by execution hereof (i) hereby irrevocably submits to the jurisdiction of the federal and state courts in the State of New York for the purpose of any action, suit or proceeding arising out of or based upon this Agreement or the subject matter hereof and (ii) hereby waives to the extent not prohibited by applicable law, and agrees not to assert, by way of motion, as a defense or otherwise, in any such action, suit or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that it is immune from extraterritorial injunctive relief or other injunctive relief, that its property is exempt or immune from attachment or execution, that any such action, suit or proceeding may not be brought or maintained in one of the above-named courts, that any such action, suit or proceeding brought or maintained in one of the above-named courts should be dismissed on grounds of forum non conveniens, should be transferred to any court other than one of the above-named courts, should be stayed by virtu of the pendency of any other action, suit or proceeding in any court other than one of the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by any of the above-named courts. Each of the parties hereto hereby consents to service of process in any such suit, action or proceeding in any manner permitted by the laws of the State of New York, agrees that service of process by registered or certified mail, return receipt requested, at the address specified in or - 4 - 5 pursuant to Section 10 is reasonably calculated to give actual notice and waives and agrees not to assert by way of motion, as a defense or otherwise, in any such action, suit or proceeding any claim that service of process made in accordance with Section 10 does not constitute good and sufficient service of process. The provisions of this Section 8.b. shall not restrict the ability of any party to enforce in any court any judgment obtained in a federal or state court of The Commonwealth of Massachusetts. c. Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT, OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, CAUSE OF ACTION, ACTION, SUIT OR PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT HEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT OR OTHERWISE. Each of the parties hereto acknowledges that it has been informed by each other party that the provisions of this Section 8.c. constitute a material inducement upon which such party is relying and will rely in entering into this Agreement and the transactions contemplated hereby. Any of the parties hereto may file an original counterpart or a copy of this Agreement with any court as written evidence of the consent of each of the parties hereto to the waiver of its right to trial by jury. 9. MERGER/ENTIRE AGREEMENT. This Agreement contains the entire understanding of the parties with respect to the subject matter hereof and supersedes any prior communication or agreement with respect thereto. 10. NOTICES. All notices, demands, and communications of any kind which any party may require or desire to serve upon any other party under this Agreement shall be in writing and shall be served upon such other party and such other party's copied persons as specified below by personal delivery to the address set forth for it below or to such other address as such party shall have specified by notice to each other party or by mailing a copy thereof by certified or registered mail, or by Federal Express or any other reputable overnight courier service, postage prepaid, with return receipt requested, addressed to such party and copied persons at such addresses. In the case of service by personal delivery, it shall be deemed complete on the first business day after the date of actual delivery to such address. In case of service by mail or by overnight courier, it shall be deemed complete, whether or not received, on the third day after the date of mailing as shown by the registered or certified mail receipt or courier service receipt. Notwithstanding the foregoing, notice to any party or copied person of change of address shall be deemed complete only upon actual receipt by an officer or agent of such party or copied person. If to the Company, to it at: - 5 - 6 Safelite Glass Corp. 1105 Schrock Road, 7th Floor Columbus, OH 43229 Attention: Secretary If to Belron, to it at: Belron International NV Kaya Krisolito P.O. Box 342 Kralendijk Bonaire Netherlands Antilles Telecopy: 59-9-75-449 and Director: Group Legal Services Attention: Louis Shakinovsky Belron International c/o Kings Observatory Old Deer Park Richmond Surrey TW9 2AZ ENGLAND Telecopy: 44-181-948-7340 with a copy to: Katten Muchin & Zavis 525 West Monroe Suite 1600 Chicago, Illinois 60661 Attention: David R. Shevitz Telecopy: (312) 902-1061 11. SEVERABILITY. If in any judicial or arbitral proceedings a court or arbitrator shall refuse to enforce any provision of this Agreement, then such unenforceable provision shall be deemed eliminated from this Agreement for the purpose of such proceedings to the extent necessary to permit the remaining provisions to be enforced. To the full extent, however, that the provisions of any applicable law may be waived, they are hereby waived to the end that this Agreement be, deemed to be valid and binding agreement enforceable in accordance with its terms, and in the event that any provision hereof shall be found to be - 6 - 7 invalid or unenforceable, such provision shall be construed by limiting it so as to be valid and enforceable to the maximum extent consistent with and possible under applicable law. 12. COUNTERPARTS. This Agreement may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which together shall constitute one and the same agreement. - 7 - 8 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf as an instrument under seal as of the date first above written by its officer or representative thereunto duly authorized. THE COMPANY: SAFELITE GLASS CORP. By: /s/ John F. Barlow --------------------------- Name: John F. Barlow Title: President BELRON: BELRON INTERNATIONAL BV By: --------------------------- Name: Title: - 8 - 9 IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf as an instrument under seal as of the date first above written by its officer or representative thereunto duly authorized. THE COMPANY: SAFELITE GLASS CORP. By: -------------------------------- Name: Title: BELRON: BELRON INTERNATIONAL BV By: /s/ ML Shakinovsky -------------------------------- Name: ML Shakinovsky Title: Director 8 EX-10.10 16 AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT 1 EXHIBIT 10.10 AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT THIS AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT (the "Agreement"), entered into this 18th day of December, 1997 is made by and among (i) Safelite Glass Corp., a Delaware corporation (the "Company"), (ii) Belron (USA) BV, a company organized under the laws of the Netherlands ("Belron" and, together with any Permitted Transferees thereof, the "Belron Shareholders"), (iii) those Shareholders listed on Exhibit A attached hereto (together with any Permitted Transferees thereof, the "Kellman Shareholders"), (iv) those Shareholders of the Company listed on Exhibit B attached hereto (including THOMAS H. LEE EQUITY FUND, III, L.P., a Delaware limited partnership ("TH Lee")) (together with any Permitted Transferees thereof, the "TH Lee Shareholders"), and (v) those Shareholders of the Company listed on Exhibit C attached hereto (together with any Permitted Transferees thereof, the "Management Shareholders"). The Belron Shareholders, the Kellman Shareholders, the TH Lee Shareholders and the Management Shareholders are hereinafter collectively referred to as the "Shareholders" and each individually referred to as a "Shareholder". WHEREAS, the Company, the TH Lee Shareholders and the Management Shareholders are parties to that certain Stockholders' Agreement, dated as of December 20, 1996 (the "Old Agreement"); WHEREAS, the TH Lee Shareholders and the Management Shareholders own, respectively, that number of shares of Voting Common Stock and Non-Voting Common Stock set forth in Exhibits B and C attached hereto; WHEREAS, pursuant to the Merger Agreement, dated October 10, 1997 (the "Merger Agreement"), by and between Vistar, Inc. and the Company, the Company shall issue on the date hereof to Belron that number of shares of Voting Common Stock and Non-Voting Common Stock set forth in Exhibit A attached hereto; WHEREAS, pursuant to the Merger Agreement, the Company shall issue on the date hereof to the Kellman Shareholders that number of shares of Non-Voting Common Stock set forth in Exhibit A attached hereto; WHEREAS, the Company, the TH Lee Shareholders, the Management Shareholders, Belron and the Kellman Shareholders desire to amend and restate the Old Agreement and set forth more fully their agreements regarding certain rights and restrictions with respect to the management of the Company and the voting, transfer and sale of the shares of capital stock held by the Shareholders; NOW, THEREFORE, in consideration of the premises, the mutual covenants of the parties hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 2 1. DEFINITIONS. The following terms will have the meaning for purposes of this Agreement set forth below for such term. "AAA RULES" has the meaning set forth in SECTION 21. "ADDITIONAL SHARES" means (i) any shares of Common Stock, whether now authorized or not, (ii) any rights, options or warrants to purchase any shares of Common Stock, or to purchase securities that may become convertible into, exercisable for or exchangeable for shares of Common Stock, and (iii) any securities convertible into, exercisable for or exchangeable for shares of Common Stock; provided, however, that Additional Shares shall not include (a) securities offered by the Company pursuant to an underwritten public offering registered pursuant to the Securities Act, (b) any shares of Common Stock or any rights, options or warrants to purchase any shares of Common Stock, or to purchase securities that may become convertible into, exercisable for or exchangeable for shares of Common Stock, issued to officers or employees of the Company after the date hereof pursuant to an employee incentive plan approved by the Board, (c) securities issued as a dividend on, subdivision of or other distribution in respect of all shares of Common Stock, (d) securities issued upon conversion, exercise or exchange of any previously issued Additional Shares, or (e) securities issued pursuant to the acquisition of another corporation, limited liability company or partnership by the Company by merger, purchase of substantially all of the assets of such other entity, or by other reorganization whereby the Company ends up owning, directly or indirectly, greater than fifty percent (50%) of the voting power of such entity or otherwise controls such entity, provided such acquisition or reorganization has been approved by the Board. "AFFILIATE" of any Person means a Person controlling, under common control with or controlled by such Person. "ARBITRATORS" has the meaning set forth in SECTION 21. "BELRON DIRECTORS" has the meaning set forth in SECTION 2(a)(ii)(A)(1). "BOARD" means the board of directors of the Company. "BUSINESS DAY" means any day on which business is ordinarily conducted in the State of New York and in the United Kingdom, excluding Saturday, Sunday or any day on which the banks located in New York City or London, England are required by law (other than a general banking moratorium or holiday for a period exceeding more than four (4) consecutive days) to be closed. If any notice or event is required to be delivered or occur, pursuant to the terms of this Agreement, on a day which is not a Business Day, such notice or event shall be delivered or occur on the next Business Day after the original required delivery or occurrence date. "CHAIRMAN" has the meaning set forth in SECTION 5. - 2 - 3 "COMMISSION" means the Securities and Exchange Commission. "COMMON STOCK" means the Voting Common Stock and the Non-Voting Common Stock. "COMPETITOR" has the meaning set forth in SECTION 8(d). "ELECTION PERIOD" has the meaning set forth in SECTION 8(c)(i)(B). "EXECUTIVE OPERATING COMMITTEE CHAIRMAN" has the meaning set forth SECTION 6. "EXECUTIVE OPERATING COMMITTEE" has the meaning set forth in SECTION 6. "FAMILY MEMBER" has the meaning set forth in SECTION 8(g)(ii) "GAAP" means, with respect to Persons organized under the laws of the 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 any successor authority) as they exist from time to time, consistently applied. "INDEPENDENT THIRD PARTY" means any Person who does not own in excess of 1% of the Company's capital stock on a fully-diluted basis (a "1% Owner"), who is not controlling, controlled by or under common control with any such 1% Owner and who is not the spouse or descendent (by birth or adoption) of any such 1% Owner or a trust for the benefit of such 1% Owner and/or such other Persons. "IPO" means an initial public offering of the Company's capital stock pursuant to the Securities Act. "ISSUANCE DATE" has the meaning set forth in SECTION 9(b). "ISSUANCE NOTICE" has the meaning set forth in SECTION 9(b). "NON-VOTING COMMON STOCK" means the Class B Non-Voting Common Stock of the Company, par value $0.01 per share. "OFFER" has the meaning set forth in SECTION 9(a). "OTHER SHAREHOLDERS" has the meaning set forth in SECTION 8(f)(ii). "PERMITTED TRANSFER" has the meaning set forth in SECTION 8(g). "PERMITTED TRANSFEREE" means any person or entity who shall have acquired and who shall hold Shareholder Shares pursuant to a Permitted Transfer. -3- 4 "PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity, or any department, agency or political subdivision thereof. "PRE-TRANSFER OFFER NOTICE" has the meaning set forth in SECTION 8(c)(i)(A). "PRE-TRANSFER RE-OFFER NOTICE" has the meaning set forth in SECTION 8(c)(ii). "PUBLIC SALE" means any sale of Shareholder Shares to the public pursuant to an underwritten offering registered under the Securities Act or to the public through a broker, dealer or market maker pursuant to a registration statement effective under the Securities Act pursuant to Rule 415 or the provisions of Rule 144 adopted under the Securities Act. "RE-OFFER ELECTION PERIOD" has the meaning set forth in SECTION 8(c)(ii). "RFR ELECTION PERIOD" has the meaning set forth in SECTION 8(d). "RFR NOTICE" has the meaning set forth in SECTION 8(d). "SALE NOTICE" has the meaning set forth in SECTION 8(e)(ii). "SALE OF THE COMPANY NOTICE" has the meaning set forth in SECTION 8(f)(ii). "SALE OF THE COMPANY" means the sale of the Company to an Independent Third Party or group of Independent Third Parties pursuant to which such party or parties acquire (i) capital stock of the Company possessing the voting power under normal circumstances to elect a majority of the Company Board (whether by merger, consolidation or sale or transfer of the Company's capital stock) or (ii) all or substantially all of the Company's assets determined on a consolidated basis. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SHAREHOLDER SHARES" means (i) any Common Stock purchased or otherwise acquired by any Shareholder, (ii) any capital stock or other equity securities issued or issuable directly or indirectly with respect to the Common Stock referred to in clause (i) above by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization, and (iii) any other shares of any class or series of capital stock of the Company held by a Shareholder. As to any particular shares constituting Shareholder Shares, such shares shall cease to be Shareholder Shares when they have been (x) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them or (y) sold to the public through a broker, dealer or market maker pursuant to Rule 144 (or any similar provision then in force) under the Securities Act. -4- 5 "SUBSIDIARY" means any entity controlled by the Company, directly or through one or more Subsidiaries. "SUPPLIER" has the meaning set forth in SECTION 8(d). "TAG-ALONG RIGHT" has the meaning set forth in SECTION 8(e)(i). "TH LEE DIRECTORS" has the meaning set forth in SECTION 2(a)(ii)(A)(2). "TRANSFER" has the meaning set forth in SECTION 8(a). "TRANSFERRING SHAREHOLDER" has the meaning set forth in SECTION 8(c)(i)(A). "TRIGGERING DAY" means the first day upon which the following three conditions have been satisfied: (i) the consummation of an IPO; (ii) the expiration of a three (3)-year period after the date of this Agreement; and (iii) the Belron Shareholders beneficially own, in the aggregate, more shares of Voting Common Stock than that beneficially owned, in the aggregate, by the TH Lee Shareholders and the Management Shareholders. "VOTING COMMON STOCK" means the Class A Voting Common Stock of the Company, par value $0.01 per share. 2. BOARD OF DIRECTORS. (a) From and after the date hereof and until the provisions of this Section 2 cease to be effective, each Shareholder shall vote all of its Voting Common Stock and any other voting securities of the Company over which such Shareholder has voting control and shall take all other reasonably necessary or desirable actions within its control (whether in its capacity as a Shareholder, director, member of a Board committee or officer of the Company or otherwise, and including, without limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), and the Company shall take all reasonably necessary or desirable actions within its control (including, without limitation, calling special Board and Shareholder meetings), so that: (i) until the Triggering Day, the authorized number of directors on the Board shall be established at ten (10) directors; (ii) the following individuals shall be elected to the Board: (A) from and after the date hereof and until the Triggering Day: (1) five (5) representatives designated by Belron (which designees initially shall be Ronnie Lubner, M. Louis Shakinovsky, John E. Mason, Adrian F. Jones and Selwyn Herson), determined by a vote of the -5- 6 Belron Shareholders owning a majority of the Shareholder Shares held by all Belron Shareholders (the "Belron Directors"); and (2) five (5) representatives designated by TH Lee (which designees initially shall be Garen K. Staglin, John F. Barlow, Anthony J. DiNovi, Scott M. Sperling and Seth W. Lawry), determined by a vote of the TH Lee Shareholders and Management Shareholders owning a majority of the Shareholder Shares held by all TH Lee Shareholders and Management Shareholders (the "TH Lee Directors"). (B) from and after the Triggering Day and until the provisions of this Section 2 cease to be effective, Belron and TH Lee agree to vote all of their shares of Voting Common Stock such that, to the extent possible, each of Belron and TH Lee shall be entitled to designate a minimum number of directors corresponding to the respective percentage ownership of the Belron Shareholders' or TH Lee Shareholders' (but excluding their Permitted Transferees who are not Affiliates or Family Members) Voting Common Stock as related to their respective percentage ownership of the Voting Common Stock on the date hereof, as set forth below:
PERCENTAGE NUMBER OF OWNERSHIP DIRECTORS --------- --------- 50% or more 3 25% - 49.99% 2 5% - 24.99% 1
Notwithstanding the foregoing, (i) any Shareholder shall be entitled to vote its shares of Voting Common Stock in the election of directors as such Shareholder deems appropriate so long as the requirements of this SECTION 2(a)(ii)(B) to elect the minimum directors are satisfied; and (ii) Belron shall not be required to vote its shares of Voting Common Stock in the election of directors to nominate or elect TH Lee Directors to the extent that such action could reasonably be expected to prevent Belron from electing a majority of the Board of Directors unless such failure to elect a majority of the Board of Directors is caused by a voting agreement entered into by Belron or a reduction in the number of directors below seven (7) caused by Belron. (iii) so long as John F. Barlow is Chief Executive Officer, he shall be a director of the Company; and -6- 7 (iv) upon the vacancy from the Board of any representative designated hereunder by Belron or TH Lee, as the case may be, such vacancy shall be filled by a representative designated by Belron or TH Lee, as appropriate. (b) The Company shall pay the reasonable out-of-pocket expenses incurred by each director in connection with attending the meetings of the Board and any committee thereof. In addition, the Company shall maintain directors and officers indemnity insurance coverage satisfactory to a majority of the directors, and the Company's certificate of incorporation and bylaws shall provide for indemnification and exculpation of directors to the fullest extent permitted under applicable law. (c) If any party fails to designate a representative to fill a directorship pursuant to the terms of this SECTION 2, the individual previously holding such directorship shall be elected to such position, or if such individual fails or declines to serve, the election of an individual to such directorship shall be accomplished in accordance with the Company's bylaws and applicable law; provided that the Shareholders shall vote to remove such individual if the party which failed to designate such directorship so directs. (d) The provisions of this SECTION 2 shall terminate automatically and be of no further force and effect upon the tenth anniversary of the date hereof. After the Triggering Day, if either the Belron Shareholders or the TH Lee Shareholders (but excluding their Permitted Transferees who are not Affiliates or Family Members), cease to hold 5% of the Voting Common Stock that such group holds on the date hereof, such group's right to designate members of the Board shall terminate. 3. REPRESENTATIONS AND WARRANTIES. Each Shareholder represents and warrants that (i) such Shareholder is the record owner of the number of Shareholder Shares set forth opposite its name on Exhibit A, Exhibit B or Exhibit C attached hereto, (ii) this Agreement has been duly authorized, executed and delivered by such Shareholder and constitutes the valid and binding obligation of such Shareholder, enforceable in accordance with its terms, and (iii) such Shareholder has not granted and is not a party to any proxy, voting trust or other agreement which is inconsistent with, conflicts with or violates any provision of this Agreement. No holder of Shareholder Shares shall grant any proxy or become party to any voting trust or other agreement which is inconsistent with, conflicts with or violates any provision of this Agreement. 4. CHIEF EXECUTIVE OFFICER. (a) The Company's initial Chief Executive Officer shall be John F. Barlow. (b) In the event of any resignation, termination of, or inability to serve as Chief Executive Officer by such person, until the Triggering Day, Belron and TH Lee shall each have the right to nominate the Chief Executive Officer or Chief Executive Officers of the Company. -7- 8 (c) The Chief Executive Officer or Chief Executive Officers shall perform such duties as may be assigned to such Chief Executive Officer or Chief Executive Officers by the Board and such Chief Executive Officer or Chief Executive Officers shall report to the Executive Operating Committee. 5. CHAIRMAN OF THE BOARD OF DIRECTORS. Until the date which is the earlier of (i) eighteen (18) months after consummation of an IPO or (ii) the third anniversary of the date hereof, the Shareholders agree that the Chairman of the Board (the "Chairman") shall be Garen K. Staglin. The Chairman shall perform such duties as may be assigned to such Chairman by the Board, including, but not limited to, presiding at all meetings of the Board. 6. EXECUTIVE OPERATING COMMITTEE. The Company shall have an Executive Operating Committee (the "Executive Operating Committee") which shall be responsible for monitoring and facilitating the implementation of the Company's budget, post-Merger integration plan, purchasing policy and other matters delegated by the Board. The Executive Operating Committee shall have a chairman (the "Executive Operating Committee Chairman") who shall preside over all meetings of the committee and have such other powers as delegated by the Board. Until the third anniversary of the date hereof, the Shareholders agree that: (a) the Executive Operating Committee shall consist of four (4) directors designated as follows: (i) two (2) members designated by the Belron Directors (one of whom shall initially be John E. Mason and the other of whom shall be designated at a later date); in the event of any resignation, removal of, or inability to serve on such committee, by any such designee, or other vacancy in the position of committee member so designated by the Belron Directors, such vacancy shall be filled by a successor designee designated by the Belron Directors; and (ii) two (2) members designated by the TH Lee Directors (one of whom shall initially John F. Barlow and the other of whom shall be designated at a later date); in the event of any resignation, removal of, or inability to serve on such committee, by any such designee, or other vacancy in the position of committee member so designated by the TH Lee Directors, such vacancy shall be filled by a successor designee designated by the TH Lee Directors; (b) the Chairman of the Executive Operating Committee shall initially be John E. Mason; in the event of any resignation, removal of, or inability to serve as such Chairman by Mr. Mason, or other vacancy in the position of the Executive Operating Committee Chairman, such vacancy shall be filled by a successor designee designated by the Belron Directors, subject to the right of TH Lee to disapprove such Belron designee for good cause; and (c) the Shareholders acknowledge the potential benefits for the Company of Belron's worldwide purchasing influence and relationships and the Executive Committee will recognize -8- 9 such influence and relationships in formulating and implementing the Company's purchasing policy. 7. RESTRICTIONS ON PURCHASES. Notwithstanding anything in this Agreement to the contrary, no Shareholder shall purchase shares of Voting Common Stock for a period of three (3) years after the date hereof; provided that Transfers to Permitted Transferees and exercise of vested options and of pre-emptive rights under Section 9 hereof shall be permitted. After the expiration of the three (3)-year period, each TH Lee Shareholder shall give Belron ten (10) days' prior written notice of its intention to purchase shares of Voting Common Stock and the number of shares it intends to purchase. 8. RESTRICTIONS ON TRANSFER. (a) RETENTION OF VOTING COMMON STOCK. Subject to the provisions of SECTION 8(g), until the third anniversary of the date hereof, no Shareholder shall sell, transfer, assign, pledge or otherwise dispose of (whether with or without consideration and whether voluntarily or involuntarily or by operation of law) any interest in such Person's Voting Common Stock (a "Transfer"). (b) RETENTION OF NON-VOTING COMMON STOCK. No Shareholder shall Transfer any interest in the Non-Voting Common Stock or any Voting Common Stock for which the restrictions in (a) above have expired, held by such Person on the date hereof or hereafter unless such Transfer complies with the provisions of this SECTION 8. (c) FIRST OFFER RIGHT. In addition to compliance with the other requirements of this SECTION 8 and subject to the provisions of SECTION 8(g), Belron shall have the following rights of first offer with respect to transfers by any of the TH Lee Shareholders and any of the Management Shareholders of any of the Shareholder Shares held by such Persons. (i) INITIAL OFFER. (A) Prior to making any Transfer of Shareholder Shares, the transferring TH Lee Shareholder or transferring Management Shareholder, as applicable (in each case, the "Transferring Shareholder"), shall deliver written notice by a method permitted by SECTION 12(c) (a "Pre-Transfer Offer Notice") to each of the parties listed as to receive notice for Belron. The Pre-Transfer Offer Notice shall disclose in reasonable detail the proposed number of Shareholders Shares to be transferred, the proposed sales price and other terms and conditions of the Transfer; provided that the Pre-Transfer Offer Notice shall not be required to include the identity of the proposed transferee(s). (B) Belron may elect to purchase all (but not less than all) of the Shareholder Shares specified in the Pre-Transfer Offer Notice at the price and on the terms specified therein by delivering written notice to the Transferring Shareholder by a method permitted by SECTION 12(d) of such election to the Transferring Shareholder within twenty-four -9- 10 (24) hours (which must include one (1) full Business Day) after the delivery of the Pre-Transfer Offer Notice (the "Election Period"). If Belron elects to purchase all (but not less than all) of such Shareholder Shares within the Election Period, the closing of any such transaction between Belron and the Transferring Shareholder shall be within fourteen (14) calendar days after expiration of the Election Period. If Belron has not elected to purchase all of the Shareholder Shares within the Election Period, the Transferring Shareholder may, within one hundred eighty (180)-days after the expiration of the Election Period and subject to the provisions of Section 8(d), if applicable, transfer such Shareholder Shares to one or more third parties at a price no less than 100% of the price per share specified in the Pre-Transfer Offer Notice and on other terms no more favorable to the transferees thereof than offered to Belron in the Pre-Transfer Offer Notice. (ii) RE-OFFER. At any time within such one hundred eighty (180)-day period provided in Section 8(c)(i)(B), above, the Transferring Shareholder may re-offer the Shareholder Shares to be transferred to Belron at a lower sales price than that specified in the Pre-Transfer Offer Notice by delivering written notice by a method permitted by SECTION 12(c) (the "Pre-Transfer Re-Offer Notice") by 9:00 a.m., London, England time, to each of the parties listed as to receive written notice for Belron; provided, however, that in the case of any proposed sale pursuant to an underwritten public offering registered pursuant to the Securities Act, the Pre-Transfer Re-Offer Notice shall be delivered by 9:00 a.m. Boston, Massachusetts time. The Pre-Transfer Re-Offer Notice shall disclose in reasonable detail the proposed number of Shareholder Shares to be transferred, the proposed sales price and other terms and conditions of the Transfer; provided that the Pre-Transfer Re-Offer Notice shall not be required to include the identity of the proposed transferee(s). Belron may elect to purchase all (but not less than all) of the Shareholder Shares to be transferred at the sales price specified in the Pre-Transfer Re-Offer Notice by delivering written notice to the Transferring Shareholder by a method permitted by SECTION 12(d) of such election to the Transferring Shareholder by 5:00 p.m., London, England time, on the day such Pre-Transfer Re-Offer Notice is received; provided, however, that in the case of any sale pursuant to an underwritten public offering registered under the Securities Act, such election period shall terminate at 4:00 p.m., Boston, Massachusetts time on the day such Pre-Transfer Re-Offer Notice is received (in either case, the "Re-Offer Election Period"). If Belron elects to purchase all (but not less than all) of such Shareholder Shares within the Re-Offer Election Period, the closing of any such transaction between Belron and the Transferring Shareholder shall be within fourteen (14) calendar days after expiration of the Re-Offer Election Period. If Belron has not elected to purchase all of the Shareholder Shares within the Re-Offer Election Period, the Transferring Shareholder may, within one hundred eighty (180) days after the expiration of the Re-Offer Election Period and subject to the provisions of Section 8(d), transfer such Shareholder Shares to one or more third parties at a price no less than 100% of the price per share specified in the Pre-Transfer Re-Offer Notice. (iii) Any Shareholder Shares subject to a Pre-Transfer Offer Notice or a Pre-Transfer Re-Offer Notice not transferred within the applicable one hundred eighty (180) day period shall be subject to SECTIONS 8(c)(i) AND (ii) prior to any subsequent Transfer. The purchase price specified in any Pre-Transfer Offer Notice or Pre-Transfer Re-Offer Notice shall be payable solely in cash at the closing of the transaction. The closing of the transaction between the -10- 11 Transferring Shareholder and one or more third parties with respect to any Shareholder Shares covered by a Pre-Transfer Offer Notice or a Pre-Transfer Re-Offer Notice shall be within fourteen (14) calendar days of the expiration of the applicable one hundred eighty (180)-day period. (iv) In the case of any proposed sale pursuant to an underwritten public offering, the Transferring Shareholder shall deliver written notice to Belron not less than forty-eight (48) hours (which must include one (1) full Business Day) before entering into a an underwriting or purchase agreement with respect to such underwritten public offering. (d) RIGHT OF FIRST REFUSAL. In addition to compliance with the other requirements of this SECTION 8 and subject to the provisions of SECTION 8(g), in the event that any of the TH Lee Shareholders or any of the Management Shareholders have a bona fide offer from a third party to sell any Shareholder Shares to any Person with respect to which such TH Lee Shareholder(s) and/or Management Shareholder(s), as the case may be, have actual knowledge, after reasonable inquiry of such Person, that such Person is a Supplier or Competitor, prior to making any such Transfer, such TH Lee Shareholder(s) and/or Management Shareholder(s), as the case may be, shall deliver written notice (the "RFR Notice") to Belron. The RFR Notice shall disclose in reasonable detail the identity of the prospective transferee(s), the number of shares to be transferred and the terms and conditions of the transfer. Belron may elect to purchase all (but not less than all) of such Shareholder Shares to be transferred upon the same terms and conditions as those set forth in the RFR Notice by delivering a written notice of such election to the transferring Shareholder within ten (10) days after the RFR Notice has been delivered to Belron ("RFR Election Period"). If Belron has not elected to purchase all of the Shareholder Shares to be transferred within such RFR Election Period, the transferring Shareholder may transfer the Shareholder Shares specified in the RFR Notice at a price and on terms no more favorable to the transferee(s) thereof than specified in the RFR Notice during the ninety (90)-day period immediately following expiration of the RFR Election Period. Any Shareholder Shares not transferred within such ninety (90)-day period shall be subject to the provisions of this SECTION 8(d) upon subsequent transfer. If Belron has elected to purchase Shareholder Shares hereunder, the transfer of such shares shall be consummated as soon as practicable but in any event, within thirty (30) calendar days, after the delivery of the election notice(s) to the transferring Shareholder, on the terms and conditions set forth in the RFR Notice. For purposes of this SECTION 8(d): "Supplier" shall mean (i) any Person who manufactures automotive glass (including, but not limited to, those manufacturers of automotive glass listed on Exhibit D attached hereto), (ii) any Person who acts as a wholesaler of automotive glass, (iii) any Person who acts as a distributor of automotive glass or (iv) any Affiliate of any Person set forth in clause (i), (ii) or (iii); and "Competitor" shall mean any Person who installs or repairs automotive glass or any Affiliate of any such Person. The provisions of this SECTION 8(d) shall not apply to any Public Sale. -11- 12 (e) TAG ALONG RIGHTS. (i) APPLICABILITY OF PROVISIONS. Notwithstanding anything in this Agreement to the contrary, (A) the Kellman Shareholders and the Belron Shareholders shall have no Tag-Along Right with respect to any Transfer by any Shareholder, (B) the Management Shareholders shall have Tag-Along Rights with respect to all Transfers by any Shareholder and (C) the TH Lee Shareholders shall have Tag-Along Rights only with respect to Transfers by the Belron Shareholders. (ii) TAG ALONG NOTICE. In addition to compliance with the other requirements of this SECTION 8 and subject to the provisions of SECTION 8(g), if any Shareholder shall propose to Transfer any Shareholder Shares in a single transaction or series of related transactions, such Shareholder shall have the obligation, and subject to SECTION 8(e)(iv) hereof, each other Shareholder or other Shareholders, as the case may be, shall have the right (the "Tag-Along Right"), to require the proposed transferee of such Shareholder Shares to purchase from such other Shareholder, at the same price per share and upon the same terms and conditions as to be paid and given to the transferring Shareholder, the number of Shareholder Shares equal to the product obtained by multiplying (A) the number of Shareholder Shares held by each such other Shareholder times, (B) the quotient derived by dividing (1) the number of Shareholder Shares which otherwise would have been sold by the transferring Shareholder by (2) the sum of the total number of Shareholder Shares held by the transferring Shareholder plus the total number of Shareholder Shares held by the other Shareholders electing to participate in the sale; provided that in order to be entitled to exercise its right to Transfer securities to the proposed transferee pursuant to this SECTION 8(e), each other Shareholder seeking to Transfer its Shareholder Shares must agree to make substantially the same representations, warranties, covenants and indemnities relating to title to such securities, and power and authority to transfer such Shareholder Shares as the transferring Shareholder agrees to make in connection with its proposed Transfer of Shareholder Shares. (iii) ELECTION. Upon receipt by a transferring Shareholder of a bona fide offer to purchase its Shareholder Shares pursuant to SECTION 8(e)(i), the transferring Shareholder shall notify each other Shareholder, in writing, of such offer and its terms and conditions, which written notice shall include the number of Shareholder Shares the transferring Shareholder desires to sell, the name of the purchasers and the consideration offered in connection therewith (the "Sale Notice"). Each other Shareholder may exercise its right to sell under this SECTION 8(e) by giving written notice to the transferring Shareholder within five (5) Business Days after the date on which such other Shareholder received the Sale Notice from the transferring Shareholder pursuant to this SECTION 8(e)(ii). (iv) BEST EFFORTS. The transferring Shareholder shall use its best efforts to obtain the agreement of the prospective transferee(s) to the participation of other Shareholders in the contemplated transfer and shall not transfer any Shareholder Shares -12- 13 to the prospective transferee(s) if such transferee(s) refuses to allow the participation of the other Shareholders. (v) TERMINATION. The provisions of this SECTION 8(e) shall terminate upon the consummation of an IPO. (f) DRAG ALONG RIGHTS. (i) THIRD PARTY TRANSACTION. Belron, TH Lee and the Board shall collectively have the right to approve a Sale of the Company at any time after the date hereof. In the event of such approval by each of Belron, TH Lee and the Board, each Shareholder shall vote for, consent to and raise no objections to such Sale of the Company. If the Sale of the Company is structured as a (i) merger or consolidation, each holder of Shareholder Shares shall waive any dissenters rights, appraisal rights or similar rights in connection with such merger or consolidation or (ii) sale of stock, each Shareholder shall agree to sell all of its Shareholder Shares and rights to acquire Shareholder Shares on the terms and conditions approved by Belron, TH Lee and the Board. Each Shareholder shall take all necessary or desirable actions in connection with the consummation of the Sale of the Company as requested by Belron, TH Lee and the Board. (ii) ELECTION. Belron and TH Lee shall deliver written notice to the Company and the other Shareholders (the "Other Shareholders") setting forth in reasonable detail the terms of the proposed Sale of the Company at least ten (10) days prior to the consummation of the Sale of the Company (the "Sale of the Company Notice"). Belron and TH Lee shall have one hundred eighty (180) days after the delivery of the Sale of the Company Notice to consummate the Sale of the Company on the terms specified in the Sale of the Company Notice. If the Sale of the Company is not consummated within such one hundred eighty (180)-day period, Belron and TH Lee shall again comply with the provisions of this SECTION 8(f). (iii) CONDITIONS TO OBLIGATION. The obligations of the Other Shareholders to participate in the Sale of the Company are subject to the satisfaction of the conditions that, upon consummation of the Sale of the Company, all holders of Common Stock shall receive the same form and amount of consideration per share of Common Stock (including for this purpose amounts allocated to noncompetition, consulting and other arrangements), or if the holders of Common Stock are given an option as to the form and consideration to be received, all holders shall be given the same option. (iv) TERMINATION. The provisions of this SECTION 8(f) shall terminate upon the consummation of an IPO. (g) PERMITTED TRANSFERS. The restrictions on Transfer set forth in this SECTION 8 shall not apply with respect to any of the following (each, a "Permitted Transfer"): -13- 14 (i) a Transfer of Shareholder Shares from the Kellman Shareholders to Belron, another Kellman Shareholder, Joseph Kellman or a trust for the benefit of Joseph Kellman; (ii) a Transfer of Shareholder Shares by any Shareholder who is a natural person, the Family Revocable Trust listed on Exhibit A or Joseph Kellman to such Shareholder's or Joseph Kellman's spouse, children, grandchildren, parents or siblings, one or more trusts for the benefit of any of such persons or a family limited partnership of which such persons are the only partners (each, a "Family Member"); (iii) a bona fide pledge of Shareholder Shares by a Shareholder to a bank or financial institution; (iv) a Transfer of Shareholder Shares between any Shareholder who is a natural person and such Shareholder's guardian or conservator; (v) a bona fide gift of Shareholder Shares by a Shareholder to a charitable institution as defined in Section 501(c) of the Internal Revenue Code of 1986, as amended; (vi) a Transfer of Shareholder Shares from any Shareholder which is a partnership to its partners; (vii) a Transfer of Shareholder Shares from any Shareholder which is a corporation or partnership to any Affiliate of such Shareholder or to any officer or director of such Shareholder; or (viii) a Transfer of Shareholder Shares by a Belron Shareholder or TH Lee Shareholder to (A) any Affiliate of such Shareholder, (B) another Belron Shareholder or TH Lee Shareholder, as appropriate, or (C) an employee of Belron or Thomas H. Lee Company, as appropriate. The restrictions contained in this SECTION 8 shall continue to be applicable to the Shareholder Shares after any such Transfer and; provided, further, no Permitted Transfer shall be effective unless and until the transferee of such Shareholder Shares shall have executed and delivered to the Company an executed counterpart of this Agreement in accordance with Section 28 hereof and; provided, further that any Permitted Transfer shall require the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, no Shareholder shall avoid the provisions of this Agreement by making one or more Permitted Transfers and then disposing of all or any portion of such Shareholder's interest in the Permitted Transferee. (h) RESTRICTIVE LEGEND. Any certificate representing Shareholder Shares will bear the following Legend: -14- 15 "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THAT ACT AS TO SAID SECURITIES OR AN OPINION, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY AND GIVEN BY COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET FORTH IN A Shareholders AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER DATED AS OF __________, 1997. