AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 12, 1996
REGISTRATION NO. 333-4723
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CLARK-SCHWEBEL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 2221 13-3883016
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
CLARK-SCHWEBEL, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 2221 57-1013751
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
2200 SOUTH MURRAY AVENUE
ANDERSON, SOUTH CAROLINA 29622
TELEPHONE: (864) 224-3506
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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DONALD R. BURNETTE
2200 SOUTH MURRAY AVENUE
ANDERSON, SOUTH CAROLINA 29622
TELEPHONE: (864) 224-3506
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPY TO:
LANCE C. BALK
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022-4675
TELEPHONE: (212) 446-4800
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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
[CAPTION]
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<S> <C> <C> <C> <C>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
10 1/2% Senior Notes due
2006, Series B.......... $110,000,000 $1,000 $110,000,000 $37,931.03
Clark-Schwebel Holdings,
Inc.'s Guarantee of 10
1/2% Senior Notes due
2006, Series B.......... $110,000,000 * * None
</TABLE>
* Not applicable.
(1) Estimated solely for the purpose of calculating the registration fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF PART I OF FORM S-4
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<CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
------------------------------------------ ------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front Cover Page; Outside Back
Cover Page
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............. Prospectus Summary; The Company; Risk
Factors; Pro Forma Financial Data;
Selected Historical Financial Data
4. Terms of the Transaction.................. Outside Front Cover Page; Prospectus
Summary; The Exchange Offer; Description
of Exchange Notes; Certain Federal Income
Tax Consequences
5. Pro Forma Financial Information........... Pro Forma Financial Data
6. Material Contracts with the Company Being
Acquired.................................. Inapplicable
7. Additional Information Required........... Inapplicable
8. Interests of Named Experts and Counsel.... Legal Matters; Independent Auditors
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Inapplicable
10. Information with Respect to S-3
Registrants............................... Inapplicable
11. Incorporation of Certain Information by
Reference................................. Inapplicable
12. Information with Respect to S-3 or S-2
Registrants............................... Inapplicable
13. Incorporation of Certain Information by
Reference................................. Inapplicable
14. Information with Respect to Registrants
other than S-3 or S-2 Registrants......... Outside Front Cover Page; Prospectus
Summary; Risk Factors; Use of Proceeds;
The Transactions; Capitalization; Pro
Forma Financial Data; Selected Historical
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Industry; Business;
Management; Security Ownership; Certain
Relationships and Related Transactions;
Description of Credit Agreement
15. Information with Respect to S-3
Companies................................. Inapplicable
16. Information with Respect to S-3 or S-2
Companies................................. Inapplicable
17. Information with Respect to Companies
Other Than S-3 or S-2 Companies........... Inapplicable
18. Information if Proxies, Consents or
Authorizations are to be Solicited........ Inapplicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or
in an Exchange Offer...................... Management; Security Ownership; Certain
Relationships and Related Transactions
</TABLE>
<PAGE>
[LOGO]
CLARK-SCHWEBEL, INC.
OFFER TO EXCHANGE ITS 10 1/2% SERIES B SENIOR NOTES DUE 2006 FOR
ANY AND ALL OF ITS OUTSTANDING 10 1/2% SERIES A SENIOR NOTES DUE 2006
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON SEPTEMBER 11, 1996, UNLESS EXTENDED
Clark-Schwebel, Inc., a Delaware corporation (the "Company"), hereby offers
(the "Exchange Offer"), upon the terms and conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), to exchange $1,000 principal amount of its Series B 10
1/2% Senior Notes due 2006 (the "New Notes"), registered under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement of which this prospectus is a part, for each $1,000 principal amount
of its outstanding 10 1/2% Series A Senior Notes due 2006 (the "Old Notes"), of
which $110,000,000 principal amount is outstanding. The form and terms of the
New Notes are the same as the form and term of the Old Notes (which they
replace) except that the New Notes will bear a Series B designation and will
have been registered under the Securities Act and, therefore, will not bear
legends restricting their transfer and will not contain certain provisions
relating to an increase in the interest rate which were included in the terms of
the Old Notes in certain circumstances relating to the timing of the Exchange
Offer. The Old Notes and the New Notes are sometimes referred to herein
collectively as the "Notes." The New Notes will evidence the same debt as the
Old Notes (which they replace) and will be issued under and be entitled to the
benefits of the Indenture (the "Indenture") dated as of April 17, 1996 between
the Company and Fleet National Bank, as trustee, governing the Notes. See "The
Exchange Offer" and "Description of New Notes."
The Company does not have any current plans to issue any significant
indebtedness to which the New Notes would rank senior or pari passu in right of
payment.
The New Notes will bear interest at a rate of 10 1/2% per annum, payable
semi-annually on April 15 and October 15 of each year, commencing October 15,
1996. The New Notes will mature on April 15, 2006. On or after April 15, 2001,
the Company may redeem the New Notes at the redemption prices set forth herein,
plus accrued and unpaid interest and Liquidated Damages, if any, to the date of
redemption. Notwithstanding the foregoing, at any time on or before April 15,
1999, the Company may redeem up to 35% of the original aggregate principal
amount of the Notes with the net proceeds of one or more Public Equity Offerings
at a redemption price equal to 110% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
redemption; provided that at least 65% of the original aggregate principal
amount of the Notes remains outstanding after each such redemption. Upon a
Change of Control, the Company will be obligated to make an offer to repurchase
all of the outstanding Notes at a price equal to 101% of the principal amount
thereof plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of repurchase. See "Description of Senior Notes."
The New Notes will be senior unsecured obligations of the Company and will
rank pari passu in right of payment to all existing and future senior
indebtedness of the Company and senior in right of payment to all subordinated
indebtedness of the Company. The New Notes will be effectively subordinated to
all existing and future secured indebtedness of the Company, including
indebtedness pursuant to the Credit Agreement, to the extent of the value of the
assets securing such indebtedness, and will also be effectively subordinated to
all existing and future indebtedness of its subsidiaries. As of March 31, 1996,
on a pro forma basis after giving effect to the Transactions, the aggregate
principal amount of senior indebtedness, including the Notes and indebtedness
pursuant to the Credit Agreement, would have been approximately $160.1 million
(of which $50.1 million would have been secured indebtedness). The New Notes
will be fully and unconditionally guaranteed (the "Guarantee") by Clark-Schwebel
Holdings, Inc. ("Holdings"). Holdings' sole asset is all of the capital stock of
the Company. The Guarantee will be a senior unsecured obligation of Holdings and
will be effectively subordinated to all secured indebtedness of Holdings to the
extent of the value of the assets securing such indebtedness. As of March 31,
1996, on a pro forma basis after giving effect to the Transactions, the
aggregate principal amount of senior indebtedness of Holdings, including the
Guarantee and Holdings' guarantee of the Company's obligations under the Credit
Agreement, would have been approximately $160.1 million (of which $50.1 million
would have been secured indebtedness). The indenture (the "Indenture") governing
the Notes permits the Company and its Restricted Subsidiaries to incur
additional indebtedness, subject to certain limitations, and contains no
limitations on the ability of Holdings to incur additional indebtedness. See
"Description of New Notes."
SEE "RISK FACTORS," BEGINNING ON PAGE 12, FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE
OFFER.
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York City time, on September 11, 1996,
unless extended by the Company in its sole discretion (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary conditions.
The Old Notes were sold by the Company on April 17, 1996 to the Initial
Purchasers (as defined) in a transaction not registered under the Securities Act
in reliance upon an exemption under the Securities Act. The Initial Purchasers
subsequently placed the Old Notes with qualified institutional buyers in
reliance upon Rule 144A under the Securities Act. Accordingly, the Old Notes may
not be reoffered, resold or otherwise transferred in the United States unless
registered under the Securities Act or unless an applicable exemption from the
registration requirements of the Securities Act is available. The New Notes are
being offered hereunder in order to satisfy the obligations of the Company under
the Registration Rights Agreement (as defined) entered into by the Company in
connection with the offering of the Old Notes. See "The Exchange Offer."
(continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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 August 13, 1996
<PAGE>
(cover page continued)
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the New Notes issued pursuant to the Exchange Offer may be offered for resale,
resold and otherwise transferred by any holder thereof (other than any such
holder that 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 New
Notes are acquired in the ordinary course of such holder's business and such
holder has no arrangement or understanding with any person to, and does not
intend to, participate in the distribution of such New Notes. See "The Exchange
Offer--Purpose and Effect of the Exchange Offer" and "The Exchange Offer--Resale
of the New Notes." Each broker-dealer (a "Participating Broker-Dealer") that
receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a Participating 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 Participating Broker-Dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
Participating 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, it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
Holders of Old Notes not tendered and accepted in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. The Company
will pay all the expenses incurred by it incident to the Exchange Offer. See
"The Exchange Offer."
There has not previously been any public market for the Old Notes or the New
Notes. The Company does not intend to list the New Notes on any securities
exchange or to seek approval for quotation through any automated quotation
system. There can be no assurance that an active market for the New Notes will
develop. See "Risk Factors--Lack of Established Public Trading Market; Absence
of Trading Market for Old Notes Not Validly Tendered." Moreover, to the extent
that Old Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Notes could be adversely
affected.
The New Notes will be available initially in book-entry form and the Company
expects that the New Notes issued pursuant this Exchange Offer will be issued in
the form of a Global Note (as defined herein), which will be deposited with, or
on behalf of, The Depository Trust Company (the "Depositary") and registered in
its name or in the name of Cede & Co., its nominee, except with respect to
institutional "accredited investors" (within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act) who will receive New Notes in certificated
form. Beneficial interests in the Global Note will be shown on, and transfer
thereof will be effected through, records maintained by the Depositary and its
participants. After the initial issuance of the Global Note, New Notes in
certificated form will be issued in exchange for the Global Note only under the
limited circumstances set forth in the Indenture. See "Description of New
Notes--Book-Entry, Delivery and Form."
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AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Exchange Offer Registration Statement," which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, and the rules and regulations promulgated thereunder, covering the New
Notes being offered hereby. This Prospectus does not contain all the information
set forth in the Exchange Offer Registration Statement. For further information
with respect to the Company and the Exchange Offer, reference is made to the
Exchange Offer Registration Statement. Statements made in this Prospectus as to
the contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Exchange Offer Registration Statement,
reference is made to the exhibit for a more complete description of the document
or matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Exchange Offer Registration Statement, including
the exhibits thereto, can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at the Regional Offices of the commission at 75 Park
Place, New York, New York 10007 and at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
can be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
As a result of the filing of the Exchange Offer Registration Statement with
the Commission, the Company will become subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith will be required to file periodic reports and
other information with the Commission. The obligation of the Company to file
periodic reports and other information with the Commission will be suspended if
the New Notes are held of record by fewer than 300 holders as of the beginning
of any fiscal year of the Company other than the fiscal year in which the
Exchange Offer Registration Statement is declared effective. The Company will
nevertheless be required to continue to file reports with the Commission if the
New Notes are listed on a national securities exchange. In the event the Company
ceases to be subject to the informational requirements of the Exchange Act, the
Company will be required under the Indenture to continue to file with the
Commission the annual and quarterly reports, information, documents or other
reports, including, without limitation, reports on Forms 10-K, 10-Q and 8-K,
which would be required pursuant to the informational requirements of the
Exchange Act. The Company will also furnish such other reports as may be
required by law.
Kevlar(R) and Teflon(R) are registered trademarks of E.I. du Pont de Nemours
and Company ("DuPont"). Spectra(R) is a registered trademark of AlliedSignal,
Inc. ("AlliedSignal").
The fiscal year for each of the Company, Holdings and Fort Mill A Inc., the
predecessor holder of all of the Company's capital stock ("Fort Mill") ends on
the Saturday closest to December 31. The fiscal years 1991, 1992, 1993, 1994 and
1995 ended on December 28, 1991, January 2, 1993, January 1, 1994, December 31,
1994, and December 30, 1995, respectively. All references herein to 1991, 1992,
1993, 1994, and 1995 with respect to the Company or Fort Mill refer to the
Company's or Fort Mill's fiscal year, respectively. The fiscal quarters for each
of the Company, Holdings and Fort Mill are 13 weeks and are measured from the
fiscal year end of the applicable year. Accordingly, the first quarter for each
of the Company and Fort Mill ended on April 1, 1995 and March 30, 1996 for 1995
and 1996, respectively. All references herein to first quarter 1995 and first
quarter 1996 with respect to the Company and Fort Mill refer to the Company's or
Fort Mill's first quarter, respectively.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial data, including
the Financial Statements and notes thereto included elsewhere in this
Prospectus. Financial Statements presented herein reflect the consolidated
financial statements of Fort Mill. Fort Mill's sole asset was, and Holdings'
sole asset is, all of the capital stock of the Company. Market data used
throughout this Prospectus were obtained from internal Company surveys and
industry publications. Industry publications generally indicate that the
information contained therein has been obtained from sources believed to be
reliable, but that the accuracy and completeness of such information is not
guaranteed. The Company has not independently verified such market data.
Similarly, internal Company surveys, while believed by the Company to be
reliable, have not been verified by any independent sources. Unless otherwise
stated in this Prospectus or unless the context otherwise requires, references
to the "Company" are to Clark-Schwebel, Inc. for periods prior to the
Acquisition (as defined) and to Clark-S Acquisition Corporation which, through a
series of mergers, was merged into Clark-Schwebel, Inc., for periods following
the Acquisition.
THE COMPANY
The Company believes it has been a leading manufacturer and marketer of
industrial fabrics, including electronics fiber glass fabric, composite
materials fiber glass fabric and high performance fabrics since its founding in
1960. The Company believes it is the largest producer of fiber glass fabrics for
use in the growing electronics industry, with an estimated 50% market share in
the United States. Fiber glass fabrics are a critical component used in the
production of printed circuit boards, which are integral to virtually all
advanced electronic products, including computers, telecommunications equipment,
advanced cable television equipment, network servers, televisions, automotive
equipment and home appliances. The Company's fiber glass fabrics are also used
in composite materials to strengthen, insulate and enhance the dimensional
stability of hundreds of products in a variety of markets, such as aerospace,
coating and laminating, marine and tooling, building insulation and sports
equipment. The Company is also a leading manufacturer of high performance
fabrics composed of Kevlar(R), Spectra(R) and quartz fibers. High performance
fabrics composed of Kevlar(R), the most widely used aramid fiber, are used
primarily in ballistic protection products, such as vests and helmets worn by
state, local and private police forces and the military, and in composite
materials for aerospace applications.
The Company continues to capitalize on its leading positions in the fiber
glass and high performance fabrics businesses and, as a result, has achieved
significant increases in net sales and profitability. From 1992 to 1995, the
Company's net sales, EBITDA (as defined herein) and operating income grew at
compounded annual growth rates of 13.4%, 36.0% and 81.7%, respectively, and the
Company's net income (loss) improved from a loss of $4.0 million in 1992 to a
profit of $15.4 million in 1995. During the same period, the Company's EBITDA
margin increased from 8.2% to 14.1% primarily as a result of the growth in sales
and management's initiatives to control the Company's fixed manufacturing and
operating costs and to improve manufacturing productivity. In 1995, the
Company's net sales, EBITDA, operating income and net income were $231.3
million, $32.7 million, $21.6 million and $15.4 million, respectively,
representing increases of 22.1%, 45.3%, 72.8% and 36.3%, respectively, over
1994.
The Company's and Holdings' principal executive offices are located at 2200
South Murray Avenue, Anderson, South Carolina 29622, and their telephone number
is (864) 224-3506.
ELECTRONICS FIBER GLASS FABRIC
The Company believes it is a leading producer of electronics fiber glass
fabric in the United States. The Company sells fiber glass fabric to
manufacturers of high pressure laminates ("HPL") who, in turn, convert fiber
glass fabric into rigid and thin core laminates that are sold to manufacturers
of
1
<PAGE>
single-sided, double-sided and multilayered printed circuit boards. Printed
circuit boards require a highly engineered substrate material on which to mount
and interconnect semiconductor chips, passive electronic devices and other
electronic components. Due to its low cost, high strength, dimensional
stability, temperature resistance and electrical insulating properties, fiber
glass fabric has proven to be the most effective substrate material used in the
manufacture of printed circuit boards. In addition, the Company believes that
currently there is no cost-effective substitute material which can satisfy the
stringent quality and performance specifications required of fiber glass fabric
for HPLs in printed circuit boards. In 1995, electronics fiber glass fabric
represented 58.9% of the Company's net sales.
The Company continues to capitalize on the growth in demand for printed
circuit boards resulting from (i) the development of increasingly complex
electronics products, including personal computers, cellular phones, pagers and
portable computing devices and (ii) the increasing electronic content of
products in which such use has been historically absent or limited, such as
automobiles, home appliances and medical equipment. From 1991 to 1995, the
$322.8 billion domestic electronics market grew at a compounded annual growth
rate of 8.2% and is expected to grow at a 7.8% compounded annual growth rate
from 1995 to 1999.
COMPOSITE MATERIALS FIBER GLASS FABRIC
Fiber glass fabrics are also used in composite materials for the aerospace,
coating and laminating, marine and tooling, building insulation and sports
equipment markets. Composite materials fiber glass fabric is used in various
applications which require combinations of fiber glass' inherent properties,
including light weight, strength, temperature and flame resistance, moisture and
chemical resistance, and durability. The Company's customers produce composite
materials by impregnating fiber glass fabric with thermosetting epoxy and
phenolic resin systems. Applications of composite material fiber glass fabric
include aircraft components, such as interior paneling systems and passenger
overhead storage compartments. Fiber glass fabrics are also used in a wide range
of other industrial applications, such as Teflon(R) coated conveyor belts,
window shades, movie screens, electrical insulation products, marine
construction materials, automotive tooling and roofing materials. In 1995,
composite materials fiber glass fabric represented 18.5% of the Company's net
sales.
The Company's fiber glass fabrics can be found on major airframe programs at
The Boeing Company, McDonnell Douglas Corporation and Airbus Industrie. The
Company expects increases in commercial aircraft build rates over the next
several years. Published industry reports estimate that 1,960 commercial
aircraft will be delivered from 1996 to 1998, representing an 18.2% increase
over the estimated 1,658 commercial aircraft delivered from 1993 to 1995. The
growing global economy and governmental regulations forcing the removal of
older, louder, less fuel efficient aircraft are expected to drive demand for new
aircraft.
HIGH PERFORMANCE FABRICS
The Company believes it is a leading producer of high performance fabrics
used primarily to make ballistic protection products, such as vests and helmets
worn by state, local and private police forces and the military and to reinforce
composite materials for aircraft applications. The Company's high performance
fabrics possess physical properties such as durability, low weight and high
tensile strength. The Company's line of high performance products are
manufactured by arranging and finishing aramid and other materials, such as
Kevlar(R), Spectra(R) and quartz. Wide ranges of fiber types and construction
patterns provide broad design potential, allowing the Company to manufacture
high performance fabrics to meet stringent customer standards. For instance, the
Company manufactures Kevlar(R) fabric, the most widely used aramid fabric,
according to ballistic design parameters determined by performance criteria of
the end product. The Company sells ballistic protection fabrics designed to
capture high mass, relatively low velocity bullets as well as ballistic
protection fabrics designed to capture low mass,
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<PAGE>
high velocity fragments. During 1995, high performance fabrics represented 22.6%
of the Company's net sales.
BUSINESS STRATEGY
The Company's business strategy is to increase sales and profitability by
capitalizing on its leading position in the fiber glass fabrics industry and the
expected increased demand for printed circuit boards. The Company believes that
its long-standing customer and supplier relationships, manufacturing and
technical expertise, and commitment to providing consistent, high quality
products will enable the Company to maintain its leading position in the
industry.
. Capitalize on the Growth of the Global Electronics Industry. The
Company believes it is a leading producer of electronic fiber glass
fabric and is well positioned to benefit from continued growth in the
advanced electronics industry. From 1992 to 1995, the Company's net
sales of electronics fiber glass fabric increased at a compounded
annual growth rate of 18.5%. The Company expects demand for its
electronics fiber glass fabric to be fueled by: (i) the development of
more complex and sophisticated electronics equipment in established
markets, such as wireless communications and personal computers; (ii)
the proliferation of computer usage through networking, server and
multi-media systems; (iii) the increase in global demand for
telecommunication infrastructure and mobile telecommunications
services; and (iv) new applications for electronic systems in
automobiles, home appliances and medical equipment.
. Enhance and Expand Customer Relationships. The Company continually
seeks to strengthen and expand its relationships with HPL
manufacturers. Due to the stringent quality, performance and delivery
specifications required of advanced electronics equipment, HPL
manufacturers are increasingly moving towards single source supply and
collaborative efforts among suppliers, such as the Company, and
customers, including printed circuit board manufacturers. The Company
is well positioned to benefit from this trend due to its leading
position in the industry, its investment in technical and manufacturing
expertise and its long-term relationships with its customers and
suppliers. The Company believes that each of its four largest
electronics customers purchased over 50% of its fiber glass fabrics
supplies from the Company in 1995. Furthermore, nine of the Company's
top ten customers have been customers for over five years.
. Manufacture High Quality Products. The trend in the electronics
industry toward higher performance and size reduction has increased the
complexity of electronics products, such as personal computers,
cellular telephones, advanced cable television equipment and network
servers, causing printed circuit board manufacturers to demand products
with increased performance, precision and consistency. Through its
research and development efforts and technology exchanges with its
foreign joint venture affiliates, the Company has introduced product
and process improvements to create fabrics which meet the high quality
standards and exacting performance specifications required by its
customers. In 1995, the Company received ISO 9002 certification of its
manufacturing operations as well as its business functions, reflecting
the Company's commitment to quality and consistency of service. (The
ISO 9002 is the highest designation issued by the International
Standards Organization for quality assurance in production,
installation and servicing.) As further evidence of this commitment,
the Company has reduced its incidence of defects and non-conformance
costs in each of the last five years.
. Continue to Control Costs and Improve Manufacturing Productivity. The
expansion of applications for computer systems, technological
advancements and new product introductions have stimulated the demand
for printed circuit boards and intensified competition within the
electronics industry. In an effort to maintain its leading position,
the Company
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has controlled its fixed costs and increased its manufacturing
productivity by consolidating functions, reducing manufacturing waste
and improving production yields. From 1992 to 1995, the Company's
EBITDA margins increased from 8.2% to 14.1%. These improvements were
due in part to the Company's ability to control fixed overhead costs
and increase operating leverage. In addition, from 1992 to 1995 the
Company's operating income margins increased from 2.3% to 9.3%, while
net income margin increased from (2.5%) to 6.7%.
THE TRANSACTIONS
Clark-Schwebel Holdings, Inc. and its wholly owned subsidiary, Clark-S
Acquisition Corporation ("Clark-S Acquisition"), and Clark-S Acquisition's
wholly owned subsidiary, CS Finance Corporation of Delaware, were organized by
Vestar Equity Partners, L.P. ("Vestar") to effect the acquisition (the
"Acquisition") of Fort Mill A Inc. ("Fort Mill") and the Company, Fort Mill's
wholly owned subsidiary. Pursuant to an Agreement and Plan of Merger, dated
February 24, 1996, as amended, among Vestar/CS Holding Company, L.L.C.
("Vestar/CS Holding"), Clark-S Acquisition, Springs Industries Inc. ("Spring
Industries") and Fort Mill, Clark-S Acquisition purchased all of the issued and
outstanding capital stock of Fort Mill from Springs Industries. Concurrently
with the consummation of the Acquisition on April 17, 1996 (the "Closing"),
Clark-S Acquisition merged into Fort Mill, with Fort Mill as the surviving
corporation, and CS Finance Corporation of Delaware merged into the Company,
with the Company as the surviving corporation. On the day following the Closing,
Fort Mill merged (the "Merger") into the Company. Immediately following the
Merger, Clark-Schwebel Holdings, Inc.'s sole asset was all of the capital stock
of the Company. Following the Merger, Holdings and the Company became
independent of Springs Industries.
The consideration for the Acquisition was $192.9 million in cash, subject to
certain adjustments. In order to finance the Acquisition, including the payment
of related fees and expenses: (i) Vestar/CS Holding and certain key members of
management and their lineal descendants (the "Management Investors")
contributed, in the aggregate, $45.0 million to Clark-Schwebel Holdings, Inc.
(the "Equity Contribution") in exchange for all of the capital stock of
Clark-Schwebel Holdings, Inc.; (ii) Clark-S Acquisition consummated the offering
(the "Offering") of the Old Notes; and (iii) Clark-S Acquisition entered into a
credit agreement (the "Credit Agreement") providing for borrowings of up to
$70.0 million (of which approximately $50.0 million was drawn at Closing). On
the day after Closing, the obligations of Clark-S Acquisition represented by
each of the Old Notes and the Credit Agreement were assumed by the Company.
Clark-Schwebel Holdings, Inc. guaranteed the indebtedness under the Old Notes
and the Credit Agreement. Through its ownership of Holdings Participating
Preferred Stock (as defined herein) and Holdings Common Stock (as defined
herein), Vestar/CS Holding owns 82% of the common equity interests, and through
its ownership of Holdings Common Stock, the Management Investors own 18% of the
common equity interests. The transactions contemplated by the Acquisition, the
Merger, the Offering, the Equity Contribution and the initial borrowings under
the Credit Agreement are referred to herein collectively as the "Transactions."
4
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THE INITIAL OFFERING
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OLD NOTES...................... The Old Notes were sold by the Company on April 17, 1996
(the "Issue Date") to Donaldson, Lufkin & Jenrette
Securities Corporation, Bear, Stearns & Co. Inc., CS First
Boston Corporation and Lazard Freres & Co. LLC
(collectively, the "Initial Purchasers") pursuant to a
Purchase Agreement dated April 12, 1996 (the "Purchase
Agreement"). The Initial Purchasers subsequently resold
the Old Notes to qualified institutional buyers and to
institutional accredited investors pursuant to Rule 144A
under the Securities Act.
REGISTRATION RIGHTS
AGREEMENT..................... Pursuant to the Purchase Agreement, the Company, Holdings
and the Initial Purchasers entered into a Registration
Rights Agreement dated April 17, 1996 (the "Registration
Rights Agreement"), which grants the holder of the Old
Notes certain exchange and registration rights. The
Exchange Offer is intended to satisfy such exchange rights
which terminate upon the consummation of the Exchange
Offer.
</TABLE>
THE EXCHANGE OFFER
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SECURITIES OFFERED............. $110,000,000 aggregate principal amount of 10 1/2% Series
B Senior Notes due 2006 (the "New Notes").
THE EXCHANGE OFFER............. $1,000 principal amount of the New Notes in exchange for
each $1,000 principal amount of Old Notes. As of the date
hereof, $110,000,000 aggregate principal amount of Old
Notes are outstanding. The Company will issue the New
Notes to holders on or promptly after the Expiration Date.
Based on an interpretation by the staff of the Commission
set forth in no-action letters issued to third parties,
the Company believes that New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered
for resale, resold and otherwise transferred by any holder
thereof (other than any such 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 New Notes are acquired
in the ordinary course of such holder's business and that
such holder does not intend to participate and has no
arrangement or understanding with any person to
participate in the distribution of such New Notes.
Any Participating Broker-Dealer that acquired Old Notes
for its own account as a result of market-making
activities or other trading activities may be a statutory
underwriter. Each Participating Broker-Dealer that
receives New Notes for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
Participating 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
Participating Broker-Dealer in connection with resales of
New Notes received in exchange for Old Notes where such
Old Notes were acquired by such Participating
Broker-Dealer as a result of market-making activities or
other trading activities.
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The Company has agreed that for a period of 180 days after
the Expiration Date, it will make this Prospectus
available to any Participating Broker-Dealer for use in
connection with any such resale. See "Plan of
Distribution."
Any holder who tenders in the Exchange Offer with the
intention to participate, or for the purpose of
participating, in a distribution of the New Notes could
not rely on the position of the staff of the Commission
enunciated in no-action letters and, in the absence of an
exemption therefrom, must comply with the registration and
prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Failure to comply
with such requirements in such instance may result in such
holder incurring liability under the Securities Act for
which the holder is not indemnified by the Company.
EXPIRATION DATE................ 5:00 p.m., New York City time, on September 11, 1996
unless the Exchange Offer is extended, in which case the
term "Expiration Date" means the latest date and time to
which the Exchange Offer is extended.
ACCRUED INTEREST ON THE NEW
NOTES AND THE OLD NOTES....... Each New Note will bear interest from its issuance date.
Holders of Old Notes that are accepted for exchange will
receive, in cash, accrued interest thereon to, but not
including, the issuance date of the New Notes. Such
interest will be paid with the first interest payment on
the New Notes. Interest on the Old Notes accepted for
exchange will cease to accrue upon issuance of the New
Notes.
CONDITIONS TO THE EXCHANGE
OFFER......................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. See "The
Exchange Offer--Conditions."
PROCEDURES FOR TENDERING OLD
NOTES......................... Each holder of Old Notes wishing to accept the Exchange
Offer must complete, sign and date the accompanying Letter
of Transmittal, or a facsimile thereof, in accordance with
the instructions contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or such
facsimile, together with the Old Notes and any other
required documentation to the Exchange Agent (as defined)
at the address set forth herein. By executing the Letter
of Transmittal, each holder will represent to the Company
that, among other things, the New Notes acquired pursuant
to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such New Notes,
whether or not such person is the holder, that neither the
holder nor any such other person (i) has any arrangement
or understanding with any person to participate in the
distribution of such New Notes, (ii) is engaging or
intends to engage in the distribution of such New Notes,
or (iii) is an "affiliate," as defined under Rule 405 of
the Securities Act, of the Company. See "The Exchange
Offer--Purpose and Effect of the Exchange Offer" and
"--Procedures for Tendering."
UNTENDERED OLD NOTES........... Following the consummation of the Exchange Offer, holders
of Old Notes eligible to participate but who do not tender
their Old Notes will not have any further exchange rights
and such Old Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the liquidity of
the market for such Old Notes could be adversely affected.
CONSEQUENCES OF FAILURE TO
EXCHANGE...................... The Old Notes that are not exchanged pursuant to the
Exchange Offer will remain restricted securities.
Accordingly, such Notes
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<S> <C>
may be resold only (i) to the Company, (ii) pursuant to
Rule 144A or Rule 144 under the Securities Act or pursuant
to some other exemption under the Securities Act, (iii)
outside the United States to a foreign person pursuant to
the requirements of Rule 904 under the Securities Act, or
(iv) pursuant to an effective registration statement under
the Securities Act. See "The Exchange Offer--Consequences
of Failure to Exchange."
SHELF REGISTRATION STATEMENT... If any holder of the Old Notes (other than any such holder
which is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) is not eligible
under applicable securities laws to participate in the
Exchange Offer, and such holder has provided information
regarding such holder and the distribution of such
holder's Old Notes to the Company for use therein, the
Company has agreed to register the Old Notes on a shelf
registration statement (the "Shelf Registration
Statement") and use its best efforts to cause it to be
declared effective by the Commission as promptly as
practical on or after the consummation of the Exchange
Offer. The Company has agreed to maintain the
effectiveness of the Shelf Registration Statement for,
under certain circumstances, a maximum of three years, to
cover resales of the Old Notes held by any such holders.
SPECIAL PROCEDURES FOR
BENEFICIAL OWNERS............ Any beneficial owner whose Old Notes are registered in the
name of a broker, dealer, commercial bank, trust company
or other nominee and who wishes to tender should contact
such registered holder promptly and instruct such
registered holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to completing
and executing the Letter of Transmittal and delivering its
Old Notes, either make appropriate arrangements to
register ownership of the Old Notes in such owner's name
or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership
may take considerable time. The Company will keep the
Exchange Offer open for not less than twenty business days
in order to provide for the transfer of registered
ownership.
GUARANTEED DELIVERY
PROCEDURES.................... Holders of Old Notes who wish to tender their Old Notes
and whose Old Notes are not immediately available or who
cannot deliver their Old Notes, the Letter of Transmittal
or any other documents required by the Letter of
Transmittal to the Exchange Agent (or comply with the
procedures for book-entry transfer) prior to the
Expiration Date must tender their Old Notes according to
the guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures."
WITHDRAWAL RIGHTS.............. Tenders may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date.
ACCEPTANCE OF NOTES AND
DELIVERY OF NEW NOTES........ The Company will accept for exchange any and all Old Notes
which are properly tendered in the Exchange Offer prior to
5:00 p.m., New York City time, on the Expiration Date. The
New Notes issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer."
USE OF PROCEEDS................ There will be no cash proceeds to the Company from the
exchange pursuant to the Exchange Offer.
EXCHANGE AGENT................. Fleet National Bank.
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THE EXCHANGE NOTES
GENERAL........................ The form and terms of the New Notes are the same as the
form and terms of the Old Notes (which they replace)
except that (i) the New Notes bear a Series B designation,
(ii) the New Notes have been registered under the
Securities Act and, therefore, will not bear legends
restricting the transfer thereof, and (iii) the holders of
New Notes will not be entitled to certain rights under the
Registration Rights Agreement, including the provisions
providing for an increase in the interest rate on the Old
Notes in certain circumstances relating to the timing of
the Exchange Offer, which rights will terminate when the
Exchange Offer is consummated. See "The Exchange
Offer--Purpose and Effect of the Exchange Offer." The New
Notes will evidence the same debt as the Old Notes and
will be entitled to the benefits of the Indenture. See
"Description of New Notes." The Old Notes and the New
Notes are referred to herein collectively as the "Notes."
SECURITIES OFFERED............. $110,000,000 aggregate principal amount of 10 1/2% Series
B Senior Notes due 2006.
MATURITY DATE.................. April 15, 2006.
INTEREST PAYMENT DATES......... April 15 and October 15 of each year, commencing October
15, 1996.
OPTIONAL REDEMPTION............ On or after April 15, 2001, the Company may redeem the New
Notes, at the redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated Damages (as
defined herein), if any, to the date of redemption.
Notwithstanding the foregoing, at any time on or before
April 15, 1999, the Company may redeem up to 35% of the
original aggregate principal amount of the Notes with the
net proceeds of one or more Public Equity Offerings at a
redemption price equal to 110% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption; provided that
at least 65% of the original aggregate principal amount of
the Notes remains outstanding after each such redemption.
See "Description of New Notes--Optional Redemption."
MANDATORY REDEMPTION........... None.
CHANGE OF CONTROL.............. Upon a Change of Control, the Company will be obligated to
make an offer to repurchase all of the outstanding Notes
at a price equal to 101% of the principal amount thereof
plus accrued and unpaid interest and Liquidated Damages,
if any, to the date of repurchase. See "Description of
Senior Notes--Change of Control."
RANKING........................ The New Notes will be senior unsecured obligations of the
Company and will rank pari passu in right of payment to
all existing and future senior indebtedness of the Company
and senior in right of payment to all subordinated
indebtedness of the Company. The New Notes will be
effectively subordinated to all existing and future
secured indebtedness of the Company, including
indebtedness pursuant to the Credit Agreement, to the
extent of the value of the assets securing such
indebtedness, and will also be effectively subordinated to
all existing and future indebtedness of its subsidiaries.
See "Description of New Notes."
GUARANTEE...................... The New Notes will be fully and unconditionally guaranteed
(the "Guarantee") by Holdings. However, the Guarantee will
be a senior unsecured obligation of Holdings and will be
effectively subordinated to all secured indebtedness of
Holdings to the extent of the value of the assets securing
such indebtedness.
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8
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<S> <C>
CERTAIN COVENANTS.............. The Indenture contains certain covenants which, among
other things, limits the ability of the Company and its
Restricted Subsidiaries to: (i) incur additional
indebtedness and issue preferred stock; (ii) repay certain
other indebtedness; (iii) pay dividends or make certain
other distributions; (iv) repurchase equity interests; (v)
consummate certain asset sales; (vi) enter into certain
transactions with affiliates; (vii) enter into sale and
leaseback transactions; (viii) incur liens; (ix) merge or
consolidate with any other person; or (x) sell, assign,
transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company. In
addition, under certain circumstances, the Company will be
required to make an offer to repurchase the Notes at a
price equal to the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, to the
date of repurchase, with the proceeds of certain Asset
Sales (as defined herein). See "Description of New
Notes--Certain Covenants." In addition, the Company's
interests in certain joint ventures are not subject to the
covenants of the Indenture or the Credit Agreement. See
"Business--Joint Ventures."
</TABLE>
RISK FACTORS
See "Risk Factors" for a discussion of certain material factors that should
be considered in connection with the Exchange Offer.
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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN MILLIONS)
The following summary historical financial data were derived from the
historical consolidated financial statements of Fort Mill, the predecessor
company. Fort Mill's sole asset was all of the capital stock of the Company.
Fort Mill had no operations and held no investments other than its investment in
the Company. The historical balance sheets for 1994 and 1995 and the historical
income statements for 1993, 1994 and 1995 were audited by Deloitte & Touche LLP.
The selected historical data for the thirteen weeks ended April 1, 1995 and
March 30, 1996 are unaudited, but include all normal recurring adjustments
necessary for a fair presentation of the financial data for such periods. The
following summary pro forma financial data represents those of Holdings, whose
sole asset consists of all of the capital stock of the Company after the
Transactions. The pro forma income statement data for 1995 and first quarter
1996 give effect to the Transactions as if they had occurred on January 1, 1995.
The pro forma balance sheet data give effect to the Transactions as if they had
occurred on March 30, 1996. The pro forma financial data do not purport to be
indicative of Holdings' financial position or results of operations had the
Transactions been completed as of the date or for the periods presented, nor do
such data purport to project Holdings' financial position or results of
operations at any future date or for any future period. The information
contained in this table should be read in conjunction with "Selected Historical
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Unaudited Pro Forma Financial Statements" and the
Financial Statements and accompanying notes thereto included elsewhere in this
Offering Memorandum.
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<CAPTION>
FISCAL YEAR FIRST QUARTER
--------------------------------------- -----------------------------
1993 1994 1995 1995 1995 1996 1996
------ ------ ------ --------- ----- ----- -----------
(PRO
(HISTORICAL) FORMA) (HISTORICAL) (PRO FORMA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................ $163.7 $189.4 $231.3 $ 231.3 $49.2 $60.2 $60.2
Gross profit..................... 24.5 28.7 39.3 38.9 7.1 12.3 12.3
Selling, general and
administrative expenses........ 15.5 14.4 17.8 17.3 4.1 3.9 3.9
Idle equipment write-off (1)..... -- 1.8 -- -- -- -- --
Operating income................. 9.0 12.5 21.6 21.7 3.0 8.4 8.4
Income (loss) from equity
investees, net.................... (3.4) 1.2 2.6 2.9 0.4 0.9 0.8
Income from continuing
operations........................ 1.6 8.3 15.3 5.6 2.1 5.9 3.3
Dividends on preferred stock..... -- -- -- (4.6) -- -- (1.1)
Income from continuing operations
applicable to common shares....... 1.6 8.3 15.3 1.0 2.1 5.9 2.2
OTHER DATA:
EBITDA (2)(3).................... $ 19.0 $ 22.5 $ 32.7 $ 32.7 $ 5.8 $11.5 $11.5
EBITDA, as adjusted (2)(3)....... 19.0 24.3 34.1 34.1 5.8 11.5 11.5
Depreciation and amortization.... 10.0 10.0 11.1 11.9 2.8 3.0 3.2
Capital expenditures............. 8.8 11.5 8.4 8.4 2.0 1.1 1.1
Gross profit as a percentage of
net sales...................... 15.0% 15.1% 17.0% 16.8% 14.5% 20.5% 20.5%
EBITDA as a percentage of net
sales............................. 11.6% 11.9% 14.1% 14.1% 11.9% 19.0% 19.0%
EBITDA, as adjusted as a
percentage of net sales........ 11.6% 12.8% 14.7% 14.7% 11.9% 19.0% 19.0%
Net cash provided by (used in)
(4):
Operating Activities........... 17.3 16.2 18.0 n/a 0.2 7.7 n/a
Investing Activities........... (8.7) 7.6 (8.4) n/a (2.0) (1.1) n/a
Financing Activities........... (8.7) (23.8) (9.1) n/a 1.9 (7.1) n/a
Ratio of earnings to fixed
charges......................... 15.0x 23.2x 45.7x 1.4x 26.1x 53.5x 1.8x
OTHER PRO FORMA DATA:
Cash interest expense (5)........ $ 15.3 $ 3.8
Ratio of EBITDA to cash interest
expense......................... 2.1x 3.0x
Ratio of EBITDA, as adjusted to
cash interest expense.......... 2.2x 3.0x
Ratio of net debt to EBITDA
(6)............................... 4.9x 3.5x
Ratio of net debt to EBITDA, as
adjusted (6).................... 4.7x 3.5x
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<CAPTION>
AT MARCH 30, 1996
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<S> <C> <C>
ACTUAL PRO FORMA
------ ---------
BALANCE SHEET DATA:
Working capital......................................................... $ 43.9 $ 46.3
Total assets............................................................ 181.6 252.5
Total long-term debt (including current portion)........................ 6.0 160.1
Total stockholders' equity.............................................. 137.0 44.2
</TABLE>
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(1) During 1994, the Company recorded a $1.8 million charge against operating
income related to the write-off of certain idle manufacturing equipment.
(2) EBITDA is defined herein as operating income plus depreciation and goodwill
amortization. EBITDA, as adjusted, is defined herein as operating income
plus depreciation, amortization, the write off of certain idle equipment
($1.8 million in 1994) and the provision for a customer bad debt ($1.4
million in 1995) related to a receivable retained by Springs Industries.
EBITDA and EBITDA, as adjusted, do not include any income (loss) from equity
investees, net. EBITDA is a widely accepted financial indicator of a
company's ability to service debt. However, EBITDA is not a defined term
under generally accepted accounting principles ("GAAP") and should not be
construed as an alternative to operating income, net income or cash flows
from operating activities as determined by GAAP and should not be construed
as an indication of the Company's operating performance or as a measure of
liquidity. EBITDA and EBITDA, as adjusted, do not represent available or
discretionary funds of the Company.
(3) Pro forma EBITDA and EBITDA, as adjusted, exclude overhead expenses
allocated to the Company by Springs Industries and include the Company's
estimate of stand-alone expenses. There are no material differences between
the excluded overhead and the stand-alone expenses. Pro forma EBITDA and
EBITDA, as adjusted, are not defined terms under GAAP as stated above in
note (2).
(4) This cash flow information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
(5) Pro forma cash interest expense represents total interest expense less
amortization of deferred financing costs of $0.9 million for fiscal year
1995 and $0.3 million for the first quarter 1996.
(6) Net debt represents total debt less cash and was calculated based on pro
forma net debt of $159.5 million and $160.0 million as of December 30, 1995
and March 30, 1996, respectively. EBITDA for the first quarter 1996 of $11.5
million was annualized for the purpose of this calculation. The ratio of net
debt to EBITDA is a key ratio used by the financial community to evaluate an
entity's ability to service its debt.
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RISK FACTORS
Prospective investors should carefully consider the following factors in
addition to the other information set forth in this Prospectus before tendering
Old Notes in exchange for the New Notes. The risk factors set forth below are
generally applicable to the Old Notes as well as the New Notes.
SIGNIFICANT LEVERAGE
The Company is highly leveraged and has indebtedness that is substantial in
relation to stockholders' equity. As of March 30, 1996, on a pro forma basis
after giving effect to the Transactions, the Company would have had an aggregate
of $160.1 million of outstanding indebtedness and stockholders' equity of $44.2
million. In addition, subject to the restrictions in the Credit Agreement and
the Indenture, the Company and its subsidiaries may incur additional
indebtedness. For the 13 weeks ended March 30, 1996, on a pro forma basis, after
giving effect to the Transactions as if they had occurred on December 31, 1995,
the Company's ratio of earnings to fixed charges would have been 1.8:1
The Company's high degree of leverage could have important consequences to
holders of the New Notes, including, but not limited to, the following: (i) a
substantial portion of the Company's cash flow from operations must be dedicated
to the payment of principal and interest on its indebtedness, thereby reducing
the funds available to the Company for other purposes; (ii) the Company's
ability to obtain additional debt financing in the future for working capital,
capital expenditures, acquisitions, general corporate purposes or other purposes
may be impaired; (iii) certain of the Company's borrowings will be at variable
rates of interest, which will expose the Company to the risk of higher interest
rates; (iv) the indebtedness outstanding under the Credit Agreement will be
secured by substantially all of the assets of the Company and matures prior to
the maturity of the New Notes; (v) the Company may be substantially more
leveraged than certain of its competitors, which may place the Company at a
competitive disadvantage; and (vi) the Company's degree of leverage may hinder
its ability to adjust rapidly to changing market conditions and could make it
more vulnerable in the event of a downturn in general economic conditions or its
business.
The Company's ability to pay principal and interest on the New Notes and to
satisfy its other debt obligations will depend on its financial and operating
performance, which in turn are subject to prevailing economic conditions and to
certain financial, business and other factors beyond its control. The Company
anticipates that its operating cash flow will be sufficient to meet its
operating expenses and to service its debt requirements as they become due.
However, if the Company cannot generate sufficient cash flow from operations to
meet its obligations, then it may be forced to take actions such as reducing or
delaying capital expenditures, selling assets, restructuring or refinancing its
indebtedness, or seeking additional equity capital. There is no assurance that
any of these remedies could be effected on satisfactory terms, if at all. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
SECURED INDEBTEDNESS
The Indenture permits the Company to incur certain secured indebtedness,
including indebtedness under the Credit Agreement, which is secured by a lien on
substantially all of the assets of the Company. The New Notes are unsecured and
will be effectively subordinated to such indebtedness. Accordingly, if an event
of default occurs under the Credit Agreement, the lenders thereto will have a
prior right to the assets of the Company and may foreclose upon such collateral
to the exclusion of the holders of the New Notes. In such event, such assets
would first be used to repay in full amounts outstanding under the Credit
Agreement, resulting in all or a portion of the Company's assets being
unavailable to satisfy the claims of the holders of New Notes and holders of
other unsecured indebtedness. In addition, the Guarantee is effectively
subordinated to Holdings' guarantee of the
12
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obligations of the Company under the Credit Agreement to the extent of the value
of the assets securing such indebtedness.
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Indenture contains covenants which, among other things, restrict the
ability of the Company and its subsidiaries to incur additional indebtedness,
repay certain other indebtedness, pay dividends, or make certain other
distributions, repay certain indebtedness, consummate certain asset sales, enter
into certain transactions with affiliates, enter into sale and leaseback
transactions, incur liens, incur additional indebtedness, 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. See
"Description of New Notes--Certain Covenants." In addition, the Credit Agreement
contains other and more restrictive covenants and also requires the Company to
maintain specified financial ratios and satisfy certain financial condition
tests. See "Description of Credit Agreement."
The Company's ability to comply with the covenants contained in the
Indenture and the Credit Agreement may be affected by events beyond its control,
including prevailing economic, financial and industry conditions. The breach of
any of such covenants or restrictions could result in a default under the
Indenture and/or the Credit Agreement which would permit the secured lenders or
the holders of the Notes, as the case may be, to declare all amounts borrowed
thereunder to be due and payable, together with accrued and unpaid interest, and
the commitments of the secured lenders to make further extensions of credit
under the Credit Agreement could be terminated. If the Company were unable to
repay its indebtedness to its secured lenders, the secured lenders could proceed
against any or all the collateral securing such indebtedness, which collateral
consists of the capital stock and substantially all of the assets of the
Company.
DEPENDENCE ON ELECTRONICS INDUSTRY/CYCLICALITY
The Company's business is dependent on manufacturers of electronic laminates
who in turn are dependent upon printed circuit board fabricators who supply
electronic equipment manufacturers. The electronics industry is cyclical and has
experienced recurring downturns. A future downturn could reduce demand for, and
prices of, materials used in electronics, including those manufactured by the
Company. Over the past three years, the electronics industry has experienced
significant growth, but there can be no assurance that such growth will
continue. A significant downturn or change in any particular market segment of
the electronics industry could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
CONCENTRATION OF CUSTOMERS
In 1995, sales to two of the Company's customers, Allied-Signal Laminate
System and Nelco International, each accounted for more than 10% of
the Company's net sales, and sales to the Company's top ten customers accounted
for approximately 70% of net sales. As customers seek to establish closer
relationships with their suppliers, the Company expects its customer base to
continue to become more concentrated. If, for any reason, any of its key
customers were to purchase significantly less of the Company's products in the
future, such decreased level of purchases could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business-- Customers" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
13
<PAGE>
TECHNOLOGICAL CHANGE
Rapid technological advances in the electronics industry have demanded
increased performance from suppliers of components and raw materials. These
advances have placed increasingly rigorous demands on the weight, thickness and
consistency of fiber glass products produced by the Company. Technological
change in the printed circuit board industry is rapid and continuous and will
continue to require increased technological and manufacturing capability and
expertise. Advances in semiconductor technology could further reduce the surface
area of printed circuit boards and possibly demand for the Company's products.
There can be no assurance that the Company will be able to maintain its current
technological position.
The Company could face increased competition if cost-effective alternatives
to fiber glass fabrics were developed for the electronics industry. Currently,
only lower-end electronics, which use a paper based laminate system for printed
circuit boards, and very high-end electronics, which use a variety of very
expensive materials for printed circuit boards, use non-fiber glass fabrics.
However, the development and introduction of cost-competitive alternatives could
have a material adverse impact on the Company's business, financial condition
and results of operations.
COMPETITION
The Company believes that competition in its markets is primarily based on
long-term relationships with customers and suppliers, quality, technical
support, price and reliability. The Company's primary competitors are BGF
Industries, Inc. in the production of fiber glass fabrics and Hexcel Corporation
in the production of Kevlar(R) fabrics and other high performance fabrics. Some
of the Company's competitors may have greater financial and other resources than
the Company.
AVAILABILITY OF RAW MATERIALS
Fiber glass yarn is the principal raw material used in the production of
fiber glass fabric. There are two major suppliers of fiber glass yarn in the
United States, and substitutes are not readily available. The Company purchases
most of its aramid yarn from one supplier. Any disruption in the ability or
willingness of the Company's suppliers to deliver fiber glass or aramid yarns to
the Company could have a material adverse effect on the Company's business,
financial condition and results of operations. In the fourth quarter of 1994,
shortages of fiber glass yarn occurred, and in the first quarter of 1995
suppliers of fiber glass yarn reduced shipments, limiting its supply to the
Company and other purchasers of fiber glass yarn. This shortage, which the
Company expects to continue at least through 1996, has limited the ability of
the Company to expand production of fiber glass fabrics. In addition, due in
part to fiber glass yarn shortages, the price of fiber glass yarn has increased
over the past year at a higher than historical rate. While the Company generally
has been able to pass through increases in the cost of fiber glass yarn, the
inability of the Company to do so in the future could have a material adverse
effect on the Company's business, financial condition and results of operations.