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." (i) OPINION OF COUNSEL. No Shareholder may Transfer any Shareholder Shares (except Transfers pursuant to an effective registration statement under the Securities Act or pursuant to the laws of descent and distribution) without first delivering to the Company an opinion of counsel in form and substance reasonably satisfactory to the Company and given by counsel reasonably satisfactory to the Company that (i) neither registration nor qualification under the Securities Act and applicable state securities laws is required in connection with such Transfer and (ii) subject to reasonable factual qualifications and assumptions, such Transfer does not and will not contravene or violate the terms of this Agreement. (j) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted Transfer of any Shareholder Shares in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported transferee of such Shareholder Shares as the owner of such Shareholder Shares for any purpose. 9. PRE-EMPTIVE RIGHTS. (a) If the Company authorizes the issuance and sale of Additional Shares, then, subject to SECTION 9(f) herein, the Company will offer to sell (the "Offer") to each Shareholder, and each such Shareholder may elect to purchase, up to that number of Additional Shares, such that following such purchase, each such Shareholder is able to maintain the same percentage ownership (on a fully-diluted basis) of Shareholder Shares which each such Shareholder owned immediately prior to the offer of Additional Shares. (b) The Company shall give written notice of the issuance of Additional Shares (the "Issuance Notice"), which notice shall set forth the price and other terms of such issuance, to each of the Shareholders at any time prior to the issuance of such Additional Shares (the "Issuance Date"), or within ten (10) days following the Issuance Date. Upon receipt of the Issuance Notice, any Shareholder may accept the Offer by giving written notice to the Company within ten (10) -15- 16 days following receipt of the Issuance Notice, which written notice shall specify the number of Additional Shares which such Shareholder wishes to purchase. Payment in the full amount of the price for the Additional Shares shall be made by wire transfer of immediately available funds, to the account designated by the Company in the Issuance Notice, on the day that is the later to occur of (i) the closing date of the transaction pursuant to which such Additional Shares are being issued and (ii) three (3) Business days after such Shareholder gives the Company written notice of acceptance of the Offer. (c) Each Shareholder will be entitled to purchase Additional Shares at the same price and upon the same terms as Additional Shares being offered to the other purchaser thereof; provided that, if such other persons is to pay for such Additional Shares in whole or in part with consideration other than cash, then the Board, in its good faith judgment, shall make a determination of the fair market value of such consideration, and each Shareholder will be entitled to purchase the Additional Shares for cash equal to the fair market value of the aggregate cash and non-cash consideration each of them would otherwise pay hereunder. Notwithstanding the foregoing, no Shareholder will be permitted to exercise its rights under this SECTION 9 unless it agrees to purchase all shares of Common Stock offered as a package or unit in the issuance of the Additional Shares. (d) The Company shall promptly deliver to each Shareholder purchasing Additional Shares hereunder certificates evidencing such Additional Shares purchased by such Shareholder, upon receipt of payment therefor, and upon execution of such documents and instruments as shall govern the issuance of such Additional Shares. (e) The provisions of this Section 9 shall terminate upon consummation of an IPO. (f) Notwithstanding anything in this Agreement to the contrary, the Kellman Shareholders shall not be entitled to any pre-emptive rights with respect to the issuance of any securities of and by the Company. 10. RESTRICTIVE COVENANTS. (a) BELRON AND TH LEE APPROVAL. Until the Triggering Day, neither the Board nor any committee thereof will take or ratify, on behalf of the Company or any Subsidiary, any of the following actions, without the prior written consent of Belron and TH Lee: (i) MERGERS. Merger or consolidation of the Company or any of its Subsidiaries with any Person, other than mergers with a wholly-owned Subsidiary. (ii) ASSET DISPOSITIONS. Sell, assign, transfer, lease or otherwise dispose of all or substantially all of the consolidated assets of the Company and its wholly-owned Subsidiaries (computed on the basis of book value, determined in accordance with GAAP, or fair market value as determined by the Board in its reasonable good faith judgment) in -16- 17 any transaction or series of related transactions, other than the sale or disposition of inventory in the ordinary course of business. (iii) RELATED PARTY ARRANGEMENTS. Enter into, amend, modify or supplement, or permit any Subsidiary to enter into amend, modify or supplement, any agreement or other transaction with any of the Company's or any of its Subsidiary's officers, directors, employees or Affiliates of any of the foregoing on terms that are less favorable to the Company or any of its Subsidiaries than could be obtained in an arms length transaction. (iv) ACQUISITIONS; JOINT VENTURES. Acquire, or permit any Subsidiary to acquire, any interest in any Person, or enter into, or permit any Subsidiary to enter into, any joint venture involving an investment by the Company or any of its Subsidiaries in excess of $10 million. (v) PERSONNEL. Hire or fire any Chief Executive Officer or other executive officer of the Company listed on attached hereto. (vi) BUDGET. Approval of annual operating plan, including capital expenditure budget and annual operating budget, and any substantial change to a previously approved operating plan or budget. (vii) AMENDMENTS TO CERTIFICATE OF INCORPORATION AND BYLAWS. Amend, modify, supplement or restate the Amended and Restated Certificate of Incorporation of the Company or the Amended and Restated Bylaws of the Company. (b) DEADLOCK RELATED TO BUDGET. Until the Triggering Day, in the event that Belron and TH Lee shall fail to agree upon the annual budget for the next year, the budget approved for the immediately preceding year shall remain in effect until such time as Belron and TH Lee shall agree upon the annual budget for the next year; provided, that the Company may spend in that next year up to 110% of the prior year's aggregate budget, subject to a greater increase, in each case, upon approval of the next annual budget by Belron and TH Lee. (c) FINANCINGS. Until the Triggering Day, neither the Board nor any committee thereof will approve, recommend or ratify, on behalf of the Company or any Subsidiary, any debt or equity financing transactions in which the Company or any of its Subsidiaries is expected to receive net proceeds in excess of $25 million without the prior written approval of TH Lee. 11. AGREEMENTS WITH RESPECT TO AN IPO; RIGHT TO CALL FOR AN IPO. (a) RIGHT TO CALL FOR AN IPO. (i) TH Lee shall have the right to require the Company to undertake an IPO at any time after the date of this Agreement, which right shall be exclusive for thirty-six (36) months after the date hereof. -17- 18 (ii) At any time after the first thirty-six (36) months after the date hereof, Belron shall have the non-exclusive right to require the Company to undertake an IPO. (b) FURTHER ASSURANCES. In the event that an initial public offering of the equity securities of the Company is approved pursuant to an effective registration statement under the Securities Act, the Shareholders shall take all necessary or desirable actions in connection with the consummation of the IPO. In the event that such IPO is an underwritten offering and the managing underwriters advise the Company in writing that, in their opinion, the equity securities structure would adversely affect the marketability of the offering, each holder shall consent to and vote for a recapitalization, reorganization and/or exchange; provided that the resulting securities reflect and are consistent with the rights and preferences set forth in the Company's Certificate of Incorporation as in effect immediately prior to such IPO. Notwithstanding the foregoing, in the case of an IPO called by TH Lee pursuant to Section 11(a)(i), the Shareholders shall not be required to take any action which could reasonably be expected to have a material adverse tax or accounting effect on the Company based on the reasonable determination of TH Lee. 12. NOTICES. Any notices, consents or other communication required to be sent or given hereunder by any of the parties shall in every case be in writing and shall be deemed properly served if (a) delivered personally, (b) sent by registered or certified mail, in all such cases with first class postage prepaid, return receipt requested, (c) delivered by a recognized overnight courier service, or (d) sent by telecopy transmission to the parties at the addresses as set forth below or at such other addresses as may be furnished in writing. (a) If to the Company: Safelite Glass Corp. 1105 Schrock Road Columbus, Ohio 43229 Attention: President Telecopy: (614) 842-3323 with copies to: Belron International NV Kaya Krisolito P.O. Box 342 Kralendijk Bonaire Netherlands Antilles Telecopy: 59-9-75-449 and Director: Group Legal Services -18- 19 Attention: Louis Shakinovsky Belron International c/o The Kings Observatory Old Deer Park Richmond Surrey TW9 2AZ ENGLAND Telecopy: 44-181-948-7340 and Katten Muchin & Zavis 525 West Monroe Street Suite 1600 Chicago, Illinois 60661 Attention: David R. Shevitz, Esq. Telecopy: (312) 902-1061 and The Thomas H. Lee Company 75 State Street Boston, Massachusetts 02109 Attention: Anthony J. DiNovi Scott M. Sperling Telecopy: (617) 227-3514 and Hutchins, Wheeler & Dittmar A Professional Corporation 101 Federal Street Boston, Massachusetts 02110 Attention: Charles W. Robins, Esq. Telecopy: (617) 951-1295 (b) If to the Kellman Shareholders to: Joseph Kellman 1000 North Lake Shore Drive Apt. 47-B Chicago, IL 60610 Telecopy: (312) 280-8070 -19- 20 and Allan B. Muchin, Trustee c/o Katten Muchin & Zavis 525 West Monroe Suite 1600 Chicago, Illinois 60661 Telecopy: (312) 902-1061 with a copy to: Katten Muchin & Zavis 525 West Monroe Street Suite 1600 Chicago, Illinois 60661 Attention: David R. Shevitz, Esq. Telecopy: (312) 902-1061 (c) If to the Belron Shareholders: Belron International NV Kaya Krisolito P.O. Box 342 Kralendijk Bonaire Netherlands Antilles Telecopy: 59-9-75-449 and Director: Group Legal Services Attention: Louis Shakinovsky Belron International c/o The Kings Observatory Old Deer Park Richmond Surrey TW9 2AZ ENGLAND Telecopy: 44-181-948-7340 -20- 21 and Katten Muchin & Zavis 525 West Monroe Street Suite 1600 Chicago, Illinois 60661 Attention: David R. Shevitz, Esq. Telecopy: (312) 902-1061 (d) If to the TH Lee Shareholders or the Management Shareholders: The Thomas H. Lee Company 75 State Street Boston, Massachusetts 02109 Attention: Anthony J. DiNovi Scott M. Sperling Telecopy: (617) 227-3514 and: Hutchins, Wheeler & Dittmar A Professional Corporation 101 Federal Street Boston, Massachusetts 02110 Attention: Charles W. Robins, Esq. Telecopy: (617) 951-1295 Date of service of such notice shall be (w) the date such notice is personally delivered, (x) three days after the date of mailing if sent by certified or registered mail, (y) one day after date of delivery to the overnight courier if sent by overnight courier or (z) if transmitted by telecopy, upon receipt of confirmation of delivery; provided, that, within three (3) days of such transmission, service is also made by personal delivery, mail or overnight courier as permitted herein. 13. SEVERABILITY. If any provision of this Agreement is, for any reason, invalid or unenforceable, the remaining provisions of this Agreement will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Agreement that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect. 14. AMENDMENT AND WAIVER. Except as otherwise provided herein, the provisions of this Agreement may be modified, amended or waived by the written agreement of Belron (acting on behalf of the Belron Shareholders and on behalf of the Kellman Shareholders), and TH Lee (acting -21- 22 on behalf of the TH Lee Shareholders and on behalf of the Management Shareholders); provided, however, that no amendment may adversely affect the Kellman Shareholders at any time, unless consented to in writing by a majority in interest of such Kellman Shareholders; provided further that no amendment may adversely affect the Management Shareholders at any time, unless consented to in writing by a majority in interest of such Management Shareholders. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. 15. COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the other. 16. GOVERNING LAW. This Agreement will be governed and construed in accordance with the laws of the State of New York, without giving effect to its principles of conflicts of laws. 17. INTERPRETATIVE MATTERS. Unless the context otherwise requires, (i) all references to Articles, Sections, Schedules or Exhibits are to Articles, Sections, Schedules or Exhibits in this Agreement; (ii) each accounting term not otherwise defined in this Agreement has the meaning assigned to it in accordance with GAAP; (iii) words in the singular or plural include the singular and plural and pronouns stated in either the masculine, the feminine or neuter gender shall include the masculine, feminine and neuter; (iv) the headings contained in this Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement; and (v) whenever the words "include", "includes" or "including" are used in this Agreement they shall be deemed to be followed by the words "but not limited to." 18. SUCCESSORS. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the parties and their successors and assigns. 19. NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction will be applied against any party hereto. 20. DOCUMENTS. Each party will execute all documents and take such other actions as any other party may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Agreement. 21. ARBITRATION. If any controversy or claim from the application and interpretation of the terms of this Agreement cannot be settled by the parties hereto within a reasonable period of time, then the controversy or claim shall be settled by arbitration, unless the controversy or claim is prohibited by the law from being arbitrated. Arbitration shall be the sole remedy for disputes hereunder, unless the controversy or claim is prohibited by the law from being arbitrated. The arbitration shall be conducted in accordance with the Rules of the American Arbitration -22- 23 Association (the "AAA Rules") and held in New York, New York. Any party hereunder seeking arbitration shall file a written notice of demand for arbitration with the other parties hereunder and with the American Arbitration Association. Three Arbitrators shall be appointed in accordance with the AAA Rules ("Arbitrators"). The decision and award of the Arbitrators shall be binding among the parties and judgment on the award may be entered in any court having jurisdiction as provided in SECTION 22 hereof. The Arbitrators shall have no previous employment by, consulting with, or business relationship with any party or its Affiliates. Questions regarding discovery or evidentiary issues shall be referred to the Arbitrators and the Arbitrators' decisions shall be final and binding on such issues. The Arbitrators may consider any material relevant to the subject matter of the dispute even if such material may also relate to issues not subject to arbitration. An audio recording of any arbitration hearing shall be made. The Arbitrators may award any appropriate relief including without limitation, an award for damages, specific performance or other equitable relief. The award shall be in writing, accompanied by a written opinion detailing the reasons for the award, and signed by the Arbitrators. Each party to such arbitration shall pay its own expenses and fees, except that administrative expenses (including the Arbitrators' fee) shall be divided equally between the parties to the arbitration. 22. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH OF THE PARTIES HERETO HEREBY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK AND IRREVOCABLY AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER RELATED DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH OF THE PARTIES HERETO ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE OR FORUM NON CONVENIENS, AND IRREVOCABLY AGREE TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. THE BELRON SHAREHOLDERS HEREBY DESIGNATE AND APPOINT CT CORPORATION SYSTEM AT 208 S. LASALLE STREET, CHICAGO, ILLINOIS 60604 AND SUCH OTHER PERSONS AS MAY HEREINAFTER BE SELECTED BY THE BELRON SHAREHOLDERS, WHICH PERSONS SHALL IRREVOCABLY AGREE IN WRITING TO SO SERVE AS AGENT TO RECEIVE ON THE BELRON SHAREHOLDERS' BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE BELRON SHAREHOLDERS TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE BELRON SHAREHOLDERS AS PROVIDED HEREIN, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY THE BELRON SHAREHOLDERS REFUSES TO ACCEPT SERVICE, THEN THE BELRON SHAREHOLDERS HEREBY AGREE THAT SERVICE UPON THEM BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY OTHER PARTY HERETO TO SERVE -23- 24 PROCESS ON THE BELRON SHAREHOLDERS IN ANY OTHER MANNER PERMITTED BY LAW. 23. WAIVER OF JURY TRIAL. THE PARTIES HEREBY, BY EXECUTION HEREOF, WAIVE ANY AND ALL RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS AMONG THEM RELATING TO THE SUBJECT MATTER OF THE PROPOSED TRANSACTIONS AND THE RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO ENCOMPASS ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE PARTIES ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE PARTIES HEREBY FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 24. ENTIRE AGREEMENT. Except as otherwise expressly set forth herein, this Agreement embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. Notwithstanding the foregoing, the Company and the Shareholders agree that this Agreement supersedes and replaces the Old Agreement and that the Old Agreement is no longer binding on any party thereto. 25. REMEDIES. The parties acknowledge and agree that money damages may not be an adequate remedy for any breach or threatened breach by a party of its obligations under this Agreement, and for that reason, among others, the non-breaching party or parties will be irreparably damaged and may not have an adequate remedy at law. Therefore, notwithstanding the provisions of SECTION 21, the parties agree that the other party may pursue injunctive relief and/or specific performance in any court of competent jurisdiction to enforce any of the provisions of this Agreement. If any of the parties institutes any such action or proceeding solely for injunctive relief and/or specific performance, then the other parties hereby waive arbitration thereof under SECTION 21 for such action solely as it relates to injunctive relief and/or specific -24- 25 performance and shall not assert in any such action or proceeding the claim or defense that any matter of injunctive relief an/or specific performance is to be submitted to arbitration under SECTION 21. The foregoing remedy is in addition to any and all other remedies which a party may have. 26. NO INCONSISTENT AGREEMENTS. None of the parties hereto will hereafter enter into any agreement which is inconsistent with the rights granted to the parties in this Agreement. 27. THIRD PARTIES. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties to this Agreement and their respective permitted successors and assigns, any rights or remedies under or by reason of this Agreement. 28. ADDITIONAL SHAREHOLDERS. Any person or entity who is not at the time a Shareholder acquiring Shareholder Shares (except for transferees acquiring Shareholder Shares in a Public Sale), shall, on or before the Transfer or issuance of it of Shareholder Shares, sign a counterpart signature page hereto in form reasonably satisfactory to the Company and shall thereby become a party to this Agreement to be bound hereunder as (i) a Management Shareholder if a Permitted Transferee thereof or an employee of the Company or any of its Subsidiaries, (ii) a TH Lee Shareholder if a Permitted Transferee thereof or an employee or Affiliate of Thomas H. Lee Company, (iii) a Belron Shareholder if a Permitted Transferee thereof or (iv) a Kellman Shareholder if a Permitted Transferee thereof; provided, that a transferee which is a Permitted Transferee under clause (iii) of the definition of Permitted Transfer shall not be obligated to so agree until foreclosure on its pledge. 29. ROLE OF TRUSTEE. Each of Allan B. Muchin, Maurice Raizes and Marvin Zimmerman is executing this Agreement as a trustee of the Kellman Trusts listed on Exhibit A attached hereto and shall be conclusively deemed to be executing such documents only in such capacity. Each of Allan B. Muchin, Maurice Raizes and Marvin Zimmerman shall not be liable personally to any other party hereto in the event of any actual or alleged breach of any provision contained herein by any of the Kellman Trusts, except in the event of any willful breach of this Agreement established by clear and convincing evidence. Each party agrees to look solely to the estate of the Kellman Trusts and not to any trustee thereof in such trustee's individual capacity for any damages or other remedy for a breach by a Kellman Trust of any provision contained herein except in the event of any willful breach of this Agreement established by clear and convincing evidence. - 25 - 26 IN WITNESS WHEREOF, parties hereto have caused this Shareholders Agreement to be signed as of the date first written above. SAFELITE GLASS CORP.: By: /s/ Douglas A. Herron ----------------------------------- Name: Douglas A. Herron Title: Treasurer BELRON (USA) BV: By: ----------------------------------- Name: Title: KELLMAN SHAREHOLDERS: FAMILY REVOCABLE TRUST By: ----------------------------------- Joseph Kellman, not individually but solely as trustee J-K GIFT TRUST U/A/D 12/16/91 JOSEPH KELLMAN 1995 DESCENDANTS TRUST FOR THE FAMILY OF JACK U/A/D 11/8/95 JOSEPH KELLMAN 1995 DESCENDANTS TRUST FOR THE FAMILY OF RICHARD U/A/D 11/8/95 JOSEPH KELLMAN 1995 DESCENDANTS TRUST FOR THE FAMILY OF CELIA U/A/D 11/8/95 JOSEPH KELLMAN 1995 GIFT TRUST FOR THE FAMILY OF JACK U/A/D 11/8/95 JOSEPH KELLMAN 1995 GIFT TRUST FOR THE FAMILY OF RICHARD U/A/D 11/8/95 27 IN WITNESS WHEREOF, parties hereto have caused this Shareholders Agreement to be signed as of the date first written above. SAFELITE GLASS CORP.: By: ----------------------------------- Name: Douglas A. Herron Title: Treasurer BELRON (USA) BV: By: /s/ M.L. Shakinovsky ----------------------------------- Name: M.L. Shakinovsky Title: Director KELLMAN SHAREHOLDERS: FAMILY REVOCABLE TRUST By: ----------------------------------- Joseph Kellman, not individually but solely as trustee J-K GIFT TRUST U/A/D 12/16/91 JOSEPH KELLMAN 1995 DESCENDANTS TRUST FOR THE FAMILY OF JACK U/A/D 11/8/95 JOSEPH KELLMAN 1995 DESCENDANTS TRUST FOR THE FAMILY OF RICHARD U/A/D 11/8/95 JOSEPH KELLMAN 1995 DESCENDANTS TRUST FOR THE FAMILY OF CELIA U/A/D 11/8/95 JOSEPH KELLMAN 1995 GIFT TRUST FOR THE FAMILY OF JACK U/A/D 11/8/95 JOSEPH KELLMAN 1995 GIFT TRUST FOR THE FAMILY OF RICHARD U/A/D 11/8/95 JOSEPH KELLMAN 1995 GIFT TRUST FOR THE FAMILY OF CELIA U/A/D 11/8/95 By: ----------------------------------- 28 IN WITNESS WHEREOF, parties hereto have caused this Shareholders Agreement to be signed as of the date first written above. SAFELITE GLASS CORP.: By: ----------------------------------- Name: Douglas A. Herron Title: Treasurer BELRON (USA) BV: By: ----------------------------------- Name: Title: KELLMAN SHAREHOLDERS: FAMILY REVOCABLE TRUST By: /s/ Joseph Kellman ----------------------------------- Joseph Kellman, not individually but solely as trustee J-K GIFT TRUST U/A/D 12/16/91 JOSEPH KELLMAN 1995 DESCENDANTS TRUST FOR THE FAMILY OF JACK U/A/D 11/8/95 JOSEPH KELLMAN 1995 DESCENDANTS TRUST FOR THE FAMILY OF RICHARD U/A/D 11/8/95 JOSEPH KELLMAN 1995 DESCENDANTS TRUST FOR THE FAMILY OF CELIA U/A/D 11/8/95 JOSEPH KELLMAN 1995 GIFT TRUST FOR THE FAMILY OF JACK U/A/D 11/8/95 JOSEPH KELLMAN 1995 GIFT TRUST FOR THE FAMILY OF RICHARD U/A/D 11/8/95 29 JOSEPH KELLMAN 1995 GIFT TRUST FOR THE FAMILY OF CELIA U/A/D 11/8/95 By: /s/ Allan B. Muchin ----------------------------------- Allan B. Muchin, not individually but solely as trustee of each of the above seven trusts By: /s/ Maurice Raizes ----------------------------------- Maurice Raizes, not individually but solely as trustee of each of the above seven trusts By: /s/ Marvin Zimmerman ----------------------------------- Marvin Zimmerman, not individually but solely as trustee of each of the above seven trusts TH LEE SHAREHOLDERS: THOMAS H. LEE EQUITY FUND III, L.P. By: THL Equity Advisors III Limited Partnership, General Partner By: THL Equity Trust, General Partner By: ----------------------------------- THOMAS H. LEE FOREIGN FUND III, L.P. By: THL Equity Advisors III Limited Partnership, General Partner By: THL Equity Trust, General Partner By: ----------------------------------- 30 JOSEPH KELLMAN 1995 GIFT TRUST FOR THE FAMILY OF CELIA U/A/D 11/8/95 By: ----------------------------------- Allan B. Muchin, not individually but solely as trustee of each of the above seven trusts By: ----------------------------------- Maurice Raizes, not individually but solely as trustee of each of the above seven trusts By: ----------------------------------- Marvin Zimmerman, not individually but solely as trustee of each of the above seven trusts TH LEE SHAREHOLDERS: THOMAS H. LEE EQUITY FUND III, L.P. By: THL Equity Advisors III Limited Partnership, General Partner By: THL Equity Trust, General Partner By: /s/ Scott M. Sperling ----------------------------------- Scott M. Sperling THOMAS H. LEE FOREIGN FUND III, L.P. By: THL Equity Advisors III Limited Partnership, General Partner By: THL Equity Trust, General Partner By: /s/ Scott M. Sperling ----------------------------------- Scott M. Sperling 31 THL-CCI INVESTORS LIMITED PARTNERSHIP By: THL Investment Management Corp., general partner By: /s/ Scott M. Sperling ----------------------------------- Scott M. Sperling BIG BEND INVESTMENTS, L.P. By: ----------------------------------- Name: Morton H. Meyerson Title: General Partner MAJORITY IN INTEREST OF THE MANAGEMENT SHAREHOLDERS: ---------------------------------------- Garen K. Staglin ---------------------------------------- John F. Barlow ---------------------------------------- Douglas A. Herron ---------------------------------------- Elizabeth A. Wolszon ---------------------------------------- Douglas R. Maehl ---------------------------------------- James K. West ---------------------------------------- Poe A. Timmons 32 THL-CCI INVESTORS LIMITED PARTNERSHIP By: THL Investment Management Corp., general partner By: ----------------------------------- BIG BEND INVESTMENTS, L.P. By: /s/ Morton H. Meyerson ----------------------------------- Name: Morton H. Meyerson Title: General Partner MAJORITY IN INTEREST OF THE MANAGEMENT SHAREHOLDERS: ---------------------------------------- Garen K. Staglin ---------------------------------------- John F. Barlow ---------------------------------------- Douglas A. Herron ---------------------------------------- Elizabeth A. Wolszon ---------------------------------------- Douglas R. Maehl ---------------------------------------- James K. West ---------------------------------------- Poe A. Timmons 33 THL-CCI INVESTORS LIMITED PARTNERSHIP By: THL Investment Management Corp., general partner By: ----------------------------------- BIG BEND INVESTMENTS, L.P. By: ----------------------------------- Name: Morton H. Meyerson Title: General Partner MAJORITY IN INTEREST OF THE MANAGEMENT SHAREHOLDERS: /s/ Garen K. Staglin ---------------------------------------- Garen K. Staglin ---------------------------------------- John F. Barlow ---------------------------------------- Douglas A. Herron ---------------------------------------- Elizabeth A. Wolszon ---------------------------------------- Douglas R. Maehl ---------------------------------------- James K. West ---------------------------------------- Poe A. Timmons 34 THL-CCI INVESTORS LIMITED PARTNERSHIP By: THL Investment Management Corp., general partner By: ----------------------------------- BIG BEND INVESTMENTS, L.P. By: ----------------------------------- Name: Morton H. Meyerson Title: General Partner MAJORITY IN INTEREST OF THE MANAGEMENT SHAREHOLDERS: ---------------------------------------- Garen K. Staglin /s/ John F. Barlow ---------------------------------------- John F. Barlow ---------------------------------------- Douglas A. Herron ---------------------------------------- Elizabeth A. Wolszon ---------------------------------------- Douglas R. Maehl ---------------------------------------- James K. West ---------------------------------------- Poe A. Timmons 35 THL-CCI INVESTORS LIMITED PARTNERSHIP By: THL Investment Management Corp., general partner By: ----------------------------------- BIG BEND INVESTMENTS, L.P. By: ----------------------------------- Name: Morton H. Meyerson Title: General Partner MAJORITY IN INTEREST OF THE MANAGEMENT SHAREHOLDERS: ---------------------------------------- Garen K. Staglin ---------------------------------------- John F. Barlow /s/ Douglas A. Herron ---------------------------------------- Douglas A. Herron ---------------------------------------- Elizabeth A. Wolszon ---------------------------------------- Douglas R. Maehl ---------------------------------------- James K. West ---------------------------------------- Poe A. Timmons 36 THL-CCI INVESTORS LIMITED PARTNERSHIP By: THL Investment Management Corp., general partner By: ----------------------------------- BIG BEND INVESTMENTS, L.P. By: ----------------------------------- Name: Morton H. Meyerson Title: General Partner MAJORITY IN INTEREST OF THE MANAGEMENT SHAREHOLDERS: ---------------------------------------- Garen K. Staglin ---------------------------------------- John F. Barlow ---------------------------------------- Douglas A. Herron /s/ Elizabeth A. Wolszon ---------------------------------------- Elizabeth A. Wolszon ---------------------------------------- Douglas R. Maehl ---------------------------------------- James K. West ---------------------------------------- Poe A. Timmons 37 THL-CCI INVESTORS LIMITED PARTNERSHIP By: THL Investment Management Corp., general partner By: ----------------------------------- BIG BEND INVESTMENTS, L.P. By: ----------------------------------- Name: Morton H. Meyerson Title: General Partner MAJORITY IN INTEREST OF THE MANAGEMENT SHAREHOLDERS: ---------------------------------------- Garen K. Staglin ---------------------------------------- John F. Barlow ---------------------------------------- Douglas A. Herron ---------------------------------------- Elizabeth A. Wolszon /s/ Douglas R. Maehl ---------------------------------------- Douglas R. Maehl ---------------------------------------- James K. West ---------------------------------------- Poe A. Timmons 38 THL-CCI INVESTORS LIMITED PARTNERSHIP By: THL Investment Management Corp., general partner By: ----------------------------------- BIG BEND INVESTMENTS, L.P. By: ----------------------------------- Name: Morton H. Meyerson Title: General Partner MAJORITY IN INTEREST OF THE MANAGEMENT SHAREHOLDERS: ---------------------------------------- Garen K. Staglin ---------------------------------------- John F. Barlow ---------------------------------------- Douglas A. Herron ---------------------------------------- Elizabeth A. Wolszon ---------------------------------------- Douglas R. Maehl /s/ James K. West ---------------------------------------- James K. West ---------------------------------------- Poe A. Timmons 39 THL-CCI INVESTORS LIMITED PARTNERSHIP By: THL Investment Management Corp., general partner By: ----------------------------------- BIG BEND INVESTMENTS, L.P. By: ----------------------------------- Name: Morton H. Meyerson Title: General Partner MAJORITY IN INTEREST OF THE MANAGEMENT SHAREHOLDERS: ---------------------------------------- Garen K. Staglin ---------------------------------------- John F. Barlow ---------------------------------------- Douglas A. Herron ---------------------------------------- Elizabeth A. Wolszon ---------------------------------------- Douglas R. Maehl ---------------------------------------- James K. West /s/ Poe A. Timmons ---------------------------------------- Poe A. Timmons 40 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ Brian D. O'Mara ---------------------------------------- Print Name: Brian D. O'Mara ---------------------------- Address: 1105 Lincoln Road ---------------------------- Grandview Heights, OH 43212 ---------------------------- 41 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ David P. Stagner --------------------------------------- Print Name: David Stagner ---------------------------- Address: 7742 Bale Kenyon Road ---------------------------- Lewis Center, OH 43035 ---------------------------- 42 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ Frederick R. Barnard --------------------------------------- Print Name: Frederick R. Barnard ---------------------------- Address: 2414 Waterside Dr. ---------------------------- Aurora, IL 60504 ---------------------------- 43 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ Garth R. Beck --------------------------------------- Print Name: Garth R. Beck ---------------------------- Address: 2232 Ave. 13070 So. ---------------------------- Riverton, UT 84065 ---------------------------- 44 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ Ronald H. Duncan --------------------------------------- Print Name: Ronald H. Duncan ---------------------------- Address: 147 Meadow Ridge Ct. ---------------------------- Powell, OH 43065 ---------------------------- 45 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ August N. Gassiot --------------------------------------- Print Name: August N. Gassiot ---------------------------- Address: 2312 N. Cumberland ---------------------------- Metairie, LA 70003 ---------------------------- 46 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ Gary J. Strain --------------------------------------- Print Name: Gary J. Strain ---------------------------- Address: 24 Chadwick Dr. ---------------------------- Voorhees, NJ 08043 ---------------------------- 47 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ Robert A. Carlson --------------------------------------- Print Name: Robert A. Carlson ---------------------------- Address: 21 Edwards Road ---------------------------- Natick, MA 01760 ---------------------------- 48 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ Steven B. Micheli --------------------------------------- Print Name: Steven B. Micheli ---------------------------- Address: 4033 Gloucester Rd. ---------------------------- Rocky Mount, NC 27803 ---------------------------- 49 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ Craig D. Douglas --------------------------------------- Print Name: Craig D. Douglas ---------------------------- Address: 6345 Lido Ct. ---------------------------- Dublin, OH 43016 ---------------------------- 50 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ Michael Von Fenstermalher --------------------------------------- Print Name: Michael Von Fenstermalher ---------------------------- Address: 6911 Lauren Place ---------------------------- Columbus, Ohio 43235 ---------------------------- 51 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ Michael G. Ridgway --------------------------------------- Print Name: Michael G. Ridgway ---------------------------- Address: 6452 Worthington Rd. ---------------------------- Westerville, OH 43082 ---------------------------- 52 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ Thomas M. Feeney --------------------------------------- Print Name: Thomas M. Feeney ---------------------------- Address: 7681 Seminary Ridge ---------------------------- Columbus, Ohio 43235 ---------------------------- 53 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ James W. Crystal --------------------------------------- Print Name: James W. Crystal ---------------------------- Address: 40 Broad Street ---------------------------- New York, NY 10004 ---------------------------- 54 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ Alleri B. OBlow --------------------------------------- Print Name: Alleri B. OBlow ---------------------------- Address: 166 N. Myrtle Ave. ---------------------------- Monrovia, CA 91016 ---------------------------- 55 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ Donald A. Poirier --------------------------------------- Print Name: Donald A. Poirier ---------------------------- Address: 6335 Deeside Dr. ---------------------------- Dublin, Ohio 43017 ---------------------------- 56 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ Peter Pearson --------------------------------------- Print Name: Peter Pearson ---------------------------- Address: 49 North Fairway Dr. ---------------------------- NSL, Utah 04054 ---------------------------- 57 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ John Ritucci --------------------------------------- Print Name: John Ritucci ---------------------------- Address: 59 Windsor Lane ---------------------------- Marshfield, MA 02050 ---------------------------- 58 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ Carl W. Blackburn --------------------------------------- Print Name: Carl W. Blackburn ---------------------------- Address: 109 Buhlmont Dr. ---------------------------- Sewickley, PA 15143 ---------------------------- 59 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: 12/31/97 /s/ M. Keith Jones --------------------------------------- Print Name: M. Keith Jones ---------------------------- Address: 8125 Crossgate Ct. N. ---------------------------- Dublin, OH 43017 ---------------------------- 60 SAFELITE GLASS CORP. SHAREHOLDERS' AGREEMENT Counterpart Signature Page -------------------------- IN WITNESS WHEREOF, the parties have executed this Agreement as an instrument under SEAL as of the date first above written. MANAGEMENT SHAREHOLDERS: /s/ Gary Mazeffa --------------------------------------- Print Name: Gary Mazeffa ---------------------------- Address: 234 Deer Meadow Dr. ---------------------------- Gahanna, OH 43230 ---------------------------- 12.31.97 61 EXHIBIT A KELLMAN SHAREHOLDERS