ENVIRONMENTAL MATTERS
The Company's facilities are subject to a broad range of federal, state,
local and foreign environmental laws and requirements, including those governing
discharges to the air and water, the handling and disposal of solid and
hazardous substances and wastes and the remediation of contamination associated
with releases of hazardous substances at Company facilities and offsite disposal
locations. The Company has made, and will continue to make, expenditures to
comply with such laws and requirements. The Company believes, based upon
information currently available to management, that it will not require material
capital expenditures to maintain compliance with environmental requirements
during this or the following fiscal year or in the foreseeable future. However,
future events, such as changes in existing laws and regulations or the discovery
of contamination at sites owned or operated
14
<PAGE>
by the Company, may give rise to additional compliance or remediation costs
which could have a material adverse effect on the Company's financial condition
or results of operations. Moreover, the nature of the Company's business exposes
it to some risk of claims with respect to environmental matters, and there can
be no assurance that material costs or liabilities will not be incurred in
connection with any such claims. See "Business--Environmental Matters."
CONTROL BY PRINCIPAL STOCKHOLDER
Through its ownership of Holdings Participating Preferred Stock and Holdings
Common Stock, Vestar/CS Holding holds 82% of the fully diluted Holdings Common
Stock. Vestar, through its interests in Vestar/CS Holding and certain
agreements, controls Holdings and, through its control of Holdings, has the
power to elect a majority of the Company's directors, appoint new management and
approve any action requiring the approval of the holders of the Company's common
stock, including adopting certain amendments to the Company's articles of
incorporation. See "Management--Directors and Executive Officers" and "Security
Ownership" and "Certain Relationships and Related Transactions."
DEPENDENCE ON KEY PERSONNEL
The Company's success is dependent upon certain key management personnel.
There is competition for qualified employees among companies in the electronic
materials industry, and the loss of certain of the Company's employees or an
inability to continue to attract and motivate highly skilled employees could
have a material adverse effect on the Company's business, financial condition
and results of operations.
PURCHASE OF NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control, the Company is required to offer to repurchase all
outstanding Notes at 101% of the principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, to the date of repurchase. The
source of funds for any such repurchase will be the Company's available cash or
cash generated from operating or other sources, including borrowing, sales of
assets, sales of equity or funds provided by a new controlling person. A Change
of Control will likely trigger an event of default under the Credit Agreement
which would permit the lenders thereto to accelerate the debt under the Credit
Agreement. However, there can be no assurance that sufficient funds will be
available at the time of any Change of Control to make any required repurchases
of Notes tendered and to repay debt under the Credit Agreement. See "Description
of New Notes--Repurchase at the Option of Holders" and "Description of Credit
Agreement."
FRAUDULENT CONVEYANCE CONSIDERATIONS
In connection with the Acquisition, the Company and Holdings incurred
substantial indebtedness, including the indebtedness under the Notes, the Credit
Agreement, the Guarantee and Holdings' guarantee of the obligations of the
Company under the Credit Agreement. If under relevant federal and state
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 Holdings, a court were to find that, at the time the Notes or the
Guarantee were issued, (i) the Company or Holdings issued the Notes or the
Guarantee, with the intent of hindering, delaying or defrauding current or
future creditors or (ii)(A) the Company or Holdings received less than
reasonably equivalent value or fair consideration for issuing the Notes or the
Guarantee, as the case may be, and (B) the Company or Holdings, as the case may
be, (1) was insolvent or was rendered insolvent by reason of the Acquisition
and/or such related transactions, including the incurrence of the indebtedness
to fund the Transactions, (2) was engaged, or about to engage, in a business or
transaction for which its assets constituted unreasonably
15
<PAGE>
small capital, (3) intended to incur, or believed that it would incur, debts
beyond its ability to pay as such debts matured (as all of the foregoing terms
are defined in or interpreted under such fraudulent conveyance statutes) or (4)
was a defendant in an action for money damages, or had a judgment for money
damages docketed against it (if, in either case, after final judgment, the
judgment is unsatisfied), such court could avoid or subordinate the Notes and
the Guarantee to presently existing and future indebtedness of the Company and
Holdings and take other action detrimental to the holders of the Notes and the
Guarantee, including, under certain circumstances, invalidating the Notes and
the Guarantee.
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 Holdings would be considered
insolvent if, at the time it incurs the indebtedness constituting the Notes or
the Guarantee, either (i) the fair market value (or fair saleable value) of its
assets is less than the amount required to pay its total existing debts and
liabilities (including the probable liability on contingent liabilities) as they
become absolute and matured or (ii) it is incurring debts beyond its ability to
pay as such debts mature.
Each of Holdings' and the Company's Board of Directors and management
believe that at the time of its issuance of the Notes and the Guarantee, as the
case may be, the Company and Holdings (i) will (A) be neither insolvent nor
rendered insolvent thereby, (B) have sufficient capital to operate their
respective businesses effectively and (C) be incurring debts within their
respective abilities to pay as the same mature or become due and (ii) will have
sufficient resources to satisfy any probable money judgment against them in any
pending action. In reaching the foregoing conclusions, Holdings and the Company
have relied upon their analyses of internal cash flow projections and estimated
values of assets and liabilities of the Company. There can be no assurance,
however, that such analyses will prove to be correct or that a court passing on
such questions would reach the same conclusions.
LACK OF ESTABLISHED PUBLIC TRADING MARKET; ABSENCE OF TRADING MARKET FOR OLD
NOTES NOT VALIDLY TENDERED
The Old Notes were issued to, and the Company believes are currently owned
by, a relatively small number of beneficial owners. Prior to the Exchange Offer,
there has not been any public market for the Old Notes. The Old Notes have not
been registered under the Securities Act and will be subject to restrictions on
transferability to the extent that they are not exchanged for New Notes by
holders who are entitled to participate in this Exchange Offer. The holders of
Old Notes (other than any such holder that is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) who are not eligible to
participate in the Exchange Offer are entitled to certain registration rights,
and the Company is required to file a Shelf Registration Statement with respect
to such Old Notes. The New Notes will constitute a new issue of securities with
no established trading market. The Company does not intend to list the New Notes
on any national securities exchange or seek the admission thereof to trading in
the National Association of Securities Dealers Automated Quotation System. The
Initial Purchasers have advised the Company that they currently intend to make a
market in the New Notes, but they are not obligated to do so and may discontinue
such market making at any time. In addition, such market making activity will be
subject to the limits imposed by the Securities Act and the Exchange Act and may
be limited during the Exchange Offer and the pendency of the Shelf Registration
Statement. Accordingly, no assurance can be given that an active public or other
market will develop for the New Notes or as to the liquidity of the trading
market for the New Notes. If a trading market does not develop or is not
maintained, holders of the New Notes may experience difficulty in reselling the
New Notes or may be unable to sell them at all. If a market for the New Notes
develops, any such market may be discontinued at any time.
If a public trading market develops for the New Notes, future trading prices
of such securities will depend on many factors including, among other things,
prevailing interest rates, the Company's results
16
<PAGE>
of operations and the market for similar securities. Depending on prevailing
interest rates, the market for similar securities and other factors, including
the financial condition of the Company, the New Notes may trade at a discount
from their principal amount.
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Company of such
Old Notes, a properly completed and duly executed Letter of Transmittal and all
other required documents. Therefore, holders of the Old Notes desiring to tender
such Old Notes in exchange for New Notes should allow sufficient time to ensure
timely delivery. The Company is under no duty to give notification of defects or
irregularities with respect to the tenders of Old Notes for exchange. Old Notes
that are not tendered or are tendered but not accepted will, following the
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof, and, upon consummation of the Exchange Offer
certain registration rights under the Registration Rights Agreement will
terminate. In addition, any holder of Old Notes who tenders in the Exchange
Offer for the purpose of participating in a distribution of the New Notes may be
deemed to have received restricted securities and, if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Each broker-dealer
that receives New Notes for its own account in exchange for Old Notes, where
such Old 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 New Notes. See "Plan of
Distribution." To the extent that Old Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Old Notes could be adversely affected. See "The Exchange Offer."
17
<PAGE>
THE TRANSACTIONS
THE ACQUISITION
Clark-Schwebel Holdings, Inc., its wholly owned subsidiary, Clark-S
Acquisition, and Clark-S Acquisition's wholly owned subsidiary, CS Finance
Corporation of Delaware, were organized by Vestar to effect the acquisition of
Fort Mill and the Company, Fort Mill's wholly owned subsidiary. Pursuant to an
Agreement and Plan of Merger, dated February 24, 1996 (as amended, the "Merger
Agreement"), among Vestar/CS Holding, Clark-S Acquisition, Springs Industries
and Fort Mill, Clark-S Acquisition purchased all of the issued and outstanding
capital stock of Fort Mill from Springs Industries. Concurrently with the
consummation of the Acquisition, Clark-S Acquisition merged into Fort Mill, with
Fort Mill as the surviving corporation, and CS Finance Corporation of Delaware
merged into the Company, with the Company as the surviving corporation. On the
day following the Closing, Fort Mill merged into the Company, and immediately
following such merger, Clark-Schwebel Holdings, Inc.'s sole asset was all of the
capital stock of the Company.
The consideration for the Acquisition was $192.9 million in cash, subject to
certain adjustments. In order to finance the Acquisition, including the payment
of related fees and expenses: (i) Vestar/CS Holding and the Management Investors
made the Equity Contribution of $45.0 million in exchange for all of the capital
stock of Clark-Schwebel Holdings, Inc.; (ii) Clark-S Acquisition consummated the
Offering; and (iii) Clark-S Acquisition entered into the Credit Agreement
providing for borrowings of up to $70.0 million (of which approximately $50.0
million was drawn at Closing). Holdings guaranteed the indebtedness under the
Old Notes and the Credit Agreement.
The following chart depicts the present organizational structure and fully
diluted common stock ownership of Clark-Schwebel Holdings, Inc. and the Company.
[FLOW CHART]
18
<PAGE>
SOURCES AND USES OF FUNDS
Concurrently with the Offering, the Company assumed the obligations under
the Credit Agreement and Vestar/CS Holding and the Management Investors made the
Equity Contribution. Proceeds from the Offering, the Equity Contribution and the
initial borrowings under the Credit Agreement were used to fund the purchase
price of the Acquisition and to pay fees and expenses.
Credit Agreement. At Closing, Clark-S Acquisition entered into the Credit
Agreement with Chemical Bank, Bankers Trust Company, Fleet National Bank,
NationsBank, N.A., and BHF-Bank Aktientesellschaft providing for a term loan
(the "Term Loan") of $15.0 million and a revolving credit facility (the
"Revolving Credit Facility") of $55.0 million. At Closing, Clark-S Acquisition
borrowed approximately $50.0 million under the Credit Agreement, consisting of
$15.0 million under the Term Loan and $35.0 million under the Revolving Credit
Facility. The undrawn amount of $20.0 million under the Revolving Credit
Facility will be available for working capital and general corporate purposes.
On the day after Closing, the obligations of Clark-S Acquisition represented by
the Credit Agreement were assumed by the Company.
Equity Contribution. The Equity Contribution was comprised of: (i) a
contribution of $43.2 million from Vestar/CS Holding in exchange for (A) $36.0
million of Holdings 12.5% Participating Preferred Stock (the "Holdings
Participating Preferred Stock") and (B) $7.2 million of the common stock of
Holdings (the "Holdings Common Stock"); and (ii) a contribution of $1.8 million
from the Management Investors in exchange for $1.8 million of Holdings Common
Stock. Vestar/CS Holding and the Management Investors purchased 7,200 shares and
1,800 shares, respectively, of Holdings Common Stock. A portion of the
contribution from the Management Investors was financed by loans from Holdings.
Through its ownership of Holdings Participating Preferred Stock and Holdings
Common Stock, Vestar/CS Holding owns 82% of the common equity interests and,
through its ownership of Holdings Common Stock, the Management Investors own 18%
of the common equity interests. The Holdings Participating Preferred Stock is
perpetual and dividends accrue at a rate of 12.5% per annum of the aggregate
initial liquidation value, and accumulate and compound on a quarterly basis,
with certain exceptions, until its redemption or cancellation. See "Description
of Holdings Participating Preferred Stock."
The estimated sources and uses of funds in connection with the Transactions
are set forth below (in millions):
SOURCES OF FUNDS:
Credit Agreement:
Term Loan....................................................... $ 15.0
Revolving Credit Facility....................................... 35.0
Notes............................................................. 110.0
Holdings Participating Preferred Stock(1)......................... 36.0
Holdings Common Stock............................................. 9.0
------
Total sources............................................... $205.0
------
------
USES OF FUNDS:
Purchase price.................................................... $192.9
Loans to Management Investors..................................... 0.8
Estimated fees and expenses....................................... 11.3
------
Total uses.................................................. $205.0
------
------
--------------------------
(1) The $36.0 million value attributed to the Holdings
Participating Preferred Stock represents an aggregate initial
liquidation value of $35.0 million and an estimated value of
$1.0 million for the participating common equity interest.
This amount does not result in additional common shares but
rather represents an additional equity contribution.
19
<PAGE>
VESTAR/CS HOLDING AND VESTAR EQUITY PARTNERS, L.P.
Vestar CS/Holding, a Delaware limited liability company, was formed by
Vestar Equity Partners, L.P. to hold all the investments of Vestar Equity
Partners, L.P. and certain other investors. Vestar Equity Partners, L.P. is an
institutional equity fund managed by Vestar Capital Partners. Founded in 1988,
Vestar Capital Partners is a New York-based investment firm focusing on
investing in management buyouts and recapitalizations of middle market
companies. Since 1988, Vestar Capital Partners has organized and invested in 17
management buyouts and recapitalizations with an aggregate value exceeding $2.0
billion. Included among these are Clark-Schwebel, Inc., Celestial Seasonings,
Inc., Westinghouse Air Brake Company, Hampshire Chemical Corporation, MAG
Aerospace Industries, Inc., Consolidated Cigar Corporation, La Petite Academy,
Inc., Pyramid Communications, Inc., Prestone Products Corporation, Anvil
Knitwear, Inc., Cabot Safety Corporation and Pinnacle Automation, Inc.
USE OF PROCEEDS
This Exchange Offer is intended to satisfy certain of the Company's
obligations under the Purchase Agreement and the Registration Rights Agreement.
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes contemplated in
this Prospectus, the Company will receive Old Notes in like principal amount,
the form and terms of which are the same as the form and terms of the New Notes
(which they replace), except as otherwise described herein. The Old Notes
surrendered in exchange for New Notes will be retired and canceled and cannot be
reissued. Accordingly, issuance of the New Notes will not result in any increase
or decrease in the indebtedness of the Company.
The net proceeds from the sale of Old Notes in the Initial Offering were
approximately $106.7 million in the aggregate after deduction of discounts and
commissions. All of such net proceeds were utilized to consummate the
Acquisition.
CAPITALIZATION
(DOLLARS IN MILLIONS)
The following table sets forth the cash and consolidated capitalization of
Holdings at March 30, 1996 and pro forma to give effect to the Transactions as
if they had occurred on March 30, 1996. This table should be read in conjunction
with the "Unaudited Pro Forma Financial Statements" included elsewhere in this
Prospectus.
AT MARCH 30, 1996
---------------------
ACTUAL PRO FORMA
------ -----------
Cash.................................................. $ 0.1 $ 0.1
------ -----------
------ -----------
Long-term debt (including current portion):
Term Loan............................................ $ -- $ 15.0
Revolving Credit Facility............................ -- 35.0
Notes................................................ -- 110.0
Industrial revenue bond obligations.................. 5.9 --
Other................................................ 0.1 0.1
------ -----------
Total long-term debt............................... 6.0 160.1
------ -----------
------ -----------
Stockholders' equity (1)
Participating Preferred Stock (0 and 1,000 shares
issued and outstanding, historically and pro forma,
respectively)......................................... -- 36.0
Common Stock (100 and 9,000 shares issued and
outstanding, historically and pro forma,
respectively)......................................... -- 8.2
Investment by Springs Industries..................... 128.7 --
Cumulative translation adjustment.................... 8.2 --
------ -----------
Total stockholders' equity......................... 137.0 44.2
------ -----------
Total capitalization.................................. $143.0 $ 204.3
------ -----------
------ -----------
- ------------
(1) Pro forma total stockholders' equity represents $36.0 million attributable
to the Holdings Participating Preferred Stock and $9.0 million attributable
to the Holdings Common Stock, net of approximately $0.8 million of loans to
Management Investors.
20
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN MILLIONS)
Set forth below are selected historical and other financial data of Fort
Mill, the predecessor company, as of the dates and for the periods presented.
Fort Mill had no other operations other than the Company and its sole asset was
all of the capital stock of the Company. The selected historical financial data
were derived from the historical balance sheets for 1994 and 1995 and the
historical income statements for 1993, 1994 and 1995 which were audited by
Deloitte & Touche LLP. The selected historical consolidated balance sheet data
for 1991, 1992 and 1993 and the income statement data for 1991 and 1992 were
derived from unaudited historical financial statements of Fort Mill. The
selected historical data for the first quarter 1995 and first quarter 1996 are
unaudited, but include all normal recurring adjustments necessary for a fair
presentation of the financial data for such periods. The results for the first
quarter 1996 are not necessarily indicative of the results for the full fiscal
year. The information contained in this table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and accompanying notes thereto included
elsewhere in this Offering Memorandum.
<TABLE>
<CAPTION>
FISCAL YEAR FIRST QUARTER
---------------------------------------------- ---------------
1991 (2) 1992 (2) 1993 1994 1995 1995 1996
-------- -------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............................ $ 188.5 $ 158.8 $163.7 $189.4 $231.3 $ 49.2 $ 60.2
Cost of sales........................ 162.0 138.9 139.2 160.7 192.0 42.1 47.9
-------- -------- ------ ------ ------ ------ ------
Gross profit......................... 26.5 19.9 24.5 28.7 39.3 7.1 12.3
Selling, general and administrative
expenses............................ 16.4 16.3 15.5 14.4 17.8 4.1 3.9
Idle equipment write-off (1)......... -- -- -- 1.8 -- -- --
-------- -------- ------ ------ ------ ------ ------
Operating income..................... 10.1 3.6 9.0 12.5 21.6 3.0 8.4
Interest expense..................... 0.6 0.5 0.4 0.4 0.4 0.1 0.1
Other, net........................... -- 0.1 -- -- -- -- --
-------- -------- ------ ------ ------ ------ ------
Income before income taxes........... 9.5 3.2 8.6 12.0 21.2 2.9 8.3
Provision for income taxes........... 4.0 1.6 3.6 4.9 8.4 1.2 3.3
Income (loss) from equity investees,
net (2)............................. (2.9) (5.4) (3.4) 1.2 2.6 0.4 0.9
-------- -------- ------ ------ ------ ------ ------
Income (loss) from continuing
operations.......................... 2.6 (3.8) 1.6 8.3 15.3 2.1 5.9
Discontinued operations (3).......... (0.1) (0.2) 0.7 3.0 0.1 -- --
-------- -------- ------ ------ ------ ------ ------
Net income (loss) applicable to
common shares....................... $ 2.5 $ (4.0) $ 2.3 $ 11.3 $ 15.4 $ 2.1 $ 5.9
-------- -------- ------ ------ ------ ------ ------
-------- -------- ------ ------ ------ ------ ------
OTHER DATA:
EBITDA (4)........................... $ 18.9 $ 13.0 $ 19.0 $ 22.5 $ 32.7 $ 5.8 $ 11.5
EBITDA, as adjusted (4).............. 18.9 13.0 19.0 24.3 34.1 5.8 11.5
Depreciation and amortization........ 8.8 9.4 10.0 10.0 11.1 2.8 3.0
Capital expenditures................. 6.3 4.3 8.8 11.5 8.4 2.0 1.1
Gross profit as a percentage of net
sales............................... 14.0% 12.5% 15.0% 15.1% 17.0% 14.5% 20.5%
EBITDA as a percentage of net
sales............................... 10.0% 8.2% 11.6% 11.9% 14.1% 11.9% 19.0%
EBITDA, as adjusted as a percentage
of net sales........................ 10.0% 8.2% 11.6% 12.8% 14.7% 11.9% 19.0%
Ratio of earnings to fixed charges
(5)................................. 9.5x 4.3x 15.0x 23.2x 45.7x 26.1x 53.5x
Net cash provided by (used in) (6):
Operating activities............... $ 17.8 $ (1.4) $ 17.3 $ 16.2 $ 18.0 $ 0.2 $ 7.7
Investing activities............... (6.3) (4.3) (8.7) 7.6 (8.4) (2.0) (1.1)
Financing activities............... (11.4) 5.7 (8.7) (23.8) (9.1) 1.9 (7.1)
</TABLE>
(Footnotes on the following page)
21
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR FIRST QUARTER
---------------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
1991 (2) 1992 (2) 1993 1994 1995 1996
-------- -------- ------ ------ ------ -------------
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital............................ $ 38.9 $ 37.9 $ 38.1 $ 41.2 $ 46.3 $ 43.9
Total assets............................... 192.7 184.8 186.2 179.6 188.7 181.6
Total long-term debt (including current
portion).................................. 5.9 5.9 5.9 6.1 6.0 6.0
Total stockholders' equity................. 150.7 148.7 147.6 137.5 144.0 137.0
</TABLE>
- ------------
(1) During 1994, the Company recorded a $1.8 million charge against operating
income related to the write-off of certain idle manufacturing equipment.
(2) In 1991 and 1992, the Company's European operations were conducted through
two wholly owned subsidiaries (the "European Subsidiaries"). On March 25,
1993, the Company contributed its two European Subsidiaries and $8.8 million
in cash to CS-Interglas AG, in consideration for a DM20 million convertible
subordinated note and a minority equity interest in CS-Interglas AG. At the
end of the first quarter 1996, the DM20.0 million convertible note had a
carrying value of $13.5 million. The value assigned to the Company's
minority interest at the time of the Transactions was $14.1 million.
Beginning in 1993, the Company accounted for this investment using the
equity method of accounting. In order to reflect comparable financial data,
the results of the European Subsidiaries for 1991 and 1992 have been
restated in the "Selected Historical Financial Data" chart using the equity
method of accounting. The financial results of the Company on a consolidated
basis for 1991 and 1992 are reflected below (in millions).
FISCAL YEAR
----------------
1991 1992
------ ------
INCOME STATEMENT DATA:
Net sales................................................. $236.0 $200.5
Operating income (loss)................................... 4.2 (4.3)
Net income (loss)......................................... 2.5 (4.0)
------ ------
------ ------
(3) In 1994, the Company sold substantially all of the assets of a subsidiary
engaged in a separate line of business. In 1996, the Company sold its equity
investment in a company engaged in a separate line of business. For further
discussion, see Note 13 to the historical financial statements on page F-15
of this Prospectus.
(4) EBITDA is defined herein as operating income plus depreciation and goodwill
amortization. EBITDA, as adjusted is defined herein as operating income plus
depreciation, amortization, the non-recurring asset write-off ($1.8 million
in 1994) and the provision for a customer bad debt ($1.4 million in 1995)
related to a receivable to be retained by Springs Industries. EBITDA and
EBITDA, as adjusted, do not include any income (loss) from equity investees,
net. EBITDA is a widely accepted financial indicator of a company's ability
to service debt. However, EBITDA is not a defined term under generally
accepted accounting principles ("GAAP") and should not be construed as an
alternative to operating income, net income or cash flows from operating
activities as determined by GAAP and should not be construed as an
indication of the Company's operating performance or as a measure of
liquidity. EBITDA and EBITDA, as adjusted, do not represent available or
discretionary funds of the Company
(5) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of income before taxes, earnings (loss) from a 50% owned
equity investment, distributed income from the less than 50% owned equity
investments and fixed charges. Fixed charges include interest expense,
including the interest portion of lease expense, and amortization of bond
issue costs. The ratio of net debt to EBITDA is a key ratio used by the
financial community to evaluate an entity's ability to service its debt.
(6) This cash flow information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
22
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited consolidated pro forma financial statements (the
"Unaudited Pro Forma Financial Statements") of Clark-Schwebel Holdings, Inc.
have been derived by the application of pro forma adjustments to historical
consolidated financial statements, included elsewhere in this Prospectus. The
unaudited pro forma income statements for the year ended December 30, 1995 and
the thirteen weeks ended March 30, 1996 give effect to the Transactions as if
such transactions were consummated as of January 1, 1995. The unaudited pro
forma balance sheet gives effect to the Transactions as if such transactions had
occurred on March 30, 1996. The Unaudited Pro Forma Financial Statements should
not be considered indicative of actual results that would have been achieved had
the Transactions been consummated on the date or for the periods indicated and
do not purport to indicate balance sheet data or results of operations as of any
future date or for any future period. The Unaudited Pro Forma Financial
Statements should be read in conjunction with the historical financial
statements and the notes thereto included elsewhere in the Prospectus.