NON-VOTING TRUST TRUSTEE(S) COMMON STOCK ----- ---------- ------------ Family Revocable Trust Joseph Kellman 2,225,096 J-K Gift Trust Allan B. Muchin U/A/D 12/16/91 Maurice Raizes Marvin Zimmerman 137,881 Joseph Kellman 1995 Allan B. Muchin Descendants Trust for the Family of Jack Maurice Raizes U/A/D 11/8/95 Marvin Zimmerman 13,716 Joseph Kellman 1995 Allan B. Muchin Descendants Trust for the Family of Richard Maurice Raizes U/A/D 11/8/95 Marvin Zimmerman 13,716 Joseph Kellman 1995 Allan B. Muchin Descendants Trust for the Family of Celia Maurice Raizes U/A/D 11/8/95 Marvin Zimmerman 13,716 Joseph Kellman 1995 Gift Allan B. Muchin Trust for the Family of Jack Maurice Raizes U/A/D 11/8/95 Marvin Zimmerman 22,841 Joseph Kellman 1995 Gift Allan B. Muchin Trust for the Family of Richard Maurice Raizes U/A/D 11/8/95 Marvin Zimmerman 22,841 Joseph Kellman 1995 Gift Allan B. Muchin Trust for the Family of Celia Maurice Raizes U/A/D 11/8/95 Marvin Zimmerman 22,841 Total 2,472,648
BELRON OWNERSHIP
VOTING COMMON NON-VOTING NAME STOCK COMMON STOCK TOTAL ---- ----- ------------ ----- Belron 1,690,101 4,487,123 6,177,224
62 EXHIBIT B TH LEE SHAREHOLDERS
VOTING COMMON NON-VOTING NAME STOCK COMMON STOCK TOTAL ---- ----- ------------ ----- Thomas H. Lee Equity Fund III, L.P. 1,241,479.33 2,482,958.67 3,724,438 Thomas H. Lee Foreign Fund III, L.P. 76,819.00 153,638.00 230,457 THL-CCI Investors Limited Partnership 128,781.67 257,563.33 386,345 Big Bend Investments, L.P. 12,483.00 24,966.00 37,449
63 EXHIBIT C MANAGEMENT SHAREHOLDERS
VOTING NON-VOTING NAME COMMON COMMON STOCK STOCK TOTAL - ---- ----- ----- ----- Garen K. Staglin 18,025.33 36,050.67 54,076.00 John F. Barlow 61,014.67 122,029.33 183,044.00 Douglas A. Herron 21,648.67 43,297.33 64,946.00 Elizabeth A. Wolszon 11,992.67 23,985.33 35,978.00 Douglas R. Maehl 11,992.67 23,985.33 35,978.00 Poe A. Timmons 6,505.33 13,010.67 19,516.00 James A. West 11,992.67 23,985.33 35,978.00 Thomas Feeney 11,992.67 23,985.33 35,978.00 James W. Crystal 3,650.00 7,300.00 10,950.00 Frederick R. Barnard 730.00 1,460.00 2,190.00 Garth R. Beck 730.00 1,460.00 2,190.00 Ronald H. Duncan 730.00 1,460.00 2,190.00 August N. Gassiot 730.00 1,460.00 2,190.00 Allen B. Oblow 730.00 1,460.00 2,190.00 Gary J. Strain 1,095.00 2,190.00 3,285.00 David P. Stagner 183.33 366.67 550.00 Robert A. Carlson 100.00 200.00 300.00 Craig D. Douglas 365.00 730.00 1,095.00 Michael V. Fenstermacher 250.00 500.00 750.00 Michael G. Ridgway 250.00 500.00 750.00 Brian D. O'Mara 250.00 500.00 750.00 Steven B. Micheli 365.00 730.00 1,095.00 Clark B. Wilson 200.00 400.00 600.00 Robert L. Avers 2,919.33 5,838.67 8,758.00 Carl W. Blackburn 730.00 1,460.00 2,190.00 James P. Catalino 1,460.00 2,920.00 4,380.00 William Dane 1,460.00 2,920.00 4,380.00 Donald P. Giles 2,919.33 5,838.67 8,758.00
64
VOTING NON-VOTING NAME COMMON COMMON STOCK STOCK TOTAL - ---- ----- ----- ----- Nicholas A. Greville 1,460.00 2,920.00 4,380.00 Stanley J. Hoffman 730.00 1,460.00 2,190.00 M. Keith Jones 1,460.00 2,920.00 4,380.00 Paul J. Krakenberg 1,460.00 2,920.00 4,380.00 Gary Mazeffa 1,460.00 2,920.00 4,380.00 Morton H. Meyerson 7,300.67 14,601.33 21,902.00 Peter T. Pearson 730.00 1,460.00 2,190.00 James R. Randolph 1,460.00 2,920.00 4,380.00 William J. Rapp 730.00 1,460.00 2,190.00 John Ritucci 730.00 1,460.00 2,190.00 Richard J. Scheer 730.00 1,460.00 2,190.00 Jack L. Warren 2,919.33 5,838.67 8,758.00 James E. Whittlesey 1,460.00 2,920.00 4,380.00 David W. Wood 730.00 1,460.00 2,190.00 Larry J. Binham, Trustee for the Shannon 5,543.33 11,086.67 16,630.00 Carole Barlow Irrevocable Trust Larry J. Binham, Trustee for the Diane 5,543.33 11,086.67 16,630.00 Michelle Barlow Irrevocable Trust Donald A. Poirier 292.00 584.00 876.00 Garen and Sharalyn Staglin 1997 54,076.00 108,152.00 162,228.00 Charitable Remainder Unitrust Michael F. Hallenberger 730.00 1,460.00 2,190.00
65 EXHIBIT D MANUFACTURERS 1. Apogee Enterprises 2. PPG Industries 3. Saint Gobain 4. Asahi Glass 5. Guardian Glass 6. Pilkington Glass 7. Amilite 8. Carlite 66 EXHIBIT E EXECUTIVE OFFICERS 1. Senior Vice President - Marketing and Strategic Planning 2. Senior Vice President - Information Services 3. Senior Vice President - Manufacturing Distribution and Purchasing 4. Senior Vice President - Wholesale Sales 5. Senior Vice President - Client Sales and Support 6. Senior Vice President - Chief Financial Officer and Treasurer 7. Vice President - Finance and Corporate Controller 8. Vice President - Network Operations 9. Vice-President Retail Store Operations, East 10. Vice President Retail Store Operations, West 11. Vice President Store Development and Real Estate 12. Vice-President Human Resources 13. Vice President, Secretary and General Counsel EX-10.11 17 PLEDGE AGREEMENT 1 EXHIBIT 10.11 EXHIBIT F PLEDGE AGREEMENT PLEDGE AGREEMENT, dated as of December 20, 1996 (the "Existing Pledge Agreement"), as amended and restated through December 17, 1997 (as further amended, modified or supplemented from time to time, this "Agreement"), made by each of the undersigned (each a "Pledgor" and, together with any other entity that becomes a party hereto pursuant to Section 23 hereof, the "Pledgors"), in favor of THE CHASE MANHATTAN BANK, as Collateral Agent (the "Pledgee"), for the benefit of the Secured Creditors (as defined below). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. W I T N E S S E T H : WHEREAS, Safelite Glass Corp. (the "Borrower"), the lenders from time to time party thereto (the "Banks"), Bankers Trust Company, as Syndication Agent, Goldman Sachs Credit Partners L.P., as Documentation Agent, and The Chase Manhattan Bank, as Administrative Agent (together with any successor agent, the "Administrative Agent", and together with the Pledgee, the Banks, the Syndication Agent and the Documentation Agent, the "Bank Creditors"), have entered into a Credit Agreement, dated as of December 20, 1996, as amended and restated through December 17, 1997 (as further amended, modified or supplemented from time to time, the "Credit Agreement"), providing for the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower, all as contemplated therein; WHEREAS, the parties hereto have elected to amend and restate the Existing Pledge Agreement pursuant to this Agreement rather than enter into a new pledge agreement for their convenience and intend that all indebtedness, obligations and liens created under the Existing Pledge Agreement and the other Credit Documents be continued hereunder and thereunder and remain in full force and effect and not be discharged, paid, satisfied or cancelled; WHEREAS, the Borrower may from time to time be party to one or more (i) interest rate agreements, interest rate cap agreements, interest rate collar agreements or other similar agreements or arrangements, (ii) foreign exchange contracts, currency swap agreements or similar agreements or arrangements designed to protect against the fluctuations in currency values and\or (iii) other types of hedging agreements from time to time (each such agreement or arrangement with an Other Creditor (as hereinafter defined), an "Interest Rate Protection Agreement or Other Hedging Agreement"), with a Bank or an affiliate of a Bank (each such Bank or affiliate, even if the respective Bank subsequently ceases to be a 2 Page 2 Bank under the Credit Agreement for any reason, together with such Bank's or affiliate's successors and assigns, collectively, the "Other Creditors", and together with Bank Creditors, the "Secured Creditors"); WHEREAS, pursuant to the Subsidiary Guaranty, each Pledgor (other than the Borrower) has jointly and severally guaranteed to the Secured Creditors the payment when due of all obligations and liabilities of the Borrower under or with respect to the Credit Documents and the Interest Rate Protection Agreements and Other Hedging Agreements; WHEREAS, it is a condition precedent to the making of Loans to the Borrower under the Credit Agreement that each Pledgor shall have executed and delivered to the Pledgee this Agreement; and WHEREAS, each Pledgor desires to execute this Agreement to satisfy the conditions described in the preceding paragraph; NOW, THEREFORE, in consideration of the benefits accruing to each Pledgor, the receipt and sufficiency of which are hereby acknowledged, each Pledgor hereby makes the following representations and warranties to the Pledgee and hereby covenants and agrees with the Pledgee as follows: 1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor for the benefit of the Secured Creditors to secure: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of such Pledgor, now existing or hereafter incurred under, arising out of or in connection with any Credit Document to which such Pledgor is a party and the due performance and compliance by such Pledgor with the terms of each such Credit Document (all such obligations and liabilities under this clause (i), except to the extent consisting of obligations or indebtedness with respect to Interest Rate Protection Agreements or Other Hedging Agreements, being herein collectively called the "Credit Document Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of such Pledgor, now existing or hereafter incurred under, arising out 3 Page 3 of or in connection with any Interest Rate Protection Agreement or Other Hedging Agreement including, in the case of Pledgors other than the Borrower, all obligations of such Pledgor under its Guaranty in respect of Interest Rate Protection Agreements or Other Hedging Agreements (all such obligations and liabilities under this clause (ii) being herein collectively called the "Other Obligations"); (iii) any and all sums advanced by the Pledgee in order to preserve the Collateral (as hereinafter defined) or preserve its security interest in the Collateral; (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities referred to in clauses (i), (ii) and (iii) above, after an Event of Default (such term, as used in this Agreement, shall mean any Event of Default under, and as defined in, the Credit Agreement, or any payment default by the Borrower under any Interest Rate Protection Agreement or Other Hedging Agreement and shall in any event include, without limitation, any payment default (after the expiration of any applicable grace period) on any of the Obligations (as hereinafter defined)) shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing or realizing on the Collateral, or of any exercise by the Pledgee of its rights hereunder, together with reasonable attorneys' fees and court costs; and (v) all amounts paid by any Secured Creditor as to which such Secured Creditor has the right to reimbursement under Section 11 of this Agreement; all such obligations, liabilities, sums and expenses set forth in clauses (i) through (v) of this Section 1 being herein collectively called the "Obligations". 2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein: (i) the term "Stock" shall mean (x) with respect to corporations incorporated under the laws of the United States or any State or territory thereof (each a "Domestic Corporation"), all of the issued and outstanding shares of capital stock of any Domestic Corporation at any time owned by each Pledgor and (y) with respect to corporations which are not Domestic Corporations (each a "Foreign Corporation"), all of the issued and outstanding shares of capital stock at any time owned by any Pledgor of any Foreign Corporation, provided that except as provided in the last sentence of this Section 2, such Pledgor shall not be required to pledge hereunder more than 65% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote; (ii) the term "Notes" shall mean (x) all Intercompany Notes at any time issued to each Pledgor and (y) all other promissory notes with a face amount of $500,000 or more from time to time issued to, or held by, each Pledgor, provided that except as provided in the last sentence of 4 Page 4 this Section 2, no Pledgor shall be required to pledge hereunder any promissory notes issued to such Pledgor by any Subsidiary of such Pledgor which is a Foreign Corporation; and (iii) the term "Securities" shall mean all of the Stock and Notes. Each Pledgor represents and warrants that on the date hereof (i) each Subsidiary of such Pledgor, and the direct ownership thereof, is listed in Annex A hereto; (ii) the Stock held by such Pledgor consists of the number and type of shares of the stock of the corporations as described in Annex B hereto; (iii) such Stock constitutes that percentage of the issued and outstanding capital stock of the issuing corporation as is set forth in Annex B hereto; (iv) the Notes held by such Pledgor consist of the promissory notes described in Annex C hereto where such Pledgor is listed as the Bank; and (v) on the date hereof, such Pledgor owns no other Securities. In the circumstances and to the extent provided in Section 7.14 of the Credit Agreement, the 65% limitation set forth in clause (i)(y) and the limitation in the proviso of clause (ii) in each case of this Section 2 and in Section 3.2 hereof shall no longer be applicable and such Pledgor shall duly pledge and deliver to the Pledgee such of the Securities not theretofore required to be pledged hereunder. 3. PLEDGE OF SECURITIES, ETC. 3.1. Pledge. To secure the Obligations and for the purposes set forth in Section 1 hereof, each Pledgor hereby: (i) grants to the Pledgee a security interest in all of the Collateral owned by such Pledgor; (ii) pledges and deposits as security with the Pledgee the Securities owned by such Pledgor on the date hereof, and delivers to the Pledgee certificates or instruments therefor, duly endorsed in blank in the case of Notes and accompanied by undated stock powers duly executed in blank by such Pledgor in the case of Stock, or such other instruments of transfer as are acceptable to the Pledgee; and (iii) assigns, transfers, hypothecates, mortgages, charges and sets over to the Pledgee all of such Pledgor's right, title and interest in and to such Securities (and in and to all certificates or instruments evidencing such Securities), to be held by the Pledgee, upon the terms and conditions set forth in this Agreement; provided, however, that no Pledgor shall be required to grant a security interest in any Pledged Securities to the extent that granting such security interest in such Pledged Securities would violate any contractual obligation to which such Pledgor is subject. 3.2. Subsequently Acquired Securities. If any Pledgor shall acquire (by purchase, stock dividend or otherwise) any additional Securities at any time or from time to time after the date hereof, such Pledgor will forthwith pledge and deposit such Securities (or certificates or instruments representing such Securities) as security with the Pledgee and deliver to the Pledgee certificates therefor or instruments thereof, duly endorsed in blank in the case of Notes and accompanied by undated stock powers duly executed in blank in the case of Stock, or such other instruments of transfer as are acceptable to the Pledgee, and will 5 Page 5 promptly thereafter deliver to the Pledgee a certificate executed by any Authorized Officer of such Pledgor describing such Securities and certifying that the same have been duly pledged with the Pledgee hereunder. Subject to the last sentence of Section 2 hereof, no Pledgor shall be required at any time to pledge hereunder any Stock which is more than 65% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote. 3.3. Uncertificated Securities. Notwithstanding anything to the contrary contained in Sections 3.1 and 3.2 hereof, if any Securities (whether now owned or hereafter acquired) are uncertificated securities, the respective Pledgor shall promptly notify the Pledgee thereof, and shall promptly take all actions required to perfect the security interest of the Pledgee under applicable law (including, in any event, under Sections 8-313 and 8-321 of the New York UCC, if applicable). Each Pledgor further agrees to take such actions as the Pledgee deems reasonably necessary or desirable to effect the foregoing and to permit the Pledgee to exercise any of its rights and remedies hereunder, and agrees to provide an opinion of counsel reasonably satisfactory to the Pledgee with respect to the creation and perfection of any such pledge of uncertificated Securities promptly upon request of the Pledgee. 3.4. Definition of Pledged Stock, Pledged Notes, Pledged Securities and Collateral. All Stock at any time pledged or required to be pledged hereunder is hereinafter called the "Pledged Stock," all Notes at any time pledged or required to be pledged hereunder are hereinafter called the "Pledged Notes," and all of the Pledged Stock and Pledged Notes together are hereinafter called the "Pledged Securities," which together with all proceeds thereof, including any securities and moneys received and at the time held by the Pledgee hereunder, is hereinafter called the "Collateral." 4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of the Pledged Securities, which may be held (in the discretion of the Pledgee) in the name of such Pledgor, endorsed or assigned in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or a sub-agent appointed by the Pledgee. The Pledgee agrees to promptly notify the relevant Pledgor after the appointment of any sub-agent; provided, however, that the failure to give such notice shall not affect the validity of such appointment. 5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until (i) an Event of Default shall have occurred and be continuing and (ii) the relevant Pledgor has knowledge of or written notice thereof shall have been given by the Pledgee to the relevant Pledgor (provided that if an Event of Default specified in Section 9.05 of the Credit 6 Page 6 Agreement shall occur, no such notice shall be required), each Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Securities and to give all consents, waivers or ratifications in respect thereof; provided that no vote shall be cast or any consent, waiver or ratification given or any action taken which would violate any of the terms of this Agreement, any other Credit Document or any Interest Rate Protection Agreement or Other Hedging Agreement (collectively, the "Secured Debt Agreements"), or which would have the effect of impairing the position or interests of the Pledgee or any other Secured Creditor. All such rights of such Pledgor to vote and to give consents, waivers and ratifications shall cease in case an Event of Default shall occur and be continuing, and Section 7 hereof shall become applicable. 6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless (i) an Event of Default shall have occurred and be continuing and (ii) the relevant Pledgor has knowledge of or written notice thereof shall have been given by the Pledgee to the relevant Pledgor (provided that if an Event of Default specified in Section 9.05 of the Credit Agreement shall occur, no such notice shall be required), all cash dividends payable in respect of the Pledged Stock and all payments in respect of the Pledged Notes shall be paid to the respective Pledgor; provided that all cash dividends payable in respect of the Pledged Stock which are determined by the Pledgee to represent in whole or in part an extraordinary, liquidating or other distribution in return of capital shall be paid, to the extent so determined to represent an extraordinary, liquidating or other distribution in return of capital, to the Pledgee and retained by it as part of the Cash Collateral Account (as defined in the Security Agreement). The Pledgee shall also be entitled to receive directly, and to retain as part of the Collateral: (i) all other or additional stock or other securities or property (other than cash) paid or distributed by way of dividend or otherwise in respect of the Pledged Stock; (ii) all other or additional stock or other securities or property (including cash) paid or distributed in respect of the Pledged Stock by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; and (iii) all other or additional stock or other securities or property (including cash) which may be paid in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate reorganization; 7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of Default shall have occurred and be continuing, the Pledgee shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement or by any other 7 Page 7 Secured Debt Agreement or by law) for the protection and enforcement of its rights in respect of the Collateral, and the Pledgee shall be entitled, without limitation, to exercise the following rights, which each Pledgor hereby agrees to be commercially reasonable: (i) to receive all amounts payable in respect of the Collateral payable to such Pledgor under Section 6 hereof; (ii) to transfer all or any part of the Pledged Securities into the Pledgee's name or the name of its nominee or nominees (the Pledgee agrees to promptly notify the relevant Pledgor after such transfer; provided, however, that the failure to give such notice shall not affect the validity of such transfer); (iii) to accelerate any Pledged Note which may be accelerated in accordance with its terms, and take any other action to collect upon any Pledged Note (including, without limitation, to make any demand for payment thereon); (iv) subject to the giving of written notice to the relevant Pledgor in accordance with clause (ii) of Section 5 hereof (to the extent required by such Section 5), to vote all or any part of the Pledged Stock (whether or not transferred into the name of the Pledgee) and give all consents, waivers and ratifications in respect of the Collateral and otherwise act with respect thereto as though it were the outright owner thereof (each Pledgor hereby irrevocably constituting and appointing the Pledgee the proxy and attorney-in-fact of such Pledgor, with full power of substitution to do so); and (v) at any time or from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby waived by each Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Pledgee in its absolute discretion may determine; provided that at least 10 days' written notice of the time and place of any such sale shall be given to such Pledgor. Each Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise. At any such sale, unless prohibited by applicable law, the Pledgee on behalf of the Secured Creditors may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption. Neither 8 Page 8 the Pledgee nor any Secured Creditor shall be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall any of them be under any obligation to take any action whatsoever with regard thereto. 8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the Pledgee provided for in this Agreement or now or hereafter existing at law or in equity or by statute shall be cumulative and concurrent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by the Pledgee or any other Secured Creditor of any one or more of the rights, powers or remedies provided for in this Agreement or now or hereafter existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee or any other Secured Creditor of all such other rights, powers or remedies, and no failure or delay on the part of the Pledgee or any other Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof. The Secured Creditors agree that this Agreement may be enforced only by the action of the Administrative Agent or the Pledgee, in each case acting upon the instructions of the Required Banks (or, after the date on which all Credit Document Obligations have been paid in full, the holders of at least the majority of the outstanding Other Obligations) and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent or the Pledgee, as the case may be, for the benefit of the Secured Creditors upon the terms of this Agreement. 9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee upon any sale or other disposition of the Collateral pursuant to the terms of this Agreement, together with all other moneys received by the Pledgee hereunder, shall be applied in the manner provided in the Security Agreement. (b) It is understood and agreed that the Pledgors shall remain jointly and severally liable to the extent of any deficiency remaining in the Obligations after receipt of the proceeds of Collateral. 10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof. 9 Page 9 11. INDEMNITY. Each Pledgor jointly and severally agrees to indemnify and hold harmless the Pledgee in such capacity and each other Secured Creditor from and against any and all claims, demands, losses, judgments and liabilities of whatsoever kind or nature, including all costs and expenses, including reasonable attorneys' fees, growing out of or resulting from this Agreement or the exercise by the Pledgee of any right or remedy granted to it hereunder or under any other Secured Debt Agreement (the "Indemnified Liabilities") except for those Indemnified Liabilities arising from the Pledgee's or such other Secured Creditor's gross negligence or willful misconduct. In no event shall the Pledgee be liable, in the absence of gross negligence or willful misconduct on its part, for any matter or thing in connection with this Agreement other than to account for moneys actually received by it in accordance with the terms hereof. If and to the extent that the obligations of the Pledgors under this Section 11 are unenforceable for any reason, each Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 12. FURTHER ASSURANCES. Each Pledgor agrees that it will join with the Pledgee in executing and, at such Pledgor's own expense, file and refile under the applicable UCC or appropriate local equivalent, such financing statements, continuation statements and other documents in such offices as the Pledgee may deem necessary or appropriate and wherever required or permitted by law in order to perfect and preserve the Pledgee's security interest in the Collateral and hereby authorizes the Pledgee to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of such Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Pledgee such additional conveyances, assignments, agreements and instruments as the Pledgee may reasonably require or deem advisable to carry into effect the purposes of this Agreement or to further assure and confirm unto the Pledgee its rights, powers and remedies hereunder. 13. THE PLEDGEE AS AGENT. (a) The Pledgee will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Pledgee as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Pledgee shall act hereunder on the terms and conditions set forth herein and in Section 11 of the Credit Agreement; (b) The Pledgee's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the New York UCC or otherwise, shall be to deal with it in the same manner as the Pledgee deals with similar securities and property for its own account, except that the Pledgee shall have no 10 Page 10 obligation to invest funds held in any Cash Collateral Account and may hold the same as demand deposits. Neither the Pledgee, any Bank nor any of their respective directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Borrower or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof. 14. TRANSFER BY PLEDGORS. Except for sales or dispositions of Collateral permitted pursuant to the Credit Agreement, no Pledgor will sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest therein (except for the Liens and security interests created by this Agreement). 15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR. Each Pledgor represents, warrants and covenants that (i) it is the legal, record and beneficial owner of, and has good and marketable title to, all Securities pledged by it hereunder, subject to no pledge, lien, mortgage, hypothecation, security interest, charge, option or other encumbrance whatsoever, except the liens and security interests created by this Agreement and liens permitted under clauses (a) and (e) of Section 8.03 of the Credit Agreement; (ii) it has full power, authority and legal right to pledge all the Securities pledged by it pursuant to this Agreement; (iii) this Agreement has been duly authorized, executed and delivered by such Pledgor and constitutes a legal, valid and binding obligation of such Pledgor enforceable in accordance with its terms, except to the extent that the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by equitable principles (regardless of whether enforcement is sought in equity or at law); (iv) no consent of any other party (including, without limitation, any stockholder or creditor of such Pledgor or any of its Subsidiaries) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required to be obtained by such Pledgor in connection with the execution, delivery or performance of this Agreement, or in connection with the exercise of its rights and remedies pursuant to this Agreement, except as may be required in connection with the disposition of the Securities by laws affecting the offering and sale of securities generally; (v) the execution, delivery and performance of this Agreement by such Pledgor do not violate any provision of any applicable law or regulation or of any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign, or of the certificate of incorporation or by-laws of such Pledgor or of any securities issued by such Pledgor or any of its Subsidiaries, or of any mortgage, indenture, lease, deed of trust, agreement, instrument or undertaking to which such Pledgor or any of its Subsidiaries is a party or which purports to be binding upon such Pledgor or any of its Subsidiaries or upon 11 Page 11 any of their respective assets and will not result in the creation or imposition of any lien or encumbrance on any of the assets of such Pledgor or any of its Subsidiaries except as contemplated by this Agreement; (vi) all the shares of Stock of Subsidiaries of the Borrower have been duly and validly issued, are fully paid and nonassessable; (vii) each of the Pledged Notes constituting Intercompany Notes, when executed by the obligor thereof, will be the legal, valid and binding obligation of such obligor, enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by equitable principles (regardless of whether enforcement is sought in equity or at law); and (viii) the pledge and assignment of the Securities pursuant to this Agreement, together with the delivery of the Securities pursuant to this Agreement (which delivery has been made), creates a valid and perfected first security interest in such Securities and the proceeds thereof, subject to no prior lien or encumbrance or to any agreement purporting to grant to any third party a lien or encumbrance on the property or assets of such Pledgor which would include the Securities. Each Pledgor covenants and agrees that it will defend the Pledgee's right, title and security interest in and to the Securities and the proceeds thereof against the claims and demands of all persons whomsoever; and such Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Pledgee as Collateral hereunder and will likewise defend the right thereto and security interest therein of the Pledgee and the other Secured Creditors. 16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (i) any renewal, extension, amendment or modification of or addition or supplement to or deletion from any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (ii) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument or this Agreement; (iii) any furnishing of any additional security to the Pledgee or its assignee or any acceptance thereof or any release of any security by the Pledgee or its assignee; (iv) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; or (v) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to such Pledgor or any Subsidiary of such Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not such Pledgor shall have notice or knowledge of any of the foregoing. 12 Page 12 17. REGISTRATION, ETC. (a) If an Event of Default shall have occurred and be continuing and any Pledgor shall have received from the Pledgee a written request or requests that such Pledgor cause any registration, qualification or compliance under any Federal or state securities law or laws to be effected with respect to all or any part of the Pledged Stock, such Pledgor as soon as practicable and at its expense will use its reasonable efforts, to the extent it has the right and authority to do so, to cause the issuer of such Pledged Stock to effect (and to keep effective) a registration and will use its reasonable efforts to cause such qualification and compliance to be effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Pledged Stock, including, without limitation, registration under the Securities Act of 1933 as then in effect (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other government requirements; provided that the Pledgee shall furnish to such Pledgor such information regarding the Pledgee as such Pledgor may request in writing and as shall be required in connection with any such registration, qualification or compliance. Such Pledgor will cause the Pledgee to be kept reasonably advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will cause to be furnished to the Pledgee by the issuer such number of prospectuses, offering circulars or other documents incident thereto as the Pledgee from time to time may reasonably request, and will indemnify the Pledgee, each other Secured Creditor and all others participating in the distribution of the Pledged Stock against all claims, losses, damages and liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same may have been caused by an untrue statement or omission based upon information furnished (or failed to be furnished) in writing to such Pledgor or issuer by the Pledgee or such other Secured Creditor expressly for use therein. (b) If at any time when the Pledgee shall determine to exercise its right to sell all or any part of the Pledged Securities pursuant to Section 7 hereof, such Pledged Securities or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act of 1933, as then in effect, the Pledgee may, in its sole and absolute discretion, sell such Pledged Securities or part thereof by private sale in such manner and under such circumstances as the Pledgee may deem necessary or advisable in order that such sale may legally be effected without such registration; provided that at least 10 days' notice of the time and place of any such sale shall be given to such Pledgor. Without limiting the generality of the foregoing, in any such event the Pledgee, in its sole and absolute discretion: (i) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Securities or part thereof 13 Page 13 shall have been filed under such Securities Act; (ii) may approach and negotiate with a single possible purchaser to effect such sale; and (iii) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Securities or part thereof. In the event of any such sale, the Pledgee shall incur no responsibility or liability for selling all or any part of the Pledged Securities at a price which the Pledgee, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until after registration as aforesaid. 