The acquisition of Fort Mill, the merger of Fort Mill into the Company, the
offering of the Old Notes, the equity contribution of Vestar/CS Holding and the
Management Investors and their lineal descendants, and the initial borrowings
under the Credit Agreement are referred to in the Unaudited Pro Forma Financial
Statements as the "Transactions."
The pro forma adjustments were applied to the historical financial
statements to reflect and account for the Transactions as a purchase.
Accordingly, the pro forma data reflect the preliminary allocation of purchase
price based on the estimated fair value of the tangible and intangible assets
and liabilities. Management believes that the final allocation will not vary
significantly from such preliminary allocation.
23
<PAGE>
UNAUDITED PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 30, 1995
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales................................................. $231.3 $-- $ 231.3
Cost of sales............................................. 192.0 0.4(1) 192.4
---------- ----------- ---------
Gross profit.............................................. 39.3 (0.4) 38.9
Selling, general and administrative expenses.............. 17.8 (0.5)(2) 17.3
---------- ----------- ---------
Operating income.......................................... 21.6 0.1 21.7
Interest expense, net..................................... 0.4 15.9(3) 16.3
---------- ----------- ---------
Income before income taxes................................ 21.2 (15.8) 5.4
Provision for income taxes................................ (8.4) 5.8(4) (2.6)
Income from equity investees, net......................... 2.6 0.3(5) 2.9
---------- ----------- ---------
Income from continuing operations......................... 15.3 (9.7) 5.6
Dividends on preferred stock.............................. -- (4.6)(6) (4.6)
---------- ----------- ---------
Income from continuing operations
applicable to common shares............................. $ 15.3 ($ 14.3) $ 1.0
---------- ----------- ---------
---------- ----------- ---------
</TABLE>
See notes to unaudited pro forma income statement.
24
<PAGE>
NOTES TO UNAUDITED PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 30, 1995
(DOLLARS IN MILLIONS)
The pro forma financial data have been derived by the application of pro
forma adjustments to the historical financial statements for the period noted.
The Transactions have been accounted for under the purchase method of
accounting.
(1) The pro forma adjustment to cost of sales relates to: (i) the
incremental costs of employee benefits for the plant workforce and incremental
property and casualty insurance (see (2) below) on a stand-alone basis of $1.2
and (ii) the net effect on depreciation expense of ($0.8) as a result of the
Transactions.
The net depreciation adjustment reflects the increase in depreciation
expense of $1.5 resulting from the step-up in basis of certain property, plant
and equipment of $15.0. In addition, the remaining lives of the property, plant
and equipment were extended to reflect management's preliminary estimate of the
remaining estimated economic lives of such assets, which resulted in a decrease
in depreciation expense of $2.3. Depreciation expense was determined by the
straight line method over the remaining useful lives of the assets: land
improvements 20 years; building and improvements 40 years; and machinery and
equipment 6 years.
(2) The historical financial statements include management fees allocated by
Springs Industries for certain support services, including executive management,
audit, tax and legal fees, benefits administration and costs, property and
casualty insurance and other expenses. This adjustment relates to the net impact
of these administrative costs to operate Holdings on a stand-alone basis,
including the management advisory agreement and the elimination of Springs
Industries' management fees as follows:
Stand-alone costs................................................... $ 1.8
Springs Industries' management fees................................. (3.0)
Amortization of goodwill over forty years, net of effect of reversal
of historical goodwill amortization............................... 0.7
-----
Total adjustment.............................................. ($0.5)
-----
-----
(3) The pro forma adjustment to interest expense under the new capital
structure is as follows:
10 1/2% Notes....................................................... $11.6
Term Loan and Revolving Credit Facility at 7 1/2%................... 3.8
Amortization of financing costs over a weighted average life of nine
years............................................................... 0.9
Less: historical interest expense................................... (0.4)
-----
Total adjustment.............................................. $15.9
-----
-----
A 1/8% increase (decrease) in the interest rate on the Term Loan and
Revolving Credit Facility would increase (decrease) interest expense with
respect to the Term Loan and Revolving Credit Facility by less than $0.1.
(4) The pro forma adjustment to taxes reflects the effect of using the
combined federal and state statutory income tax rate of 38.4% on pro forma
taxable income, which is adjusted for the increase in nondeductible goodwill
amortization.
(5) The pro forma adjustment to income from equity investments reflects the
effect of purchase accounting on the equity investments. The primary impact
relates to the extension of ASCO goodwill life to thirty years of $0.2 and tax
adjustment of $0.1.
(6) The pro forma adjustment reflects the accumulated dividend on the
liquidation value of $35.0 of Holdings Participating Preferred Stock at a per
annum rate of 12 1/2% compounded quarterly.
(7) The pro forma income statement does not reflect a nonrecurring charge of
$0.4 related to certain stock options which were vested at the time of the
transaction. Such charge will be recorded in the 1996 historical financial
statements for the period prior to the Transactions.
25
<PAGE>
UNAUDITED PRO FORMA INCOME STATEMENT
FOR THE THIRTEEN WEEKS ENDED MARCH 30, 1996
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales................................................... $ 60.2 $-- $60.2
Cost of sales............................................... 47.9 --(1) 47.9
----- ----- ---------
Gross profit................................................ 12.3 -- 12.3
Selling, general and administrative expenses................ 3.9 --(2) 3.9
----- ----- ---------
Operating income............................................ 8.4 -- 8.4
Interest expense, net....................................... 0.1 4.0(3) 4.1
----- ----- ---------
Income before income taxes.................................. 8.3 (4.0) 4.3
Provision for income taxes.................................. (3.3) 1.5(4) (1.8)
Income from equity investees, net........................... 0.9 (0.1)(5) 0.8
----- ----- ---------
Income from continuing operations........................... 5.9 (2.6) 3.3
Dividends on preferred stock................................ -- (1.1)(6) (1.1)
----- ----- ---------
Income from continuing operations
applicable to common shares............................... $ 5.9 $(3.7) $ 2.2
----- ----- ---------
----- ----- ---------
</TABLE>
See notes to unaudited pro forma income statement.
26
<PAGE>
NOTES TO UNAUDITED PRO FORMA INCOME STATEMENT
FOR THE THIRTEEN WEEKS ENDED MARCH 30, 1996
(DOLLARS IN MILLIONS)
The pro forma financial data have been derived by the application of pro
forma adjustments to the historical financial statements for the period noted.
The Transactions have been accounted for under the purchase method of
accounting.
(1) The pro forma adjustment to cost of sales relates to: (1) the
incremental costs of employee benefits for the plant workforce and incremental
property and casualty insurance (see (2) below) on a stand-alone basis of $0.3
and (ii) the net effect on depreciation expense of ($0.3) as a result of the
Transactions.
The net depreciation adjustment reflects the increase in depreciation
expense of $0.4 resulting from the step up in basis of certain property, plant
and equipment of $15.0. In addition, the remaining lives of the property, plant
and equipment were extended to reflect management's preliminary estimate of the
remaining estimated economic lives of such assets, which resulted in a decrease
in depreciation expense of $0.7. Depreciation expense was determined by the
straight line method over the remaining useful lives of the assets: land
improvements 20 years; building and improvements 40 years; and machinery and
equipment 6 years.
(2) The historical financial statements include management fees allocated by
Springs Industries for certain support services including executive management,
audit, tax and legal fees, benefits administration and costs, property and
casualty insurance and other expenses. This adjustment relates to the net impact
of these administrative costs to operate Holdings on a stand-alone basis,
including the management advisory agreement, and the elimination of Springs
Industries' management fees as follows:
Stand-alone costs................................................... $ 0.4
Springs Industries' management fees................................. (0.6)
Amortization of goodwill over forty years, net of effect of reversal
of historical goodwill amortization............................... 0.2
-----
Total adjustment.............................................. --
-----
-----
(3) The pro forma adjustment to interest expense under the new capital
structure is as follows:
10 1/2% Notes....................................................... $ 2.9
Term Loan and Revolving Credit Facility at 7 1/2%................... 0.9
Amortization of financing costs over a weighted average life of nine
years.............................................................. 0.3
Less: historical interest expense................................... (0.1)
-----
Total adjustment.............................................. $ 4.0
-----
-----
A 1/8% rate increase (decrease) in the interest rate on the Term Loan
and Revolving Credit Facility would increase (decrease) interest expense with
respect to the Term Loan and Revolving Credit Facility by less than $0.1.
(4) The pro forma adjustment to taxes reflects the effect of using the
combined federal and state statutory income tax rate of 38.4% on pro forma
taxable income, which is adjusted for the increase in nondeductible goodwill
amortization.
(5) The pro forma adjustment to income from equity investments reflects the
effect of purchase accounting on the equity investments. The primary impact
relates to the extension of ASCO goodwill life to thirty years and tax
adjustment.
(6) The pro forma adjustment reflects the accumulated dividend on the
liquidation value of $35.0 of Holdings Participating Preferred Stock at a per
annum rate of 12 1/2% compounded quarterly.
27
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 30, 1996
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.................................................... $ 0.1 $-- $ 0.1
Accounts receivable, net................................ 31.9 -- 31.9
Inventories, net........................................ 28.6 7.4(1) 36.0
Other................................................... 1.4 -- 1.4
---------- ----------- ---------
Total current assets................................ 62.0 7.4 69.4
Property, plant, and equipment, net....................... 51.0 15.0(1) 66.0
Equity investments........................................ 62.9 -- 62.9
Goodwill.................................................. -- 45.8(1) 45.8
Other assets.............................................. 5.7 2.7(1)(2) 8.4
---------- ----------- ---------
Total assets........................................ $181.6 $ 70.9 $ 252.5
---------- ----------- ---------
---------- ----------- ---------
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable........................................ $ 9.4 $-- $ 9.4
Accrued liabilities..................................... 6.6 2.3(1)(3) 8.9
Deferred income taxes................................... 2.0 1.9(1) 3.9
Current maturities of long-term debt.................... 0.1 0.8(4) 0.9
---------- ----------- ---------
Total current liabilities........................... 18.1 5.0 23.1
Long-term debt.......................................... 5.9 153.3(4) 159.2
Deferred tax liabilities.................................. 15.3 6.0(1) 21.3
Long term benefit plans and deferred compensation......... 5.3 (0.6)(3) 4.7
---------- ----------- ---------
Total liabilities................................... 44.6 163.7 208.3
---------- ----------- ---------
Stockholders' equity:
Preferred stock (0 and 1,000 shares issued and
outstanding on a historical and pro forma basis,
respectively)......................................... -- 35.0(5) 35.0
Common equity (100 and 9,000 shares issued and
outstanding on a historical and pro forma basis,
respectively)......................................... 128.7 (119.6)(5) 9.2
Cumulative translation adjustment....................... 8.2 (8.2)(5) --
---------- ----------- ---------
Total stockholders' equity.......................... 137.0 (92.8)(5) 44.2
---------- ----------- ---------
Total liabilities and equity........................ $181.6 $ 70.9 $ 252.5
---------- ----------- ---------
---------- ----------- ---------
</TABLE>
See notes to unaudited pro forma balance sheet.
28
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 30, 1996
(DOLLARS IN MILLIONS)
The pro forma financial data have been derived by the application of pro
forma adjustments to the historical financial statements for the period noted.
The Transactions have been accounted for under the purchase method of
accounting. The sources and uses of funds are as follows:
Total Sources of Funds:
Credit Agreement:
Term Loan..................................................... $ 15.0
Revolving Credit Facility..................................... 35.0
Notes........................................................... 110.0
Holdings Participating Preferred Stock.......................... 36.0
Holdings Common Stock........................................... 9.0
------
Total sources............................................... $205.0
------
------
Total Uses of Funds:
Purchase price.................................................. $192.9
Loans to Management Investors................................... 0.8
Estimated fees and expenses..................................... 11.3
------
Total uses.................................................. $205.0
------
------
(1) The pro forma adjustment to net assets represents the step-up to fair
value of the net assets acquired as follows:
Purchase price.................................................... $192.9
Nonfinancing portion of fees and expenses......................... 3.2
------
Total purchase price........................................ 196.1
Less net assets acquired, including the effect of the net assets
retained by Springs Industries.................................. (143.4)
------
Excess of purchase price over net assets acquired............... $ 52.7
------
------
Management's preliminary allocation of such excess is as follows:
Inventories..................................................... $ 7.4
Property, plant and equipment................................... 15.0
Other assets.................................................... (5.0)
Goodwill........................................................ 45.8
Accrued liabilities............................................. (2.6)
Deferred income taxes: current portion.......................... (1.9)
long term portion............................................... (6.0)
------
$ 52.7
------
------
(2) The pro forma adjustment to other assets reflects certain other assets
retained by Springs Industries and the deferred financing costs incurred in
connection with the Transactions as follows:
Certain retained assets........................................... $(0.4)
Deferred financing costs.......................................... 8.1
-----
Total adjustment.............................................. $ 7.7
-----
-----
29
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET--(CONTINUED)
AS OF MARCH 30, 1996
(DOLLARS IN MILLIONS)
(3) The pro forma adjustments to current liabilities of $0.3 and long-term
liabilities of $0.6 reflect environmental matters, accrued interest, accrued
long-term disability obligation and executive compensation retained by Springs
Industries.
(4) The pro forma adjustment to long-term debt reflects the following:
Industrial revenue bond obligations retained by Springs
Industries........................................................ $ (5.9)
Credit Agreement.................................................. 50.0
Notes............................................................. 110.0
------
Total adjustment............................................ $154.1
------
------
Additional payments due in the next twelve months for the long-term debt are
$0.8. Any payments under the Credit Agreement pursuant to the excess cash flow
calculation have been excluded from current maturities of long-term debt.
(5) The pro forma adjustment to total equity relates to the Acquisition as
follows:
Equity Contribution, net of loans to
Management Investors............................................ $ 44.2
Elimination of historical equity.................................. (137.0)
-------
Total adjustment............................................ $ (92.8)
-------
-------
Holdings Participating Preferred Stock's value of $36.0 has been assigned
based on its Liquidation Value, plus the estimated value of its participating
common equity interests. Management believes that this preliminary assignment of
value will not vary significantly from the ultimate valuation.
The outstanding amount of loans to the management investors on the closing
date was $0.8 million. The interest rate on each loan is 6.51%. Each loan is to
be repaid in five equal installments in the years 1997, 1998, 1999, 2000 and
2001 with a balloon note payable for the balance at the maturity date in the
year 2006.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with "Selected
Historical Financial Data" and the Financial Statements and the notes thereto
included elsewhere in this Prospectus.
GENERAL
The Company believes it is the largest manufacturer of fiber glass fabrics
in the United States for use in the electronics industry and a leading
manufacturer of fiber glass fabrics and high performance fabrics for a wide
variety of industrial applications. Fiber glass fabric is a critical component
of printed circuit boards which are used in virtually all electronic products,
including computers, telecommunications equipment, advanced cable television
equipment, network servers, televisions, automotive equipment and home
appliances. Fiber glass fabrics are also used to reinforce plastic composite
materials for aircraft and aerospace applications and for marine and tooling
markets. Other applications of fiber glass fabrics include reinforcing
electrical tape and providing high temperature dust filtration for the carbon
black, steel and power industries. The Company's high performance fabrics are
used primarily for civilian and military ballistics protection in
bullet-resistant vests and helmets, and by the aerospace industry in the
manufacture of composite material aircraft parts.
Sales of the Company's fiber glass fabrics are principally driven by the
electronics industry which has experienced rapid growth due to: (i) expanded
applications for computer systems; (ii) technological advancements; and (iii)
new product introductions. From 1993 to 1995, the Company's net sales of fiber
glass fabrics to the electronics industry increased at a compounded annual
growth rate of 26.0%. The Company believes that there is no cost-effective
substitute for fiber glass fabric that can satisfy the stringent quality and
performance criteria demanded of printed circuit boards. During 1995,
electronics fiber glass accounted for 58.9% of the Company's net sales.
During 1995, net sales of composite materials fiber glass fabric and high
performance fabrics represented 18.5% and 22.6%, respectively, of the Company's
net sales. The Company's high performance sales to the military end-use market
are generally dependent upon government expenditures and may fluctuate from year
to year; however, sales to the civilian ballistics protection market have
historically been stable.
From 1993 to 1995, the Company's gross profit margin increased from 15.0% to
17.0% due to management's initiatives to increase weekly production schedules
from five days to seven days and improve productivity on selected equipment,
which enabled the Company to better leverage the fixed component of its cost
structure. Furthermore, management's efforts to control the aggregate level of
fixed operating expenses in a period of increasing sales resulted in a reduction
of the Company's selling, general and administrative expenses as a percentage of
net sales from 9.5% in 1993 to 7.7% in 1995. Consequently, during the same
period, EBITDA as a percentage of net sales increased from 11.6% to 14.1%,
operating income as a percentage of net sales increased from 5.5% to 9.3% and
net income as a percentage of net sales increased from 1.4% to 6.7%.
The Company's financial results have historically been affected by general
economic conditions. However, the Company believes the impact of the most recent
economic recession, from 1990 to 1992, was particularly severe with regard to
sales of electronic components for several reasons: (i) the 1990 to 1992
recession was global in nature, affecting North America, Europe and Asia; (ii)
United States electronics manufacturers were less competitive in the global
market than today; (iii) the end-user markets for electronics products were
fewer and less diversified than today; (iv) many electronics products, such as
personal computers, fax machines and cellular telephones, were owned by a
smaller percentage of the population than today and used primarily for business
purposes; and (v) complex multilayer printed circuit boards (with increased
plies of fiber glass fabric) were less prevalent than
31
<PAGE>
today. In addition, in 1991, due to increased demand related to the Gulf War,
the Company's net sales of high performance fabrics for military applications
represented a significantly larger percentage of net sales than they currently
do. The domestic economy's stable growth from 1992 to 1996 have positively
impacted the Company's operations and financial condition. Technology
advancements as well as cost reductions for personal computers and cellular
telephones continue to drive the proliferation of electronic devices and growth
in wireless telecommunications. These factors increase demand for the Company's
fiber glass fabric products, which fueled growth in the Company's operations and
improved the Company's financial condition.
The Company purchases its principal raw material, fiber glass yarn, from two
suppliers in the United States. Fiber glass yarn is currently in short supply on
a global basis, and the Company believes that this shortage will last at least
through 1996. Based on current levels of demand, an increase in fiber glass yarn
supply would allow the Company to utilize existing excess production capacity
without incurring substantially higher fixed costs or requiring significant
capital expenditures. Due in part to the above-mentioned fiber glass yarn
shortage, the price of fiber glass yarn has increased over the past year at a
higher than historical rate. The Company generally has been able to pass through
such price increases to its customers.
RESULTS OF OPERATIONS
FIRST QUARTER 1996 COMPARED TO FIRST QUARTER 1995
Net Sales. Net sales for 1996 increased $11.0 million or 22.2%, to $60.2
million from $49.2 million in 1995. The majority of this increase was due to
increased electronics fiber glass fabric sales resulting from strong demand for
electronic products driven primarily by the telecommunications and computer
markets and improved pricing. Net sales of electronic fiber glass grew in 1996
by $7.2 million or 23.5%. Net sales of composite materials fiber glass fabric
increased by 4.2%. Net sales of high performance fabrics grew by $3.3 million or
39.6% to $11.6 million in 1996. The increases in high performance sales were
noted both in civilian and military ballistic fabrics. Because of a decline in
the number of quotes for government military contracts in the ballistic markets,
the Company does not anticipate continued strength in such markets throughout
the year.
Gross Profit. Gross profit for 1996 increased $5.2 million or 72.9% from
$7.1 million in 1995. Gross profit as a percentage of sales improved to 20.5% in
1996 from 14.5% in 1995. The significant improvement in both gross profit
dollars and gross profit percentage resulted from several factors: improved
pricing, higher sales of lightweight electronic fiber glass fabric which
generate stronger gross margins than heavier weight fiber glass fabric, higher
volume, increased operating leverage (the Company's ability to produce higher
output and, consequently, generate increased sales with the same level of fixed
costs), and operating efficiencies resulting from running extended workweeks at
its electronics fiber glass fabrics plants.
SG&A. SG&A for 1996 decreased by $0.2 million or 6.0%. As a percentage of
net sales SG&A decreased to 6.4% in 1996 from 8.4% in 1995 due to higher sales
and increased operating leverage.
Operating Income. Operating income for 1996 increased $5.4 million or 181.5%
to $8.4 million from $3.0 million in 1995. As a percentage of net sales,
operating income increased to 14.0% in 1996 from 6.1% in 1995 due to improved
product sales mix, pricing, increased operating leverage (the Company's ability
to produce higher output and, consequently, generate increased sales with the
same level of fixed costs), better efficiency and effective cost control.
Income from Equity Investees, net. Income from equity investees increased
$0.5 million to $0.9 million in 1996 from $0.4 million in 1995. The improvement
resulted primarily from higher net income
32
<PAGE>
reported by Asahi-Schwebel due to increased sales revenue. This improvement was
partially offset by slightly lower earnings reported by CS Tech-Fab.
1995 COMPARED TO 1994
Net Sales. Net sales for 1995 increased $41.9 million, or 22.1%, to $231.3
million from $189.4 million in 1994. This increase was substantially driven by
volume increases in the electronics fiber glass and high performance fabrics
categories. Net sales of electronics fiber glass fabric grew in 1995 by $27.2
million, or 25.0%, with volume increases accounting for the majority of this
increase. Net sales of composite materials fiber glass fabric in 1995 decreased
$2.6 million, or 5.8%, to $42.7 million due primarily to lower volume in the
markets for coated and laminated fabrics. Net sales of high performance fabrics
grew by $17.3 million, or 49.4%, to $52.3 million in 1995. Military contract
related volume increases accounted for $14.1 million of this increase. In late
1995, the Company elected to discontinue sales of high performance fabrics to
the automotive industry for use in airbags. This decision was due to the
existence of several well-established competitors and significant price
competition in the market. Airbag sales were $4.7 million, or 2.0%, of the
Company's net sales, in 1995. The Company expects to fully exit this business by
the first half of 1996 and anticipates no effect on profitability as a result.
Gross Profit. Gross profit for 1995 increased to $39.3 million, or 37.2%,
from $28.7 million in 1994. The increase in gross profit resulted primarily from
increased volume in electronics fiber glass and high performance fabrics. Gross
profit as a percentage of net sales improved to 17.0% in 1995 from 15.1% in 1994
due to improved capacity utilization resulting from management's initiatives to
extend workweeks at its electronics fiber glass fabrics plants.
SG&A. SG&A for 1995 increased by $3.4 million to $17.8 million from $14.4
million in 1994. Increased bad debt expense, higher intercompany charges
allocated by the Company's parent, Springs Industries, and increased
distribution costs related to higher volume accounted for $1.6 million, $0.6
million and $0.4 million, respectively, of the increase. Approximately $1.4
million of the increase in bad debt expense relates to the potential
uncollectibility of an outstanding receivable from a high performance fabric
customer servicing the military end-use market. The outstanding accounts
receivable balance and corresponding reserve will be transferred to Springs
Industries prior to the Closing and will represent no further bad debt exposure
to the Company. As a percentage of net sales, SG&A increased to 7.7% in 1995
from 7.6% in 1994.
Operating Income. Operating income for 1995 increased $9.1 million to $21.6
million from $12.5 million in 1994. As a percentage of net sales, operating
income for 1995 increased to 9.3% from 6.6% in 1994. During 1994, the Company
took a $1.8 million charge against operating earnings related to the write-off
of certain idle manufacturing equipment. Operating income for 1994 excluding the
write-off of certain idle equipment was $14.3 million or 7.6% of net sales.
Income From Equity Investees, Net. Income from equity investees, net,
increased $1.4 million to $2.6 million in 1995 from $1.2 million in 1994. This
improvement resulted primarily from higher net income reported by Asahi-Schwebel
and CS Interglas due to increased world wide demand for fiber glass fabric.
Similar to the U.S. market, this increase was driven primarily by the strong
demand for electronics. CS Tech-Fab reported a slight increase in net income.
]1994 COMPARED TO 1993
Net Sales. Net sales for 1994 increased $25.7 million, or 15.7%, to $189.4
million from $163.7 million in 1993. The majority of this increase was due to
increased electronics fiber glass fabric volume driven primarily by demand from
the telecommunication and computer markets. Net sales of electronics fiber glass
fabric grew in 1994 by $23.3 million, or 27.1%, with volume increases accounting
for
33
<PAGE>
virtually all of the increase. Net sales of composite materials fiber glass
fabric increased $0.6 million from 1993. Net sales of high performance fabrics
grew $1.8 million, or 5.4%, to $35.0 million in 1994. Slight volume increases in
sales to the military accounted for most of this increase.
Gross Profit. Gross profit for 1994 increased to $28.7 million, or 16.9%,
from $24.5 million in 1993. This improvement resulted primarily from higher net
sales in 1994. Gross profit as a percentage of sales improved slightly to 15.1%
in 1994 from 15.0% in 1993.
SG&A. SG&A for 1994 decreased by $1.1 million to $14.4 million from $15.5
million in 1993. A reduction of the intercompany charges for administrative
services charged by the Company's parent accounts for most of this decrease. As
a percentage of net sales, SG&A decreased to 7.6% in 1994 from 9.5% in 1993 due
to higher sales and increased operating leverage.