18. TERMINATION; RELEASE. (a) After the Termination Date (as defined below), this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in Section 11 hereof shall survive any such termination) and the Pledgee, at the request and expense of the respective Pledgor, will promptly execute and deliver to such Pledgor a proper instrument or instruments acknowledging the satisfaction and termination of this Agreement, and will duly release from the security interest created hereby and assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Pledgee and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, "Termination Date" shall mean the date upon which the Total Commitment and all Interest Rate Protection Agreements or Other Hedging Agreements have been terminated, no Note (as defined in the Credit Agreement) or Letter of Credit is outstanding (other than Letters of Credit, together with all Fees that have accrued and will accrue thereon through the stated termination date of such Letters of Credit, which have been supported in a manner satisfactory to the Letter of Credit Issuer as provided in the Credit Agreement) and all other Obligations (other than indemnities described in Section 11 hereof and in Section 12.13 of the Credit Agreement which are not then due and payable) have been paid in full. (b) In the event that any part of the Collateral is sold or otherwise disposed in connection with a sale or other disposition permitted by Section 8.02 of the Credit Agreement or is otherwise released at the direction of the Required Banks (or all the Banks if required by Section 12.12 of the Credit Agreement), the Pledgee, at the request and expense of such Pledgor will duly release from the security interest created hereby and assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold or released and as may be in possession of the Pledgee and has not theretofore been released pursuant to this Agreement and will execute all instruments as may be reasonably necessary to accomplish the same. 14 Page 14 (c) At any time that a Pledgor desires that Collateral be released as provided in the foregoing Section 18(a) or (b), it shall deliver to the Pledgee a certificate signed by an Authorized Officer of such Pledgor stating that the release of the respective Collateral is permitted pursuant to Section 18(a) or (b). 19. PLEDGOR'S RETAINED RIGHTS. In order to permit Pledgor to exercise the voting and other rights which it is entitled to exercise pursuant to Section 5 hereof and/or to receive the dividends and distributions that it is authorized to receive and retain pursuant to Section 6 hereof, the Pledgee shall, if necessary, upon the written request of Pledgor, from time to time execute and deliver to Pledgor all such proxies, dividend payment orders and other instruments as Pledgor may reasonably request. 20. NOTICES, ETC. All notices and other communications hereunder shall be in writing and shall be delivered or mailed by first class mail, postage prepaid, addressed: (a) if to any Pledgor, at its address set forth opposite its signature below; (b) if to the Pledgee, at: The Chase Manhattan Bank 270 Park Avenue New York, New York 10017 Attention: William Caggiano Telephone No.: (212) 270-1338 Telecopier No.: (212) 972-0009 (c) if to any Bank (other than the Pledgee), at such address as such Bank shall have specified in the Credit Agreement; (d) if to any Other Creditor, at such address as such Other Creditor shall have specified in writing to each Pledgor and the Pledgee; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 21. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Pledgor directly affected thereby and the Pledgee (with the written consent of either (x) the Required Banks (or all the Banks if required by Section 12.12 of the Credit Agreement) at all times prior to the time on which all Credit Document 15 Page 15 Obligations have been paid in full or (y) the holders of at least a majority of the outstanding Other Obligations at all times after the time on which all Credit Document Obligations have been paid in full); provided that any change, waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors (as defined below) of such Class. For the purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, i.e., whether (i) the Bank Creditors as holders of the Credit Document Obligations or (ii) the Other Creditors as holders of the Other Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (i) with respect to the Credit Document Obligations, the Required Banks and (ii) with respect to the Other Obligations, the holders of at least a majority of all obligations outstanding from time to time under the Interest Rate Protection Agreements or Other Hedging Agreements. 22. MISCELLANEOUS. This Agreement shall be binding upon the successors and assigns of each Pledgor and shall inure to the benefit of and be enforceable by the Pledgee and its successors and assigns. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. The headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. 23. ADDITIONAL PLEDGORS. It is understood and agreed that any Subsidiary of the Borrower that is required to execute a counterpart of this Agreement after the date hereof pursuant to Sections 7.13 and/or 8.15 of the Credit Agreement shall automatically become a Pledgor hereunder by executing a counterpart hereof and delivering the same to the Pledgee. * * * 16 Page 16 IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this Agreement to be executed by their duly elected officers duly authorized as of the date first above written. Address: SAFELITE GLASS CORP., Safelite Glass Corp. as a Pledgor 1105 Schrock Road Columbus, OH 43227 By: /s/ Douglas A. Herron ------------------------------ Attention: Douglas A. Herron Title: Chief Financial Officer THE CHASE MANHATTAN BANK, as Collateral Agent By: /s/ Bruce Borden --------------------------- Title: Vice President EX-10.12 18 AMENDMENT NO.1 TO SHAREHOLDERS' AGREEMENT 1 Exhibit 10.12 AMENDMENT NO. 1 TO SHAREHOLDERS AGREEMENT AMENDMENT NO. 1, DATED AS OF MARCH 26, 1998 (THE "AMENDMENT") TO SHAREHOLDERS AGREEMENT, dated as of December 18, 1997 (the "Agreement") by and among Safelite Glass Corp. ("Safelite"), Belron (USA) BV ("Belron"), the Kellman Shareholders (as defined therein), TH Lee (as defined therein) and the Management Shareholders (as defined therein). WHEREAS, pursuant to Section 14 of the Agreement, the parties hereto desire to modify certain terms and conditions of the Agreement as specifically set forth in this Amendment; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: A. AMENDMENT TO THE AGREEMENT. 1. Section 2(a)(i) of the Agreement is hereby amended by deleting the following: "until the Triggering Day, the authorized number of directors on the Board shall be established at ten (10) directors;" and inserting in lieu thereof the following: "until the Triggering Day, the authorized number of directors on the Board shall be established at an even number between eight (8) and sixteen (16);" 2. Section 2(a)(ii) of the Agreement is hereby amended by deleting the following: "the following individuals shall be elected to the Board:" and inserting in lieu thereof the following: "individuals shall be elected to the Board as follows:" 3. Section 2(a)(ii)(A)(1) of the Agreement is hereby amended by deleting the following: "five (5) representatives designated by Belron (which designees initially shall be Ronnie Lubner, M. Louis Shakinovsky, John E. Mason, Adrian F. Jones and Selwyn Herson), determined by a vote of the Belron Shareholders owning a majority of the Shareholder Shares held by all Belron Shareholders (the "Belron Directors"); and" 2 and inserting in lieu thereof the following: "one-half of the Board members shall be designated by Belron, determined by a vote of the Belron Shareholders owning a majority of the Shareholder Shares held by all Belron Shareholders (the "Belron Directors"); and" 4. Section 2(a)(ii)(A)(2) of the Agreement is hereby amended by deleting the following: "five (5) representatives designated by TH Lee (which designees initially shall be Garen K. Staglin, John F. Barlow, Anthony J. DiNovi, Scott M. Sperling and Seth W. Lawry), determined by a vote of the TH Lee Shareholders and Management Shareholders owning a majority of the Shareholder Shares held by all TH Lee Shareholders and Management Shareholders (the "TH Lee Directors"). and inserting in lieu thereof the following: "one-half of the Board shall be designated by TH Lee, determined by a vote of the TH Lee Shareholders and Management Shareholders owning a majority of the Shareholder Shares held by all TH Lee Shareholders and Management Shareholders (the "TH Lee Directors"). B. RATIFICATION, ETC. Except as otherwise expressly set forth herein, all terms and conditions of the Agreement are hereby ratified and confirmed and shall remain in full force and effect. Except as expressly set forth herein, nothing herein shall be construed to be an amendment or a waiver of any requirements of the Agreement. All references in the Agreement to the Agreement shall, from and after the date hereof, be deemed to be references to the Agreement as amended by this Amendment. C. COUNTERPARTS. This Amendment may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. D. GOVERNING LAW. This Amendment shall be governed by the laws of the State of New York as to all matters, including but not limited to matters of validity, construction, effect, performance and remedies, without giving effect to provisions thereof regarding conflict of laws. - 2 - 3 IN WITNESS WHEREOF, the parties hereto have executed this Amendment as an instrument under seal to be effective as of the date first above written. BELRON (USA) BV By: /s/ Louis Shakinovsky ------------------------------- Name: Louis Shakinovsky Title: Director THOMAS H. LEE EQUITY FUND III, L.P. By: /s/ Anthony J. Dinovi ------------------------------- Name: Anthony J. DiNovi Title: Vice President - 3 - EX-10.13 19 AMENDMENT TO SAFELITE'S 1998 STOCK OPTION PLAN 1 EXHIBIT 10.13 AMENDMENT OF THE 1998 STOCK OPTION PLAN WHEREAS, this Board of Directors deems it to be in the best interest of the Corporation to increase the number of shares of Class B Common Stock for which options may be granted under the 1998 Stock Option Plan from 350,000 to 410,000; NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby recommends that the Stockholders of the Corporation approve the following amendments to the 1998 Stock Option Plan: Section 2(a) of the 1998 Stock Option Plan to read in full as follows: The total number of shares of the authorized but unissued or Treasury shares of the Class B Non-Voting Common Stock, $0.01 par value, of the Company ("Common Stock") for which options may be granted under the Plan shall not exceed 410,000 shares, subject to adjustment as provided in Section 12 hereof. The last paragraph in Section 5 of the 1998 Stock Option Plan to read in full as follows: The maximum number of shares of the Company's Common Stock with respect to which an option or options may be granted to any employee in any calendar year shall not exceed 410,000 shares, taking into account shares subject to options granted and terminated, or repriced, during such calendar year. FURTHER RESOLVED, that, subject to the approval of the foregoing amendments by the Stockholders, the Corporation reserve, from its authorized and unissued shares of Class B Common Stock 410,000 shares of the Corporation's Class B Common Stock for issuance upon the exercise of options granted pursuant to the Corporation's 1998 Stock Option Plan; and, FURTHER RESOLVED, that each of the officers of the Corporation be, and each of them is hereby, authorized and directed to execute on behalf of the Corporation such instruments, and to perform such further acts, as he or she, in his or her sole discretion, deems necessary or desirable to effectuate the intent of the foregoing resolutions. EX-10.14 20 REGISTRATION AGREEMENT 1 EXHIBIT 10.14 REGISTRATION AGREEMENT This REGISTRATION AGREEMENT (this "Agreement"), dated as of December 18, 1997, is by and among SAFELITE GLASS CORP., a Delaware corporation (the "Company"), BELRON (USA) BV, a company organized under the laws of the Netherlands ("Belron"), those shareholders of the Company listed on Exhibit A attached hereto (the "Kellman Shareholders"), those shareholders of the Company listed on Exhibit B attached hereto, including THOMAS H. LEE EQUITY FUND III, L.P., a Delaware limited partnership ("TH Lee")(collectively, the "TH Lee Shareholders"), and those shareholders of the Company listed on Exhibit C attached hereto (collectively, the "Management Shareholders"). Belron, each of the Kellman Shareholders, each of the TH Lee Shareholders and each of the Management Shareholders are referred to herein individually as a "Shareholder" and collectively as the "Shareholders". WITNESSETH: WHEREAS, the Company and the Shareholders deem it desirable to enter into this Agreement to establish certain rights and restrictions with respect to the registration of the shares of capital stock held by the Shareholders. NOW, THEREFORE, in consideration of the premises, the mutual covenants of the parties hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. The following terms will have the meaning for purposes of this Agreement set forth below for such term. "AFFILIATE" of any Person means a Person controlling, under common control with or controlled by such Person. "BOARD" means the board of directors of the Company. "BUSINESS DAY" means any day on which business is ordinarily conducted in the State of New York, excluding Saturday, Sunday or any day on which the national banks located in the City of New York are required by law (other than a general banking moratorium or holiday for a period exceeding more than four (4) consecutive days) to be closed. If any notice or event is required to be delivered or occur, pursuant to the terms of this Agreement, on a day which is not a Business Day, such notice or event shall be delivered or occur on the next Business Day after the original required delivery or occurrence date. "COMMISSION" means the Securities and Exchange Commission. "COMMON STOCK" means the shares of Voting Common Stock and Non-Voting Common Stock. 2 "IPO" means an initial public offering of the Company's capital stock pursuant to the Securities Act. "NON-VOTING COMMON STOCK" means the Class B Non-Voting Common Stock of the Company, par value $0.01 per share. "PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity, or any department, agency or political subdivision thereof. "PUBLIC SALE" means any sale of any Registrable Securities to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker pursuant to the provisions of Rule 144 adopted under the Securities Act. "REGISTRABLE SECURITIES" means any shares of Common Stock held by the Shareholders; provided, however, that Registrable Securities shall not include any shares of Common Stock that have been registered pursuant to the Securities Act or that have been sold to the public pursuant to Rule 144 of the Commission promulgated under the Securities Act. "SECURITIES ACT" means the Securities Act of 1933, as amended. "VOTING COMMON STOCK" means the Class A Voting Common Stock of the Company, par value $0.01 per share. 2. DEMAND REGISTRATIONS. (a) REQUESTS FOR REGISTRATION. Subject to the terms and conditions set forth below, at any time after the Company has completed an IPO, Shareholders may request registration under the Securities Act of all or any portion of their Registrable Securities on Form S-1 or any similar long-form registration ("Long-Form Registrations"), and registration under the Securities Act of all or any portion of their Registrable Securities on Form S-2 or S-3 or any similar short-form registration ("Short-Form Registrations"), if available, as follows: (i) TH Lee shall have the right to request up to two (2) Demand Registrations. (ii) From and after the earlier of (i) (x) four (4) years from the date hereof and (y) such time as TH Lee has exercised its right to request one (1) Demand Registration as provided herein, or (ii) such time as TH Lee has exercised its right to request two (2) Demand Registrations as provided herein, Belron shall have the right to request up to two (2) Demand Registrations. (iii) After Belron has exercised its right to request two Demand Registrations, TH Lee shall have the right to request a third Demand Registration if, at -2- 3 the time of such request, the TH Lee Shareholders, in the aggregate, hold more than ten percent (10%) of the outstanding Common Stock. (iv) Notwithstanding anything in this Agreement to the contrary, no Shareholder shall be entitled to request a Demand Registration with respect to, and the Company shall not be obligated to take any action to effect the registration of, any shares of Voting Common Stock held by the Shareholders for the first three (3) years after the date of this Agreement. All registrations requested pursuant to this SECTION 2(a) are referred to herein as "Demand Registrations". Each request for a Demand Registration shall specify the approximate number of Registrable Securities requested to be registered. Within ten (10) days after receipt of any such request, the Company shall give written notice of such requested registration to all other holders of Registrable Securities and shall, subject to Sections 2(c) and 2(d) hereof, include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within fifteen (15) days after the receipt of the Company's notice; provided that Belron shall not have the right to be included in any Demand Registrations requested by TH Lee; provided further that the Kellman Shareholders shall not have the right to be included in any Demand Registrations requested by any person until: (i) the third year anniversary of the date of this Agreement and (ii) such time as the Kellman Shareholders own at least one more share of Common Stock than the TH Lee Shareholders. (b) REGISTRATION EXPENSES; DEMAND REGISTRATIONS. The Company shall pay all Registration Expenses (as defined in SECTION 6(a) hereof) for Demand Registrations requested by the holders of Registrable Securities provided in (a), above, whether or not any such Demand Registration becomes effective. A registration shall not count as one of the permitted Demand Registrations until it has become effective (unless such Demand Registration has not become effective due to the fault of, or at the request of, the holders requesting such registration). (c) PRIORITY ON DEMAND REGISTRATIONS. The Company shall not include in any Demand Registration any securities which are not Registrable Securities without the prior written consent of the holders of at least 65% of the Registrable Securities initially requesting such registration. If a Demand Registration is an underwritten offering and the managing underwriters advise the Company in writing that in their opinion the number of Registrable Securities and, if permitted hereunder, other securities requested to be included in such offering, exceeds the number of Registrable Securities and other securities, if any, which can be sold therein without adversely affecting the marketability of the offering, the Company shall include in such registration (i) first, the Registrable Securities of the Shareholder(s) requesting such Demand Registration (TH Lee or Belron, as the case may be), (ii) second, the Registrable Securities of the other Shareholders entitled to be included in such Demand Registration pro rata among such Shareholders on the basis of the number of shares of Registrable Securities owned by each such Shareholder and (iii) third, other securities requested to be included in such Demand Registration. -3- 4 (d) RESTRICTIONS ON LONG-FORM REGISTRATIONS. The Company shall not be obligated to effect any Demand Registration within ninety (90) days after the effective date of a previous Demand Registration or a previous registration in which the holders of Registrable Securities were given piggyback rights pursuant to SECTION 3 hereof and in which there was no reduction in the number of Registrable Securities requested to be included. The Company may postpone for up to ninety (90) days the filing or the effectiveness of a registration statement for a Demand Registration if the Company reasonably determines in good faith that such Demand Registration could reasonably be expected to have a material adverse effect on any proposal or plan by the Company to engage in any material transaction including any acquisition of assets, any merger, consolidation, tender offer, reorganization or similar transaction; provided that, in such event, the holders of Registrable Securities initially requesting such Demand Registration shall be entitled to withdraw such request and, if such request is withdrawn, such Demand Registration shall not count as one of the permitted Demand Registrations hereunder and the Company shall pay all Registration Expenses in connection with such registration. (e) SELECTION OF UNDERWRITERS. The Shareholder requesting a Demand Registration (Belron or TH Lee, as the case may be) shall have the right to select the investment banker(s) and manager(s) to administer the offering, subject to the approval of the Company, which shall not be unreasonably withheld. 3. PIGGYBACK REGISTRATIONS. (a) RIGHT TO PIGGYBACK. Whenever the Company proposes to register any of its securities under the Securities Act (other than pursuant to a Demand Registration) and the registration form to be used may be used for the registration of Registrable Securities (a "Piggyback Registration"), the Company shall give prompt written notice to all holders of Registrable Securities of its intention to effect such a registration and shall, subject to Sections 3(c) and 3(d) hereof, include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within twenty (20) days after the receipt of the Company's notice; provided that the Kellman Shareholders shall not have the right to be included in any Piggyback Registrations until: (i) the third year anniversary of the date of this Agreement and (ii) such time as the Kellman Shareholders own at least one more share of Common Stock than the TH Lee Shareholders. (b) PIGGYBACK EXPENSES. The Company shall pay all Registration Expenses (as defined in SECTION 6(A) hereof) incurred by the holders of Registrable Securities for Piggyback Registrations, whether or not any such Piggyback Registration becomes effective. (c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration is an underwritten primary registration on behalf of the Company, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company shall include in such registration (i) first, the -4- 5 securities the Company proposes to sell, (ii) second, the Registrable Securities requested to be included in such registration by the TH Lee Shareholders, the Management Shareholders and/or the Kellman Shareholders, pro rata among such Shareholders on the basis of the number of shares of Registrable Securities owned by each such Shareholder, (iii) third, the Registrable Securities requested to be included in such registration by Belron and (iv) fourth, other securities requested to be included in such registration. (d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Company's securities, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company shall include in such registration (i) first, the securities requested to be included therein by the holders requesting such registration, (ii) second, the Registrable Securities requested to be included in such registration by the TH Lee Shareholders, the Management Shareholders and/or the Kellman Shareholders, pro rata among such Shareholders on the basis of the number of shares of Registrable Securities owned by each such Shareholder, (iii) third, the Registrable Securities requested to be included in such registration by Belron and (iv) fourth, other securities requested to be included in such registration. (e) SELECTION OF UNDERWRITERS. If any Piggyback Registration is an underwritten offering, the selection of investment banker(s) and manager(s) for the offering must be approved by the holders of a majority of the Registrable Securities included in such Piggyback Registration, which approval shall not be unreasonably withheld. 4. HOLDBACK AGREEMENTS. (a) Each holder of Registrable Securities shall not effect any Public Sale of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the seven (7) days prior to and the one hundred and eighty (180)-day period beginning on the effective date of the registration statement filed by the Company under the Securities Act for its underwritten IPO (except as part of such underwritten registration), unless the underwriters managing the registered public offering otherwise agree. (b) Each holder of Registrable Securities shall not effect any Public Sale of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the seven (7) days prior to and the ninety (90)-day period beginning on the effective date of any underwritten offering pursuant to a registration statement filed by the Company under the Securities Act (except as part of such underwritten registration) subsequent to consummation of the Company's IPO, unless the underwriters managing the registered public offering otherwise agree. -5- 6 (c) The Company (i) shall not effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the seven (7) days prior to and during the ninety (90)-day period beginning on the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration (except as part of such underwritten registration or pursuant to registrations on Form S-8 or any successor form), unless the underwriters managing the registered public offering otherwise agree, and (ii) shall cause each holder of at least five percent (5%) (on a fully-diluted basis) of its Common Stock, or any securities convertible into or exchangeable or exercisable for Common Stock, 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 sale or distribution (including sales pursuant to Rule 144) of any such securities during such period (except as part of such underwritten registration, if otherwise permitted), unless the underwriters managing the registered public offering otherwise agree. 5. REGISTRATION PROCEDURES. Whenever the holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to this Agreement, the Company shall use its reasonable best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof by a holder of Registrable Securities requesting registration, and pursuant thereto the Company shall as expeditiously as possible: (a) prepare and file with the Commission a registration statement with respect to such Registrable Securities and use its reasonable best efforts to cause such registration statement to become effective (provided that, before filing a registration statement or prospectus or any amendments or supplements thereto, the Company shall furnish to the counsel selected by the holders of a majority of the Registrable Securities covered by such registration statement copies of all such documents proposed to be filed, which documents shall be subject to the review and comment of such counsel); (b) notify each holder of Registrable Securities of the effectiveness of each registration statement filed hereunder and prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than ninety (90) days and comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement; (c) furnish to each seller of Registrable Securities such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller; -6- 7 (d) use its reasonable best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller (provided that the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction); (e) notify each seller of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such seller, the Company shall prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading; (f) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed and, if not so listed, to be listed on the National Association of Securities Dealers, Inc. ("NASD") automated quotation system and, if listed on the NASD automated quotation system, use its reasonable best efforts to secure designation of all such Registrable Securities covered by such registration statement as a NASDAQ "national market system security" within the meaning of Rule 11 Aa2-1 of the Commission or, failing that, to secure NASDAQ authorization for such Registrable Securities and, without limiting the generality of the foregoing, use its reasonable best efforts to arrange for at least two market makers to register as such with respect to such Registrable Securities with the NASD; (g) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement; (h) enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as the holders of a majority of the Registrable Securities being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (including effecting a stock split or a combination of shares); (i) make available for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, its counsel and the independent accountants who have certified the financial -7- 8 statements to supply information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement, as shall be reasonably necessary in order to conduct a reasonable and diligent investigation within the meaning of the Securities Act; (j) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve (12) months beginning with the first day of the Company's first full calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; (k) permit any holder of Registrable Securities which, in its sole and exclusive judgment, might be deemed to be an underwriter or a controlling person of the Company, to participate in the preparation of such registration or comparable statement and to require the insertion therein of material, furnished to the Company in writing, which in the reasonable judgment of such holder and its counsel should be included; (l) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any common stock included in such registration statement for sale in any jurisdiction, the Company shall use its reasonable best efforts promptly to obtain the withdrawal of such order; (m) use its reasonable best efforts to cause such Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the sellers thereof to consummate the disposition of such Registrable Securities; and (n) use its reasonable best efforts to furnish to each seller of Registrable Securities, addressed to such seller, a "cold comfort" letter signed by the independent public accountants who have certified the Company's financial statements included in such registration statement, covering substantially the same matters with respect to such registration statement (and the prospectus included therein), and with respect to events subsequent to the date of such financial statements, as are customarily covered in accountants' letters delivered to underwriters in underwritten public offerings of securities and such other matters as the holders of a majority of the Registrable Securities being sold reasonably request (provided that such Registrable Securities constitute at least 25% of the securities covered by such registration statement); 6. REGISTRATION EXPENSES. (a) All expenses incident to the Company's performance of or compliance with this Agreement, including, without limitation, all registration and filing fees, fees and expenses of -8- 9 compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, fees and disbursements of custodians, and fees and disbursements of counsel for the Company and all independent certified public accountants, underwriters (excluding discounts and commissions) and other Persons retained by the Company (all such expenses being herein called "Registration Expenses"), shall be borne as provided in this Agreement, except that the Company shall, 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 expense of any annual audit or quarterly review, 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. (b) To the extent Registration Expenses are not required to be paid by the Company, each holder of securities included in any registration hereunder shall pay those Registration Expenses allocable to the registration of such holder's securities so included, and any Registration Expenses not so allocable shall be borne by all sellers of securities included in such registration in proportion to the aggregate selling price of the securities to be so registered. 7. INDEMNIFICATION. (a) The Company agrees to indemnify, to the extent permitted by law, each holder of Registrable Securities, its officers and directors and each Person who controls such holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such holder expressly for use therein or by such holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished such holder with a sufficient number of copies of the same. In connection with an underwritten offering, the Company shall indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the holders of Registrable Securities. (b) In connection with any registration statement in which a holder of Registrable Securities is participating, each such holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary -9- 10 to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder; provided that the obligation to indemnify shall be individual, not joint and several, for each holder and shall be limited to the net amount of proceeds received by such holder from the sale of Registrable Securities pursuant to such registration statement. (c) Any Person entitled to indemnification hereunder shall (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that the failure to give prompt notice shall not impair any Person's right to indemnification hereunder to the extent such failure has not prejudiced the indemnifying party) and (ii) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party shall not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent shall not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim shall not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. (d) The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and shall survive the transfer of securities. The Company also agrees to make such provisions, as are reasonably requested by any indemnified party, for contribution to such party in the event the Company's indemnification is unavailable for any reason. 8. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may participate in any registration hereunder which is underwritten unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 9. NOTICES. Any notices, consents or other communication required to be sent or given hereunder by any of the parties shall in every case be in writing and shall be deemed properly served if (a) delivered personally, (b) sent by registered or certified mail, in all such cases with first class postage prepaid, return receipt requested, (c) delivered by a recognized overnight courier service, or (d) sent by telecopy transmission to the parties at the addresses as set forth below or at such other addresses as may be furnished in writing. -10- 11 (a) If to the Company: Safelite Glass Corp. 1105 Schrock Road Columbus, Ohio 43229 Attention: President Telecopy: (614) 842-3323 with copies to: Belron International NV Kaya Krisolito P.O. Box 342 Kralendijk Bonaire Netherlands Antilles Telecopy: 59-9-75-449 and Director: Group Legal Services Attention: Louis Shakinovsky Belron International c/o The Kings Observatory Old Deer Park Richmond Surrey TW9 2AZ ENGLAND Telecopy: 44-181-948-7340 and Katten Muchin & Zavis 525 West Monroe Street Suite 1600 Chicago, Illinois 60661 Attention: David R. Shevitz, Esq. Telecopy: (312) 902-1061 -11- 12 and The Thomas H. Lee Company 75 State Street Boston, Massachusetts, 02109 Attention: Anthony J. DiNovi Scott M. Sperling Telecopy: (617) 227-3514 and Hutchins, Wheeler & Dittmar A Professional Corporation 101 Federal Street Boston, Massachusetts 02110 Attention: Charles W. Robins, Esq. Telecopy: (617) 951-1295 (b) If to Belron: Belron International NV Kaya Krisolito P.O. Box 342 Kralendijk Bonaire Netherlands Antilles Telecopy: 59-9-75-449 with a copies to: Director: Group Legal Services Attention: Louis Shakinovsky Belron International c/o The Kings Observatory Old Deer Park Richmond Surrey TW9 2AZ ENGLAND Telecopy: 44-181-948-7340 -12- 13 and Katten Muchin & Zavis 525 West Monroe Street Suite 1600 Chicago, Illinois 60661 Attention: David R. Shevitz, Esq. Telecopy: (312) 902-1061 (c) If to the TH Lee Shareholders or the Management Shareholders: The Thomas H. Lee Company 75 State Street Boston, Massachusetts, 02109 Attention: Anthony J. DiNovi Scott M. Sperling Telecopy: (617) 227-3514 with a copy to: Hutchins, Wheeler & Dittmar A Professional Corporation 101 Federal Street Boston, Massachusetts 02110 Attention: Charles W. Robins, Esq. Telecopy: (617) 951-1295 Date of service of such notice shall be (w) the date such notice is personally delivered, (x) three days after the date of mailing if sent by certified or registered mail, (y) one day after date of delivery to the overnight courier if sent by overnight courier or (z) if transmitted by telecopy, upon receipt of confirmation of delivery, provided that, within three (3) days after such transmission, service is also made by personal delivery. 10. SEVERABILITY. If any provision of this Agreement is, for any reason, invalid or unenforceable, the remaining provisions of this Agreement will nevertheless be valid and enforceable and will remain in full force and effect. Any provision of this Agreement that is held invalid or unenforceable by a court of competent jurisdiction will be deemed modified to the extent necessary to make it valid and enforceable and as so modified will remain in full force and effect. 11. AMENDMENT AND WAIVER. This Agreement may be amended, or any provision of this Agreement may be waived, provided that any such amendment or waiver will be binding on a party hereto only if such amendment or waiver is set forth in a writing executed by the parties -13- 14 hereto; provided, however, that the consent of a Shareholder shall not be required with respect to an amendment to or waiver of this Agreement if (i) such Shareholder owns less than five percent (5%) of the fully-diluted Common Stock then outstanding and (ii) such amendment or waiver could not reasonably be expected to adversely affect such Shareholder in any material respect. The waiver by any such party hereto of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any other breach. 12. COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties hereto and delivered to the others. 13. GOVERNING LAW. This Agreement will be governed and construed in accordance with the laws of the State of New York, without giving effect to its principles of conflicts of laws. 14. HEADINGS. The headings of this Agreement are included for purposes of convenience only and will not affect the construction or the interpretation of any of its provisions of this Agreement. 15. SUCCESSORS. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the parties and their respective successors and assigns. 16. ASSIGNMENT. This Agreement shall not be directly or indirectly assignable or delegable by any party without the prior written consent of the other parties. 17. NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the parties hereto to express their mutual intent and no rule of strict construction will be applied against any party hereto. 18. DOCUMENTS. Each party will execute all documents and take such other actions as the other parties may reasonably request in order to consummate the transactions provided for herein and to accomplish the purposes of this Agreement. 19. ARBITRATION. If any controversy or claim from the application and interpretation of the terms of this Agreement cannot be settled by the parties hereto within a reasonable period of time, then the controversy or claim shall be settled by arbitration, unless the controversy or claim is prohibited by the law from being arbitrated. Arbitration shall be the sole remedy for disputes hereunder, unless the controversy or claim is prohibited by the law from being arbitrated. The arbitration shall be conducted in accordance with the Rules of the American Arbitration Association (the "AAA Rules") and held in New York, New York. Any party hereunder seeking arbitration shall file a written notice of demand for arbitration with the other parties hereunder and with the American Arbitration Association. Three arbitrators shall be appointed in accordance with the AAA Rules ("Arbitrators"). The decision and award of the Arbitrators shall be binding among the parties and judgment on the award may be entered in any court having jurisdiction as -14- 15 provided in SECTION 21 hereof. The Arbitrators shall have no previous employment by, consulting with, or business relationship with any party or its Affiliates. Questions regarding discovery or evidentiary issues shall be referred to the Arbitrators and the Arbitrators' decisions shall be final and binding on such issues. The Arbitrators may consider any material relevant to the subject matter of the dispute even if such material may also relate to issues not subject to arbitration. An audio recording of any arbitration hearing shall be made. The Arbitrators may award any appropriate relief including without limitation, an award for damages, specific performance or other equitable relief. The award shall be in writing, accompanied by a written opinion detailing the reasons for the award, and signed by the Arbitrators. Each party to such arbitration shall each pay its own expenses and fees, except that administrative expenses (including the Arbitrators' fee) shall be divided equally between the parties to the arbitration. 20. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. EACH OF THE PARTIES HERETO HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE STATE OF NEW YORK AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER RELATED DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH OF THE PARTIES HERETO ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVE ANY DEFENSE OR FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT. BELRON HEREBY DESIGNATES AND APPOINTS CT CORPORATION SYSTEM AT 208 S. LASALLE STREET, CHICAGO, ILLINOIS 60604 AND SUCH OTHER PERSONS AS MAY HEREINAFTER BE SELECTED BY BELRON, WHICH PERSONS SHALL IRREVOCABLY AGREE IN WRITING TO SO SERVE AS AGENT TO RECEIVE ON BELRON'S BEHALF SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY BELRON TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO BELRON AS PROVIDED HEREIN, EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY BELRON REFUSES TO ACCEPT SERVICE, THEN BELRON HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY OTHER PARTY HERETO TO SERVE PROCESS ON BELRON IN ANY OTHER MANNER PERMITTED BY LAW. 21. WAIVER OF JURY TRIAL. THE PARTIES HEREBY, BY EXECUTION HEREOF, WAIVE ANY AND ALL RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY -15- 16 DEALINGS AMONG THEM RELATING TO THE SUBJECT MATTER OF THE PROPOSED TRANSACTIONS AND THE RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS INTENDED TO ENCOMPASS ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE PARTIES ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE PARTIES HEREBY FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTION CONTEMPLATED HEREBY. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. 22. ENTIRE AGREEMENT. Except as otherwise expressly set forth herein, this Agreement embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. 23. REMEDIES. The parties acknowledge and agree that money damages may not be an adequate remedy for any breach or threatened breach by a party of its obligations under this Agreement, and for that reason, among others, the non-breaching party or parties will be irreparably damaged and may not have an adequate remedy at law. Therefore, notwithstanding the provisions of SECTION 19, the parties agree that the other party may pursue injunctive relief and/or specific performance in any court of competent jurisdiction to enforce any of the provisions of this Agreement. If any of the parties institutes any such action or proceeding solely for injunctive relief any/or specific performance, then the other parties hereby waive arbitration thereof under SECTION 19 for such action solely as it relates to injunctive relief and/or specific performance and shall not assert in any such action or proceeding the claim or defense that any matter of injunctive relief and/or specific performance is to be submitted to arbitration under SECTION 19. The foregoing remedy is in addition to any and all other remedies which a party may have. 24. NO INCONSISTENT AGREEMENTS. None of the parties hereto will hereafter enter into any agreement which is inconsistent with the rights granted to the parties in this Agreement. -16- 17 25. THIRD PARTIES. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, other than the parties to this Agreement and their respective permitted successors and assigns, any rights or remedies under or by reason of this Agreement. 26. ROLE OF TRUSTEE. Each of Allan B. Muchin, Maurice Raizes and Marvin Zimmerman is executing this Agreement as a trustee of the Kellman Trusts listed on Exhibit A attached hereto and shall be conclusively deemed to be executing such documents only in such capacity. Each of Allan B. Muchin, Maurice Raizes and Marvin Zimmerman shall not be liable personally to any other party hereto in the event of any actual or alleged breach of any provision contained herein by any of the Kellman Trusts. Each party agrees to look solely to the estate of the Kellman Trusts and not to any trustee thereof in such trustee's individual capacity for any damages or other remedy for a breach by a Kellman Trust of any provision contained herein, except in the event of any willful breach of this Agreement established by clear and convincing evidence. * * * * -17- 18 IN WITNESS WHEREOF, parties hereto have caused this Registration Agreement to be signed as of the date first written above. SAFELITE GLASS CORP.: By: /s/ D. A. Herron ----------------------------------- Name: Douglas A. Herron Title: Treasurer BELRON (USA) BV: By: /s/ [signature illegible] ----------------------------------- Name: Title: KELLMAN SHAREHOLDERS: FAMILY REVOCABLE TRUST By: /s/ Joseph Kellman ------------------------------------ Joseph Kellman, not individually but solely as trustee J-K GIFT TRUST U/A/D 12/16/91 JOSEPH KELLMAN 1995 DESCENDANTS TRUST FOR THE FAMILY OF JACK U/A/D 11/8/95 JOSEPH KELLMAN 1995 DESCENDANTS TRUST FOR THE FAMILY OF RICHARD U/A/D 11/8/95 JOSEPH KELLMAN 1995 DESCENDANTS TRUST FOR THE FAMILY OF CELIA U/A/D 11/8/95 JOSEPH KELLMAN 1995 GIFT TRUST FOR THE FAMILY OF JACK U/A/D 11/8/95 JOSEPH KELLMAN 1995 GIFT TRUST FOR THE FAMILY OF RICHARD U/A/D 11/8/95 -18- 19 JOSEPH KELLMAN 1995 GIFT TRUST FOR THE FAMILY OF CELIA U/A/D 11/8/95 By: /s/ Allan B. Muchin ------------------------------------ Allan B. Muchin, not individually but solely as trustee of each of the above seven trusts By: /s/ Maurice P. Raizes ------------------------------------ Maurice Raizes, not individually but solely as trustee of each of the above seven trusts By: /s/ Marvin Zimmerman ------------------------------------ Marvin Zimmerman, not individually but solely as trustee of each of the above seven trusts TH LEE SHAREHOLDERS: THOMAS H. LEE EQUITY FUND, III, L.P. By: THL Equity Advisors III Limited Partnership, General Partner By: THL Equity Trust, General Partner By: /s/ Scott M. Sperling ----------------------------------- Scott M. Sperling THOMAS H. LEE FOREIGN FUND III, L.P. By: THL Equity Advisors III Limited Partnership, General Partner By: THL Equity Trust, General Partner By: /s/ Scott M. Sperling ----------------------------------- Scott M. Sperling -19- 20 THL-CCI INVESTORS LIMITED PARTNERSHIP By: THL Investment Management Corp., General Partner By: /s/ Scott M. Sperling ----------------------------------- Scott M. Sperling MANAGEMENT SHAREHOLDERS: /s/ Garen K. Staglin ----------------------------------- Garen K. Staglin /s/ John F. Barlow ----------------------------------- John F. Barlow /s/ D. A. Herron ----------------------------------- Douglas A. Herron /s/ Elizabeth A. Wolszon ----------------------------------- Elizabeth A. Wolszon /s/ Douglas R. Maehl ----------------------------------- Douglas R. Maehl /s/ James K. West ----------------------------------- James K. West /s/ Poe A. Timmons ----------------------------------- Poe A. Timmons -20- 21 EXHIBIT A THE KELLMAN SHAREHOLDERS
TRUST TRUSTEE(S) ----- ---------- Family Revocable Trust Joseph Kellman J-K Gift Trust Allan B. Muchin U/A/D 12/16/91 Maurice Raizes Marvin Zimmerman Joseph Kellman 1995 Allan B. Muchin Descendants Trust for the Family of Jack Maurice Raizes U/A/D 11/8/95 Marvin Zimmerman Joseph Kellman 1995 Allan B. Muchin Descendants Trust for the Family of Richard Maurice Raizes U/A/D 11/8/95 Marvin Zimmerman Joseph Kellman 1995 Allan B. Muchin Descendants Trust for the Family of Celia Maurice Raizes U/A/D 11/8/95 Marvin Zimmerman Joseph Kellman 1995 Gift Allan B. Muchin Trust for the Family of Jack Maurice Raizes U/A/D 11/8/95 Marvin Zimmerman Joseph Kellman 1995 Gift Allan B. Muchin Trust for the Family of Richard Maurice Raizes U/A/D 11/8/95 Marvin Zimmerman Joseph Kellman 1995 Gift Allan B. Muchin Trust for the Family of Celia Maurice Raizes U/A/D 11/8/95 Marvin Zimmerman
-21- 22 EXHIBIT B TH LEE SHAREHOLDERS Thomas H. Lee Equity Fund III, L.P. Thomas H. Lee Foreign Fund III, L.P. THL-CCI Investors Limited Partnership Big Bend Investments, L.P. -22- 23 EXHIBIT C MANAGEMENT SHAREHOLDERS Garen K. Staglin John F. Barlow Douglas A. Herron Elizabeth A. Wolszon Douglas R. Maehl Poe A. Timmons James A. West Thomas Feeney James W. Crystal Frederick R. Barnard Garth R. Beck Ronald H. Duncan August N. Gassiot Allen B. Oblow Gary J. Strain David P. Stagner Robert A. Carlson Craig D. Douglas Michael V. Fenstermacher Michael G. Ridgway Brian D. O'Mara Steven B. Micheli Clark B. Wilson Robert L. Avers Carl W. Blackburn James P. Catalino William Dane Donald P. Giles Nicholas A. Greville Stanley J. Hoffman M. Keith Jones Paul J. Krakenberg Gary Mazeffa Morton H. Meyerson Peter T. Pearson James R. Randolph William J. Rapp John Ritucci Richard J. Scheer Jack L. Warren James E. Whittlesey David W. Wood Larry J. Binham, Trustee for the Shannon Carole Barlow Irrevocable Trust Larry J. Binham, Trustee for the Diane Michelle Barlow Irrevocable Trust Donald A. Poirier Garen and Sharalyn Staglin 1997 Charitable Remainder Unitrust Michael F. Hallenberger -23- EX-10.15 21 SECURITY AGREEMENT 1 EXHIBIT 10.15 EXHIBIT G SECURITY AGREEMENT among SAFELITE GLASS CORP. and THE CHASE MANHATTAN BANK, as Collateral Agent Dated as of December 20, 1996, as amended and restated through December 17, 1997 2 TABLE OF CONTENTS
Page ---- ARTICLE I SECURITY INTERESTS........................................ 2 1.1. Grant of Security Interests..................................................... 2 1.2. Power of Attorney............................................................... 3 ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS........................ 3 2.1. Necessary Filings............................................................... 3 2.2. No Liens........................................................................ 4 2.3. Other Financing Statements...................................................... 4 2.4. Chief Executive Office; Records................................................. 4 2.5. Location of Inventory and Equipment............................................. 5 2.6. Trade Names; Change of Name..................................................... 5 ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS............................ 6 3.1. Additional Representations and Warranties....................................... 6 3.2. Maintenance of Records.......................................................... 6 3.3. Direction to Account Debtors; Contracting Parties; etc.......................... 6 3.4. Modification of Terms; etc...................................................... 7 3.5. Collection...................................................................... 7 3.6. Instruments..................................................................... 7 ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS............................. 8 4.1. Additional Representations and Warranties....................................... 8 4.2. Licenses and Assignments........................................................ 8
(i) 3
Page ---- 4.3. Infringements................................................................... 8 4.4. Preservation of Marks........................................................... 9 4.5. Maintenance of Registration..................................................... 9 4.6. Future Registered Marks......................................................... 9 4.7. Remedies........................................................................ 9 ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS.............................. 10 5.1. Additional Representations and Warranties....................................... 10 5.2. Licenses and Assignments........................................................ 10 5.3. Infringements................................................................... 10 5.4. Maintenance of Patents.......................................................... 11 5.5. Prosecution of Patent Application............................................... 11 5.6. Other Patents and Copyrights.................................................... 11 5.7. Remedies........................................................................ 11 ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL............................... 12 6.1. Protection of Collateral Agent's Security....................................... 12 6.2. Further Actions................................................................. 12 6.3. Financing Statements............................................................ 13 ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT........................... 13 7.1. Remedies; Obtaining the Collateral Upon Default................................. 13 7.2. Remedies; Disposition of the Collateral......................................... 14 7.3. Waiver of Claims................................................................ 15 7.4. Application of Proceeds......................................................... 16 7.5. Remedies Cumulative............................................................. 17 7.6. Discontinuance of Proceedings................................................... 18
(ii) 4
Page ---- ARTICLE VIII INDEMNITY............................................ 18 8.1. Indemnity....................................................................... 18 8.2. Indemnity Obligations Secured by Collateral; Survival........................... 19 ARTICLE IX DEFINITIONS........................................... 19 ARTICLE X MISCELLANEOUS.......................................... 24 10.1. Notices......................................................................... 24 10.2. Waiver; Amendment............................................................... 25 10.3. Obligations Absolute............................................................ 25 10.4. Successors and Assigns.......................................................... 25 10.5. Headings Descriptive............................................................ 26 10.6. Governing Law................................................................... 26 10.7. Assignor's Duties............................................................... 26 10.8. Termination; Release............................................................ 26 10.9. Counterparts.................................................................... 27 10.10. The Collateral Agent............................................................ 27 10.11. Additional Assignors............................................................ 27 ANNEX A Schedule of Chief Executive Offices and other Record Locations ANNEX B Schedule of Inventory and Equipment Locations ANNEX C Trade and Fictitious Names ANNEX D List of Marks ANNEX E List of Patents and Applications ANNEX F List of Copyrights and Applications ANNEX G Assignment of Security Interest in United States Trademarks and Patents ANNEX H Assignment of Security Interest in United States Copyrights
(iii) 5 SECURITY AGREEMENT SECURITY AGREEMENT, dated as of December 20, 1996 (the "Existing Security Agreement"), as amended and restated through December 17, 1997, among each of the undersigned (each an "Assignor" and, together with any other entity that becomes a party hereto pursuant to Section 10.11 hereof, the "Assignors") and The Chase Manhattan Bank, as Collateral Agent (the "Collateral Agent"), for the benefit of the Secured Creditors (as defined below). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. W I T N E S S E T H : WHEREAS, Safelite Glass Corp. (the "Borrower"), the lenders from time to time party thereto (the "Banks"), Bankers Trust Company, as Syndication Agent, Goldman Sachs Credit Partners L.P., as Documentation Agent, and The Chase Manhattan Bank, as Administrative Agent (together with any successor agent, the "Administrative Agent," and together with the Collateral Agent, the Syndication Agent, the Documentation Agent and the Banks, the "Bank Creditors"), have entered into a Credit Agreement, dated as of December 20, 1996, as amended and restated through December 17, 1997 (as further amended, modified or supplemented from time to time, the "Credit Agreement"), providing for the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower, all as contemplated therein; WHEREAS, the parties hereto have elected to amend and restate the Existing Security Agreement pursuant to this Agreement rather than enter into a new security agreement for their convenience and intend that all indebtedness, obligations and liens created under the Existing Security Agreement and the other Credit Documents be continued hereunder and thereunder and remain in full force and effect and not be discharged, paid, satisfied or cancelled; WHEREAS, the Borrower may from time to time be party to one or more (i) interest rate agreements, interest rate cap agreements, interest rate collar agreements or other similar agreements or arrangements, (ii) foreign exchange contracts, currency swap agreements or similar agreements or arrangements designed to protect against the fluctuations in currency values and\or (iii) other types of hedging agreements from time to time (each such agreement or arrangement with an Other Creditor (as hereinafter defined), an "Interest Rate Protection Agreement or Other Hedging Agreement"), with a Bank or an affiliate of a Bank (each such Bank or affiliate, even if the respective Bank subsequently ceases to be a Bank under the Credit Agreement for any reason, together with such Bank's or affiliate's 6 Page 2 successors and assigns, collectively, the "Other Creditors", and together with the Bank Creditors, the "Secured Creditors"); WHEREAS, pursuant to the Subsidiary Guaranty, each Assignor (other than the Borrower) has jointly and severally guaranteed to the Secured Creditors the payment when due of all obligations and liabilities of the Borrower under or with respect to the Credit Documents and the Interest Rate Protection Agreements or Other Hedging Agreements; WHEREAS, it is a condition precedent to the making of Loans to the Borrower under the Credit Agreement that the Assignors shall have executed and delivered to the Collateral Agent this Agreement; and WHEREAS, each Assignor desires to execute this Agreement to satisfy the conditions described in the preceding paragraph; NOW, THEREFORE, in consideration of the benefits accruing to each Assignor, the receipt and sufficiency of which are hereby acknowledged, each Assignor hereby makes the following representations and warranties to the Collateral Agent and hereby covenants and agrees with the Collateral Agent as follows: ARTICLE I SECURITY INTERESTS 1.1. Grant of Security Interests. (a) As security for the prompt and complete payment and performance when due of all of its Obligations, each Assignor does hereby assign and transfer unto the Collateral Agent, and does hereby pledge and grant to the Collateral Agent for the benefit of the Secured Creditors, a continuing security interest of first priority in all of the right, title and interest of such Assignor in, to and under all of the following, whether now existing or hereafter from time to time acquired: (i) each and every Receivable, (ii) all Contracts (other than Excluded Contracts except to the extent provided in the definition thereof), together with all Contract Rights arising thereunder, (iii) all Inventory, (iv) all Equipment, (v) all Investment Property, (vi) all Marks, together with the registrations and right to all renewals thereof, and the goodwill of the business of such Assignor symbolized by the Marks, (vii) all Patents and Copyrights, (viii) all computer pro grams of such Assignor and all intellectual property rights therein (to the extent not constituting Excluded Contracts) and all other proprietary information of such Assignor, including, but not limited to, trade secrets, (ix) all other Goods, General Intangibles, Chattel Paper, Documents and Instruments, (x) the Cash Collateral Account and all monies, securities and instruments deposited or required to be deposited in such Cash Collateral 7 Page 3 Account, and (xi) all Proceeds and products of any and all of the foregoing (all of the above, collectively, the "Collateral"). Notwithstanding the foregoing, the term "Collateral" shall not include any Equipment that, as of the date hereof, serves as security for any Existing Indebtedness but only to the extent that (and so long as) the terms of such Existing Indebtedness specifically prohibit the granting of a prior, pari passu or junior Lien and security interest in such Equipment, and then only so long as any such Existing Indebtedness remains outstanding after which time such Equipment shall be subject to the security interests and Liens created by this Agreement. (b) The security interest of the Collateral Agent under this Agreement extends to all Collateral of the kind which is the subject of this Agreement which any Assignor may acquire at any time during the continuation of this Agreement. 1.2. Power of Attorney. Each Assignor hereby constitutes and appoints the Collateral Agent its true and lawful attorney, irrevocably, with full power after the occurrence of and during the continuance of an Event of Default (in the name of such Assignor or otherwise) to act, require, demand, receive, compound and give acquittance for any and all monies and claims for monies due or to become due to such Assignor under or arising out of the Collateral, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Collateral Agent may deem to be necessary or advisable to protect the interests of the Secured Creditors, which appointment as attorney is coupled with an interest. ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS Each Assignor represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Agreement, as follows: 2.1. Necessary Filings. All filings, registrations and recordings necessary or appropriate to create, preserve and perfect the security interest granted by such Assignor to the Collateral Agent hereby in respect of the Collateral have been accomplished and the security interest granted to the Collateral Agent pursuant to this Agreement in and to the Collateral creates a perfected security interest therein prior to the rights of all other Persons therein and subject to no other Liens (other than Permitted Liens) and is entitled to all the rights, priorities and benefits afforded by the Uniform Commercial Code or other relevant law as enacted in any relevant jurisdiction to perfected security interests, in each case to the extent that the Collateral consists of the type of property in which a security interest may be perfected by filing a financing statement or other appropriate documents under the Uniform 8 Page 4 Commercial Code as enacted in any relevant jurisdiction or in the United States Patent and Trademark Office or United States Copyright Office. 2.2. No Liens. Such Assignor is, and as to Collateral acquired by it from time to time after the date hereof such Assignor will be, the owner of, or has rights in, all Collateral free from any Lien, security interest, encumbrance or other right, title or interest of any Person (other than Permitted Liens), and such Assignor shall defend the Collateral to the extent of its rights therein against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent. 2.3. Other Financing Statements. As of the date hereof, there is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering any interest of any kind in the Collateral (other than financing statements filed in respect of Permitted Liens), and so long as the Total Commitment has not been terminated or any Note remains unpaid or any of the Obligations remain unpaid or any Interest Rate Protection Agreement or Other Hedging Agreement or Letter of Credit remains in effect (other than Letters of Credit, together with all Fees that have accrued and will accrue thereon through the stated termination date of such Letters of Credit, which have been supported in a manner satisfactory to the Letter of Credit Issuer as provided in the Credit Agreement) or any Obligations are owed with respect thereto, such Assignor will not execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted hereby by such Assignor or as permitted by the Credit Agreement. 2.4. Chief Executive Office; Records. The chief executive office of such Assignor is located at the address or addresses indicated on Annex A hereto for such Assignor. Such Assignor will not move its chief executive office except to such new location as such Assignor may establish in accordance with the last sentence of this Section 2.4. The originals of all documents evidencing all Receivables and Contract Rights of such Assignor and the only original books of account and records of such Assignor relating thereto are, and will continue to be, kept at such chief executive office, at one or more of the locations set forth on Annex B hereto or at such new locations as such Assignor may establish in accordance with the last sentence of this Section 2.4. All Receivables and Contract Rights of such Assignor are, and will continue to be, maintained at, and controlled and directed (including, without limitation, for general accounting purposes) from, the office locations described above or such new location established in accordance with the last sentence of this Section 2.4. No Assignor shall establish new locations for such offices until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention to do so, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request and (ii) with respect to such new location, it shall have taken all action, satisfactory to the Collateral Agent, to maintain the 9 Page 5 security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. 2.5. Location of Inventory and Equipment. (a) All Inventory and Equipment held on the date hereof by each Assignor is located at one of the locations shown on Annex B hereto for such Assignor (other than (i) immaterial portions of Inventory as may be transferred to another location in connection with a sale of such Inventory in the ordinary course of business, so long as such sale occurs within 30 days from the date of such transfer and (ii) various spare parts held for maintenance or repair of Equipment). Each Assignor agrees that all Inventory and Equipment now held or subsequently acquired by it shall be kept at (or shall be in transport to) any one of the locations shown on Annex B hereto, or such new location as such Assignor may establish in accordance with the last sentence of this Section 2.5 (other than (i) immaterial portions of Inventory may be transferred to another location in connection with a sale of such Inventory in the ordinary course of business, so long as such sale occurs within 30 days from the date of such transfer or (ii) various spare parts held for maintenance or repair of Equipment). Any Assignor may establish a new location for Inventory and Equipment only if (i) it shall have given to the Collateral Agent not less than 30 days prior written notice of its intention so to do, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may request and (ii) with respect to such new location, it shall have taken all action satisfactory to the Collateral Agent to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. (b) Inventory and Equipment may be transferred in accordance with the terms of the Credit Agreement subject to procedures set forth herein relating to releases of Collateral. 2.6. Trade Names; Change of Name. No Assignor has or operates in any jurisdiction under, or in the preceding 12 months has had or has operated in any jurisdiction under, any trade names, fictitious names or other names except its legal name and such other trade or fictitious names as are listed on Annex C hereto. No Assignor shall change its legal name or assume or operate in any jurisdiction under any trade, fictitious or other name except those names listed on Annex C hereto and new names established in accordance with the last sentence of this Section 2.7. No Assignor shall assume or operate in any jurisdiction under any new trade, fictitious or other name until (i) it shall have given to the Collateral Agent not less than 30 days' prior written notice of its intention so to do, clearly describing such new name and the jurisdictions in which such new name shall be used and providing such other information in connection therewith as the Collateral Agent may request and (ii) with respect to such new name, it shall have taken all action requested by the Collateral Agent, to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. 10 Page 6 ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS 3.1. Additional Representations and Warranties. As of the time when each of its Receivables arises, each Assignor shall be deemed to have represented and warranted that such Receivable is genuine and represents a bona fide transaction completed in accordance with the terms and provisions contained in any document related thereto and for which payment is owed to Assignor. 3.2. Maintenance of Records. Each Assignor will keep and maintain at its own cost and expense accurate records of its Receivables and Contracts, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith, and such Assignor will make the same available on such Assignor's premises to the Collateral Agent for inspection, at such Assignor's own cost and expense, at any and all reasonable times upon reasonable prior notice to an Authorized Officer of such Assignor. Upon the occurrence and during the continuance of an Event of Default and at the request of the Collateral Agent, such Assignor shall, at its own cost and expense, deliver all tangible evidence of its Receivables and Contract Rights (including, without limitation, all documents evidencing the Receivables and all Contracts) and such books and records to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by such Assignor). Upon the occurrence and during the continuance of an Event of Default and if the Collateral Agent so directs, such Assignor shall legend, in form and manner satisfactory to the Collateral Agent, the Receivables and the Contracts, as well as books, records and documents (if any) of such Assignor evidencing or pertaining to such Receivables and Contracts with an appropriate reference to the fact that such Receivables and Contracts have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. 3.3. Direction to Account Debtors; Contracting Parties; etc. Upon the occurrence and during the continuance of an Event of Default, and if the Collateral Agent so directs any Assignor, such Assignor agrees (x) upon the written request of the Collateral Agent, unless an Event of Default of the type specified in Section 9.05 has occurred and is continuing, to cause all payments on account of the Receivables and Contracts to be made directly to the Cash Collateral Account, (y) that the Collateral Agent may, at its option, directly notify the obligors with respect to any Receivables and/or under any Contracts to make payments with respect thereto as provided in the preceding clause (x) and (z) that the Collateral Agent may enforce collection of any Receivables and Contracts and may adjust, settle or compromise the amount of payment thereof, in the same manner and to the same extent as such Assignor. Without notice to or assent by any Assignor, the Collateral Agent 11 Page 7 may apply any or all amounts then in, or thereafter deposited in, the Cash Collateral Account which application shall be effected in the manner provided in Section 7.4 of this Agreement. The reasonable costs and expenses (including reasonable attorneys' fees) of collection, whether incurred by the Assignor or the Collateral Agent, shall be borne by the relevant Assignor. The Collateral Agent shall use reasonable efforts to deliver a copy of each notice referred to in the preceding clause (y) to the relevant Assignor not later than the date of delivery of such notice to obligors; provided that the failure by the Collateral Agent to so notify such Assignor shall not affect the effectiveness of such notice or the other rights of the Collateral Agent created by this Section 3.3. 3.4. Modification of Terms; etc. No Assignor shall rescind or cancel any indebtedness evidenced by any Receivable or under any Contract, or modify in any material respect any term thereof or make any material adjustment with respect thereto, or extend or renew the same, or compromise or settle any material dispute, claim, suit or legal proceeding relating thereto, or sell any Receivable or Contract, or interest therein, without the prior written consent of the Collateral Agent, except as permitted by Section 3.5 hereof. Each Assignor will duly fulfill all obligations on its part to be fulfilled under or in connection with the Receivables and Contracts and will do nothing to impair the rights of the Collateral Agent in the Receivables or Contracts. 3.5. Collection. Each Assignor shall endeavor in accordance with reasonable business practices to cause to be collected from the account debtor named in each of its Receivables or obligor under any Contract, as and when due (including, without limitation, amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures) any and all amounts owing under or on account of such Receivable or Contract, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Receivable or under such Contract, except that, prior to the occurrence of an Event of Default, any Assignor may allow in the ordinary course of business as adjustments to amounts owing under its Receivables and Contracts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which such Assignor finds appropriate in accordance with reasonable business judgment and (ii) a refund or credit due as a result of returned or damaged merchandise or improperly performed services or for other reasons which such Assignor finds appropriate in accordance with reasonable business judgment. The reasonable costs and expenses (including, without limitation, reasonable attorneys' fees) of collection, whether incurred by an Assignor or the Collateral Agent, shall be borne by the relevant Assignor. 3.6. Instruments. If any Assignor owns or acquires any Instrument constituting Collateral with a face amount of $500,000 or more, such Assignor will within 10 Business Days notify the Collateral Agent thereof, and upon request by the Collateral Agent will promptly deliver such Instrument to the Collateral Agent appropriately endorsed 12 Page 8 in blank or to the order of the Collateral Agent as further security hereunder as requested by the Collateral Agent. ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS 4.1. Additional Representations and Warranties. Each Assignor represents and warrants that it is the true and lawful owner of or otherwise has the right to use the registered Marks listed in Annex D hereto for such Assignor and that said listed Marks constitute all the United States marks and applications for United States marks registered in the United States Patent and Trademark Office that such Assignor presently owns or uses in connection with its business. Each Assignor represents and warrants that it owns, is licensed to use or otherwise has the right to use all Marks that it uses. Each Assignor further warrants that it has no knowledge of any third party claim that any aspect of such Assignor's present or currently contemplated business operations infringes or will infringe any trademark, service mark or trade name held or used by any other party. Each Assignor represents and warrants that it is the true and lawful owner of or otherwise has the right to use all U.S. trademark registrations and applications listed in Annex D hereto and that said registrations are valid, subsisting, have not been cancelled and that such Assignor is not aware of any third-party claim that any of said registrations is invalid or unenforceable, or is not aware that there is any reason that any of said registrations is invalid or unenforceable, or is not aware that there is any reason that any of said applications will not pass to registration. Each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of an Event of Default, any document which may be required by the United States Patent and Trademark Office in order to effect an absolute assignment of all right, title and interest in each Mark, and record the same. 4.2. Licenses and Assignments. Except as otherwise permitted by the Credit Agreement or this Agreement, each Assignor hereby agrees not to divest itself of any right under any Mark absent prior written approval of the Collateral Agent. 4.3. Infringements. Each Assignor agrees, promptly upon learning thereof, to notify the Collateral Agent in writing of the name and address of, and to furnish such pertinent information that may be available with respect to, any party who such Assignor believes is infringing or diluting or otherwise violating in any material respect any of such Assignor's rights in and to any Mark material to such Assignor's business, or with respect to any party claiming that such Assignor's use of any Mark material to such Assignor's business violates in any material respect any property right of that party. Each Assignor further agrees, absent direction by the Collateral Agent to the contrary, diligently to prosecute if it determines to do so in accordance with reasonable business judgment any 13 Page 9 Person infringing any such Mark owned by such Assignor, in accordance with reasonable business practices. 