Operating Income. Operating income for 1994 increased $3.5 million to $12.5
million from $9.0 million in 1993. As a percentage of sales, operating income
increased to 6.6% in 1994 from 5.5% in 1993 due to increased operating
efficiencies. In addition, during 1994, the Company took a $1.8 million charge
against operating earnings related to the write-off of certain idle
manufacturing equipment. Operating income for 1994 excluding the write-off of
certain idle equipment was $14.3 million or 7.6% of net sales.
Income from Equity Investees, Net. Income from equity investees, net,
increased $4.6 million to a profit of $1.2 million in 1994 from a loss of $3.4
million in 1993. The improvement resulted from CS-Interglas, where the benefits
of the merger with the Company's European subsidiaries (see Note 10 to the
historical financial statements included elsewhere in this Prospectus) and
subsequent restructuring which followed the merger were fully realized in 1994.
Additionally, approximately $1.2 million of the improvement resulted from
recording interest income on the CS-Interglas convertible note receivable, which
was deemed collectible in 1994 when the results and financial condition of
CS-Interglas significantly improved.
LIQUIDITY AND CAPITAL RESOURCES
Historical.
First Quarter 1996 Compared to First Quarter 1995. Cash provided by
operations was $7.7 million in the first quarter of 1996, up from $0.2 million
for the same period of 1995. Increased sales volume combined with a lower
investment in working capital when compared to the prior year accounted for most
of the improvement. Accounts receivable provided cash in the first quarter of
1996 primarily because sales volume in the first quarter of 1996 was lower than
volume in the fourth quarter of 1995. Inventory levels remained relatively
constant as the Company maintained appropriate inventory levels to satisfy
strong levels of customer demand.
1995 Compared to 1994. Cash provided by operations was $18.0 million in
1995, up from $16.2 million in 1994. This increase reflects the better results
reported by the Company in 1995, but was somewhat offset by the Company's higher
investments in working capital at year-end 1995. Accounts receivable were
significantly higher in 1995 when compared to 1994 primarily because sales in
the fourth quarter of 1995 were $14.8 million higher than the same period in
1994. Additionally, higher inventory levels were needed at year-end 1995 in
order to service the increased customer demands for fiber glass and high
performance fabric. In 1995 and 1994 capital expenditures were $8.4 million and
$11.5 million, respectively.
1994 Compared to 1993. Cash provided by operations was $16.2 million in
1994, down from $17.3 million in 1993. This decrease was primarily due to the
increased use of working capital necessary to fund operations in 1994. In 1993,
capital expenditures were $8.8 million.
34
<PAGE>
Following the Acquisition.
Vestar/CS Holding and Management Investors contributed $45.0 million in
exchange for all of the capital stock of Holdings. Vestar/CS Holding contributed
$43.2 million in exchange for $36.0 million of Holdings Participating Preferred
Stock and $7.2 million of Holdings Common Stock. Management Investors
contributed $1.8 million in exchange for $1.8 million of Holdings Common Stock.
Approximately $0.8 million of the contribution from Management Investors was
financed by loans from Holdings.
Following Closing, the Company's primary capital requirements consist of
debt service and capital expenditures. At Closing, the Company had outstanding
indebtedness of $110.0 million for the Old Notes, $15.0 million under the Term
Loan and $35.0 million under the Revolving Credit Facility. The required
amortization payments under the Term Loan are: $0.5 million in the remainder of
1996, $1.5 million in 1997, $2.0 million in 1998, $2.5 million in 1999, $3.0
million in 2000, $3.5 million in 2001 and $2.0 million in 2002. The Revolving
Credit Facility matures in April 2002. Other than upon a change of control or as
a result of certain asset sales, the Company will not be required to make any
principal payments in respect of the Notes until maturity. The Company is
required to make semi-annual interest payments with respect to the Notes. The
Company typically makes capital expenditures related primarily to the
maintenance and improvement of manufacturing facilities and processing
equipment. The Company estimates that capital expenditures will be approximately
$7.0 million in 1996.
The Company has a substantial amount of indebtedness. To meet its liquidity
needs, the Company will rely on internally generated funds and, to the extent
necessary, on undrawn commitments available under the Revolving Credit Facility,
subject to customary drawing conditions. At Closing, the Company had $20.0
million of undrawn commitments available under the Revolving Credit Facility.
The Company's ability to borrow in excess of the amounts set forth in the Credit
Agreement is limited by covenants in the Credit Agreement and the Indenture. See
"Description of Credit Agreement" and "Description of New Notes."
The Company believes that cash generated from operations and borrowing
resources are adequate to permit the Company to meet both its debt service
requirements and capital requirements for the foreseeable future, although no
assurance can be given in this regard.
JOINT VENTURES
The Company accounts for its three joint venture interests using the equity
method of accounting. Accordingly, the Company's operating income excludes net
income (loss) from such interests. Each of the three joint venture interests are
wholly self-supporting and receive no distributions from the Company. See
"Business--Joint Ventures."
ACCOUNTING STANDARDS
The Acquisition was accounted for as a purchase business combination.
Following the Acquisition, the purchase cost (including the fees and expenses
related thereto) was allocated to the tangible and intangible assets and
liabilities of the Company based upon their respective fair values. The excess
of purchase cost over fair value of assets acquired and liabilities assumed, if
any, has been recorded as goodwill. See "Unaudited Pro Forma Financial
Statements."
The Financial Accounting Standards Board ("FASB") issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," in March 1995, which establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles and goodwill
related to those assets to be held and used and for long-lived assets and
certain identifiable intangibles to be disposed of. SFAS No. 121 will be adopted
for the Company's financial statements
35
<PAGE>
beginning in 1996. As a result of continued growth in results of operations,
management does not believe that the adoption of SFAS No. 121 will have a
material effect on its financial statements.
The FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," in
October 1995. SFAS No. 123 will be adopted for the Company's financial
statements beginning in 1996. The Company anticipates the continued application
of the intrinsic value based method in accounting for its stock option plan
prescribed by APB No. 25 and will disclose the effect, if any, of the fair value
based method in accordance with SFAS No. 123. Management does not believe that
the adoption of SFAS No. 123 will have a material effect on its financial
statements.
SEASONALITY
The Company's business is not materially subject to seasonality.
INFLATION
The Company generally attempts to pass cost increases to its customers.
Costs are affected by, among other things, inflation, and the effects of
inflation may be experienced by the Company in future periods. The Company
believes, however, that inflationary effects have not been material to the
Company during the past three years.
36
<PAGE>
THE BUSINESS
OVERVIEW
The Company believes it has been a leading manufacturer and marketer of
industrial fabrics, including electronics fiber glass fabric, composite
materials fiber glass fabric and high performance fabrics since its founding in
1960. The Company believes it is the largest producer of fiber glass fabrics for
use in the growing electronics industry, with an estimated 50% market share in
the United States. Fiber glass fabrics are a critical component used in the
production of printed circuit boards, which are integral to virtually all
advanced electronic products, including computers, telecommunications equipment,
advanced cable television equipment, network servers, televisions, automotive
equipment and home appliances. The Company's fiber glass fabrics are also used
in composite materials to strengthen, insulate and enhance the dimensional
stability of hundreds of products in a variety of markets, such as aerospace,
coating and laminating, marine and tooling, building insulation and sports
equipment. The Company is also a leading manufacturer of high performance
fabrics composed of Kevlar(R), Spectra(R) and quartz fibers. High performance
fabrics composed of Kevlar(R), the most widely used aramid fiber, are used
primarily in ballistic protection products, such as vests and helmets worn by
state, local and private police forces and the military, and in composite
materials for aerospace applications.
The Company continues to capitalize on its leading positions in the fiber
glass and high performance fabrics businesses and, as a result, has achieved
significant increases in net sales and profitability. From 1992 to 1995, the
Company's net sales, EBITDA and operating income grew at compounded annual
growth rates of 13.4%, 36.0% and 81.7%, respectively, and the Company's net
income (loss) improved from a loss of $4.0 million in 1992 to a profit of $15.4
million in 1995. During the same period, the Company's EBITDA margin increased
from 8.2% to 14.1% primarily as a result of the growth in sales and management's
initiatives to control the Company's fixed manufacturing and operating costs and
to improve manufacturing productivity. In 1995, the Company's net sales, EBITDA,
operating income and net income were $231.3 million, $32.7 million, $21.6
million and $15.4 million, respectively, representing increases of 22.1%, 45.3%,
72.8% and 36.3%, respectively, over 1994.
ELECTRONICS FIBER GLASS FABRIC
The Company believes it is a leading producer of electronics fiber glass
fabric in the United States. The Company sells fiber glass fabric to
manufacturers of high pressure laminates ("HPL") who, in turn, convert fiber
glass fabric into rigid and thin core laminates that are sold to manufacturers
of single-sided, double-sided and multilayered printed circuit boards. Printed
circuit boards require a highly engineered substrate material on which to mount
and interconnect semiconductor chips, passive electronic devices and other
electronic components. Due to its low cost, high strength, dimensional
stability, temperature resistance and electrical insulating properties, fiber
glass fabric has proven to be the most effective substrate material used in the
manufacture of printed circuit boards. In addition, the Company believes that
currently there is no cost-effective substitute material which can satisfy the
stringent quality and performance specifications required of fiber glass fabric
for HPLs in printed circuit boards. In 1995, electronics fiber glass fabric
represented 58.9% of the Company's net sales.
The Company continues to capitalize on the growth in demand for printed
circuit boards resulting from (i) the development of increasingly complex
electronics products, including personal computers, cellular phones, pagers and
portable computing devices and (ii) the increasing electronic content of
products in which such use has been historically absent or limited, such as
automobiles, home appliances and medical equipment. From 1991 to 1995, the
$322.8 billion domestic electronics market grew at a compounded annual growth
rate of 8.2% and is expected to grow at a 7.8% compounded annual growth rate
from 1995 to 1999.
37
<PAGE>
COMPOSITE MATERIALS FIBER GLASS FABRIC
Fiber glass fabrics are also used in composite materials for the aerospace,
coating and laminating, marine and tooling, building insulation and sports
equipment markets. Composite materials fiber glass fabric is used in various
applications which require combinations of fiber glass' inherent properties,
including light weight, strength, temperature and flame resistance, moisture and
chemical resistance, and durability. The Company's customers produce composite
materials by impregnating fiber glass fabric with thermosetting epoxy and
phenolic resin systems. Applications of composite material fiber glass fabric
include aircraft components, such as interior paneling systems and passenger
overhead storage compartments. Fiber glass fabrics are also used in a wide range
of other industrial applications, such as Teflon(R) coated conveyor belts,
window shades, movie screens, electrical insulation products, marine
construction materials, automotive tooling and roofing materials. In 1995,
composite materials fiber glass fabric represented 18.5% of the Company's net
sales.
The Company's fiber glass fabrics can be found on major airframe programs at
The Boeing Company, McDonnell Douglas Corporation and Airbus Industrie. The
Company expects increases in commercial aircraft build rates over the next
several years. Published industry reports estimate that 1,960 commercial
aircraft will be delivered from 1996 to 1998, representing an 18.2% increase
over the estimated 1,658 commercial aircraft delivered from 1993 to 1995. The
growing global economy and governmental regulations forcing the removal of
older, louder, less fuel efficient aircraft are expected to drive demand for new
aircraft.
HIGH PERFORMANCE FABRICS
The Company believes it is a leading producer of high performance fabrics
used primarily to make ballistic protection products, such as vests and helmets
worn by state, local and private police forces and the military and to reinforce
composite materials for aircraft applications. The Company's high performance
fabrics possess physical properties such as durability, low weight and high
tensile strength. The Company's line of high performance products are
manufactured by arranging and finishing aramid and other materials, such as
Kevlar(R), Spectra(R) and quartz. Wide ranges of fiber types and construction
patterns provide broad design potential, allowing the Company to manufacture
high performance fabrics to meet stringent customer standards. For instance, the
Company manufactures Kevlar(R) fabric, the most widely used aramid fabric,
according to ballistic design parameters determined by performance criteria of
the end product. The Company sells ballistic protection fabrics designed to
capture high mass, relatively low velocity bullets as well as ballistic
protection fabrics designed to capture low mass, high velocity fragments. During
1995, high performance fabrics represented 22.6% of the Company's net sales.
38
<PAGE>
BUSINESS STRATEGY
The Company's business strategy is to increase sales and profitability by
capitalizing on its leading position in the fiber glass fabrics industry and the
expected increased demand for printed circuit boards. The Company believes that
its long-standing customer and supplier relationships, manufacturing and
technical expertise, and commitment to providing consistent, high quality
products will enable the Company to maintain its leading position in the
industry.
. Capitalize on the Growth of the Global Electronics Industry. The
Company believes it is a leading producer of electronics fiber glass fabrics
and is well positioned to benefit from continued growth in the advanced
electronics industry. From 1992 to 1995, the Company's net sales of
electronics fiber glass fabric increased at a compounded annual growth rate
of 18.5%. The Company expects demand for its electronics fiber glass fabric
to be fueled by: (i) the development of more complex and sophisticated
electronics equipment in established markets, such as wireless
communications and personal computers; (ii) the proliferation of computer
usage through networking, server and multi-media systems; (iii) the increase
in global demand for telecommunication infrastructure and mobile
telecommunications services; and (iv) new applications for electronic
systems in automobiles, home appliances and medical equipment.
. Enhance and Expand Customer Relationships. The Company continually
seeks to strengthen and expand its relationships with HPL manufacturers. Due
to the stringent quality, performance and delivery specifications required
of advanced electronics equipment, HPL manufacturers are increasingly moving
towards single source supply and collaborative efforts among suppliers, such
as the Company, and customers, including printed circuit board
manufacturers. The Company is well positioned to benefit from this trend due
to its leading position in the industry, its investment in technical and
manufacturing expertise and its long-term relationships with its customers
and suppliers. The Company believes that each of its four largest
electronics customers purchased over 50% of its fiber glass fabrics supplies
from the Company in 1995. Furthermore, nine of the Company's top ten
customers have been customers for over five years.
. Manufacture High Quality Products. The trend in the electronics
industry toward higher performance and size reduction has increased the
complexity of electronics products, such as personal computers, cellular
telephones, advanced cable television equipment and network servers, causing
printed circuit board manufacturers to demand products with increased
performance, precision and consistency. Through its research and development
efforts and technology exchanges with its foreign joint venture affiliates,
the Company has introduced product and process improvements to create
fabrics which meet the high quality standards and exacting performance
specifications required by its customers. In 1995, the Company received ISO
9002 certification of its manufacturing operations as well as its business
functions, reflecting the Company's commitment to quality and consistency of
service. (The ISO 9002 is the highest designation issued by the
International Standards Organization for quality assurance in production,
installation and servicing.) As further evidence of this commitment, the
Company has reduced its incidence of defects and non-conformance costs in
each of the last five years.
. Continue to Control Costs and Improve Manufacturing Productivity. The
expansion of applications for computer systems, technological advancements
and new product introductions have stimulated the demand for printed circuit
boards and intensified competition within the electronics industry. In an
effort to maintain its leading position, the Company has controlled its
fixed costs and increased its manufacturing productivity by consolidating
functions, reducing manufacturing waste and improving production yields.
From 1992 to 1995, the Company's EBITDA margins increased from 8.2% to
14.1%. These improvements were due in part to the Company's ability to
control fixed overhead costs and increase operating leverage. In addition,
39
<PAGE>
from 1992 to 1995, the Company's operating income margin increased from 2.3%
to 9.3%, while net income margin increased from (2.5%) to 6.7%.
THE ELECTRONICS FIBER GLASS FABRIC INDUSTRY
Fiber glass fabric suppliers to the electronics industry, such as the
Company, convert fiber glass yarn into a variety of fabrics which are then sold
to HPL manufacturers. HPL manufacturers, in turn, convert fiber glass fabric
into rigid, layered laminates that are sold to printed circuit board
manufacturers. There are many intermediate steps between the manufacture of
unstuffed printed circuit boards (i.e. without semiconductors) and final
electronics products. The following chart illustrates the role of electronics
fiber glass fabric suppliers in the large and growing electronics industry.
United States electronics Market Supply Chain
1995 Sales
Electronics $322.8 Billion
Printed Circuit Boards $6.6 Billion
High Pressure Laminates $1.1 Billion
Fiber Glass Fabrics $250 Million
Fiber Glass Yarn $120 Million
Sources: PCI Quarterly Forecast (4th Quarter 1995) and Company estimates.
Increasing Demand for Electronic Products. Fiber glass fabrics are a
critical component in the production of printed circuit boards, which are used
in virtually all electronics products. Demand for electronics products has
experienced substantial growth in recent years and is expected to continue to
grow due to expanded applications for computer systems, technological
advancements and new product introductions. This growth is primarily
attributable to the development of more complex and sophisticated electronic
products, including cellular phones, pagers, personal computers and portable
computing devices, as well as the increasing electronic content of products in
which such use has been historically absent or limited, such as automobiles,
home appliances and medical equipment.
40
<PAGE>
The following table illustrates the historical and projected growth of the
major end-user markets for electronics fiber glass fabric.
<TABLE>
<CAPTION>
UNITED STATES ELECTRONIC EQUIPMENT PRODUCTION
(DOLLARS IN BILLIONS)
HISTORICAL PROJECTED
CAGR CAGR
1991 1992 1993 1994 1995 1991-1995 1995-1999
------ ------ ------ ------ ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Computer & office equipment............ $ 77.2 $ 82.7 $ 91.5 $106.8 $122.9 12.3% 9.1%
Industrial/Instrumentation............. 55.2 57.6 61.5 67.1 76.5 8.5 8.0
Communications......................... 33.9 36.7 40.2 47.9 56.6 13.7 10.6
Military............................... 53.7 52.2 49.0 45.5 44.5 (4.6) 0.9
Automotive/Consumer.................... 15.0 16.9 18.2 20.9 22.4 10.5 5.2
------ ------ ------ ------ ------ --- ---
Total................................ $235.1 $246.1 $260.5 $288.2 $322.8 8.2% 7.8%
------ ------ ------ ------ ------ --- ---
------ ------ ------ ------ ------ --- ---
</TABLE>
Source: PCI Quarterly Forecast (4th Quarter 1995)
High Performance Standards. As the proliferation of advanced electronics
products continues, electronics producers require printed circuit boards and
fiber glass materials which: (i) operate at higher speeds and frequencies; (ii)
have higher temperature tolerances; and (iii) have reliable, predictable
performance characteristics.
Advanced wireless communications equipment as well as next generation high
speed computer chips and microprocessors require printed circuit boards that
operate at higher speeds and frequencies with minimal signal loss or distortion.
Higher frequency operations often must be accomplished with a limited low power
source, particularly in the case of portable equipment. Printed circuit boards
that perform at faster speeds with limited power usage must employ printed
circuit materials with improved electrical conductivity properties and
insulating characteristics.
Printed circuit boards are subject to high temperature environments in
operating systems. Advanced technology assembly processes, such as surface mount
technology, direct-chip attach and gold wire bonding, subject these advanced
interconnect systems to a greater number of higher temperature heat cycles than
lower technology processes. The ability of printed circuit boards to perform in
high temperature environments is directly correlated to the electronic materials
used to construct the board.
Higher density printed circuit boards require components with uniformity,
purity, consistency, performance predictability, dimensional stability and
production tolerance characteristics. High density printed circuit boards often
involve higher layer count multilayer circuit boards in which the multiple
planes of circuitry and dielectric insulating substrates are very thin and the
circuit line and space geometries in the circuitry plane are very narrow.
Printed circuit board components must have consistently manufactured dimensional
characteristics and purity to extremely high tolerance levels in order for
printed circuit board manufacturers to achieve acceptable production yields.
Faster Production Cycles Require Closer Collaboration with
Customers. Competitive pressures have led electronic equipment manufacturers to
introduce new products and increase production volume to satisfy growing
commercial demand. These trends have increased the level of collaboration among
system providers, fabricators and printed circuit materials suppliers.
Manufacturers of electronics component materials, such as the Company, must
maintain strong customer and supplier relationships and provide greater
technical support to high pressure laminators on a timely basis.
41
<PAGE>
PRODUCT CHARACTERISTICS
The versatility of fiber glass fabric makes it a unique industrial material.
The Company's fiber glass fabrics offer an excellent combination of properties
from high strength to fire resistance. Wide ranges of yarn sizes and weave
patterns provide broad design potential, enabling the Company to work with its
customers to choose the best combination of material performance, economics and
product flexibility. Fiber glass fabrics have the properties shown below:
. Dimensional Stability. Fiber glass is a dimensionally stable engineering
material. Fiber glass does not stretch or shrink after exposure to
extremely high or low temperatures.
. Moisture Resistance. Fiber glass does not absorb moisture and does not
change physically or chemically when exposed to water.
. High Strength. The high strength-to-weight ratio of fiber glass makes it a
superior material in applications where high strength and minimum weight
are required. When manufactured into a fiber glass fabric, this strength
can be unidirectional or bi-directional, allowing flexibility in design
and cost.
. Temperature Resistance. Fiber glass is an inorganic material and does not
burn or support combustion.
. Chemical Resistance. Most chemicals have little or no effect on fiber
glass. Fiber glass fabric does not mildew, rot or deteriorate.
. Electrical Properties. Fiber glass fabric is an excellent material for
electrical insulation. The combination of properties such as low moisture
absorption, high strength, heat resistance and low dielectric constant
makes fiber glass fabric suitable as a reinforcement for printed circuit
boards and insulating varnishes.
. Thermal Conductivity. High thermal conductivity properties enable fiber
glass fabric to rapidly dissipate heat.
PRODUCT APPLICATIONS
The Company manufactures approximately 600 products which are used in a
broad range of technical, highly engineered product applications as shown below:
<TABLE>
<CAPTION>
PERCENTAGE
OF 1995 REPRESENTATIVE REPRESENTATIVE
PRODUCT MARKET NET SALES PRODUCT APPLICATION CUSTOMERS END USERS
- ------------------- ------------------- --------- --------------------- -------------------- ----------------
<S> <C> <C> <C> <C> <C>
Electronics Fiber High pressure 58.9% Personal and main- AlliedSignal, IBM, AT&T, Delco,
Glass Fabric laminates frame computers, Isola-ADI, NVF, Park Hewlett Packard,
manufactured for printers, cellular Electrochemical IBM, Motorola,
printed circuit telephones, Texas
boards automotive Instruments
electronics, advanced
cable television
equipment, personal
communication
devices,
network servers
Composite Materi- Aerospace, 18.5% Commercial aircraft 3M, Fiberite, Airbus
als Fiber Glass Coating/ components, water International Paper, Industrie,
Fabric Laminating, skis, electrical Menardi-Criswell, Boeing,
Filtration, cable insulation, M.C. Gill Corp. McDonnell
Marine/Tooling, movie screens, window Douglas, General
Building shades, pollution Electric
control, reinforced
roofing products
High Performance Aerospace, 22.6% Bullet-resistant American Body Armor, Airbus
Fabrics (Kevlar(R), Ballistics vests and helmets, Fiberite, Gibraltar, Industrie,
Spectra(R), quartz) aircraft Protective Apparel, Boeing,
interior/exterior Specialty Plastics McDonnell
components Douglas, munici-
pal governments,
United States
military
</TABLE>
42
<PAGE>
MANUFACTURING PROCESS
The Company's customers demand certain qualities and specifications in
fabric which vary across industry lines. The electronics industry typically
requires a fiber glass fabric based on a designated weight and thickness,
whereas the aircraft industry usually requires a structural fabric based on its
strength, stiffness and thickness. Industrial fabrics are commonly defined by
fiber type, yarn yield, fabric construction, and finish chemistry.
Fiber Type. The Company purchases and converts synthetic fibers into
technical fabrics for industry. Fiber types used in the conversion process
include E(electronic)-glass, S2(structural)-glass, Kevlar(R)(aramid),
Spectra(R)(polyethylene), quartz and polyester fibers. The electronics industry
consumes the largest volume of fiber(E-glass) for production of high pressure
laminates in printed circuit boards. The aircraft, composite, coated fabrics,
and ballistic protection markets consume significant quantities of fabrics
produced with E-glass, S-2 glass, and Kevlar(R) fibers. Spectra(R) and quartz
fibers are consumed by smaller and more specialized market applications for
electronics and impact resistance structures.
Yarn Yield. The Company purchases synthetic fibers in yarn form. Yarn
consists of bundles of individual fibers. A higher yield yarn fabric will
contain more individual fibers, and thus greater mass, than a lower yarn yield
for a given length. By varying yarn yields, the Company can produce fabrics
demonstrating a wide range of technical properties to meet end-use requirements.
The Company works closely with its customers to identify the most effective
fiber types to be used in the production of the Company's fabrics.
Fabric Construction. The Company arranges yarn into fabric by weaving the
yarn on customized equipment which is able to produce highly uniform fabrics.
Different types of yarn perform more efficiently on certain types of weaving
equipment. Through years of industry experience, the Company has developed a
significant base of knowledge which enables it to understand and control the
chemical and mechanical interactions of the fibers and the weaving equipment. In
manufacturing fabric products, the Company arranges yarn bundles in varied
pattern forms to meet the weight, thickness, and strength required by the
customer's specifications.