4.4. Preservation of Marks. Each Assignor agrees to use its Marks in interstate commerce during the time in which this Agreement is in effect, sufficiently to preserve such Marks as trademarks or service marks under the laws of the United States; provided that no Assignor shall be obligated to preserve any Mark in the event such Assignor determines, in its reasonable business judgment, that the preservation of such Mark is no longer desirable in the conduct of its business. 4.5. Maintenance of Registration. Each Assignor shall, at its own expense, diligently process all documents required by the Trademark Act of 1946, 15 U.S.C. Sections 1051 et seq. to maintain trademark registrations, including but not limited to affidavits of use and applications for renewals of registration in the United States Patent and Trademark Office for all of its registered Marks pursuant to 15 U.S.C. Sections 1058(a), 1059 and 1065, and shall pay all fees and disbursements in connection therewith and shall not abandon any such filing of affidavit of use or any such application of renewal prior to the exhaustion of all administrative and judicial remedies without prior written consent of the Collateral Agent; provided that no Assignor shall be obligated to maintain registration of any Mark in the event that such Assignor determines, in its reasonable business judgment, that such maintenance of such Mark is no longer necessary or desirable in the conduct of its business. Each Assignor agrees to notify the Collateral Agent three (3) months prior to the dates on which the affidavits of use or the applications for renewal registration are due with respect to any registered Mark that the affidavits of use or the renewal is being processed or being abandoned, as the case may be. 4.6. Future Registered Marks. If any Mark registration issues hereafter to any Assignor as a result of any application now or hereafter pending before the United States Patent and Trademark Office, such Mark shall be deemed to have been assigned by such Assignor for security to the Collateral Agent and within 30 days of receipt of a certificate of registration, such Assignor shall deliver to the Collateral Agent a copy of such certificate, and an assignment for security in such Mark, to the Collateral Agent and at the expense of such Assignor, confirming the assignment for security in such Mark to the Collateral Agent hereunder, the form of such security to be substantially the same as the form hereof or in such other form as may be reasonably satisfactory to the Collateral Agent. 4.7. Remedies. If an Event of Default shall occur and be continuing, the Collateral Agent may, by written notice to the relevant Assignor, take any or all of the following actions: (i) declare the entire right, title and interest of such Assignor in and to each of the Marks, together with all trademark rights and rights of protection to the same, vested in the Collateral Agent for the benefit of the Secured Creditors, in which event such rights, title and interest shall immediately vest in the Collateral Agent for the benefit of the 14 Page 10 Secured Creditors, and the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 4.1 hereof to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (ii) take and use or sell the Marks and the goodwill of such Assignor's business symbolized by the Marks and the right to carry on the business and use the assets of such Assignor in connection with which the Marks have been used; and (iii) direct such Assignor to refrain, in which event such Assignor shall refrain, from using the Marks in any manner whatsoever, directly or indirectly, and, if requested by the Collateral Agent, execute such other and further documents that the Collateral Agent may request to further confirm this and to transfer ownership of the Marks and registrations and any pending trademark application in the United States Patent and Trademark Office to the Collateral Agent. ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS 5.1. Additional Representations and Warranties. Each Assignor represents and warrants that it is the true and lawful owner or licensee of all rights in (i) all material United States trade secrets and proprietary information necessary to operate the business of the Assignor (the "Trade Secret Rights"), (ii) the Patents listed in Annex E hereto for such Assignor and that said Patents constitute all the United States patents and applications for United States patents that such Assignor now owns and (iii) the Copyrights listed in Annex F hereto for such Assignor and that said Copyrights constitute all registrations of United States copyrights and applications for United States copyright registrations that such Assignor now owns. Each Assignor further warrants that it has no knowledge of any third party claim that any aspect of such Assignor's present or currently contemplated business operations infringes or will infringe any patent or any copyright owned or held by any other party or such Assignor has misappropriated any trade secret or proprietary information owned or held by any other party. Each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of any Event of Default, any document which may be required by the United States Patent and Trademark Office or the United States Copyright Office in order to effect an absolute assignment of all right, title and interest in each Patent and Copyright, and to record the same. 5.2. Licenses and Assignments. Except as otherwise permitted by the Credit Agreement or this Agreement, each Assignor hereby agrees not to divest itself of any right under any Patent or Copyright absent prior written approval of the Collateral Agent. 5.3. Infringements. Each Assignor agrees, promptly upon learning thereof, to furnish the Collateral Agent in writing with all pertinent information available to such 15 Page 11 Assignor with respect to any infringement, contributing infringement or active inducement to infringe in any Patent or Copyright material to such Assignor's business or to any claim that the practice of any such Patent or the use of any such Copyright violates any property right of a third party, or with respect to any misappropriation of any Trade Secret Right material to such Assignor's business or any claim that practice of any such Trade Secret Right violates any property right of a third party. Each Assignor further agrees, absent direction of the Collateral Agent to the contrary, diligently to prosecute, if it determines to do so in accordance with reasonable business judgment, any Person infringing any Patent or Copyright or any Person misappropriating any Trade Secret Right in accordance with reasonable business practices. 5.4. Maintenance of Patents. At its own expense, each Assignor shall make timely payment of all post-issuance fees required pursuant to 35 U.S.C. Section 41 to maintain in force rights under each Patent, absent prior written consent of the Collateral Agent; provided that no Assignor shall be obligated to maintain any Patent in the event such Assignor determines, in its reasonable business judgment, that the maintenance of such Patent is no longer necessary or desirable in the conduct of its business. 5.5. Prosecution of Patent Application. At its own expense, each Assignor shall diligently prosecute all applications for United States Patents listed in Annex E hereto for such Assignor and shall not abandon any such application prior to exhaustion of all administrative and judicial remedies, absent written consent of the Collateral Agent; provided that no Assignor shall be obligated to prosecute any application in the event such Assignor determines, in its reasonable business judgment, that the prosecuting of such application is no longer necessary or desirable in the conduct of its business. 5.6. Other Patents and Copyrights. Within 30 days of the acquisition or issuance of a United States Patent, registration of a Copyright, or acquisition of a registered Copyright, or of filing of an application for a United States Patent or Copyright, such United States Patent or Copyright shall be deemed to have been assigned by such Assignor for security to the Collateral Agent, and the relevant Assignor shall deliver to the Collateral Agent a copy of said Copyright or certificate or registration of, or application therefor, said Patents, as the case may be, with an assignment for security as to such Patent or Copyright, as the case may be, to the Collateral Agent and at the expense of such Assignor, confirming the assignment for security, the form of such assignment for security to be substantially the same as the form hereof or in such other form as may be reasonably satisfactory to the Collateral Agent. 5.7. Remedies. If an Event of Default shall occur and be continuing, the Collateral Agent may by written notice to the relevant Assignor, take any or all of the following actions: (i) declare the entire right, title, and interest of such Assignor in each of the Patents and Copyrights vested in the Collateral Agent for the benefit of the Secured 16 Page 12 Creditors, in which event such right, title, and interest shall immediately vest in the Collateral Agent for the benefit of the Secured Creditors, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 5.1 hereof to execute, cause to be acknowledged and notarized and to record said absolute assignment with the applicable agency; (ii) take and practice or sell the Patents and Copyrights; and (iii) direct such Assignor to refrain, in which event such Assignor shall refrain, from practicing the Patents and using the Copyrights directly or indirectly, and such Assignor shall execute such other and further documents as the Collateral Agent may request further to confirm this and to transfer ownership of the Patents and Copyrights to the Collateral Agent for the benefit of the Secured Creditors. ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL 6.1. Protection of Collateral Agent's Security. Each Assignor will do nothing to impair the rights of the Collateral Agent in the Collateral. Each Assignor will at all times keep its Inventory and Equipment insured in favor of the Collateral Agent, at such Assignor's own expense to the extent and in the manner provided in the Credit Agreement; all policies or certificates with respect to such insurance (and any other insurance maintained by such Assignor) (i) shall be endorsed to the Collateral Agent's satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as additional insured and loss payee) and (ii) shall state that such insurance policies shall not be cancelled or revised without at least 30 days' prior written notice thereof by the insurer to the Collateral Agent; and certified copies of such policies or certificates shall be deposited with the Collateral Agent. If any Assignor shall fail to insure its Inventory and Equipment in accordance with the preceding sentence, or if any Assignor shall fail to so endorse and deposit all policies or certificates with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance and such Assignor agrees to promptly reimburse the Collateral Agent for all costs and expenses of procuring such insurance. Except as otherwise permitted to be retained by the relevant Assignor pursuant to the Credit Agreement, the Collateral Agent shall, at the time such proceeds of such insurance are distributed to the Secured Creditors, apply such proceeds in accordance with Section 7.4 hereof. Each Assignor assumes all liability and responsibility in connection with the Collateral acquired by it and the liability of such Assignor to pay the Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason whatsoever unavailable to such Assignor. 6.2. Further Actions. Each Assignor will, at its own expense, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Collateral, warehouse receipts, receipts in the 17 Page 13 nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent deems reasonably appropriate or advisable to perfect, preserve or protect its security interest in the Collateral. 6.3. Financing Statements. Each Assignor agrees to execute and deliver to the Collateral Agent such financing statements, in form reasonably acceptable to the Collateral Agent, as the Collateral Agent may from time to time reasonably request or as are necessary or desirable in the opinion of the Collateral Agent to establish and maintain a valid, enforceable, first priority perfected security interest in the Collateral as provided herein and the other rights and security contemplated hereby all in accordance with the Uniform Commercial Code as enacted in any and all relevant jurisdictions or any other relevant law. Each Assignor will pay any applicable filing fees, recordation taxes and related expenses relating to its Collateral. Each Assignor hereby authorizes the Collateral Agent to file any such financing statements without the signature of such Assignor where permitted by law. ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT 7.1. Remedies; Obtaining the Collateral Upon Default. Each Assignor agrees that, if any Event of Default shall have occurred and be continuing, then and in every such case, the Collateral Agent, in addition to any rights now or hereafter existing under applicable law, shall have all rights as a secured creditor under the Uniform Commercial Code in all relevant jurisdictions and may: (i) personally, or by agents or attorneys, immediately take possession of the Collateral or any part thereof, from such Assignor or any other Person who then has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon such Assignor's premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of such Assignor; (ii) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Receivables and the Contracts) constituting the Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Collateral Agent; 18 Page 14 (iii) withdraw all monies, securities and instruments in the Cash Collateral Account for application to the Obligations in accordance with Section 7.4 hereof; (iv) sell, assign or otherwise liquidate any or all of the Collateral or any part thereof in accordance with Section 7.2 hereof, or direct the relevant Assignor to sell, assign or otherwise liquidate any or all of the Collateral or any part thereof, and, in each case, take possession of the proceeds of any such sale or liquidation; (v) take possession of the Collateral or any part thereof, by directing the relevant Assignor in writing to deliver the same to the Collateral Agent at any place or places designated by the Collateral Agent, in which event such Assignor shall at its own expense: (x) forthwith cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent; (y) store and keep any Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in Section 7.2 hereof; and (z) while the Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition; and (vi) license or sublicense, whether on an exclusive or nonexclusive basis, any Marks, Patents or Copyrights included in the Collateral for such term and on such conditions and in such manner as the Collateral Agent shall in its sole judgment determine (taking into account such provisions as may be necessary to protect and preserve such Marks, Patents or Copyrights); it being understood that each Assignor's obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific performance by such Assignor of said obligation. The Secured Creditors agree that this Agreement may be enforced only by the action of the Administrative Agent or the Collateral Agent, in each case acting upon the instructions of the Required Banks (or, after the date on which all Credit Document Obligations have been paid in full, the holders of at least the majority of the outstanding Other Obligations) and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent or the Collateral Agent or the holders of at least a 19 Page 15 majority of the outstanding Interest Rate Obligations, as the case may be, for the benefit of the Secured Creditors upon the terms of this Agreement. 7.2. Remedies; Disposition of the Collateral. Any Collateral repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof and any other Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the necessity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable. Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair at the expense of the relevant Assignor which the Collateral Agent shall determine to be commercially reasonable. Any such disposition which shall be a private sale or other private proceedings permitted by such requirements shall be made upon not less than 10 days' written notice to the relevant Assignor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 10 days after the giving of such notice, to the right of the relevant Assignor or any nominee of such Assignor to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public sale permitted by such requirements shall be made upon not less than 10 days' written notice to the relevant Assignor specifying the time and place of such sale and, in the absence of applicable requirements of law, shall be by public auction (which may, at the Collateral Agent's option, be subject to reserve), after publication of notice of such auction not less than 10 days prior thereto in two newspapers in general circulation in the City of New York. To the extent permitted by any such requirement of law, the Collateral Agent may bid for and become the purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section without accountability to the relevant Assignor. If, under mandatory requirements of applicable law, the Collateral Agent shall be required to make disposition of the Collateral within a period of time which does not permit the giving of notice to the relevant Assignor as hereinabove specified, the Collateral Agent need give such Assignor only such notice of disposition as shall be reason ably practicable in view of such mandatory requirements of applicable law. 7.3. Waiver of Claims. Except as otherwise provided in this Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH ASSIGNOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR 20 Page 16 ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and each Assignor hereby further waives, to the extent permitted by law: (i) all damages occasioned by such taking of possession except any damages which are the direct result of the Collateral Agent's gross negligence or willful misconduct; (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights here under; and (iii) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and each Assignor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws. Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the relevant Assignor therein and thereto, and shall be a perpetual bar both at law and in equity against such Assignor and against any and all Persons claiming or attempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under such Assignor. 7.4. Application of Proceeds. (a) All moneys collected by the Collateral Agent (or, to the extent the Pledge Agreement, the Mortgages or Additional Security Documents require proceeds of collateral under such Security Documents to be applied in accordance with the provisions of this Agreement, the Pledgee or Mortgagee under such other Security Document) upon any sale or other disposition of the Collateral, together with all other moneys received by the Collateral Agent hereunder, shall be applied as follows: (i) first, to the payment of all Obligations owing to the Collateral Agent of the type provided in clauses (iii) and (iv) of the definition of Obligations; (ii) second, to the extent proceeds remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Obligations shall be paid to the Secured Creditors as provided in Section 7.4(c) hereof with each Secured Creditor receiving an amount equal to its outstanding Obligations or, if the proceeds are insufficient to pay in full all such Obligations, its Pro Rata Share of the amount remaining to be distributed; and 21 Page 17 (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii) and following the termination of this Agreement pursuant to Section 10.8 hereof, to the relevant Assignor or, to the extent directed by such Assignor or a court of competent jurisdiction, to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement, "Pro Rata Share" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor's Obligations and the denominator of which is the then outstanding amount of all Obligations. (c) All payments required to be made to the Bank Creditors hereunder shall be made to the Agent under the Credit Agreement for the account of the Bank Creditors and all payments required to be made to the Other Creditors hereunder shall be made directly to the respective Other Creditors. (d) For purposes of applying payments received in accordance with this Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the Administrative Agent under the Credit Agreement and (ii) the Other Creditors for a determination (which the Administrative Agent, each Other Creditor and the Secured Creditors agree (or shall agree) to provide upon request of the Collateral Agent) of the outstanding Obligations owed to the Bank Creditors or the Other Creditors, as the case may be. Unless it has actual knowledge (including by way of written notice from a Bank Creditor or an Other Creditor) to the contrary, the Administrative Agent under the Credit Agreement, in furnishing information pursuant to the preceding sentence, and the Collateral Agent, in acting hereunder, shall be entitled to assume that (x) no Credit Document Obligations other than principal, interest and regularly accruing fees are owing to any Bank Creditor and (y) no Interest Rate Protection Agreement or Other Hedging Agreement, or Other Obligations in respect thereof, are in existence. (e) It is understood that the Assignors shall remain jointly and severally liable to the extent of any deficiency remaining in the Obligations after receipt of the proceeds of the Collateral. 7.5. Remedies Cumulative. Each and every right, power and remedy hereby specifically given to the Collateral Agent shall be in addition to every other right, power and remedy specifically given under this Agreement, the Interest Rate Protection Agreements or Other Hedging Agreements, the other Credit Documents or now or hereafter existing at law, in equity or by statute and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent. All such 22 Page 18 rights, powers and remedies shall be cumulative and the exercise or the beginning of the exercise of one shall not be deemed a waiver of the right to exercise any other or others. No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy and no renewal or extension of any of the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence therein. No notice to or demand on any Assignor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Collateral Agent to any other or further action in any circumstances without notice or demand. In the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Collateral Agent may recover reasonable expenses, including attorneys' fees, and the amounts thereof shall be included in such judgment. 7.6. Discontinuance of Proceedings. In case the Collateral Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case the relevant Assignor, the Collateral Agent and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceeding had been instituted. ARTICLE VIII INDEMNITY 8.1. Indemnity. (a) Each Assignor jointly and severally agrees to indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor and their respective successors, permitted assigns, employees, agents and servants (hereinafter in this Section 8.1 referred to individually as "Indemnitee," and collectively as "Indemnitees") harmless from any and all liabilities, obligations, damages, injuries, penalties, claims, demands, actions, suits, judgments and any and all costs, expenses or disbursements (including attorneys' fees and expenses) (for the purposes of this Section 8.1 the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or arising out of this Agreement, any Interest Rate Protection Agreement or Other Hedging Agreement, any other Credit Document or any other document executed in connection herewith or therewith or in any other way connected with the administration of the transactions contemplated hereby or thereby or the enforcement of any of the terms of, or the preservation of any rights under any thereof, or in any way relating to or arising out of the manufacture, ownership, ordering, purchase, delivery, con- 23 Page 19 trol, acceptance, lease, financing, possession, operation, condition, sale, return or other disposition, or use of the Collateral (including, without limitation, latent or other defects, whether or not discoverable), the violation of the laws of any country, state or other govern mental body or unit, any tort (including, without limitation, claims arising or imposed under the doctrine of strict liability, or for or on account of injury to or the death of any Person (including any Indemnitee), or property damage), or contract claim; provided that no Indemnitee shall be indemnified pursuant to this Section 8.1(a) for losses, damages or liabilities to the extent caused by the gross negligence or willful misconduct of such Indemnitee. Each Assignor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, damage, injury, penalty, claim, demand, action, suit or judgment, the relevant Assignor shall assume full responsibility for the defense thereof. Each Indemnitee agrees to use its best efforts to promptly notify the relevant Assignor of any such assertion of which such Indemnitee has knowledge. (b) Without limiting the application of Section 8.1(a) hereof, each Assignor agrees, jointly and severally, to pay, or reimburse the Collateral Agent for any and all reasonable fees, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation or protection of the Collateral Agent's Liens on, and security interest in, the Collateral, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or Liens upon or in respect of the Collateral, premiums for insurance with respect to the Collateral and all other fees, costs and expenses in connection with protecting, maintaining or preserving the Collateral and the Collateral Agent's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Collateral, provided that the Collateral Agent shall not pay amounts due with respect to taxes, Liens or insurance in respect of the Collateral unless such Assignor shall have failed to do so following notice by the Collateral Agent. (c) If and to the extent that the obligations of any Assignor under this Section 8.1 are unenforceable for any reason, such Assignor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 8.2. Indemnity Obligations Secured by Collateral; Survival. Any amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Obligations secured by the Collateral. The indemnity obligations of each Assignor contained in this Article VIII shall continue in full force and effect notwithstanding the full payment of all the Notes issued under the Credit Agreement, the termination of all Interest Rate Protection Agreements or Other Hedging Agreements and the payment of all other Obligations and notwithstanding the discharge thereof. 24 Page 20 ARTICLE IX DEFINITIONS The following terms shall have the meanings herein specified. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. "Administrative Agent" shall have the meaning provided in the recitals to this Agreement. "Agreement" shall mean this Security Agreement as the same may be further modified, supplemented or amended from time to time in accordance with its terms. "Assignor" shall have the meaning provided in the first paragraph of this Agreement. "Bank Creditors" shall have the meaning provided in the recitals to this Agreement. "Banks" shall have the meaning provided in the recitals to this Agreement. "Borrower" shall have the meaning provided in the recitals to this Agreement. "Cash Collateral Account" shall mean a non-interest bearing cash collateral account maintained with, and in the sole dominion and control of, the Collateral Agent for the benefit of the Secured Creditors. "Chattel Paper" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Class" shall have the meaning provided in Section 10.2 of this Agreement. "Collateral" shall have the meaning provided in Section 1.1(a) of this Agreement. "Collateral Agent" shall have the meaning provided in the first paragraph of this Agreement. "Contract Rights" shall mean all rights of any Assignor (including, without limitation, all rights to payment) under each Contract (including each Excluded Contract to the extent provided in the definition thereof). 25 Page 21 "Contracts" shall mean all contracts (other than Excluded Contracts except to the extent provided in the definition thereof) between any Assignor and one or more additional parties (including, without limitation, any Interest Rate Protection Agreements or Other Hedging Agreements). "Copyrights" shall mean any United States or foreign copyright owned by any Assignor, including any registrations of any Copyrights, in the United States Copyright Office or the equivalent thereof in any foreign country, as well as any application for a United States copyright registration now or hereafter made with the United States Copyright Office by any Assignor. "Credit Agreement" shall have the meaning provided in the recitals to this Agreement. "Credit Document Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Default" shall mean any event which, with notice or lapse of time, or both, would constitute an Event of Default. "Documents" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Equipment" shall mean any "equipment," as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor and, in any event, shall include, but shall not be limited to, all machinery, equipment, furnishings, movable trade fixtures and vehicles now or hereafter owned by any Assignor and any and all additions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. "Excluded Contracts" shall mean one or more Contracts which by their terms would be breached by the grant of the security interests created therein pursuant to the terms of this Agreement (it being understood and agreed, however, that notwithstanding the foregoing, all rights to payment for money due or to become due pursuant to any Excluded Contract shall be subject to the security interests created pursuant to this Agreement). "Event of Default" shall mean any Event of Default under, and as defined in, the Credit Agreement and shall in any event, without limitation, include any payment default on any of the Obligations after the expiration of any applicable grace period. 26 Page 22 "General Intangibles" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Goods" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Indemnitee" shall have the meaning provided in Section 8.1 of this Agreement. "Instrument" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Interest Rate Protection Agreements or Other Hedging Agreements" shall have the meaning provided in the recitals to this Agreement. "Inventory" shall mean merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all goods, supplies, incidentals, packaging materials, labels, materials and any other items used or usable in manufacturing, processing, packaging or shipping same; in all stages of production -- from raw materials through work-in-process to finished goods -- and all products and proceeds of whatever sort and wherever located and any portion thereof which may be returned, rejected, reclaimed or repossessed by the Collateral Agent from any Assignor's customers, and shall specifically include all "inventory" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor. "Investment Property" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Liens" shall mean any security interest, mortgage, pledge, lien, claim, charge, encumbrance, title retention agreement, lessor's interest in a financing lease or analogous instrument, in, of, or on any Assignor's property. "Marks" shall mean all right, title and interest in and to any United States or foreign trademarks, service marks and trade names now held or hereafter acquired by any Assignor, including any registration of any trademarks and service marks, or the equivalent thereof in any foreign country in the United States Patent and Trademark Office and any trade dress including logos and/or designs used by any Assignor in the United States or any foreign country. "Obligations" shall mean (i) all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and 27 Page 23 liabilities of each Assignor, now existing or hereafter incurred under, arising out of or in connection with any Credit Document to which such Assignor is a party and the due performance and compliance by each Assignor with the terms of each such Credit Document (all such obligations and liabilities under this clause (i), except to the extent consisting of obligations or indebtedness with respect to Interest Rate Protection Agreements or Other Hedging Agreements, being herein collectively called the "Credit Document Obligations"); (ii) all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each Assignor now existing or hereafter incurred under, arising out of or in connection with any Interest Rate Protection Agreement or Other Hedging Agreement including, in the case of Assignors other than the Borrower, all obligations of such Assignor under its Guaranty in respect of Interest Rate Protection Agreements or Other Hedging Agreements (all such obligations and liabilities under this clause (ii) being herein collectively called the "Other Obligations"); (iii) any and all sums advanced by the Collateral Agent in order to preserve the Collateral or preserve its security interest in the Collateral; (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of each Assignor referred to in clauses (i) and (ii), after an Event of Default shall have occurred and be continuing, the reasonable expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Collateral Agent of its rights hereunder, together with reasonable attorneys' fees and court costs; and (v) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement under Section 8.1 of this Agreement. "Other Creditors" shall have the meaning provided in the recitals to this Agreement. "Other Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Patents" shall mean any United States or foreign patent to which any Assignor now or hereafter has title and any divisions or continuations thereof, as well as any application for a United States or foreign patent now or hereafter made by any Assignor. "Proceeds" shall have the meaning provided in the Uniform Commercial Code as in effect in the State of New York on the date hereof or under other relevant law and, in any event, shall include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or any Assignor from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to any Assignor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any person acting under color of governmental 28 Page 24 authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Pro Rata Share" shall have the meaning provided in Section 7.4(b) of this Agreement. "Receivables" shall mean any "account" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor and, in any event, shall include, but shall not be limited to, all of such Assignor's rights to payment for goods sold or leased or services performed by such Assignor, whether now in existence or arising from time to time hereafter, including, without limitation, rights evidenced by an account, note, contract, security agreement, chattel paper, or other evidence of indebtedness or security, together with (a) all security pledged, assigned, hypothecated or granted to or held by such Assignor to secure the foregoing, (b) all of any Assignor's right, title and interest in and to any goods, the sale of which gave rise thereto, (c) all guarantees, endorsements and indemnifications on, or of, any of the foregoing, (d) all powers of attorney for the execution of any evidence of indebtedness or security or other writing in connection therewith, (e) all books, records, ledger cards, and invoices relating thereto, (f) all evidences of the filing of financing statements and other statements and the registration of other instruments in connection therewith and amendments thereto, notices to other creditors or secured parties, and certificates from filing or other registration officers, (g) all credit information, reports and memoranda relating thereto and (h) all other writings related in any way to the foregoing. "Requisite Creditors" shall have the meaning provided in Section 10.2 of this Agreement. "Secured Creditors" shall have the meaning provided in the recitals to this Agreement. "Termination Date" shall have the meaning provided in Section 10.8 of this Agreement. "Trade Secret Rights" shall have the meaning provided in Section 5.1 of this Agreement. ARTICLE X MISCELLANEOUS 29 Page 25 10.1. Notices. Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered to the party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement, addressed: (a) if to any Assignor, at it address set forth opposite its signature below; (b) if to the Collateral Agent: The Chase Manhattan Bank 270 Park Avenue New York, New York 10017 Attention: William Caggiano Telephone No.: (212) 270-1338 Facsimile No.: (212) 972-0009 (c) if to any Bank Creditor (other than the Collateral Agent), at such address as such Bank Creditor shall have specified in the Credit Agreement; (d) if to any Other Creditor, at such address as such Other Creditor shall have specified in writing to each Assignor and the Collateral Agent; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 10.2. Waiver; Amendment. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Assignor directly affected thereby and the Collateral Agent (with the consent of (x) either the Required Banks or, to the extent required by Section 12.12 of the Credit Agreement, all of the Banks at all times prior to the time on which all Credit Document Obligations have been paid in full or (y) the holders of at least a majority of the outstanding Other Obligations at all times after the time on which all Credit Document Obligations have been paid in full); provided that any change, waiver, modification or variance affecting the rights and benefits of a single Class of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors of such Class of Secured Creditors. For the purpose of this Agreement the term "Class" shall mean each class of Secured Creditors, i.e., whether (x) the Bank Creditors as holders of the Credit Document Obligations or (y) the Other Creditors as the holders of the Other Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (x) with respect to the Credit Document Obligations, the Required Banks and (y) with respect to the Other Obligations, the holders of at least a majority 30 Page 26 of all obligations outstanding from time to time under the Interest Rate Protection Agreements or Other Hedging Agreements. 10.3. Obligations Absolute. The obligations of each Assignor hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of such Assignor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Agreement, any other Credit Document or any Interest Rate Protection Agreement or Other Hedging Agreement; or (c) any amendment to or modification of any Credit Document or any Interest Rate Protection Agreement or Other Hedging Agreement or any security for any of the Obligations; whether or not any Assignor shall have notice or knowledge of any of the foregoing. 10.4. Successors and Assigns. This Agreement shall be binding upon each Assignor and its successors and assigns and shall inure to the benefit of the Collateral Agent and its successors and assigns; provided that no Assignor may transfer or assign any or all of its rights or obligations hereunder without the prior written consent of the Collateral Agent. All agreements, statements, representations and warranties made by each Assignor herein or in any certificate or other instrument delivered by such Assignor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Creditors and shall survive the execution and delivery of this Agreement, the other Credit Documents and the Interest Rate Protection Agreements or Other Hedging Agreements regardless of any investigation made by the Secured Creditors or on their behalf. 10.5. Headings Descriptive. The headings of the several sections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 10.6. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 10.7. Assignor's Duties. It is expressly agreed, anything herein contained to the contrary notwithstanding, that each Assignor shall remain liable to perform all of the obligations, if any, assumed by it with respect to the Collateral and the Collateral Agent shall not have any obligations or liabilities with respect to any Collateral by reason of or arising out of this Agreement, nor shall the Collateral Agent be required or obligated in any manner to perform or fulfill any of the obligations of each Assignor under or with respect to any Collateral. 31 Page 27 10.8. Termination; Release. (a) After the Termination Date, this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in Section 8.1 hereof shall survive such termination) and the Collateral Agent, at the request and expense of the respective Assignor, will promptly execute and deliver to such Assignor a proper instrument or instruments (including Uniform Commercial Code termination statements on form UCC-3) acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to such Assignor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Collateral Agent and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, "Termination Date" shall mean the date upon which the Total Commitment and all Interest Rate Protection Agreements or Other Hedging Agreements have been terminated, no Note or Letter of Credit is outstanding (other than Letters of Credit, together with all Fees that have accrued and will accrue thereon through the stated termination date of such Letters of Credit, which have been supported in a manner satisfactory to the Letter of Credit Issuer in its sole and absolute discretion) and all other Obligations (other than any indemnities described in Section 8.1 hereof and in Section 12.13 of the Credit Agreement which are not then due and payable) have been paid in full. (b) In the event that any part of the Collateral is sold or otherwise disposed in connection with a sale or other disposition permitted by Section 8.02 of the Credit Agreement or is otherwise released at the direction of the Required Banks (or all the Banks if required by Section 12.12 of the Credit Agreement), the Collateral Agent, at the request and expense of such Assignor, will duly release from the security interest created hereby and assign, transfer and deliver to such Assignor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold or released and as may be in the possession of the Collateral Agent and has not theretofore been released pursuant to this Agreement. (c) At any time that the respective Assignor desires that Collateral be released as provided in the foregoing Section 10.8(a) or (b), it shall deliver to the Collateral Agent a certificate signed by an Authorized Officer stating that the release of the respective Collateral is permitted pursuant to Section 10.8(a) or (b) hereof. 10.9. Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Collateral Agent. 10.10. The Collateral Agent. The Collateral Agent will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. 32 Page 28 It is expressly understood and agreed that the obligations of the Collateral Agent as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Collateral Agent shall act hereunder on the terms and conditions set forth in Section 11 of the Credit Agreement. 10.11. Additional Assignors. It is understood and agreed that any Subsidiary of the Borrower that is required to execute a counterpart of this Agreement after the date hereof pursuant to Sections 7.13 and/or 8.15 of the Credit Agreement shall automatically become an Assignor hereunder by executing a counterpart hereof and delivering the same to the Collateral Agent. * * * 33 Page 29 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. Address: SAFELITE GLASS CORP., Safelite Glass Corp. as an Assignor 1105 Schrock Road Columbus, OH 43227 Attention: Douglas A. Herron By: /s/ Douglas A. Herron ------------------------------ Title: Chief Financial Officer Address: U.S. AUTO GLASS CENTERS, INC., 2 North Lasalle as an Assignor Chicago, Illinois 60602 Attention: Douglas A. Herron By: /s/ Douglas A. Herron ------------------------------ Title: Chief Financial Officer Address: U.S.A. GLAS, INC., 2 North Lasalle as an Assignor Chicago, Illinois 60602 Attention: Douglas A. Herron By: /s/ Douglas A. Herron ------------------------------ Title: Chief Financial Officer Address: CARCOMP SERVICES, INC., 2 North Lasalle as an Assignor Chicago, Illinois 60602 Attention: Douglas A. Herron By: /s/ Douglas A. Herron ------------------------------ Title: Chief Financial Officer 34 Page 30 THE CHASE MANHATTAN BANK, as Collateral Agent By: /s/ Bruce Borden --------------------------- Title: Vice President EX-10.16 22 SUBSIDIARY GUARANTY 1 EXHIBIT 10.16 EXHIBIT H SUBSIDIARY GUARANTY GUARANTY, dated as of December 20, 1996 (the "Existing Guaranty"), as amended and restated through December 17, 1997 (as further amended, modified or supplemented from time to time, this "Guaranty"), made by each of the undersigned (each, a "Guarantor" and, together with any other entity that becomes a party hereto pursuant to Section 26 hereof, the "Guarantors"). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. W I T N E S S E T H : WHEREAS, Safelite Glass Corp. ("Borrower"), the lenders from time to time party thereto (the "Banks"), Bankers Trust Company, as Syndication Agent, Goldman Sachs Credit Partners L.P., as Documentation Agent, and The Chase Manhattan Bank, as Administrative Agent (together with any successor agent, the "Administrative Agent"), have entered into a Credit Agreement, dated as of December 20, 1996, as amended and restated through December 17, 1997 (as further amended, modified or supplemented from time to time, the "Credit Agreement"), providing for the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower, all as contemplated therein (the Banks, the Administrative Agent, the Syndication Agent, the Documentation Agent and the Collateral Agent are herein called the "Bank Creditors"); WHEREAS, the parties hereto have elected to amend and restate the Existing Guaranty pursuant to this Guaranty rather than enter into a new guaranty for their convenience and intend that all indebtedness, obligations and liens created under the Existing Guaranty and the other Credit Documents be continued hereunder and thereunder and remain in full force and effect and not be discharged, paid, satisfied or cancelled; WHEREAS, the Borrower may from time to time be party to one or more (i) interest rate agreements, interest rate cap agreements, interest rate collar agreements or other similar agreements or arrangements, (ii) foreign exchange contracts, currency swap agreements or similar agreements or arrangements designed to protect against the fluctuations in currency values and\or (iii) other types of hedging agreements from time to time (each such agreement or arrangement with an Other Creditor (as hereinafter defined), an "Interest Rate Protection Agreement or Other Hedging Agreement"), with a Bank or an affiliate of a Bank (each such Bank or affiliate, even if the respective Bank subsequently ceases to be a 2 Page 2 Bank under the Credit Agreement for any reason, together with such Bank's or affiliate's successors and assigns, collectively, the "Other Creditors," and together with the Bank Creditors, are herein called the "Creditors"); WHEREAS, each Guarantor is a Subsidiary of the Borrower; WHEREAS, it is a condition to the making of Loans under the Credit Agreement that each Guarantor shall have executed and delivered this Guaranty; and WHEREAS, each Guarantor will obtain benefits from the incurrence of Loans by the Borrower under the Credit Agreement and the entering into of Interest Rate Protection Agreements or Other Hedging Agreements and, accordingly, desires to execute this Guaranty in order to satisfy the conditions described in the preceding paragraph and to induce the Banks to make Loans to the Borrower and Other Creditors to enter into Interest Rate Protection Agreements or Other Hedging Agreements with the Borrower; NOW, THEREFORE, in consideration of the foregoing and other benefits accruing to each Guarantor, the receipt and sufficiency of which are hereby acknowledged, each Guarantor hereby makes the following representations and warranties to the Creditors and hereby covenants and agrees with each Creditor as follows: 1. Each Guarantor, jointly and severally, irrevocably and unconditionally guarantees: (i) to the Bank Creditors the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of (x) the principal of and interest on the Notes issued by, and the Loans made to, the Borrower under the Credit Agreement and all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit and (y) all other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing by the Borrower to the Bank Creditors under the Credit Agreement (including, without limitation, indemnities, Fees and interest thereon) and the other Credit Documents to which the Borrower is a party, whether now existing or hereafter incurred under, arising out of or in connection with the Credit Agreement or any such other Credit Document and the due performance and compliance with the terms of the Credit Documents by the Borrower (all such principal, interest, liabilities and obligations under this clause (i), except to the extent consisting of obligations or liabilities with respect to Interest Rate Protection Agreements or Other Hedging Agreements, being herein collectively called the "Credit Document Obligations"); and (ii) to each Other Creditor the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing by the Borrower under any Interest Rate Protection Agreements or Other 3 Page 3 Hedging Agreements, whether now in existence or hereafter arising, and the due performance and compliance by the Borrower with all terms, conditions and agreements contained therein (all such obligations and liabilities being herein collectively called the "Other Obligations", and together with the Credit Document Obligations are herein collectively called the "Guaranteed Obligations"). Anything herein or in any other Credit Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Credit Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors. Each Guarantor understands, agrees and confirms that the Creditors may enforce this Guaranty without proceeding against any other Guarantor, the Borrower, against any security for the Guaranteed Obligations, or under any other guaranty covering all or a portion of the Guaranteed Obligations. All payments by each Guarantor under this Guaranty shall be made on the same basis as payments by the Borrower under Sections 4.03 and 4.04 of the Credit Agreement. 2. Additionally, each Guarantor, jointly and severally, unconditionally and irrevocably, guarantees the payment of any and all Guaranteed Obligations of the Borrower to the Creditors whether or not due or payable by the Borrower upon the occurrence in respect of the Borrower of any of the events specified in Section 9.05 of the Credit Agreement, and unconditionally and irrevocably, jointly and severally, promises to pay such Guaranteed Obligations to the Creditors, or order, on demand, in lawful money of the United States. 3. The liability of each Guarantor hereunder is exclusive and independent of any security for or other guaranty of the Guaranteed Obligations of the Borrower whether executed by such Guarantor, any other Guarantor, any other guarantor or by any other party, and the liability of each Guarantor hereunder shall not be affected or impaired by (a) any direction as to application of payment by the Borrower or by any other party, (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the Guaranteed Obligations of the Borrower, (c) any payment on or in reduction of any such other guaranty or undertaking, (d) any dissolution, termination or in crease, decrease or change in personnel by the Borrower or (e) any payment made to any Creditor on the Guaranteed Obligations which any Creditor repays the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and each Guarantor waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding. 4. The obligations of each Guarantor hereunder are independent of the obligations of any other Guarantor, any other guarantor or the Borrower, and a separate action or actions may be brought and prosecuted against each Guarantor whether or not action is brought against any other Guarantor, any other guarantor or the Borrower and 4 Page 4 whether or not any other Guarantor, any other guarantor of the Borrower or the Borrower be joined in any such action or actions. Each Guarantor waives, to the fullest extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by the Borrower or other circumstance which operates to toll any statute of limitations as to the Borrower shall operate to toll the statute of limitations as to each Guarantor. 5. Each Guarantor hereby waives (to the fullest extent permitted by applicable law) notice of acceptance of this Guaranty and notice of any liability to which it may apply, and waives demands for performance, promptness, diligence, presentment, demand of payment, protest, notices of nonperformance, notices of protest, notices of the existence, creation or incurring of new or additional indebtedness, notice of dishonor or nonpayment of any such liabilities, suit or taking of other action by the Administrative Agent or any other Creditor against, and any other notice to, any party liable thereon (including such Guarantor or any other guarantor or the Borrower). 6. Any Creditor may (except as shall be required by applicable statute and cannot be waived) at any time and from time to time without the consent of, or notice to, any Guarantor, without incurring responsibility to such Guarantor, without impairing or releasing the obligations of such Guarantor hereunder, upon or without any terms or conditions and in whole or in part: (a) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew, increase, accelerate or alter, any of the Guaranteed Obligations, any security therefor, or any liability incurred directly or indirectly in respect thereof, and the guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered; (b) sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset thereagainst; (c) exercise or refrain from exercising any rights against the Borrower or others or otherwise act or refrain from acting; (d) settle or compromise any of the Guaranteed Obligations, any security therefor or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any 5 Page 5 part thereof to the payment of any liability (whether due or not) of the Borrower to creditors of the Borrower; (e) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of the Borrower to the Creditors regardless of what liabilities of the Borrower remain unpaid; (f) consent to or waive any breach of, or any act, omission or default under, any of the Interest Rate Protection Agreements or Other Hedging Agreements, the Credit Documents or any of the instruments or agreements referred to therein, or otherwise amend, modify or supplement any of the Interest Rate Protection Agreements or Other Hedging Agreements, the Credit Documents or any of such other instruments or agreements; and/or (g) act or fail to act in any manner referred to in this Guaranty which may deprive such Guarantor of its right to subrogation against the Borrower to recover full indemnity for any payments made pursuant to this Guaranty. 7. No invalidity, irregularity or unenforceability of all or any part of the Guaranteed Obligations or of any security therefor shall affect, impair or be a defense to this Guaranty, and this Guaranty shall be primary, absolute and unconditional notwithstanding the occurrence of any event or the existence of any other circumstances which might constitute a legal or equitable discharge of a surety or guarantor except payment in full of the Guaranteed Obligations. 8. This Guaranty is a continuing one and all liabilities to which it applies or may apply under the terms hereof shall be conclusively presumed to have been created in reliance hereon. No failure or delay on the part of any Creditor in exercising any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein expressly specified are cumulative and not exclusive of any rights or remedies which any Creditor would otherwise have. No notice to or demand on any Guarantor in any case shall entitle such Guarantor to any other further notice or demand in similar or other circumstances or constitute a waiver of the rights of any Creditor to any other or further action in any circumstances without notice or demand. It is not necessary for any Creditor to inquire into the capacity or powers of the Borrower or any of its Subsidiaries or the officers, directors, partners or agents acting or purporting to act on its behalf, and any indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. 6 Page 6 9. Any indebtedness of the Borrower now or hereafter held by any Guarantor is hereby subordinated to the indebtedness of the Borrower to the Creditors; and such indebtedness of the Borrower to any Guarantor, if the Administrative Agent, after an Event of Default has occurred and is continuing, so requests, shall be collected, enforced and received by such Guarantor as trustee for the Creditors and be paid over to the Creditors on account of the indebtedness of the Borrower to the Creditors, but without affecting or impairing in any manner the liability of such Guarantor under the other provisions of this Guaranty. Prior to the transfer by any Guarantor of any note or negotiable instrument evidencing any indebtedness of the Borrower to such Guarantor, such Guarantor shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. Without limiting the generality of the foregoing, each Guarantor hereby agrees with the Creditors that it will not exercise any right of subrogation which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or otherwise) until all Guaranteed Obligations have been irrevocably paid in full in cash. 10. (a) Each Guarantor waives any right (except as shall be required by applicable statute or law and cannot be waived) to require the Creditors to: (i) proceed against the Borrower, any other Guarantor, any other guarantor of the Borrower or any other party; (ii) proceed against or exhaust any security held from the Borrower, any other Guarantor, any other guarantor of the Borrower or any other party; or (iii) pursue any other remedy in the Creditors' power whatsoever. Each Guarantor waives (to the fullest extent permitted by applicable law) any defense based on or arising out of any defense of the Borrower, any other Guarantor, any other guarantor of the Borrower or any other party other than payment in full of the Guaranteed Obligations, including, without limitation, any defense based on or arising out of the disability of the Borrower, any other Guarantor, any other guarantor of the Borrower or any other party, or the unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower other than payment in full of the Guaranteed Obligations. The Creditors may, at their election, foreclose on any security held by the Administrative Agent, the Collateral Agent or the other Creditors by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Creditors may have against the Borrower or any other party, or any security, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent the Guaranteed Obligations have been paid in full. Each Guarantor waives any defense arising out of any such election by the Creditors, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against the Borrower or any other party or any security. 7 Page 7 (b) Each Guarantor assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which such Guarantor assumes and incurs hereunder, and agrees that the Creditors shall have no duty to advise any Guarantor of information known to them regarding such circumstances or risks. (c) Each Guarantor understands, is aware and hereby acknowledges that to the extent the Guaranteed Obligations are secured by real property located in the State of California, such Guarantor shall be liable for the full amount of its liability hereunder notwithstanding foreclosure on such real property by trustee sale or any other reason impairing such Guarantor's or any Creditor's right to proceed against any Credit Party. Each Guarantor hereby waives, to the fullest extent permitted by law, all rights and benefits under Section 2809 of the California Civil Code purporting to reduce a guarantor's obligation in proportion to the principal obligation. Each Guarantor hereby waives all rights and benefits under Section 580a of the California Code of Civil Procedure purporting to limit the amount of any deficiency judgment which might be recoverable following the occurrence of a trustee's sale under a deed of trust and all rights and benefits under Section 580b of the California Code of Civil Procedure stating that no deficiency may be recovered on a real property purchase money obligation. Each Guarantor further understands, is aware and hereby acknowledges that if the Creditors elect to nonjudicially foreclose on any real property security located in the State of California any right of subrogation of such Guarantor against the Creditors may be impaired or extinguished and that as a result of such impairment or extinguishment of subrogation rights, such Guarantor may have a defense to a deficiency judgment arising out of the operation of (i) Section 580d of the California Code of Civil Procedure which states that no deficiency may be recovered on a note secured by a deed of trust on real property in case such real property is sold under the power of sale contained in such deed of trust, and (ii) related principles of estoppel. To the fullest extent permitted by law, each Guarantor waives all rights and benefits and any defense arising out of the operation of Section 580d of the California Code of Civil Procedure and related principles of estoppel, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against any Credit Party or any other party or any security. In addition, each Guarantor hereby waives, to the fullest extent permitted by applicable law, without limiting the generality of the foregoing or any other provision hereof, all rights and benefits which might otherwise be available to such Guarantor under Section 726 of the California Code of Civil Procedure and all rights and benefits which might otherwise be available to such Guarantor under California Civil Code Sections 2809, 2810, 2815, 2819, 2821, 2839, 2845, 2848, 2849, 2850, 2899 and 3433. 8 Page 8 (d) Each Guarantor hereby further waives (to the fullest extent permitted by applicable law): (1) all rights and defenses arising out of an election of remedies by the Creditors, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a Guaranteed Obligation, has destroyed such Guarantor's rights of subrogation and reimbursement against the principal by the operation of Section 580d of the California Code of Civil Procedure or otherwise; (2) such Guarantor's rights of subrogation and reimbursement and any other rights and defenses available to such Guarantor by reason of the California Civil Code Sections 2787 to 2855, inclusive, including, without limitation, (i) any defenses such Guarantor may have to the Guaranteed Obligations by reason of an election of remedies by the Creditors and (ii) any rights or defenses such Guarantor may have by reason of protection afforded to the principal borrower with respect to the obligation so guaranteed pursuant to the antideficiency or other laws of the State of California limiting or discharging the borrower's indebtedness, including, without limitation, California Code of Civil Procedure Sections 580a, 580b, 580d or 726. 11. The Creditors agree that this Guaranty may be enforced only by the action of the Administrative Agent or the Collateral Agent, in each case acting upon the instructions of the Required Banks (or, after the date on which all Credit Document Obligations have been paid in full, the holders of at least a majority of the outstanding Other Obligations) and that no other Creditor shall have any right individually to seek to enforce or to enforce this Guaranty or to realize upon the security to be granted by the Security Documents, it being understood and agreed that such rights and remedies may be exercised by the Administrative Agent or the Collateral Agent for the benefit of the Creditors upon the terms of this Guaranty and the Security Documents. The Creditors further agree that this Guaranty may not be enforced against any director, officer, employee, or stockholder of any Guarantor (except to the extent such stockholder is also a Guarantor hereunder). 12. In order to induce the Banks to make Loans and issue Letters of Credit pursuant to the Credit Agreement, and in order to induce the Other Creditors to execute, deliver and perform the Interest Rate Protection Agreements or Other Hedging Agreements, each Guarantor represents, warrants and covenants that: (a) Such Guarantor (i) is a duly organized and validly existing corporation and is in good standing under the laws of the jurisdiction of its organization, and has the corporate power and authority to own its property and assets and to transact the business in which it is engaged and presently proposes to engage and (ii) is duly qualified and is authorized to do business and is in good standing in all jurisdictions where it is required to be so qualified and where the failure to be so qualified could reasonably be expected to have a Material Adverse Effect. 9 Page 9 (b) Such Guarantor has the corporate power and authority to execute, deliver and carry out the terms and provisions of this Guaranty and each other Credit Document to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance by it of each such Credit Document. Such Guarantor has duly executed and delivered this Guaranty and each other Credit Document to which it is a party and each such Credit Document constitutes the legal, valid and binding obligation of such Guarantor enforceable in accordance with its terms, except to the extent that the enforceability hereof or thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by equitable principles (regardless of whether enforcement is sought in equity or at law). (c) Neither the execution, delivery or performance by such Guarantor of this Guaranty or any other Credit Document to which it is a party, nor compliance by it with the terms and provisions hereof or thereof (i) will contravene any applicable provision of any law, statute, rule or regulation, or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or (other than pursuant to the Security Documents) result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of such Guarantor or any of its Subsidiaries pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, credit agreement or other material agreement or other instrument to which such Guarantor or any of its Subsidiaries is a party or by which it or any of its property or assets is bound or to which it may be subject or (iii) will violate any provision of the certificate of incorporation or by-laws of such Guarantor or any of its Subsidiaries. (d) No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, (i) the execution, delivery and performance of this Guaranty or any other Credit Document to which such Guarantor is a party, or (ii) the legality, validity, binding effect or enforceability of this Guaranty or any other Credit Document to which such Guarantor is a party. (e) There are no actions, suits or proceedings pending or threatened (i) with respect to such Guarantor that could reasonably be expected to have a Material Adverse Effect or (ii) that could reasonably be expected to have a material adverse effect on the rights or remedies of the Creditors or on the ability of such Guarantor 10 Page 10 to perform its respective obligations to the Creditors hereunder and under the other Credit Documents to which it is a party. 13. Each Guarantor covenants and agrees that on and after the date hereof and until the termination of the Total Commitment and all Interest Rate Protection Agreements or Other Hedging Agreements and when no Note or Letter of Credit remains outstanding (other than Letters of Credit, together with all Fees that have accrued and will accrue thereon through the stated termination date of such Letters of Credit, which have been supported in a manner satisfactory to the Letter of Credit Issuer as provided in the Credit Agreement) and all Guaranteed Obligations have been paid in full (other than indemnities described in Section 12.13 of the Credit Agreement and analogous provisions in the Security Documents which are not then due and payable), such Guarantor shall take, or will refrain from taking, as the case may be, all actions that are necessary to be taken or not taken so that no violation of any provision, covenant or agreement contained in Section 7 or 8 of the Credit Agreement, and so that no Default or Event of Default, is caused by the actions of such Guarantor or any of its Subsidiaries. 14. The Guarantors hereby jointly and severally agree to pay all reasonable out-of-pocket costs and expenses of each Creditor in connection with the enforcement of this Guaranty and any amendment, waiver or consent relating hereto (including, without limitation, the reasonable fees and disbursements of counsel (including in-house counsel) employed by any of the Creditors). 15. This Guaranty shall be binding upon each Guarantor and its successors and assigns and shall inure to the benefit of the Creditors and their successors and assigns. 16. Neither this Guaranty nor any provision hereof may be changed, waived, discharged or terminated except with the written consent of each Guarantor directly affected thereby and either (x) the Required Banks (or to the extent required by Section 12.12 of the Credit Agreement, with the written consent of each Bank) at all times prior to the time on which all Credit Document Obligations have been paid in full or (y) the holders of at least a majority of the outstanding Other Obligations at all times after the time on which all Credit Document Obligations have been paid in full; provided that any change, waiver, modification or variance affecting the rights and benefits of a single Class (as defined below) of Creditors (and not all Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors (as defined below) of such Class of Creditors (it being understood that the addition or release of any Guarantor hereunder shall not constitute a change, waiver, discharge or termination affecting any Guarantor other than the Guarantor so added or released). For the purpose of this Guaranty the term "Class" shall mean each class of Creditors, i.e., whether (x) the Bank Creditors as holders of the Credit Document Obligations or (y) the Other Creditors as the holders of the Other Obligations. For the 11 Page 11 purpose of this Guaranty, the term "Requisite Creditors" of any Class shall mean each of (x) with respect to the Credit Document Obligations, the Required Banks and (y) with respect to the Other Obligations, the holders of at least a majority of all obligations outstanding from time to time under the Interest Rate Protection Agreements or Other Hedging Agreements. 17. Each Guarantor acknowledges that an executed (or conformed) copy of each of the Credit Documents and Interest Rate Protection Agreements or Other Hedging Agreements has been made available to its principal executive officers and such officers are familiar with the contents thereof. 18. In addition to any rights now or hereafter granted under applicable law (including, without limitation, Section 151 of the New York Debtor and Creditor Law) and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default (such term to mean and include any "Event of Default" as defined in the Credit Agreement or any payment default under any Interest Rate Protection Agreement or Other Hedging Agreement continuing after any applicable grace period), each Creditor is hereby authorized at any time or from time to time, without notice to any Guarantor or to any other Person, any such notice being expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Creditor to or for the credit or the account of such Guarantor, against and on account of the obligations and liabilities of such Guarantor to such Creditor under this Guaranty, irrespective of whether or not such Creditor shall have made any demand here under and although said obligations, liabilities, deposits or claims, or any of them, shall be contingent or unmatured. Notwithstanding anything to the contrary contained in this Section 18, no Creditor shall exercise any such right of set-off without the prior consent of the Administrative Agent or the Required Banks so long as the Guaranteed Obligations shall be secured by any Real Property located in the State of California, it being understood and agreed, however, that this sentence is for the sole benefit of the Creditors and may be amended, modified or waived in any respect by the Required Banks without the requirement of prior notice to or consent by any Credit Party and does not constitute a waiver of any rights against any Credit Party or against any Collateral. 19. All notices, requests, demands or other communications pursuant hereto shall be deemed to have been duly given or made when delivered to the Person to which such notice, request, demand or other communication is required or permitted to be given or made under this Guaranty, addressed to such party at (i) in the case of any Bank Creditor, as provided in the Credit Agreement, (ii) in the case of any Guarantor, at its address set forth opposite its signature below and (iii) in the case of any Other Creditor, at such address as such Other Creditor shall have specified in writing to the Guarantor; or in any case at such other address as any of the Persons listed above may hereafter notify the others in writing. 12 Page 12 20. If claim is ever made upon any Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property or (ii) any settlement or compromise of any such claim effected by such payee with any such claimant (including the Borrower), then and in such event each Guarantor agrees that any such judgment, decree, order, settlement or compromise shall be binding upon such Guarantor, notwithstanding any revocation hereof or other instrument evidencing any liability of the Borrower, and such Guarantor shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee. 21. (a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding with respect to this Guaranty or any other Credit Document to which such Guarantor is a party may be brought in the courts of the State of New York or of the United States of America for the Southern District of New York, and, by execution and delivery of this Guaranty, each Guarantor hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each Guarantor hereby further irrevocably waives any claim that any such courts lack jurisdiction over such Guarantor, and agrees not to plead or claim, in any legal action or proceeding with respect to this Guaranty or any other Credit Document to which such Guarantor is a party brought in any of the aforesaid courts, that any such court lacks jurisdiction over such Guarantor. Each Guarantor further irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to each Guarantor at its address set forth opposite its signature below, such service to become effective 30 days after such mailing. Each Guarantor hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any action or proceeding commenced hereunder or under any other Credit Document to which such Guarantor is a party that service of process was in any way invalid or ineffective. Nothing herein shall affect the right of any of the Creditors to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against each Guarantor in any other jurisdiction. (b) Each Guarantor hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Guaranty or any other credit document brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees 13 Page 13 not to plead or claim in any such court that such action or proceeding brought in any such court has been brought in an inconvenient forum. 22. In the event that all of the capital stock of one or more Guarantors is sold or otherwise disposed of or liquidated in compliance with the requirements of Section 8.02 of the Credit Agreement (or such sale or other disposition or liquidation has been approved in writing by the Required Banks (or all Banks if required by Section 12.12 of the Credit Agreement)) and the proceeds of such sale, disposition or liquidation are applied in accordance with the provisions of the Credit Agreement, to the extent applicable, such Guarantor shall be released from this Guaranty and this Guaranty shall, as to each such Guarantor or Guarantors, terminate, and have no further force or effect (it being understood and agreed that the sale of one or more Persons that own, directly or indirectly, all of the capital stock or partnership interests of any Guarantor shall be deemed to be a sale of such Guarantor for the purposes of this Section 22). 23. This Guaranty may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Agent. 24. EACH GUARANTOR HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 25. All payments made by any Guarantor hereunder will be made without setoff, counterclaim or other defense. 26. It is understood and agreed that any Subsidiary of the Borrower that is required to execute a counterpart of this Guaranty after the date hereof pursuant to Sections 7.13 and/or 8.15 of the Credit Agreement shall automatically become a Guarantor hereunder by executing a counterpart hereof and delivering the same to the Agent. * * * 14 Page 14 IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed and delivered as of the date first above written. Address: U.S. AUTO GLASS CENTERS, INC., 2 North Lasalle as a Guarantor Chicago, Illinois 60602 Attention: Douglas A. Herron By: /s/ Douglas A. Herron ------------------------------ Title: Chief Financial Officer Address: U.S.A. GLAS, INC., 2 North Lasalle as a Guarantor Chicago, Illinois 60602 Attention: Douglas A. Herron By: /s/ Douglas A. Herron ------------------------------ Title: Chief Financial Officer Address: CARCOMP SERVICES, INC., 2 North Lasalle as a Guarantor Chicago, Illinois 60602 Attention: Douglas A. Herron By: /s/ Douglas A. Herron ------------------------------ Title: Chief Financial Officer 15 Accepted and Agreed to: THE CHASE MANHATTAN BANK, as Administrative Agent for the Banks By: /s/ Bruce Borden ------------------------------- Title: Vice President EX-12.1 23 COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 1 Exhibit 12.1 SAFELITE GLASS CORP. RATIO OF EARNINGS TO FIXED CHARGES (Dollars in Millions)