Finish Chemistry. After construction, most fabrics, require some type of
chemical finish treatment. This treatment serves to prepare or set the fabric
surface for its use. For electronic high pressure laminate and aircraft
composite fiber glass fabrics, the chemical finish treatment consists of the
application of a special silane chemistry to the fiber surfaces. This chemistry,
and similar finish chemistries for fabrics for other uses, allows a true
chemical interfacial bond to be established between the fiber and applied
thermosetting resins. Application of proprietary finish chemistry is critical to
the successful application of the Company's fabric. The Company has developed an
extensive knowledge and understanding of finish chemistries and treatments.
RESEARCH AND DEVELOPMENT
The Company has a modern, well-equipped research and development laboratory
located at its headquarters in Anderson, South Carolina. The laboratory is
equipped to (i) test the physical properties of yarns, fabrics, and high
pressure laminates and the chemical analysis of finishes, sizings and resins and
(ii) produce laminate samples similar to those made by its customers.
The Company's product development and technical staff works with the
in-house technical staffs of its customers in the early stages of product
development to produce and manufacture products with certain qualities and
performance specifications to meet specific customer needs. The Company believes
that its emphasis on product development and technology exchanges with its
German and Japanese joint ventures has enhanced its technical knowledge and
ability to serve its customers.
43
<PAGE>
CUSTOMERS
The Company's customer list includes many leading companies in their
respective industry segments. In 1995, the Company sold its products to nearly
500 customers, with the ten largest accounting for approximately 70% of net
sales. Sales to two of the Company's customers each accounted for more than 10%
of the Company's 1995 net sales. Nine of the Company's top ten customers have
been customers for over five years. As customers seek to establish closer
relationships with suppliers, the Company expects the concentration of its
customer base to increase. The Company markets its products primarily through a
direct sales force.
RAW MATERIALS
The principal materials used in the manufacture of the Company's products
are fiber glass, Kevlar(R) and Spectra(R) yarns, PVA sizing and silane binding
agents and coating materials. Over the past 35 years, the Company has developed
close relationships with the two major producers of fiber glass yarn in North
America, PPG Industries, Inc. and Owens-Corning Fiberglas Corporation. DuPont,
the sole manufacturer of Kevlar(R), has provided its Kevlar(R) yarn to the
Company for more than 20 years.
Fiber glass yarn is currently in short supply on a global basis, and the
Company believes that this shortage will continue at least through 1996. Based
on current levels of demand, an increase in fiber glass yarn supply would allow
the Company to utilize existing excess production capacity without incurring
substantially higher fixed costs or requiring significant capital expenditures.
Due in part to the above-mentioned fiber glass yarn shortage, the price of fiber
glass yarn has increased over the past year at a higher than historical rate.
The Company generally has been able to pass through its raw material price
increases to its customers.
FACILITIES
The Company's executive offices are located in Anderson, South Carolina. The
Company leases warehouses in Santa Fe Springs, California and Anderson, South
Carolina and owns a warehouse that is part of its Statesville facility. The
Company owns and operates four principal manufacturing facilities located in the
southeastern United States.
<TABLE>
<CAPTION>
FACILITY SIZE
LOCATION (SQUARE FEET) PRINCIPAL PRODUCTS MANUFACTURED
- --------------------------- -------------- ---------------------------------------------
<S> <C> <C>
Statesville, North Carolina 553,000 Electronics Fiber Glass Fabric
Washington, Georgia 160,000 Electronics Fiber Glass Fabric
Cleveland, Georgia 93,000 Electronics Fiber Glass Fabric
Anderson, South Carolina 432,000 Composite Materials Fiber Glass Fabric, High
Performance Fabrics
</TABLE>
In 1993, 1994 and 1995, the Company spent an aggregate of approximately
$28.8 million on facilities maintenance, capacity expansion, modernization and
upgrades of equipment.
COMPETITION
The Company believes it is the market share leader in its targeted fiber
glass fabrics markets in the United States, where it competes primarily on the
basis of long-term relationships with customers and suppliers, quality,
technical support, price and reliability. The Company's major competitor in the
fiber glass fabrics market is BGF Industries. Other fiber glass fabrics
manufacturers are smaller and generally compete in niche markets. The Company's
major competitor in the high performance fabrics market is Hexcel Corporation.
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JOINT VENTURES
The Company has three joint ventures: Clark-Schwebel Tech-Fab Company ("CS
Tech-Fab") in the United States, CS-Interglas AG ("CS-Interglas") in Europe and
Asahi-Schwebel Co., Ltd. ("Asahi-Schwebel") in Asia.
CS-Interglas. Through a DM20 million convertible subordinated note and a 25%
common stock ownership position, the Company effectively has a 42% fully diluted
equity interest in CS-Interglas, a publicly held German company. CS-Interglas is
the successor corporation to a 1993 combination of the Company's European
operations with Interglas. Today, CS-Interglas is Europe's leading manufacturer
of fiber glass fabrics with plants in England, Belgium, France and Germany. In
1995, CS-Interglas had net sales of $197.9 million.
Asahi-Schwebel. The Company owns a 39% interest in Asahi-Schwebel, a
Japanese manufacturer of fiber glass fabrics for the electronics industry.
Asahi-Schwebel has plant facilities in Japan and has purchased a majority
interest in an existing fiber glass fabric manufacturing and finishing plant in
Taiwan. In 1995, Asahi-Schwebel had net sales of $117.1 million.
CS Tech-Fab. In 1984, the Company and Les Fils d'Auguste Chomarat, a French
company, formed CS Tech-Fab. CS Tech-Fab is 50% owned by each of the Company and
Les Fils d'Auguste Chomarat. CS Tech-Fab manufactures nonwoven fiber glass
materials for roofing and cement construction applications and for high
performance sails. In 1995, CS Tech-Fab had net sales of $13.1 million.
The Company's joint venture interests are not subject to the covenants of
the Indenture or the Credit Agreement. See "Description of New Notes" and
"Description of Credit Agreement."
EMPLOYEES
As of February 29, 1996, the Company had 1,509 full time employees, all of
whom were located in the United States. Of these employees, 1,402 were engaged
in manufacturing and manufacturing related services, and 107 were engaged in
sales, marketing and administrative functions. The Company's employees are not
represented by labor unions. The Company considers its relationship with its
employees to be satisfactory.
LEGAL PROCEEDINGS
From time to time, the Company is involved in various legal proceedings
arising in the ordinary course of business. None of the legal matters in which
the Company is currently involved, either individually or in the aggregate, is
expected to have a material adverse effect on the Company's business or
financial condition. See "--Environmental Matters."
ENVIRONMENTAL MATTERS
The Company's facilities are subject to a broad range of federal, state and
local environmental laws and requirements, including those governing discharges
to the air and water, the handling and disposal of solid and hazardous
substances and wastes and the remediation of contamination associated with
releases of hazardous substances at Company facilities and offsite disposal
locations. Liability with respect to hazardous substance releases arises
principally under the federal Comprehensive Environmental Response, Compensation
and Liability Act and similar state laws, which impose strict, retroactive,
joint and several liability upon statutorily defined classes of "potentially
responsible parties." The Company's foreign operations are subject to varying
degrees of environmental regulation in the jurisdictions in which those
facilities are located.
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Based upon an environmental review conducted by outside consultants in
connection with the Transactions, the Company believes that it is currently in
substantial compliance with all material environmental requirements.
Nevertheless, as is the case with manufacturing operations in general, if a
release of hazardous substances occurs on or from the Company's properties or
any offsite disposal locations, or if contamination from prior activities is
discovered at such properties or locations, the Company may be held liable and
may be required to pay the cost of remedying the condition and/or satisfying
third party damage claims. The Company has from time to time been the subject of
administrative proceedings, litigation or investigations relating to
environmental matters. Management does not believe that it is currently subject
to any proceedings, litigation or investigations which will have a material
adverse effect on the Company.
PATENTS AND TRADEMARKS
The Company has several United States patents, patent applications and
trademarks. While the Company considers its patents to be valuable assets, the
Company does not believe that its competitive position is dependent on patent
protection or that its operations are dependent on any individual patent or
group of related patents. However, in some instances, patents and patent
protection may serve as a barrier to entry in certain product lines. The
Company's policy is to obtain patents on its new products and enforce its patent
rights.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY AND HOLDINGS
The following sets forth certain information with respect to members of the
Board of Directors or executive officers of the Company and Holdings following
consummation of the Transactions. Each director and executive officer of the
Company also serves in such capacity at Holdings.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- -----------------------------------------------
<S> <C> <C>
Jack P. Schwebel.................. 71 Chairman of the Board
William D. Bennison............... 51 President and Director
Richard C. Wolfe.................. 47 Executive Vice President and Director
William H. Boyles................. 52 Vice President--Fiber Glass Sales and Marketing
Donald R. Burnette................ 47 Vice President and Chief Financial Officer
Harvey A. Morse................... 42 Vice President--Human Resources
Dieter R. Wachter................. 52 Vice President--High Performance Fabrics
Norman W. Alpert.................. 37 Director
John D. Howard.................... 43 Director
Sander M. Levy.................... 34 Director
Arthur J. Nagle................... 57 Director
Daniel S. O'Connell............... 42 Director
</TABLE>
JACK P. SCHWEBEL co-founded Clark-Schwebel, Inc. in 1960 and served as
Chairman, President and Chief Executive Officer from 1964 until retiring at the
end of 1992. Mr. Schwebel received a B.S. degree from The Wharton School of the
University of Pennsylvania.
WILLIAM D. BENNISON joined the Company in 1989 as Vice President, Sales and
Marketing, and since 1992 has served as President. Mr. Bennison also serves as
President of CS Tech-Fab and director of CS-Interglas and Asahi-Schwebel. Mr.
Bennison was President of BGF Industries and its predecessor, Burlington Glass
Fabrics Co., from 1981 to 1989. Mr. Bennison received a B.S. degree from Indiana
University and an M.B.A. degree from Columbia University.
RICHARD C. WOLFE joined the Company in 1986 as Vice President,
Manufacturing, and from 1989 to 1996, he has served as Senior Vice President of
United States Manufacturing and Operational Functions. Mr. Wolfe upon
consummation of the Acquisition was named Executive Vice President. Mr. Wolfe
received a B.S. degree from the Georgia Institute of Technology and is a
graduate of the Advanced Management Program of The Harvard Business School.
WILLIAM H. BOYLES joined the Company in 1988 as National Sales Manager and
since 1989 has served as Vice President, Fiber Glass Sales and Marketing. Prior
to 1988, Mr. Boyles was Vice President and General Manager of Uniglass
Industries.
DONALD R. BURNETTE has served as Vice President and Controller of the
Company since December 1993. From 1987 to 1993, Mr. Burnette was Vice President
of Administration and Controller for the Wamsutta House Products Division of
Springs Industries. Mr. Burnette served in various financial positions with
Springs Industries from 1978 to 1987. Mr. Burnette upon consummation of the
Acquisition was named Chief Financial Officer. Mr. Burnette received a B.S.
degree from Francis Marion University.
HARVEY A. MORSE has served as Vice President, Human Resources since 1995.
From 1987 to 1995, Mr. Morse served as Director of Human Resources for the
Company, and from 1978 to 1987, he served in various human resource positions
for Springs Industries. Mr. Morse received a bachelor's degree from the
University of North Carolina at Chapel Hill.
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<PAGE>
DIETER R. WACHTER has served as Vice President, High Performance Fabrics
since 1989. Prior to 1989, Mr. Wachter was involved in the development of the
High Performance Fabrics unit and held positions in a variety of areas within
High Performance Fabrics, including sales and marketing. Mr. Wachter graduated
from business school in Zurich, Switzerland.
NORMAN W. ALPERT is a Managing Director of Vestar Capital Partners and was a
founding partner of Vestar at its inception in 1988. Mr. Alpert is Chairman of
the Board of Directors of International AirParts Corporation and a director of
Cabot Safety Corporation, Russell Stanley Corporation, Remington Products
Company, and Prestone Products Corporation, all companies in which Vestar or its
affiliates have a significant equity interest. Mr. Alpert received an A.B.
degree from Brown University.
JOHN D. HOWARD is Chairman and Chief Executive Officer of Gryphon Capital
Corporation and previously was Co-Chief Executive Officer of Vestar Capital
Partners. Mr. Howard is a director of Celestial Seasonings, Inc., Dyersburg
Fabrics, Inc. and New River Industries Incorporated. Mr. Howard received a B.A.
degree from Trinity College and an M.P.P.M. degree from Yale University School
of Management.
SANDER M. LEVY is a Managing Director of Vestar Capital Partners and was a
founding partner of Vestar at its inception in 1988. Mr. Levy is a director of
Super D Drugs, Inc., a company in which Vestar or its affiliates has a
significant equity interest. Mr. Levy received a B.S. degree from The Wharton
School of the University of Pennsylvania and an M.B.A. degree from Columbia
University.
ARTHUR J. NAGLE is a Managing Director of Vestar Capital Partners and was a
founding partner of Vestar at its inception in 1988. Mr. Nagle is a director of
Cabot Safety Corporation, Chart House Enterprises, Inc., Russell-Stanley
Corporation, Super D Drugs, Inc., La Petite Holdings Corporation, Remington
Products Company, and Prestone Products Corporation, all companies (other than
Chart House Enterprises, Inc.) in which Vestar or its affiliates have a
significant equity interest. Mr. Nagle received a B.S. degree from Pennsylvania
State University and an M.B.A. degree from Columbia University.
DANIEL S. O'CONNELL is the Chief Executive Officer and founder of Vestar
Capital Partners. Mr. O'Connell is a director of Cabot Safety Corporation,
Pinnacle Automation, Inc., Russell-Stanley Corporation, Prestone Products
Corporation, Remington Products Company, and Anvil Knitwear, Inc., all companies
in which Vestar or its affiliates have a significant equity interest. Mr.
O'Connell received an A.B. degree from Brown University and an M.P.P.M. degree
from Yale University School of Management.
The term in office of each director ends when his or her successor has been
elected at the next following annual meeting of stockholders and qualified or
upon his or her removal or resignation. The term in office of each executive
officer ends when his or her successor has been elected and qualified or upon
his or her removal or resignation.
COMPENSATION OF DIRECTORS
Mr. Schwebel receives base annual compensation of $250,000 for his services
as Chairman of the Board. Currently, the directors of the Company and Holdings,
other than the Chairman of the Board, do not receive any compensation for
services in such capacity; however, the Company or Holdings may compensate
directors for services provided in such capacity.
COMPENSATION OF EXECUTIVE OFFICERS
The compensation of executive officers of the Company is determined by the
Board of Directors of the Company. None of the historical benefit or
compensation plans of Springs Industries are described herein because each will
be terminated with respect to the named officers and replaced as a group by a
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<PAGE>
single compensation plan in connection with the Acquisition. The following table
sets forth information concerning compensation received by the five most highly
compensated officers of the Company (the "Named Executive Officers") for
services rendered in 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------- -----------------------------------------
LTIP ALL OTHER
NAME AND PRINCIPAL RESTRICTED OPTIONS/ PAYOUTS COMPENSATION
POSITION SALARY BONUS STOCK AWARDS (1) SAR (#)(2) (3) (4)
- -------------------------- -------- -------- ---------------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Bennison, William D. ..... $191,211 $133,848 $4,859 6,000 $33,317 $ 38,600
President
Wolfe, Richard C. ........ 153,846 92,308 4,859 4,000 22,846 27,640
Senior Vice President
Boyles, William H. ....... 118,500 56,000 2,916 -- -- 12,500
Vice President
Burnette, Donald R. ...... 106,385 63,832 2,916 -- -- 12,281
Vice President and
Controller
Wachter, Dieter R. ....... 120,500 57,750 2,916 -- -- 12,206
Vice President
</TABLE>
- ------------
(1) Under a Springs Industries' restricted stock award plan, each of the Named
Executive Officers was awarded restricted shares of Springs Industries Class
A Common Stock which were fully vested and unrestricted as of the date
hereof. The price of such shares at the date of issuance was $38.875 and the
number of such shares is as follows: Mr. Bennison, 125; Mr. Wolfe, 125; Mr.
Boyles, 75; Mr. Burnette, 75; and Mr. Wachter, 75. The number and value of
the aggregate restricted stock holdings of Company employees at December 31,
1995 was 475 and $19,653, respectively.
(2) On February 16, 1995, Messrs. Bennison and Wolfe received options to
purchase 6,000 and 4,000 shares of Springs Industries Class A Common Stock,
respectively, pursuant to the Springs Industries, Inc. 1991 Incentive Stock
Plan. Pursuant to the terms of the Merger Agreement, all options received by
the Named Executive Officers from Springs Industries vested upon the
Acquisition.
(3) Messrs. Bennison and Wolfe received cash payments pursuant to performance
unit awards granted under an incentive stock plan of Springs Industries of
$16,659 and $11,423, respectively. Messrs. Bennison and Wolfe received
shares of Springs Industries Class A Common Stock under the Restated and
Amended Springs Industries, Inc. Deferred Unit Stock Plan with a value of
$16,658 and $11,423, respectively. All such shares became unrestricted at
the Closing.
(4) The Named Executive Officers participated in Springs Industries' profit
sharing, 401(k) match, contingent compensation and excess benefit programs.
The aggregate payments made by Springs Industries pursuant to such programs
are listed as All Other Compensation.
BONUS
The Company intends to provide performance-based compensation awards to
executive officers and key employees for achievement during each year as part of
a bonus plan. Such compensation awards may be a function of individual
performance and consolidated corporate results. The qualitative and quantitative
criteria will be determined by the Board of Directors of Company.
MANAGEMENT EQUITY PARTICIPATION
In connection with the Acquisition, in order to provide financial incentives
for certain of its employees, Holdings entered into a management subscription
agreement with each of the Management Investors and certain other employees of
the Company (each, a "Management Subscription Agreement") and expects to adopt a
Stock Option Plan (the "Option Plan"). The Management Subscription Agreement
provides for certain rights with respect to shares of Holdings Common Stock to
be purchased by the Management Investors (the "Purchased Shares"). The Option
Plan will provide for
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<PAGE>
the grant of options ("Options") to purchase shares of Holdings Common Stock
(the "Option Shares") from time to time. The following is a description of the
expected general terms of the Option Plan.
Stock Option Plan. Holdings intends to grant over a four year period, to the
Management Investors and certain other employees of the Company, Options to
purchase Option Shares up to an aggregate of 2.0% of the common equity interests
in Holdings (based on the number of shares of Holdings Participating Preferred
Stock and Holdings Common Stock initially outstanding). The Options are expected
to be granted periodically and to vest and become exercisable upon the earlier
of (i) certain threshold dates and (ii) the satisfaction of certain financial
performance tests. The Option Shares are expected to be subject to rights and
restrictions similar to those of the Purchased Shares. The exercise price of the
Options will be established by the Board of Directors of Holdings or a
compensation committee thereof.
Purchased Shares. At Closing, the Management Investors purchased an
aggregate of $1.8 million of Purchased Shares representing 18% of the fully
diluted Holdings Common Stock in Holdings. Approximately $0.8 million of the
purchase price of the Purchased Shares was financed by Holdings. Upon the
termination of employment of the holder, the Purchased Shares will be subject to
certain call provisions exercisable by Holdings and/or Vestar/CS Holding and
certain put provisions exercisable by the holder.
401(K) PLAN
The Company will adopt a savings plan (the "Savings Plan"), which is
qualified under Sections 401(a) and 401(k) of the Internal Revenue Code. All
regular employees of the Company in the United States will be eligible to
participate in the Savings Plan. For each employee who elects to participate in
the Savings Plan and makes a contribution thereto, the Company may make a
matching contribution. The maximum contribution for any participant for any year
will be 10.0% of such participant's eligible compensation.
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SECURITY OWNERSHIP
All of the Company's issued and outstanding capital stock is owned by
Holdings. Set forth below is certain information regarding the ownership of
Holdings Participating Preferred Stock and Holdings Common Stock by each person
known by Holdings to beneficially own 5.0% or more of the outstanding shares of
either Holdings Participating Preferred Stock or Holdings Common Stock, each
director and Named Executive Officer and all directors and Named Executive
Officers as a group. Except as indicated below, the address for each of the
persons listed below is c/o Clark-Schwebel, Inc., 2200 South Murray Avenue,
Anderson, South Carolina, 29622.
<TABLE>
<CAPTION>
HOLDINGS
PARTICIPATING HOLDINGS COMMON
PREFERRED STOCK STOCK
-------------------- --------------------
NAME NUMBER PERCENTAGE NUMBER PERCENTAGE
- ------------------------------------------------------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Vestar/CS Holding Company, L.L.C.(1)(2)................ 1,000 100.0% 7,200 80.0%
c/o Vestar Equity Partners
245 Park Avenue, 41st Floor
New York, New York 10167
William D. Bennison(2)................................. 0 0 480 5.3%
Richard C. Wolfe(2).................................... 0 0 360 4.0%
William H. Boyles(2)................................... 0 0 120 1.3%
Donald R. Burnette(2).................................. 0 0 150 1.6%
Dieter R. Wachter(2)................................... 0 0 90 1.0%
Jack P. Schwebel(3).................................... 0 0 0 0
Norman W. Alpert(4).................................... 1,000 100.0% 7,200 80.0%
John D. Howard......................................... 0 0 0 0
Sander M. Levy(4)...................................... 1,000 100.0% 7,200 80.0%
Arthur J. Nagle(4)..................................... 1,000 100.0% 7,200 80.0%
Daniel S. O'Connell(4)................................. 1,000 100.0% 7,200 80.0%
Directors and Named Executive Officers as a group (10
persons)............................................... 1,000 100.0% 8,400 93.3%
</TABLE>
- ------------
(1) The manager of Vestar/CS Holding is Vestar. The general partner of Vestar is
Vestar Associates L.P., a limited partnership whose general partner is
Vestar Associates Corporation ("VAC"). In such capacity, VAC exercises sole
voting and investment power with respect to all of the shares held of record
by Vestar/CS Holding. Messrs. Alpert, Levy, Nagle and O'Connell, who are
directors of the Company and Holdings, are affiliated with Vestar in the
capacities described under "Management--Directors and Executive Officers"
and are stockholders of VAC. Individually, no stockholder, director or
officer of VAC is deemed to have or share such voting or investment power
within the meaning of Rule 13d-3 under the Exchange Act. Accordingly, no
part of the shares of Holdings Participating Preferred Stock or Holdings
Common Stock is beneficially owned by Messrs. Alpert, Levy, Nagle or
O'Connell or any other stockholder, director or officer of VAC.
(2) Messrs. Bennison, Wolfe, Boyles, Burnette and Wachter have entered into the
Securityholders Agreement (as defined herein) which contains certain
agreements with respect to the capital stock and corporate governance of
Holdings and the Voting Trust Agreement (as defined herein) pursuant to
which Messrs. Bennison, Wolfe, Boyles, Burnette and Wachter have agreed to
vote their shares as directed by Vestar/CS Holding with respect to certain
matters. See "Certain Relationships and Related Transactions."
(3) Each of Mr. Schwebel's three daughters own 1.94% of the fully diluted
Holdings Common Stock. Mr. Schwebel has no voting or investment power with
respect to the shares owned by any of his daughters, and accordingly no part
of such shares is beneficially owned by Mr. Schwebel.
(4) Messrs. Alpert, Levy, Nagle and O'Connell are affiliated with Vestar in the
capacities described under "Management--Directors and Executive Officers."
Ownership of Holdings capital stock for these individuals includes the 1,000
shares of Holdings Participating Preferred Stock and 7,200 shares of
Holdings Common Stock included in the above table beneficially owned by
Vestar/CS Holdings, of which such persons disclaim beneficial ownership.
Each such person's business address is c/o Vestar Equity Partners, L.P., 245
Park Avenue, 41st Floor, New York, New York 10167.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SECURITYHOLDERS AGREEMENT
In connection with the Acquisition, Vestar/CS Holding, the Management
Investors and any other employee executing a Management Subscription Agreement
entered into a securityholders agreement (the "Securityholders Agreement") which
contains certain agreements among such parties with respect to the capital stock
and corporate governance of Holdings. The following is a summary of the material
terms of the Securityholders Agreement.
Pursuant to the Securityholders Agreement, Vestar/CS Holding has the right
to appoint all members to the Board of Directors of Holdings. In addition,
pursuant to a voting trust agreement (the "Voting Trust Agreement"), the
Management Investors will vote all of their Holdings Common Stock as directed by
Vestar/CS Holding for the approval of any amendment to Holdings' Certificate of
Incorporation, merger, share exchange, combination or consolidation of Holdings
with any other person, the sale, lease or exchange of all or substantially all
of the property and assets of Holdings and its subsidiaries on a consolidated
basis or the reorganization, recapitalization, liquidation, dissolution or
winding-up of Holdings.
The Securityholders Agreement contains certain provisions which, with
certain exceptions, (i) restrict the ability of the Management Investors to
transfer their respective equity interest in Holdings except pursuant to, among
other bases, an exercise of tag-along rights upon the sale of Holdings Common
Stock held by Vestar/CS Holding, a sale of the Company, the exercise of certain
put and call options under the Management Subscription Agreements, or a public
sale of Holdings Common Stock; and (ii) restrict the ability of Vestar/CS
Holding to transfer certain of its securities of Holdings, except pursuant to,
among other bases, the tag-along rights of the Management Investors, a public
sale of Holdings Common Stock, or a sale of the Company.
The Securityholders Agreement contains certain provisions which, subject to
certain exceptions, grant Vestar/CS Holding, subsequent to the first public sale
of Holdings Common Stock, the right to demand registration of Holdings Common
Stock under the Securities Act (a "Demand Right"). Vestar/CS Holding will be
able to exercise such Demand Right four times. All persons party to the
Securityholders Agreement will have the right to participate, or "piggyback," in
certain registrations initiated by the Company or pursuant to a Demand Right.
TRANSITIONAL SERVICES AGREEMENT
In connection with the Acquisition, Holdings entered into a transitional
services agreement with Springs Industries pursuant to which Springs Industries
will provide various services (e.g., benefits administration) for a transitional
period following the Closing. The value of the services rendered under this
agreement is not material.
OTHER RELATIONSHIPS
Upon consummation of the Acquisition, Holdings paid to affiliates of Vestar
an investment banking fee of approximately $1.5 million plus out-of-pocket
expenses for Vestar's services in structuring the transaction and providing
financial advice in connection therewith.
Pursuant to a management advisory agreement (the "Management Agreement"),
affiliates of Vestar will receive an annual fee and reimbursement of
out-of-pocket expenses for management and financial consulting services provided
to the Company. Such services include advising the Company on the establishment
of effective banking, legal and other business relationships, and assisting
management in developing and implementing strategies for improving the
operational, marketing and financial performance of the Company. The management
advisory fees to be paid will equal the greater of
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<PAGE>
(i) 1.0% of the consolidated earnings of the Company before interest, taxes,
depreciation and amortization and (ii) $350,000.
DESCRIPTION OF HOLDINGS PARTICIPATING PREFERRED STOCK
In connection with the Acquisition, Holdings issued 1,000 shares of Holdings
Participating Preferred Stock, par value $.01 per share, with an initial
liquidation value of $35.0 million (the "Liquidation Value"), to Vestar/CS
Holding. Holdings Participating Preferred Stock entitles its holders to one vote
per share and each share of such stock votes and receives dividends and other
distributions with Holdings Common Stock on a share for share basis on the same
terms as the Holdings Common Stock. The Company has outstanding 9,000 shares of
Holdings Common Stock and 1,000 shares of Holdings Participating Preferred Stock
and, accordingly, the Holdings Participating Preferred Stock receives 10% of all
distributions to stockholders after Holdings Participating Preferred Stock
dividends and payments in respect of the Liquidation Value. The Holdings
Participating Preferred Stock is perpetual and dividends accrue at a rate of
12.5% per annum, and cumulate and compound on a quarterly basis unless Holdings
elects to pay any dividends in cash. Holdings Participating Preferred Stock
ranks prior to Holdings Common Stock upon liquidation and in respect of
dividends and redemption. Upon redemption or a conversion event, a holder of
Holdings Participating Preferred Stock is entitled to receive for each share of
such Holdings Participating Preferred Stock one share of Holdings Common Stock
plus its per share Liquidation Value and accrued and unpaid dividends. (Upon
redemption, the holders of all of the Holdings Participating Preferred Stock
will receive in the aggregate 1,000 shares of Holdings Common Stock and $35
million plus accrued and unpaid dividends.) The Company may at any time and from
time to time redeem all or any portion of Holdings Participating Preferred
Stock. Concurrent with or after the occurrence of an initial public offering of
Holdings Common Stock, Vestar/CS Holding may at any time and from time to time
cause the conversion of all or any portion of Holdings Participating Preferred
Stock. The price per share at which each share of Holdings Participating
Preferred Stock is subject to conversion is (i) the price per share of Holdings
Common Stock received by Holdings (net of underwriting discounts and
commissions) in an initial public offering, if conversion occurs concurrent with
an initial public offering and (ii) the fair market value of a share of Holdings
Common Stock, if conversion occurs after an initial public offering.
DESCRIPTION OF CREDIT AGREEMENT
General. Clark-S Acquisition entered into the Credit Agreement with Chemical
Bank, as agent, and Bankers Trust Company, Fleet National Bank and NationsBank,
N.A., as co-agents and BHF-Bank Aktiengesellschaft (collectively, the "Banks").
The Company, through its merger with CS Finance Corporation of Delaware and the
merger with Fort Mill, assumed by operation of law the obligations under the
Credit Agreement. The information relating to the Credit Agreement is qualified
in its entirety by reference to the complete text of the documents entered into
in connection therewith. The following is a description of the general terms of
the Credit Agreement.
The Credit Agreement provides for a Term Loan of $15.0 million and a
Revolving Credit Facility of $55.0 million. At Closing, the Company borrowed
approximately $50.0 million under the Credit Agreement, consisting of $15.0
million under the Term Loan and $35.0 million under the Revolving Credit
Facility. The initial borrowings under the Credit Agreement, along with the
gross proceeds of the Offering, were used to finance a portion of the
Transactions and to pay certain fees and expenses related thereto. The $20.0
million undrawn amount under the Revolving Credit Facility is available for
working capital and general corporate purposes.
Security. The obligations of the Company under the Credit Agreement are
unconditionally and irrevocably guaranteed by Holdings and certain future
subsidiaries of Holdings and the Company. In
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<PAGE>
addition, the Credit Agreement and the guarantees thereunder are secured by: (i)
a first priority security interest in all of the assets and properties
(including, without limitation, accounts receivable, inventory, real property,
machinery, equipment, contracts and contract rights, trademarks, copyrights,
patents, license agreements and general intangibles) of the Company and Holdings
and certain future domestic subsidiaries of Holdings (direct or indirect),
whether now owned or hereafter acquired subject to customary exceptions as set
forth in the Credit Agreement; (ii) a first priority perfected pledge of certain
capital stock owned by Holdings and certain future domestic subsidiaries of
Holdings (direct or indirect), whether now owned or hereafter acquired (other
than CS-Interglas, Asahi-Schwebel and CS Tech-Fab); and (iii) a first priority
perfected pledge of 65% of the capital stock of foreign subsidiaries owned by
Holdings and certain future domestic subsidiaries of Holdings (direct or
indirect), whether now owned or hereafter acquired (other than CS-Interglas,
Asahi-Schwebel and CS Tech-Fab).
Interest. At the Company's option, the interest rates per annum applicable
to the loans under the Credit Agreement will be based upon (i) the Base Rate (as
defined in the Credit Agreement) plus 0.75% or (ii) the London Interbank Offered
Rate for one, two, three, six or, if available, nine or twelve months, plus
2.0%; provided, however, beginning on the date six months after the Closing
Date, the interest rates are subject to reduction if certain requirements of
financial performance are met.
Maturity. Outstanding loans under the Revolving Credit Facility must be
repaid in April 2002. The Term Loan will amortize quarterly over six years with
amortization payments totaling $0.5 million in the remainder of 1996, $1.5
million in 1997, $2.0 million in 1998, $2.5 million in 1999, $3.0 million in
2000, $3.5 million in 2001 and $2.0 million in 2002. Loans made pursuant to the
Revolving Credit Facility may be borrowed, repaid and reborrowed from time to
time until the sixth anniversary of the Closing Date, subject to the
satisfaction of certain conditions on the date of any such borrowing. In
addition, the Credit Agreement provides for mandatory repayments in the event of
certain asset sales, debt issuances and sales of equity.
Extension of Credit. The obligation of the Banks to make subsequent loans or
extend letters of credit after the Closing will be subject to the satisfaction
of certain customary conditions including the absence of a default or event of
default under the Credit Agreement.
Covenants. The Credit Agreement requires the Company to meet certain
financial tests, including minimum fixed charge coverage ratio, minimum interest
coverage ratio, maximum senior debt ratio and maximum amounts of capital
expenditures. The Credit Agreement also contains covenants which, among other
things, limits the incurrence of additional indebtedness, the nature of the
business of the Company and its subsidiaries, investments, leases of assets,
ownership of subsidiaries, dividends, transactions with affiliates, asset sales,
acquisitions, mergers and consolidations, prepayments of other indebtedness
(including the Notes), liens and encumbrances and other matters customarily
restricted in such agreements. Certain of the Company's joint venture interests
are not subject to the covenants under the Credit Agreement.
Events of Default. The Credit Agreement contains customary events of
default, including payment defaults, breach of representations and warranties,
covenant defaults, cross-default to certain other indebtedness, certain events
of bankruptcy and insolvency, ERISA violations, judgment defaults, failure of
any guaranty or security agreement supporting the Credit Agreement to be in full
force and effect and change of control of Holdings or the Company.
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DESCRIPTION OF NEW NOTES
GENERAL
The New Notes will be issued pursuant to an Indenture (the "Indenture")
between the Company and Fleet National Bank, as trustee (the "Trustee"). The
terms of the New Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (the "Trust
Indenture Act"). The New Notes are subject to all such terms, and Holders of New
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of certain provisions of the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below. A copy
of the Indenture and Registration Rights Agreement is available as set forth
under "--Available Information." The definitions of certain terms used in the
following summary are set forth below under "--Certain Definitions."
The New Notes will be senior unsecured obligations of the Company and will
rank senior in right of payment to all subordinated Indebtedness of the Company
and pari passu in right of payment with all existing and future senior
Indebtedness, including Indebtedness pursuant to the Credit Agreement. The New
Notes will be effectively subordinated to all existing and future secured
Indebtedness of the Company, including Indebtedness pursuant to the Credit
Agreement, to the extent of the value of the assets securing such Indebtedness
and the New Notes will be structurally subordinated to Indebtedness of the
Company's Subsidiaries. At December 30, 1995, on a pro forma basis after giving
effect to the Transactions, the New Notes would have been effectively
subordinated to $50.0 million of secured Indebtedness under the Credit
Agreement.
Restrictions in the Indenture on the ability of the Company and its
Restricted Subsidiaries to incur additional Indebtedness, to make Asset Sales,
to enter into transactions with Affiliates and to enter into mergers,
consolidations or sales of all or substantially all of its assets, may make more
difficult or discourage a takeover of the Company or Holdings, whether favored
or opposed by the management of the Company and Holdings. While such
restrictions cover a wide variety of arrangements which have traditionally been
used to effect highly leveraged transactions, the Indenture may not afford
holders of New Notes protection in all circumstances from the adverse aspects of
a highly leveraged transaction, reorganization, restructuring, merger or similar
transaction.
As of the date of the Indenture, the Company has no Subsidiaries. Under
certain circumstances, the Company will be able to designate future Subsidiaries
as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to
many of the restrictive covenants set forth in the Indenture. In addition, the
Company's interests in the Joint Ventures have effectively been excluded from
the Indenture's covenants. See "Business--Joint Ventures."
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $110.0 million and
will mature on April 15, 2006. Interest on the Notes will accrue at the rate of
10 1/2% per annum and will be payable semi-annually in arrears on April 15 and
October 15, commencing on October 15, 1996, to Holders of record on the
immediately preceding April 1 and October 1. 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 original issuance. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. Principal, premium,
if any, interest and Liquidated Damages on the Notes will be payable at the
office or agency of the Company maintained for such purpose within the City and
State of New York or, at the option of the Company, payment of interest and
Liquidated Damages may be made by check mailed to the Holders of the Notes at
their respective addresses set forth in the register of Holders of Notes;
provided that all payments with respect to Global Notes and Certificated
Securities the Holders of whom have given wire transfer instructions to the
Company will be required to be made by wire transfer
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of immediately available funds to the accounts specified by the Holders thereof.
Until otherwise designated by the Company, the Company's office or agency in New
York will be the office of the Trustee maintained for such purpose. The New
Notes will be issued in denominations of $1,000 and integral multiples thereof.
HOLDINGS GUARANTEE
Holdings, as obligor, will irrevocably and unconditionally guarantee on a
senior basis the performance and punctual payment when due, whether at stated
maturity, by acceleration or otherwise, of all obligations of the Company under
the Indenture and the Notes, whether for principal of or interest on or
Liquidated Damages, if any, on the Notes, expenses, indemnification or otherwise
(all such obligations guaranteed by Holdings being herein called the "Guaranteed
Obligations") with respect to Holdings. The Guarantee is a senior unsecured
obligation of Holdings and will be effectively subordinated to all secured
indebtedness of Holdings to the extent of the value of the assets securing such
indebtedness. Holdings has no material assets other than the common stock of the
Company, and, accordingly, its ability to perform under the Guarantee will be
dependent on the financial condition and net worth of the Company. Holdings will
covenant in the Indenture to engage in no businesses other than holding the
capital stock of the Company and other Persons engaged in the same, similar,
ancillary, complementary or related business to the business in which the
Company is engaged and other activities incidental thereto, including financing
activities for the benefit of the Company and such Persons.
The Guarantee is a continuing guarantee and shall (a) remain in full force
and effect until payment in full of all the Guaranteed Obligations, (b) be
binding upon Holdings and its successors, transferees and assigns and (c) inure
to the benefit of and be enforceable by the Trustee, the Holders and their
successors, transferees and assigns.
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Notes guaranteed pursuant to
future guarantees (collectively, the "Subsidiary Guarantees") on a senior basis
by any Subsidiaries that become guarantors (collectively, the "Subsidiary
Guarantors") under the covenant entitled "Subsidiary Guarantors." The
obligations of each Subsidiary Guarantor under its Subsidiary Guarantee will be
limited so as not to constitute a fraudulent conveyance under applicable law. As
of the Closing, there will be no Subsidiary Guarantors.
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person), another Person or entity whether or not affiliated with such Subsidiary
Guarantor unless (i) subject to the provisions of the following paragraph, the
Person formed by or surviving any such consolidation or merger (if other than
such Subsidiary Guarantor) assumes all the obligations of such Subsidiary
Guarantor pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee under the Indenture; (ii) immediately after giving
effect to such transaction, no Default or Event of Default exists; (iii) such
Subsidiary Guarantor, or any Person formed by or surviving any such
consolidation or merger, (A) would have Consolidated Net Worth (immediately
after giving effect to such transaction) equal to or greater than the
Consolidated Net Worth of such Subsidiary Guarantor immediately preceding the
transaction and (B) would be permitted by virtue of the Company's pro forma
Fixed Charge Coverage Ratio to incur, immediately after giving effect to such
transaction, at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the covenant described in "--Incurrence
of Indebtedness and Issuance of Preferred Stock"; and (iv) such Subsidiary
Guarantor delivers to the Trustee an Officers' Certificate and an Opinion of
Counsel addressed to the Trustee with respect to the foregoing matters;
provided, however, that the foregoing will not apply to the merger of
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two or more Subsidiary Guarantors with and into each other or the merger of any
Subsidiary Guarantor into the Company.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all of the capital stock of any
Subsidiary Guarantor, by way of merger, consolidation or otherwise, then such
Subsidiary Guarantor (in the event of a sale or other disposition of all of the
capital stock of such Subsidiary Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all of the assets of
such Subsidiary Guarantor) will be released and relieved of any obligations
under its Subsidiary Guarantee; provided that the Net Proceeds of such sale or
other disposition are applied in accordance with the applicable provisions of
the Indenture. See "--Repurchase at the Option of Holders--Asset Sales."
OPTIONAL REDEMPTION
The Notes are not redeemable at the Company's option prior to April 15,
2001. Thereafter, the Notes are subject to redemption at the option of the
Company, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon
to the applicable redemption date, if redeemed during the twelve-month period
beginning on April 15 of the years indicated below:
YEAR PERCENTAGE
- ------------------------------------------------ -----------
2001...........................................] 105.25%
2002...........................................] 103.50%
2003...........................................] 101.75%
2004 and thereafter............................] 100.00%
Notwithstanding the foregoing, during the first 36 months after April 12,
1996, the Company may (but will not have the obligation to) redeem up to 35% of
the original aggregate principal amount of the Notes at a redemption price of
110% of the principal amount thereof, in each case plus accrued and unpaid
interest and Liquidated Damages thereon to the redemption date, with the net
proceeds of a Public Equity Offering; provided that at least 65% of the original
aggregate principal amount of the Notes remains outstanding immediately after
the occurrence of such redemption; and provided, further, that such redemption
will occur within 60 days of the date of the closing of such Public Equity
Offering.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee will deem fair and appropriate; provided
that no Notes of $1,000 or less will be redeemed in part. Notices of redemption
will be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note will 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 the redemption date, interest ceases to accrue
on Notes or portions of them called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
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REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
The Indenture provides that upon the occurrence of a Change of Control, each
Holder of Notes will have the right to require the Company to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of such Holder's
Notes pursuant to the offer described below (the "Change of Control Offer") at
an offer price in cash equal to 101% of the aggregate principal amount thereof
plus accrued and unpaid interest and Liquidated Damages thereon to the date of
purchase (the "Change of Control Payment"). Within 30 days following any Change
of Control, the Company will mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Notes pursuant to the procedures required by the Indenture and
described in such notice. 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 the Notes as a result of a Change of Control.
The Change of Control Offer will remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Change of Control Offer
Period"). No later than five Business Days after the termination of the Offer
Period (the "Change of Control Purchase Date"), the Company will purchase all
Notes tendered in response to the Change of Control Offer. Payment for any Notes
so purchased will be made in the same manner as interest payments are made.
If the Change of Control Purchase Date is on or after an interest record
date and on or before the related interest payment date, any accrued and unpaid
interest will be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest will be
payable to Holders who tender Notes pursuant to the Change of Control Offer.
On the Change of Control Purchase Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the Holders of Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or other restructuring.
The Credit Agreement provides that certain change of control events with
respect to the Company would constitute a default thereunder permitting the
lending parties thereto to accelerate the Indebtedness thereunder. However, the
Company may not have sufficient resources to repay Indebtedness under the Credit
Agreement and to repurchase tendered Notes. Furthermore, 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 occurs at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its lenders to the
purchase of 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 Notes. The
Company's failure to purchase tendered Notes would constitute an Event of
Default under the Indenture which would, in turn, constitute a default under the
Credit Agreement.
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The definition of Change of Control includes a phrase relating to the sale,
lease or transfer of "all or substantially all" of the assets of the Company and
its Restricted Subsidiaries, taken as a whole. Although there is a developing
body of case law interpreting the phrase "substantially all," there is no
precisely established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease or transfer of less than all
of the assets of the Company and its Restricted Subsidiaries taken as a whole to
another Person or group may be uncertain.
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, engage in an Asset Sale in excess of $1 million
unless (i) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the fair
market value, and in the case of a lease of assets, a lease providing for rent
and other conditions which are no less favorable to the Company (or the
Restricted Subsidiary, as the case may be) in any material respect than the then
prevailing market conditions (evidenced in each case by a resolution of the
Board of Directors of such entity set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests sold or otherwise
disposed of, and (ii) at least 75% (100% in the case of lease payments) of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash or Cash Equivalents; 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, excluding contingent liabilities
and trade payables), of the Company or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Notes, or any guarantee
thereof) 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 promptly, but in no event more than 30 days after
receipt, converted by the Company or such Subsidiary into cash (to the extent of
the cash received), will be deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds (a) to permanently reduce long-term
Indebtedness of a Restricted Subsidiary, (b) to permanently reduce Indebtedness
(and, in the case of revolving Indebtedness, to permanently reduce the
commitments) under the Credit Agreement, or (c) to an investment in another
business, the making of a capital expenditure or the acquisition of other
tangible assets, in each case, in the same or a similar line of business as the
Company was engaged in on the date of the Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the preceding sentence of
this paragraph will be deemed to constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $5 million, the Company will be
required to make an offer to all Holders of Notes (an "Asset Sale Offer") to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon to the date of
purchase, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
The Asset Sale Offer will remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Asset Sale Offer Period"). No later
than five Business Days after the termination of the Asset Sale Offer Period
(the "Asset Sale Purchase Date"), the Company will purchase the principal amount
of Notes required to be purchased pursuant to this covenant (the "Asset Sale
Offer Amount") or, if less than the Asset Sale Offer Amount has been tendered,
all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so
purchased will be made in the same manner as interest payments are made.
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If the Asset Sale Purchase Date is on or after an interest record date and
on or before the related interest payment date, any accrued and unpaid interest
will be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest will be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
On or before the Asset Sale Purchase Date, the Company will, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Asset Sale Offer Amount of Notes or portions thereof tendered pursuant to the
Asset Sale Offer, or if less than the Asset Sale Offer Amount has been tendered,
all Notes tendered, and will deliver to the Trustee an Officers' Certificate
stating that such Notes or portions thereof were accepted for payment by the
Company in accordance with the terms of this covenant. The Company, the
Depositary or the Paying Agent, as the case may be, will promptly (but in any
case not later than five days after the Asset Sale Purchase Date) mail or
deliver to each tendering Holder an amount equal to the purchase price of the
Notes tendered by such Holder and accepted by the Company for purchase, and the
Company will promptly issue a new Note, and the Trustee, upon delivery of an
Officers' Certificate from the Company will authenticate and mail or deliver
such new Note to such Holder, in a principal amount equal to any unpurchased
portion of the Note surrendered. Any Note not so accepted will be promptly
mailed or delivered by the Company to the Holder thereof. The Company will
publicly announce the results of the Asset Sale Offer on the Asset Sale Purchase
Date.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company)
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or dividends or distributions payable to the
Company or any Wholly Owned Subsidiary of the Company); (ii) purchase, redeem or
otherwise acquire or retire for value any Equity Interests of the Company or any
direct or indirect parent of the Company or other Affiliate or Restricted
Subsidiary of the Company; (iii) make any principal payment on, or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness that
is subordinated to the Notes, except in accordance with the scheduled mandatory
redemption or repayment provisions set forth in the original documentation
governing such Indebtedness (but not pursuant to any mandatory offer to
repurchase upon the occurrence of any event); or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i) through
(iv) above being collectively referred to as "Restricted Payments"), unless, at
the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default will have occurred and be continuing
or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described under "--Incurrence of Indebtedness and Issuance of Preferred
Stock"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of the Indenture, is less than the sum of, without
duplication, (i) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing
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after the date of the Indenture to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), plus (ii) to the
extent not included in the amount described in clause (i) above, 100% of the
aggregate net cash proceeds received after the date of the Indenture by the
Company from the issue or sale of, or from additional capital contributions
in respect of, Equity Interests of the Company or of debt securities of the
Company or any Subsidiary Guarantor that have been converted into, or
cancelled in exchange for, Equity Interests of the Company (other than
Equity Interests (or convertible debt securities) sold to a Restricted
Subsidiary or an Unrestricted Subsidiary of the Company and other than
Disqualified Stock or debt securities that have been converted into
Disqualified Stock), plus (iii) 100% of any cash dividends received by the
Company or a Wholly Owned Subsidiary that is a Subsidiary Guarantor after
the date of the Indenture from an Unrestricted Subsidiary of the Company,
plus (iv) 100% of the cash proceeds realized upon the sale of any
Unrestricted Subsidiary (less the amount of any reserve established for
purchase price adjustments and less the maximum amount of any
indemnification or similar contingent obligation for the benefit of the
purchaser, any of its Affiliates or any other third party in such sale, in
each case as adjusted for any permanent reduction in any such amount on or
after the date of such sale, other than by virtue of a payment made to such
person) following the date of the Indenture, plus (v) to the extent that any
Restricted Investment that was made after the date of the Indenture is sold
to an unaffiliated purchaser for cash or otherwise liquidated or repaid for
cash, the cash proceeds realized with respect to such Restricted Investment
(less the cost of disposition, if any).
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the making of any Restricted Investment in exchange for, or out
of the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of, or from substantially concurrent additional
capital contributions in respect of, Equity Interests of the Company (other than
Disqualified Stock); (iii) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company or any direct or indirect
parent of the Company in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of the Company) of, or
from substantially concurrent additional capital contributions in respect of,
other Equity Interests of the Company (other than any Disqualified Stock); (iv)
the defeasance, redemption or repurchase of subordinated Indebtedness with the
net cash proceeds from (X) an incurrence of Permitted Refinancing Indebtedness
or (Y) the substantially concurrent sale (other than to a Subsidiary of the
Company) of, or from substantially concurrent additional capital contributions
in respect of, Equity Interests of the Company (other than Disqualified Stock);
(v) the distribution of the Joint Ventures or interests in the Joint Ventures or
any proceeds from the sale of, or distributions from, any of the Joint Ventures;
(vi) the declaration or payment of any dividend to Holdings for, or the direct
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company or any Restricted Subsidiary of the Company or
any direct or indirect parent of the Company held by any member of the Company's
(or any of its Restricted Subsidiaries') management pursuant to any management
agreement, stock option agreement or plan or stockholders agreement; provided
that (x) the aggregate price paid for all such repurchased, redeemed, acquired
or retired Equity Interests will not exceed $1.0 million in any fiscal year
(plus any amount available for such payments hereunder since the date of the
Indenture which have not been used for such purpose) or $5.0 million in the
aggregate (in each case, net of the cash proceeds received by the Company from
subsequent reissuances of such Equity Interests to new members of management);
(vii) loans to members of management of the Company or any Restricted Subsidiary
the proceeds of which are used for a concurrent purchase of Equity Interests of
Holdings and a capital contribution in an amount equal to such proceeds to the
Company; (viii) payments under the Management Advisory Agreement; (ix) payments
to Holdings in respect of accounting, legal or other administrative expenses
incurred by Holdings relating to the operations of the Company in the ordinary
course of business and in respect of fees and related expenses associated with
registration statements
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filed with the Commission and subsequent ongoing public reporting requirements
arising from the issuance of the Guarantee; provided that the aggregate amount
of such payments does not exceed $500,000 in any fiscal year; (x) so long as
Holdings files consolidated income tax returns which include the Company,
payments to Holdings in an amount equal to the amount of income tax that the
Company would have paid if it had filed consolidated tax returns on a
separate-company basis; (xi) payments to Holdings in an amount sufficient to pay
director's fees and the reasonable expenses of its directors in an aggregate
amount not to exceed $100,000 per year; and (xii) make any principal payment on,
or purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes out of Excess Proceeds available
for general corporate purposes after consummation of purchases of Notes pursuant
to an Asset Sale Offer; provided however that in the case of any transaction
described in clauses (i), (ii), (iii), (iv) and (vi) no Default or Event of
Default will have occurred and be continuing immediately after such transaction.