FISCAL YEAR (1) Three Months Ended 1993 1994 1995 1996 1997 April 4, 1998 ---- ---- ---- ---- ---- ------------- EARNINGS & LOSSES: PRE-TAX INCOME (LOSS) FROM CONTINUING OPERATIONS ($21.6) ($2.9) $7.5 $19.2 $(0.4) $(5.9) INTEREST EXPENSE 15.5 4.5 6.0 6.7 27.5 10.9 PORTION OF RENTAL EXPENSE REPRESENTATIVE OF AN INTEREST FACTOR 11.0 11.5 12.0 12.5 14.3 7.1 ----- ----- ----- ----- ------ ------ TOTAL EARNINGS (LOSSES) $4.9 $13.1 $25.5 $38.4 $41.4 $12.1 FIXED CHARGES: INTEREST EXPENSE $15.5 $4.5 $6.0 $6.7 $27.5 $10.9 PORTION OF RENTAL EXPENSE REPRESENTATIVE OF AN INTEREST FACTOR 11.0 11.5 12.0 12.5 14.3 7.1 ---- ----- ----- ----- ------ ---- TOTAL FIXED CHARGES $26.5 $16.0 $18.0 $19.2 $41.8 $18.0 RATIO OF EARNINGS TO FIXED CHARGES -- -- 1.4X 2.0X -- --
(1) Prior to 1998, the Company's fiscal year ended on the Saturday closest to December 31 of each year. On May 18, 1998, the Company changed its fiscal year to the Saturday closest to March 31. EX-23.1 24 CONSENT OF DELOITTE & TOUCHE LLP 1 Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Amendment No. 2 to Registration Statement No. 333-21949 of Safelite Glass Corp. on Form S-4 of our report dated June 25, 1998 appearing in the prospectus, which is a part of such Registration Statement, and to the reference to us under the headings "Summary Historical and Pro Forma Financial Information," "Selected Consolidated Financial Data" and "Independent Auditors" in such prospectus. DELOITTE & TOUCHE LLP Dayton, Ohio August 11, 1998 EX-23.2 25 CONSENT OF ARTHUR ANDERSEN LLP 1 Exhibit 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use in this registration statement of our report dated April 7, 1997 (except with respect to the matter described in Note 15, as to which the date is July 22, 1998), regarding Vistar, Inc. and to all references to our Firm included in this registration statement. ARTHUR ANDERSEN LLP Chicago, Illinois August 14, 1998 EX-27.1 26 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SAFELIFE CLASS CORP. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED JANUARY 3, 1998 AND THREE MONTHS ENDED APRIL 4, 1998 INCLUDED IN FORM S-4 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001033671 SAFELITE GLASS, INC. 1,000 U.S. DOLLARS YEAR 3-MOS JAN-03-1998 APR-04-1998 DEC-29-1996 JAN-04-1998 JAN-03-1998 APR-04-1998 1 1 7,404 10,254 0 0 70,755 74,622 (15,828) (12,622) 48,133 50,535 141,582 152,587 120,667 134,088 (56,847) (72,094) 558,054 576,355 111,773 112,268 473,499 497,645 0 0 1 1 142 142 (47,017) (48,554) 558,054 576,355 0 0 483,304 213,792 0 0 331,658 155,545 125,802 53,337 1,469 1,319 (27,517) (10,987) (419) (5,939) 6,842 1,623 6,423 (4,316) 0 0 (2,835) 0 0 0 3,588 (4,316) 0 0 0 0
EX-99.1 27 LETTER OF TRANSMITTAL 1 Exhibit 99.1 LETTER OF TRANSMITTAL FOR OFFER FOR ALL OUTSTANDING 9 7/8% SENIOR SUBORDINATED NOTES DUE 2006 IN EXCHANGE FOR 9 7/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2006 SAFELITE GLASS CORP. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON __________, 1998 (THE "EXPIRATION DATE") UNLESS EXTENDED BY SAFELITE GLASS CORP. The Exchange Agent for the Exchange Offer STATE STREET BANK & TRUST COMPANY By Registered or Certified Mail: By Overnight Courier: State Street Bank & Trust Company State Street Bank & Trust Company 2 International Place, 4th Floor 2 International Place, 4th Floor Corporate Trust Department Corporate Trust Department Boston, MA 02110 Boston, MA 02110 Attn.: Sandra Szczsponik Attn.: Sandra Szczsponik By Hand: By Facsimile: State Street Bank & Trust Company State Street Bank & Trust Company 2 International Place, 4th Floor (617) 664-5779 Corporate Trust Department Confirm by telephone: Boston, MA 02110 Attn.: Sandra Szczsponik Delivery of this Letter of Transmittal to an address other than as set forth above or transmission of instructions via a facsimile transmission to a number other than set forth above will not constitute a valid delivery. The undersigned acknowledges receipt of the Prospectus dated ____________, 1998 (the "Prospectus") of Safelite Glass Corp. (the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"), which together describe the Company's offer (the "Exchange Offer") to exchange $1,000 in principal amount of 9 7/8% Series B Senior Notes due 2006 (the "Exchange Notes") for each $1,000 in principal amount of outstanding 9 7/8% Senior Subordinated Notes due 2006 (the "Initial Notes"). The terms of the Exchange Notes are substantially identical in all respects (including principal amount, interest rate and maturity) to the terms of the Initial Notes for which they may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes are freely transferable by holders thereof (except as provided herein or in the Prospectus) and are issued without any covenant upon the Company regarding registration. The undersigned has checked the appropriate boxes below and signed this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. 1 2 PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE CHECKING ANY BOX BELOW. YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT. A holder that is a participant in the Depository Trust Company's system may utilize the Depository Trust Company's Automated Tender Offer Program to tender Initial Notes. List below the Initial Notes to which this Letter of Transmittal relates. If the space provided below is inadequate, the Certificate Numbers and Principal Amounts should be listed on a separate signed schedule affixed hereto. DESCRIPTION OF INITIAL NOTES TENDERED HEREWITH
Name(s) and Address(es) of Registered Certificate Aggregate Principal Principal Amount Holder(s) (Please fill in) Number(s)* Amount Represented by Tendered* Initial Notes
* Need not be completed by book-entry holders. ** Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate amount represented by such Initial Notes. See Instruction 2. This Letter of Transmittal is to be used either if certificates of Initial Notes are to be forwarded herewith or if delivery of Initial Notes is to be made by book-entry transfer to an account maintained by the Exchange Agent at The Depository Trust Company, pursuant to the procedures set forth in "The Exchange Offer -- How To Tender" in the Prospectus. Delivery of documents to a book-entry transfer facility does not constitute delivery to the Exchange Agent. Holders whose Initial Notes are not immediately available or who cannot deliver their Initial Notes and all other documents required hereby to the Exchange Agent on or prior to the Expiration Date may tender their Initial Notes according to the guaranteed procedure set forth in the Prospectus under the caption "The Exchange Offer How To Tender." CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution__________________________________________________ / / The Depository Trust Company Account Number________________________________________________________ Transaction Code Number_______________________________________________ / / CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name of Registered Holder(s)__________________________________________ 2 3 Name of Eligible Institution that Guaranteed Delivery_________________ If Delivered by Book-Entry Transfer: Account Number________________________________________________________ / / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE Registration Statement AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name__________________________________________________________________ Address:______________________________________________________________ ______________________________________________________________ PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY LADIES AND GENTLEMEN: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the above-described principal amount of the Initial Notes. Subject to, and effective upon, the acceptance for exchange of the Initial Notes tendered herewith, the undersigned hereby exchanges, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Initial Notes. The undersigned hereby irrevocably constitutes (with full knowledge that said Exchange Agent acts as the Agent of the Company in connection with the Exchange Offer) to cause the Initial Notes to be assigned, transferred and exchanged. The undersigned represents and warrants that it has full power and authority to tender, exchange, assign and transfer the Initial Notes and to acquire Exchange Notes issuable upon the exchange of such tendered Initial Notes, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title to the tendered Initial Notes, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the exchange, assignment and transfer of tendered Initial Notes or transfer ownership of such Notes on the account books maintained by a book-entry transfer facility. The undersigned further agrees that acceptance of any and all validly tendered Initial Notes by the Company and the issuance of Exchange Notes in exchange therefor shall constitute performance in full by the Company of its obligations under the Registration Rights Agreement (as defined in the Prospectus) and that the Company shall have no further obligations or liabilities thereunder. The Exchange Offer is subject to certain conditions as set forth in the Prospectus under the caption "The Exchange Offer -- Conditions to the Exchange Offer." The undersigned recognizes that as a result of these conditions (which may be waived, in whole or in part, by the Company), as more particularly set forth in the Prospectus, the Company may not be required to exchange any of the Initial Notes tendered hereby and, in such event, the Initial Notes not exchanged will be returned to the undersigned at the address above. By tendering, each holder of Initial Notes represents that Exchange Notes acquired in the exchange will be obtained in the ordinary course of such holder's business, that such holder has no arrangement or understanding with any person to participate in the distribution of such Exchange Notes and that such holder is not an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act of 1933, as amended (the "Act"). If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is 3 4 a broker-dealer that will receive Exchange Notes for its own account in exchange for Initial Notes it represents that the Initial Notes to be exchanged for Exchange Notes were acquired as a result of market-making activities or other trading activities and it acknowledges that it will deliver a Prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a Prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Any holder of Initial Notes using the Exchange Offer to participate in a distribution of the Exchange Notes (i) cannot rely on the position of the staff of the Commission enunciated in its interpretive letter with respect to Exxon Capital Holdings Corporation (available May 13, 1988) or similar letters issued to third parties and (ii) must comply with the registration and Prospectus requirements of the Act in connection with a secondary resale transaction. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and every obligation of the undersigned shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. Tendered Initial Notes may be withdrawn at any time prior to the Expiration Date. Certificates for all Exchange Notes delivered in exchange for tendered Initial Notes and any Initial Notes delivered herewith but not exchanged, and registered in the name of the undersigned, shall be delivered to the undersigned at the address shown below the signature of the undersigned. TENDERING HOLDER(S) SIGN HERE Signature of Holder(s) Dated:___________________, 1998 (Must be signed by registered holder(s) exactly as name(s) appear(s) on certificate(s) of Initial Notes. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth the full title of such person.) See Instruction 3. Name(s):_______________________________________________________________________ _______________________________________________________________________________ (PLEASE PRINT) Capacity (full title):_________________________________________________________ Address:_______________________________________________________________________ _______________________________________________________________________________ (INCLUDING ZIP CODE) Area Code and Telephone No.____________________________________________________ Taxpayer Identification No.____________________________________________________ GUARANTEE OF SIGNATURE(S) (IF REQUIRED - SEE INSTRUCTION 3) Authorized Signature___________________________________________________________ Name___________________________________________________________________________ 4 5 Title__________________________________________________________________________ Address________________________________________________________________________ Name of Firm___________________________________________________________________ Area Code and Telephone No.____________________________________________________ Dated:______________________________, 1998 ________________________________________________ 5 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITION OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES. Certificates for all physically delivered Initial Notes or confirmation of any book-entry transfer to the Exchange Agent's account at a book-entry transfer facility of Initial Notes tendered by book-entry transfer, as well as a properly completed and duly executed copy of this Letter of Transmittal or facsimile thereof, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at any of its addresses set forth herein on or prior to the Expiration Date (as defined in the Prospectus). THE METHOD OF DELIVER OF THIS LETTER OF TRANSMITTAL, THE INITIAL NOTES AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, E USED. Holders whose Initial Notes are not immediately available or who cannot deliver their Initial Notes and all other required documents to the Exchange Agent on or prior to the Expiration Date or comply with book-entry transfer procedures on a timely basis may tender their Initial Notes pursuant to the guaranteed delivery procedure set forth in the Prospectus under "The Exchange Offer -- How to Tender." Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution (as defined in the Prospectus); (ii) on or prior to the Expiration Date the Exchange Agent must have received from such Eligible Institution a letter, telex, telegram or facsimile transmission setting forth the name and address of the tendering holder, the names in which such Initial Notes are registered, and, if possible, the certificate numbers of the Initial Notes to be tendered and a guarantee that within five New York Stock Exchange Trading days after the date of execution of such letter, telegram or facsimile transmission by the Eligible Institution, the Initial Notes, in proper form for transfer (or a confirmation of book-entry transfer of such Initial Notes into the Exchange Agent's account at the book-entry transfer facility), will be delivered by such Eligible Institution, the Initial Notes, in proper form for transfer (or a confirmation of book-entry transfer of such Initial Notes, in proper form for transfer (or a confirmation of book-entry transfer of such Initial Notes into the Exchange Agent's account at the book-entry transfer of such Initial Notes into the Exchange Agent's account at a book-entry transfer facility) as well as this Letter of Transmittal and all other documents required by this Letter of Transmittal, must be received by the Exchange Agent within five New York Stock Exchange trading days after the date of execution of such letter, telex, telegram or facsimile transmission, as all provided in the Prospectus under the caption "The Exchange Offer -- How to Tender." No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders, by execution of this Letter of Transmittal (or facsimile thereof), shall waive any right to receive notice of the acceptance of the Initial Notes of exchange. 2. PARTIAL TENDERS: WITHDRAWALS. If less than the entire principal amount of Initial Notes evidenced by a submitted certificate is tendered, the tendering holder should fill in the principal amount tendered in the box entitled "Principal Amount Tendered." A newly issued certificate for the principal amount of Initial Notes submitted but not tendered will be sent to such holder as soon as practicable after the Expiration Date. All Initial Notes to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. Initial Notes tendered pursuant to the Exchange Offer may be withdrawn at anytime prior to the Expiration Date. For a withdrawal to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Exchange Agent. Any such notice of withdrawal must specify the person named in the Letter of Transmittal as having tendered Initial Notes to be withdrawn, the certificate numbers of the Initial Notes to be withdrawn, the principal amount of Initial Notes delivered for exchange, a statement that such holder is withdrawing his or her election to have such Initial Notes exchanged, and the 6 7 name of the registered holder of such Initial Notes, and must be signed by the holder in the same manner as the original signature on the Letter of Transmittal (including any required signature guarantees) or be accepted by evidence satisfactory to the Company that the person withdrawing the tender has succeeded to the beneficial ownership of the Initial Notes being withdrawn. The Exchange Agent will return the properly withdrawn Initial Notes promptly following receipt of notice of withdrawal. If Initial Notes have been tendered pursuant to the procedure for book-entry transfer, any notice of withdrawal must specify the name and number of the account at the book-entry transfer facility to be credited with the withdrawn Initial Notes or otherwise comply with the book-entry transfer facility's procedures. 3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the registered holder(s) of the Initial Notes tendered hereby, the signature must correspond with the name(s) as written on the face of the certificates without alteration or any change whatsoever. If any of the Initial Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If a number of Initial Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If a number of Initial Notes registered in different names are tendered, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of Initial Notes. When this Letter of Transmittal is signed by the registered holder or holders (which term, for the purposes described herein, shall include a book-entry transfer facility whose name appears on a security listing as the owner of the Initial Notes) of Initial Notes listed and tendered hereby, no endorsements of certificates or separate written instruments of transfer or exchange are required. If this Letter of Transmittal is signed by a person other than the registered holder or holders of the Initial Notes listed, such Initial Notes must be endorsed or accompanied by separate written instruments of transfer or exchange in form satisfactory to the Company and duly executed by the registered holder, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the Initial Notes. If this Letter of Transmittal, any certificates or separate written instruments of transfer or exchange are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority so to act must be submitted. Endorsements on certificates or signatures on separate written instruments of transfer or exchange required by this Instruction 3 must be guaranteed by an Eligible Institution. Signatures on this Letter of Transmittal need not be guaranteed by an Eligible Institution, provided the Initial Notes are tendered: (i) by a registered holder of such Initial Notes; or (ii) for the account of an Eligible Institution. 4. TRANSFER TAXES. The Company shall pay all transfer taxes, if any, applicable to the transfers and exchange of Initial Notes to it or its order pursuant to the Exchange Offer. If a transfer tax is imposed for any reason other than the transfer and exchange of Initial Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exception therefrom is 7 8 not submitted herewith the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 4, it will not be necessary for transfer tax stamps to be affixed to the Initial Notes listed in this Letter of Transmittal. 5. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive, in whole or in part, any of the conditions to the Exchange Offer set forth in the Prospectus. 6. MUTILATED, LOST, STOLEN OR DESTROYED INITIAL NOTES. Any holder whose Initial Notes have been mutilated, lost, stolen or destroyed, should contact the Exchange Agent at the address indicated below for further instructions. 7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent at the address and telephone number set forth on the first page of this Letter of Transmittal. In addition, all questions relating to the Exchange Offer, as well as requests for assistance or additional copies of the Prospectus and this Letter of Transmittal, may be directed to the Company at 1105 Schrock Road, 7th Floor, P.O. Box 2000, Columbus, OH 43216. Attention: Poe A. Timmons (telephone: (614) 842-3325). IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH CERTIFICATES OF INITIAL NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. 8 EX-99.2 28 NOTICE OF GUARANTEED DELIVERY 1 Exhibit 99.2 NOTICE OF GUARANTEED DELIVERY FOR OFFER FOR ALL OUTSTANDING 9 7/8% SENIOR SUBORDINATED NOTES DUE 2006 IN EXCHANGE FOR 9 7/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2006 OF SAFELITE GLASS CORP. Registered holders of outstanding 9 7/8% Senior Subordinated Notes due 2006 (the "Initial Notes") who wish to tender their Initial Notes in exchange for a like principal amount of 9 7/8% Series B Senior Subordinated Notes due 2006 (the "Exchange Notes") and whose Initial Notes are not immediately available or who cannot deliver their Initial Notes and Letter of Transmittal (and any other documents required by the Letter of Transmittal) to Fleet National Bank (the "Exchange Agent") prior to the Expiration Date, may use this Notice of Guaranteed Delivery or one substantially equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile transmission or mail to the Exchange Agent, See "The Exchange Offer -- How to Tender" in the Prospectus. The Exchange Agent for the Exchange Offer is: STATE STREET BANK & TRUST COMPANY
By Registered or Certified Mail: By Overnight Courier: State Street Bank & Trust Company State Street Bank & Trust Company 2 International Place, 4th Floor 2 International Place, 4th Floor Corporate Trust Department Corporate Trust Department Boston, MA 02110 Boston, MA 02110 Attn.: Sandra Szczsponik Attn.: Sandra Szczsponik By Hand: By Facsimile: State Street Bank & Trust Company State Street Bank & Trust Company 2 International Place, 4th Floor (617) 664-5779 Corporate Trust Department Confirm by telephone: Boston, MA 02110 Attn.: Sandra Szczsponik
Delivery of this Letter of Transmittal to an address other than as set forth above or transmission of instructions via a facsimile transmission to a number other than set forth above will not constitute a valid delivery. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided on the Letter of Transmittal for Guarantee of Signatures. Ladies and Gentlemen: 1 2 The undersigned hereby tenders the principal amounts of Initial Notes indicated below, upon the terms and subject to the conditions contained in the Prospectus dated ___________, 1998 of Safelite Glass Corp. (the "Prospectus"), receipt of which is hereby acknowledged. DESCRIPTION OF SECURITIES TENDERED
Name and address of registered holder as it appears on Certificate number(s) of Initial Principal Amount of Initial the privately placed 9 7/8% Senior Subordinated Notes Notes transmitted Notes Transmitted due 2006, ("Initial Notes")
THE FOLLOWING MUST BE COMPLETED GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office, branch, agency or correspondent in the United States, hereby guarantees to deliver to the Exchange Agent at one of its addresses set forth above, the Initial Notes, together with a properly completed and duly executed Letter of Transmittal within five New York Stock Exchange, Inc. trading days after the date of execution of this Notice of Guaranteed Delivery. Name of Firm:__________________________ ___________________________________ (Authorized Signature) Address:_______________________________ Title:_____________________________ _______________________________________ Name:______________________________ (Zip Code) Area Code and Telephone Number: Date:______________________________ ___________________________________ NOTE: DO NOT SEND INITIAL NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY, INITIAL NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 2 EX-99.3 29 FORM OF EXCHANGE AGENT AGREEMENT 1 Exhibit 99.3 EXCHANGE AGENT AGREEMENT Dated as of _______, 1998 State Street Bank & Trust Company 2 International Place, 4th Floor Corporate Trust Department Boston, MA 02110 Attn.: Sandra Szczsponik Ladies and Gentlemen: Pursuant to the provisions of the Offer (the "Exchange Offer") for all of the outstanding 9 7/8% Senior Subordinated Notes due 2006 (the "Initial Notes") of Safelite Glass Corp., a Delaware corporation (the "Company"), in exchange for 9 7/8% Series B Senior Subordinated Notes due 2006 (the "Exchange Notes"), all of the Company's issued and outstanding Initial Notes accepted for tender of exchange (the "Exchange") prior to 5:00 p.m. New York time on __________, 1998, unless extended, for the Company's Exchange Notes will be exchanged pursuant to the terms and conditions of the Exchange Offer. The Exchange Offer is being made pursuant to a Prospectus (the "Prospectus") included in the Company's registration statement on Form S-4 (File No. __________) (the "Registration Statement") filed with the Securities and Exchange Commission (the "SEC"). The term "Expiration Date" shall mean the date on which the Exchange Offer, as it may be extended, shall expire. Upon receipt and execution of this letter and confirmation of the arrangements herein set forth, Fleet National Bank will act as the Exchange Agent for the Exchange (the "Exchange Agent"). A copy of the Prospectus is attached hereto as Exhibit A. A copy of the form of the letter of transmittal, including the related notice of guaranteed delivery (the "Letters of Transmittal"), to be used by the holders of record of the Initial Notes (the "Holders") to surrender their Initial Notes in order to receive the Exchange Notes pursuant to the Exchange is attached hereto as Exhibit B. The Company hereby appoints you to act as Exchange Agent in connection with the Exchange. In carrying out your duties as Exchange Agent, you are to act in accordance with the following: 1. You are to mail the Prospectus and the Letters of Transmittal to all of the Holders on the day that you are notified in writing by the Company that the Registration Statement has become effective under the Securities Act of 1933, as amended, and to make subsequent mailings thereof to persons who become Holders prior to the Expiration Date as may from time to time be requested by the Company. 2. You are to examine the Letters of Transmittal and the Initial Notes and other documents delivered or mailed to you, by or for the Holders, prior to the Exchange Date, to ascertain whether (i) the Letters of Transmittal are properly executed and completed in accordance with the instructions set forth therein, (ii) the Initial Notes are in proper form for transfer and (iii) all other documents submitted to you are in proper form. In each case where a Letter of Transmittal or other document has been improperly executed or completed or, for any other reason, is not in proper form, or some other irregularity exists, you are authorized to endeavor to take such action as you consider appropriate to notify the tenderer of such irregularity and as to the appropriate means of resolving the same. Determination of questions as to the proper completion or execution of the Letters of Transmittal, or as to the proper form for transfer of the Initial Notes or as to any other irregularity in connection with the submission of Letters of Transmittal and/or Initial Notes and other documents in connection with the Exchange, shall be made by officers of the Company evidenced by their written instructions or oral direction confirmed by facsimile. Any determination made by the Company on such questions shall be final and binding. As Exchange Agent, you are entitled to rely on any determination by the 1 2 Company as described above and shall be fully protected and indemnified in such reliance. 3. Tender of the Initial Notes may be made only as set forth in the Letter of Transmittal. Notwithstanding the foregoing, tenders which the Company shall approve in writing as having been properly tendered shall be considered to be properly tendered. Letters of Transmittal shall be recorded by you as to the date and time of receipt and shall be preserved and retained by you. Exchange Notes are to be issued in exchange for the Initial Notes pursuant to the Exchange only (i) against deposit with you of the Initial Notes, together with executed Letters of Transmittal and any other documents required by the Exchange Offer on each business day from the execution hereof up to the Expiration Date or (ii) in the event the holder is a participant in the Depository Trust Company ("DTC") system, by the utilization of DTC's Automated Tender Offer Program ("ATOP") and any evidence required by the Exchange Offer on each business day from the execution hereof up to the Expiration Date. 4. Upon the oral or written request of the Company (with written confirmation of such oral request thereafter), you will transmit by telephone, and promptly thereafter confirm in writing to (i) Poe A. Timmons, Controller (telephone (614) 842-3325) and (ii) Steven M. Peck, Esq., Hutchins, Wheeler & Dittmar, A Professional Corporation, counsel to the Company (telephone (617) 951-6644) or such other persons as the Company may reasonably request, the aggregate number of the Initial Notes tendered to you and the number of the Initial Notes properly tendered that day. Furthermore, you shall transmit copies of all Agents Messages (as defined in the Letter of Transmittal) received in connection with ATOP to the aforementioned persons as they are received. In addition, you will also inform the aforementioned persons, upon oral request made from time to time (with written confirmation of such request thereafter) prior to the Expiration Date, of such information as they or any of them may reasonably request. 5. Upon the terms and subject to the conditions of the Exchange Offer, delivery of Exchange Notes to be issued in exchange for accepted Initial Notes will be made by you promptly after acceptance of the tendered Initial Notes. 6. If any Holder shall report to you that his/her failure to surrender Initial Notes registered in his/her name is due to the loss, misplacement or destruction of a certificate or certificates, you shall request such Holder (i) to furnish to the Exchange Agent an affidavit of loss and, if required by the Company, a corporate bond of indemnity in an amount and evidenced by such certificate or certificates of a surety, as may be satisfactory to you and the Company, and (ii) to execute and deliver an agreement to indemnify the Company and you in such form as is acceptable to you and the Company. The obligees to be named in each such indemnity bond shall include the Company and you. You shall report to the Company the names of all Holders who claim that their Initial Notes have been lost, misplaced or destroyed and the principal amount of such Initial Notes. 7. As soon as practicable after you mail or deliver to an Initial Holder the Exchange Notes that such Holder may be entitled to receive, you shall arrange for cancellation of the Initial Notes submitted to you or returned by DTC in connection with ATOP. Such Notes shall be forwarded to Fleet National Bank, as trustee (the "Trustee") under the Indenture dated as of December 20, 1996 governing the Initial Notes, for cancellation and retirement as you are instructed by the Company (or a representative designated by the Company). 8. For your services as the Exchange Agent hereunder, the Company shall pay you in accordance with the schedule of fees attached hereto as Exhibit C. The Company also will reimburse you for your reasonable out-of-pocket expenses (including but not limited to counsel fees not previously paid to you as set forth in Exhibit C) in connection with your services promptly after submission to the Company of itemized statements. 9. As the Exchange Agent hereunder you: 2 3 (a) shall have no duties or obligations other than those specifically set forth herein or in the Exhibits attached hereto or as may be subsequently requested in writing of you by the Company and agreed to by you in writing with respect to the Exchange; (b) will be regarded as making no representations and having no responsibilities as to the validity, accuracy, sufficiency, value or genuineness of any of the Company's Holder record information, any Initial Notes deposited with you hereunder or any Exchange Notes, any Letters of Transmittal or other documents prepared by the Company in connection with the Exchange Offer or any signatures or endorsements other than your own, and will not be required to and will make no representations as to the validity, value or genuineness of the Exchange Offer; (c) shall not be obligated to take any legal action hereunder which might in your judgment involve any expenses or liability unless you shall have been furnished with an indemnity reasonably satisfactory to you; (d) may rely on and shall be fully protected and indemnified as provided in paragraph 10 hereof in acting in reliance upon any certificate, instrument, opinion, notice, letter, telegram, facsimile or other document or security delivered to you and reasonably believed by you to be genuine and to have been signed by the proper party or parties; (e) may rely on and shall be fully protected and indemnified as provided in paragraph 10 hereof in acting upon the written or oral instructions with respect to any matter relating to your acting as Exchange Agent specifically covered by this Agreement or supplementing or qualifying any such action of any officer or agent of the Company or such other person or persons as may be designated or whom you reasonably believe has been designated by the Company; (f) may consult with counsel satisfactory to you, including counsel for the Company, and the opinion or advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by you hereunder in good faith and in accordance with the opinion or advice of such counsel; (g) shall not at any time advise any person as to the wisdom of the Exchange or as to the market value or decline or appreciation in market value of any Initial Notes or Exchange Notes; and (h) shall not be liable for anything which you may do or refrain from doing in connection with this letter except for your gross negligence, willful misconduct or bad faith. 10. The Company covenants and agrees to indemnify and hold harmless State Street Bank & Trust Company and its officers, directors, employees, agents and affiliates (collectively, the "Indemnified Parties" and each an "Indemnified Party") and hold each Indemnified Party harmless against any loss, liability or reasonable expense of any nature (including reasonable legal and other fees and expenses) incurred in connection with the administration of the duties of the Indemnified Parties hereunder; provided, however, that no Indemnified Party shall be indemnified against any such loss, liability or expense arising out of such party's gross negligence or bad faith. In no event shall you be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if you have been advised of the likelihood of such loss or damage and regardless of the form of action. To the extent stated below, the Company shall not be liable under this indemnity with respect to any claim against any Indemnified Party unless the Company shall be notified by such Indemnified Party by letter, or by cable, telex or telecopier confirmed by letter, of the written assertion of a claim against such Indemnified Party, or of any action commenced against such Indemnified Party, promptly after but in any event within 10 days of the date such Indemnified Party shall have received any such written assertion of a claim or shall have been served with a summons, or other legal process, giving information as to the nature and basis of the claim, but failure so to notify the Company shall not relieve the Company of any liability which it may have otherwise than on account of this Agreement or hereunder except such liability which is a direct result of such Indemnified Party's failure to notify promptly. The Company shall be entitled to participate at its own expense in the defense against any 3 4 such claim or legal action. If such Indemnified Party in such notice so directs, the Company shall assume the defense of any suit brought to enforce any such claim. If such Indemnified Party does not so direct the Company but elects not to defend any such claim or legal action or if such Indemnified Party has elected to defend any such claim or legal action but is not, in the reasonable judgment of the Company, diligently pursuing such defense, then the Company may elect to assume the defense of any suit brought to enforce any such claim. In the event the Company assumes the defense, the Company shall not be liable for any fees and expenses thereafter incurred by such Indemnified Party's counsel, except for any reasonable fees and expenses of such Indemnified Party's counsel incurred in representing such Indemnified Party that are necessary and appropriate as a result of the need to have separate representation because of a conflict of interest between such Indemnified Party and the Company. You shall not enter into a settlement or other compromise with respect to any indemnified loss, liability or expense without the prior written consent of the Company, which shall not be unreasonably withheld or delayed. 11. This Agreement and your appointment as the Exchange Agent shall be construed and enforced in accordance with the laws of the Commonwealth of Massachusetts and shall inure to the benefit of, and the obligations created hereby shall be binding upon, the successors and assigns of the parties hereto. This Agreement may not be modified orally. Any inconsistency between this Agreement and the Letter of Transmittal, as they may from time to time be supplemented or amended, shall be resolved in favor of the latter, except with respect to the duties, liabilities and indemnification of you as Exchange Agent. Please acknowledge receipt of this letter and confirm the arrangements herein provided by signing and returning the enclosed copy. Very truly yours, SAFELITE GLASS CORP. By:________________________________ Name: Title: Accepted and Agreed to: State Street Bank & Trust Company Exchange Agent By:_______________________________ Name: Title: 4 -----END PRIVACY-ENHANCED MESSAGE-----