In determining the aggregate amount of Restricted Payments made after the date
of the Indenture, 100% of the amounts expended pursuant to the foregoing clauses
(ii), (iii), (iv)(Y), (vi) and (vii) shall be included in such calculation and
none of the amounts expended pursuant to the foregoing clauses (i), (iv)(X),
(v), (viii), (ix), (x), (xi) and (xii) shall be included in such calculation.
The Board of Directors may designate any Subsidiary to be an Unrestricted
Subsidiary (subject to clause (f) of the definition of "Permitted Investments")
if such designation would not cause a Default. For purposes of making such
determination, all outstanding Investments by the Company and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments (i) in any Subsidiary that was not formerly a
Joint Venture, in an amount equal to the greatest of (x) the net book value of
such Investments at the time of such designation, (y) the fair market value of
such Investments at the time of such designation and (z) the original fair
market value of such Investments at the time they were made or (ii) in any
Subsidiary that was formerly a Joint Venture, in an amount equal to the amount
of such Investments made by the Company or a Restricted Subsidiary since the
date of the Indenture. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) will be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
Not later than the date of making any Restricted Payment, the Company will
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculation
required by this covenant were computed, which calculations may be based upon
the Company's latest available financial statements.
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Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries and Unrestricted Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guaranty or otherwise become directly
or indirectly liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness (including Acquired Indebtedness) and that the Company
will not issue any Disqualified Stock and will not permit any of its Restricted
Subsidiaries and Unrestricted Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company and its Restricted Subsidiaries may
incur Indebtedness (including Acquired Indebtedness) or issue shares of
Disqualified Stock if: (i) the Fixed Charge Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.25 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock had been issued, as the case may
be, at the beginning of such four-quarter period; and (ii) no Default or Event
of Default will have occurred and be continuing or would occur as a consequence
thereof; provided, that no Guarantee may be incurred pursuant to this paragraph
unless the guaranteed Indebtedness is incurred by the Company or a Restricted
Subsidiary pursuant to this paragraph.
The foregoing provisions will not apply to:
(i) the incurrence by the Company and its Restricted Subsidiaries of
Indebtedness and letters of credit pursuant to the Credit Agreement (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company or the relevant Restricted
Subsidiary thereunder), in a maximum principal amount outstanding at any one
time not to exceed an amount equal to the greater of (1) (a) $70 million
less (b) the aggregate amount of all Net Proceeds of Asset Sales applied
pursuant to clause (a) or (b) of the first sentence of the second paragraph
under the covenant entitled "Asset Sales" to permanently reduce Indebtedness
(and the commitments) thereunder or (2) the Borrowing Base;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes and by the Restricted Subsidiaries of Indebtedness represented by the
Subsidiary Guarantees;
(iv) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or Purchase Money Obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property used in the business of the Company
or such Restricted Subsidiary, in an aggregate principal amount not to
exceed $10 million at any time outstanding;
(v) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by the Indenture to be incurred;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Wholly Owned Subsidiaries or between or among any Wholly Owned Subsidiaries;
provided, however, that (i) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a Person other
than a Wholly Owned Subsidiary and (ii) any sale or other transfer of any
such Indebtedness to a Person that is not either the Company or a Wholly
Owned Subsidiary will be deemed, in each case, to constitute an incurrence
of such Indebtedness by the Company or such Subsidiary, as the case may be;
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(vii) the incurrence by the Company or any of its Restricted
Subsidiaries that are Subsidiary Guarantors of Hedging Obligations that are
incurred for the purpose of fixing or hedging interest rate risk with
respect to any floating rate Indebtedness that is permitted by the Indenture
to be incurred;
(viii) the incurrence by the Company, its Restricted Subsidiaries that
are Subsidiary Guarantors and its foreign subsidiaries that are Restricted
Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any
other clause of this paragraph) in an aggregate principal amount at any time
outstanding not to exceed $15 million; provided that such Indebtedness
incurred by foreign subsidiaries that are Restricted Subsidiaries shall not
exceed an aggregate principal amount at any time outstanding of $5 million;
(ix) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event will be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company; and
(x) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries that is a Subsidiary Guarantor arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from guarantees or letters of credit, surety bonds or
performance bonds securing the performance of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in connection with the
disposition of any business, assets or Restricted Subsidiary of the Company
(other than guarantees or similar credit support by the Company or any of
its Restricted Subsidiaries 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), in a principal amount not to exceed
25% of the gross proceeds (with proceeds other than cash or Cash Equivalents
being valued at the fair market value thereof as determined by the Board of
Directors of the Company in good faith) actually received by the Company or
any of its Restricted Subsidiaries in connection with such disposition.
Notwithstanding any other provision of this covenant, a Guarantee of
Indebtedness permitted by the terms of the Indenture at the time such
Indebtedness was incurred will not constitute a separate incurrence of
Indebtedness.
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company or any Subsidiary Guarantor may enter into a sale and
leaseback transaction if (i) the Company or such Subsidiary Guarantor could have
(a) incurred Indebtedness in an amount equal to the Attributable Debt relating
to such sale and leaseback transaction pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant "--Incurrence of
Additional Indebtedness and Issuance of Preferred Stock" and (b) incurred a Lien
to secure such Indebtedness pursuant to the covenant "Liens," (ii) the net cash
proceeds of such sale and leaseback transaction are at least equal to the fair
market value (as determined in good faith by the Board of Directors and set
forth in an Officers' Certificate delivered to the Trustee) of the property that
is the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and the proceeds
of such transaction are applied in compliance with, the covenant "Asset Sales."
Liens
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on any asset now
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owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Indenture provides that the Company will not, and will not permit any of
its Restricted 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 Restricted Subsidiary to (i) (a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, (b) the Credit Agreement
as in effect as of the date of the Indenture, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are no more restrictive with respect to such dividend and other
payment restrictions than those contained in the Credit Agreement as in effect
on the date of the Indenture, (c) the Indenture and the Notes, (d) applicable
law, (e) any instrument governing Acquired Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Acquired
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that the Consolidated
EBITDA of such Person is not taken into account in determining whether such
acquisition was permitted by the terms of the Indenture, (f) by reason of
customary non-assignment provisions in leases and licenses entered into in the
ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (h) agreements relating to the financing of the
acquisition of real or tangible personal property acquired after the date of the
Indenture, provided, that such encumbrance or restriction relates only to the
property which is acquired and in the case of any encumbrance or restriction
that constitutes a Lien, such Lien constitutes a Purchase Money Lien or (i) any
restriction or encumbrance contained in contracts for sale of assets permitted
by the Indenture in respect of the assets being sold pursuant to such contract.
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of
any of its properties or assets to, or purchase any property or assets from, or
enter into or make any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that
are no less favorable to the Company or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by the Company
or such Restricted Subsidiary with an unrelated Person and (ii) the Company
delivers to the Trustee (a) with respect to any Affiliate Transaction entered
into after the date of the Indenture involving aggregate consideration in excess
of $1.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors and (b) with
respect to any Affiliate Transaction involving aggregate consideration in excess
of $5.0 million, an opinion as to the fairness to the Company or such Restricted
Subsidiary of such Affiliate Transaction from a financial point of view issued
by an investment banking firm of national standing; provided that the following
will not be deemed to be
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Affiliate Transactions: (u) reasonable compensation paid to, and indemnity
provided on behalf of, officers and directors of Holdings, the Company or any
Restricted Subsidiary as determined in good faith by the Company's Board of
Directors or senior management; (v) the provision of administrative or
management services by the Company or any of its officers to Holdings or any of
its Restricted Subsidiaries in the ordinary course of business consistent with
past practice, (w) any employment agreement entered into by the Company or any
of its Restricted Subsidiaries in the ordinary course of business and consistent
with the past practice of the Company or such Restricted Subsidiary, (x)
transactions between or among the Company and/or its Wholly Owned Subsidiaries,
(y)(i) fees paid and reimbursement of out-of-pocket expenses pursuant to the
Management Advisory Agreement and (ii) the payment of an acquisition advisory
fee to Vestar or its Affiliates in respect of the Acquisition in an amount not
to exceed $1.5 million and (z) transactions permitted by the covenant described
in "-- Restricted Payments."
Line of Business
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any line of business which is not the same, similar, ancillary,
complementary or related to the businesses in which the Company is engaged on
the date of the Indenture.
Additional Subsidiary Guarantees
The Indenture provides that all Restricted Subsidiaries of the Company
substantially all of whose assets are located in the United States or that
conduct substantially all of their business in the United States will be
Subsidiary Guarantors. In addition, the Indenture will provide that the Company
will not, and will not permit any of the Subsidiary Guarantors to, make any
Investment in any Subsidiary that is not a Subsidiary Guarantor unless either
(i) such Investment is permitted by the covenant described under "--Restricted
Payments," or (ii) such Restricted Subsidiary executes a Subsidiary Guarantee
and delivers an opinion of counsel in accordance with the provisions of the
Indenture.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, Holdings or
the Company will furnish to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, at any time after
the Company files a registration statement with respect to the Exchange Offer,
the Company will file a copy of all such information and reports with the
Commission for public availability (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. In addition, the Company has agreed and the
Subsidiary Guarantors, if any, will agree that, for so long as any Notes remain
outstanding, they will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company shall not, in a single transaction
or series of related transactions, consolidate or merge with or into (whether or
not the Company is the surviving corporation), or directly and/or indirectly
through its Restricted Subsidiaries sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets
determined on a
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consolidated basis for the Company and its Restricted Subsidiaries taken as a
whole in one or more related transactions, to another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition will have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
will have been made assumes all the obligations of the Company, under the Notes
and the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no Default
or Event of Default exists; (iv) the Company or the entity or Person formed by
or surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
will have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant described
above under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock"; and (v) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel addressed to the Trustee with respect to the foregoing
matters; provided, however, that the requirement set forth in clause (iv) above
shall not apply to a merger between the Company and any Wholly Owned Subsidiary
and between Wholly Owned Subsidiaries.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes; (ii) default in payment when due
of the principal of or premium, if any, on the Notes; (iii) failure by the
Company to comply with the provisions described under the captions "--Change of
Control," "--Asset Sales," "--Restricted Payments," "--Incurrence of
Indebtedness and Issuance of Preferred Stock," "--Sale and Leaseback
Transactions" or "--Merger, Consolidation or Sale of Assets"; (iv) failure by
the Company for 60 days after notice to comply with any of its other agreements
in the Indenture or the Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries or Holdings (or the payment of which is guaranteed by
the Company or any of its Restricted Subsidiaries or Holdings) whether such
Indebtedness or Guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5 million or more; (vi) failure by the Company or
any of its Restricted Subsidiaries or Holdings to pay final judgments
aggregating in excess of $5 million, which judgments are not paid, discharged or
stayed for a period of 60 days; (vii) except as permitted by the Indenture, any
Subsidiary Guarantee will be held in any judicial proceeding to be unenforceable
or invalid or will cease for any reason to be in full force and effect or any
Subsidiary Guarantor, or any Person acting on behalf of any Subsidiary
Guarantor, will deny or disaffirm its obligations under its Subsidiary
Guarantee; (viii) the Guarantee will be held in any judicial proceeding to be
unenforceable or invalid or will cease for any reason to be in full force and
effect or Holdings, or any Person acting on behalf of Holdings, will deny or
disaffirm its obligations under the Guarantee and (ix) certain events of
bankruptcy or insolvency with respect to Holdings, the
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Company or any of its Significant Subsidiaries or group of Restricted
Subsidiaries that, together, would constitute a Significant Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to Holdings, the Company, any Significant Subsidiary or
any group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, premium and Liquidated Damages, if any, on the
Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, will have any liability for any obligations of the Company under the
Notes, 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 all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below, (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 payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
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 will not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including nonpayment, bankruptcy, receivership,
rehabilitation 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.
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dollars, non-callable Government Securities, 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 and Liquidated Damages on the outstanding Notes on the stated maturity
or on the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date; (ii) in the case of Legal Defeasance, the Company will 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 will confirm that, the Holders of the outstanding 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 will have delivered to the Trustee an opinion of counsel
in the United States reasonably acceptable to the Trustee confirming that the
Holders of the outstanding 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 will have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit; (v) such
Legal Defeasance or Covenant Defeasance will not result in a breach or violation
of, or constitute a default under any material agreement or instrument (other
than the Indenture) 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
must have delivered to the Trustee an opinion of counsel to the effect that on
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; (vii) the Company must deliver to the
Trustee an Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Notes over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for
Notes), and any existing default or compliance with any provision of the
Indenture or the Notes
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may be waived with the consent of the Holders of a majority in principal amount
of the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders") or (viii) make any change in
the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default will
occur (which will not be cured), the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent man in the conduct of his
own affairs. Subject to such provisions, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request of
any Holder of Notes, unless such Holder will have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to Clark-Schwebel, Inc.
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BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes to be resold as set
forth herein will initially be issued in the form of one Global Note (the
"Global Note"). The Global Note will be deposited on the date of the closing of
the sale of the Notes offered hereby (the "Closing Date") with, or on behalf of,
The Depository Trust Company (the "Depositary") and registered in the name of
Cede & Co., as nominee of the Depositary (such nominee being referred to herein
as the "Global Note Holder").
Notes that were issued as described below under "--Certificated Securities"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Such Certificated Securities may, unless the Global
Note has previously been exchanged for Certificated Securities, be exchanged for
an interest in the Global Note representing the principal amount of Senior Notes
being transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants designated by the Initial Purchasers with portions of
the principal amount of the Global Note and (ii) ownership of the Notes
evidenced by the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer Notes evidenced by the Global
Note will be limited to such extent. For certain other restrictions on the
transferability of the Notes, see "Notice to Investors."
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose names Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Notes. The Company believes, however, that it is currently the policy of the
Depositary to immediately credit the accounts of the relevant Participants with
such payments, in amounts proportionate to their respective
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holdings of beneficial interests in the relevant security as shown on the
records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
Certificated Securities
Institutional "accredited investors" (within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) will receive Notes only in
certificated form. In addition, if (i) the Company notifies the Trustee in
writing that the Depositary is no longer willing or able to act as a depositary
and the Company is unable to locate a qualified successor within 90 days or (ii)
the Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of Notes in certificated form, then, upon surrender by the
Global Note Holder of its Global Note, Notes in certificated form will be issued
to each person that the Global Note Holder and the Depositary identify as being
the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Depositary in identifying the beneficial owners of Notes and the Company and the
Trustee may conclusively rely on, and will be protected in relying on,
instructions from the Depositary for all purposes.
Same-Day Settlement and Payment
The Indenture requires that payments in respect of the Notes represented by
the Global Certificate (including principal, premium, if any, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
funds to the accounts specified by the Global Certificate Holder. With respect
to Certificated Securities, the Company will make all payments of principal,
premium, if any, interest and Liquidated Damages, if any, by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each such Holder's
registered address. Secondary trading in long-term notes and debentures of
corporate issuers is generally settled in clearing-house or next-day funds. In
contrast, the Notes represented by the Global Certificate are expected to be
eligible to trade in the Depositary's Same-Day Funds Settlement System, and any
permitted secondary market trading activity in such Notes will, therefore, be
required by the Depositary to be settled in immediately available funds. The
Company expects that secondary trading in the Certificated Exchange Notes
Securities will also be settled in immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Indebtedness" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary or is designated a Restricted
Subsidiary of such specified Person, including, without limitation, Indebtedness
incurred in connection with, or in contemplation of, such other Person merging
with or into or becoming a Subsidiary or Restricted Subsidiary of such specified
Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired
by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly
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or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting securities,
by agreement or otherwise; provided that beneficial ownership of 10% or more of
the voting securities of a Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback,
including any disposition by means of a merger, consolidation or similar
transaction and including the issuance, sale or other transfer of any of the
capital stock of any Restricted Subsidiary of such person) other than to the
Company or to any of its Wholly Owned Subsidiaries that is a Subsidiary
Guarantor (including the receipt of proceeds of insurance paid on account of the
loss of or damage to any asset and awards of compensation for any asset taken by
condemnation, eminent domain or similar proceeding, and including the receipt of
proceeds of business interruption insurance); and (ii) the issuance of Equity
Interests in any Restricted Subsidiaries or the sale of any Equity Interests in
any Restricted Subsidiaries, in each case, in one or a series of related
transactions, provided, that notwithstanding the foregoing, the term "Asset
Sale" shall not include: (a) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of the Company, as permitted
pursuant to the covenant described under "Merger, Consolidation or Sale of
Assets," (b) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business consistent with past practice,
(c) a transfer of assets by the Company to a Wholly Owned Subsidiary that is a
Subsidiary Guarantor or by a Wholly Owned Subsidiary to the Company or to
another Wholly Owned Subsidiary that is a Subsidiary Guarantor or by a Wholly
Owned Subsidiary that is not a Subsidiary Guarantor to another Wholly Owned
Subsidiary that is not a Subsidiary Guarantor, (d) an issuance of Equity
Interests by a Wholly Owned Subsidiary to the Company or to another Wholly Owned
Subsidiary that is a Subsidiary Guarantor, or by a Wholly Owned Subsidiary that
is not a Subsidiary Guarantor to another Wholly Owned Subsidiary that is not a
Subsidiary Guarantor, (e) the surrender or waiver of contract rights or the
settlement, release or surrender of contract, tort or other claims of any kind,
(f) the grant in the ordinary course of business of any non-exclusive license of
patents, trademarks, registrations therefor and other similar intellectual
property, (g) the sale, lease, conveyance or other disposition of the Joint
Ventures, the assets of the Joint Ventures or any interest therein, (h)
Permitted Investments or (i) any cash dividend, distribution, Investment or
payment made pursuant to the first or second paragraph of the "Restricted
Payments" covenant.
"Attributable Debt" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of interest
implicit in such transaction, determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such sale and leaseback transaction (including any period
for which such lease has been extended or may, at the option of the lessor, be
extended).
"Board of Directors" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
"Borrowing Base" means, as of any date, an amount equal to the sum of (i)
85% of the face amount of all Eligible Accounts Receivable owned by the Company
and its Restricted Subsidiaries as of such date, and (ii) 65% of the book value
(calculated on first in, first out basis) of all Eligible Inventory owned by the
Company and its Restricted Subsidiaries as of such date, all calculated on a
consolidated basis and in accordance with GAAP, calculated as of the end of the
most recently completed fiscal quarter.
"Business Day" means any day other than a Legal Holiday.
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"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (a) 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 is pledged in support thereof) having maturities not more than twelve
months from the date of acquisition, (b) U.S. dollar denominated (or foreign
currency fully hedged) time deposits, certificates of deposit, Eurodollar time
deposits or Eurodollar certificates of deposit of (i) any domestic commercial
bank of recognized standing having capital and surplus in excess of $100.0
million or (ii) any bank 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 (any such bank being an "Approved Lender"), in each case with
maturities of not more than twelve months from the date of acquisition, (c)
commercial paper and variable or fixed rate notes issued by any Approved Lender
(or by the parent company thereof) or any variable rate notes issued by, or
guaranteed by, any domestic corporation rated A-2 (or the equivalent thereof) or
better by S&P or P-2 (or the equivalent thereof) or better by Moody's and
maturing within twelve months of the date of acquisition, (d) repurchase
agreements with a bank or trust company or recognized securities dealer having
capital and surplus in excess of $100.0 million for direct obligations issued by
or fully guaranteed by the United States of America in which the Company shall
have a perfected first priority security interest (subject to no other Liens)
and having, on the date of purchase thereof, a fair market value of at least
100% of the amount of repurchase obligations, and (e) interests in money market
mutual funds which invest solely in assets or securities of the type described
in subparagraphs (a), (b), (c) or (d) hereof.
"Change of Control" means such time as (i) prior to the initial public
offering by the Company or any direct or indirect parent of the Company of its
common stock (other than a public offering pursuant to a registration statement
on Form S-8), Vestar and its Affiliates (collectively, the "Initial Investors")
cease to have, directly or indirectly, in the aggregate at least 51% of the
voting power of the voting stock of the Company or Holdings ceases to own,
directly or indirectly, 100% of the voting power of the voting stock of the
Company (other than by reason of a merger of Holdings and the Company) or (ii)
after the initial public offering by the Company or any direct or indirect
parent of the Company of its common stock (other than a public offering pursuant
to a registration statement on Form S-8), (A) any Schedule 13D, Form 13F or
Schedule 13G under the Exchange Act, or any amendment to such Schedule or Form,
is received by the Company or Holdings which indicates that, or the Company or
Holdings otherwise becomes aware that, a "person" or "group" (within the meaning
of Sections 13(d) and 14(d) (2) of the Exchange Act) has become, directly or
indirectly, the "beneficial owner," by way of merger, consolidation or
otherwise, of 35% or more of the voting power of the voting stock of the Company
or Holdings on a fully-diluted basis after giving effect to the conversion and
exercise of all outstanding warrants, options and other securities of the
Company or Holdings, as the case may be (whether or not such securities are then
currently convertible or exercisable) and (B) such person or group has become,
directly or indirectly, the beneficial owner of a greater percentage of the
voting capital stock of the Company, calculated on such fully-diluted basis,
than beneficially owned by the Initial Investors, or (iii) the sale, lease or
transfer of all or substantially all of the assets of the Company to any person
or group (other than a Subsidiary Guarantor or the Initial Investors), or (iv)
during any period of two consecutive calendar years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by the Board of Directors of
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the Company or whose nomination for election by the shareholders of the Company,
as the case may be, was approved by a vote of a majority of the directors then
still in office who either were directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the directors of the Company, as the case
may be, then in office. Notwithstanding anything to the contrary in the
foregoing, the mergers (as described in "The Transactions" herein) shall not be
deemed to constitute a "Change of Control".
"Consolidated EBITDA" means, with respect to the Company and its Restricted
Subsidiaries for any period, the sum of, without duplication, (i) the
Consolidated Net Income for such period, plus (ii) to the extent deducted from
Consolidated Net Income for such period, (x) the Fixed Charges for such period,
plus (y) non-cash dividends on the Company's preferred stock, plus (iii)
provision for taxes based on income or profits for such period (to the extent
such income or profits were included in computing Consolidated Net Income for
such period), plus (iv) consolidated depreciation, amortization and other
non-cash charges of the Company and its Restricted Subsidiaries required to be
reflected as expenses on the books and records of the Company, minus (v) cash
payments with respect to any non-recurring, non-cash charges previously added
back pursuant to clause (iv), and (vi) excluding the impact of foreign currency
translations. Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, and the depreciation and amortization and other
non-cash charges of, a Restricted Subsidiary of a Person shall be added to
Consolidated Net Income to compute Consolidated EBITDA only to the extent that
the Net Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to the Company by
such Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to that
Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Subsidiary
thereof that is a Subsidiary Guarantor, (ii) the Net Income of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (which has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded, (v) the Net Income of, or any dividends
or other distributions from, any Unrestricted Subsidiary, to the extent
otherwise included, shall be excluded, whether or not distributed to the Company
or one of its Restricted Subsidiaries, (vi) income or loss attributable to
discontinued operations shall be excluded; (vii) any increase in cost of sales
or other write-offs resulting from the purchase accounting treatment of the
Acquisition or other acquisitions shall be excluded; and (viii) all other
extraordinary, unusual or nonrecurring gains or losses shall be excluded.
"Consolidated Net Worth" of a Person at any date means the amount by which
the assets of such Person and its consolidated Restricted Subsidiaries (less any
revaluation or other write-up subsequent to the date of the Indenture in any
such assets (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within twelve
months after the acquisition of such business)) exceed the sum of (a) the total
liabilities of such Person and its consolidated Restricted Subsidiaries, plus
(b) any Disqualified Stock of such Person or any consolidated
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Restricted Subsidiaries of such Person issued to any Person other than such
Person or a wholly-owned Restricted Subsidiary of such Person, in each case
determined in accordance with GAAP.
"Credit Agreement" means, collectively, (i) that certain Credit Agreement,
as in effect on the date of the Indenture, by and among the Company, the lenders
that may be from time to time parties thereto and Chemical Bank, as
administrative agent, as the foregoing may from time to time be amended,
renewed, supplemented or otherwise modified at the option of the parties
thereto, including increases in the principal amount thereof; and (ii) after
Chemical Bank, as administrative agent, has acknowledged in writing that the
Credit Agreement has been terminated and all then outstanding Indebtedness
thereunder or with respect thereto have been repaid in full in cash and
discharged, any successors to or replacements of (as designated by the Board of
Directors of the Company in its sole judgment, and evidenced by a resolution)
such Credit Agreement, as such successors or replacements may from time to time
be amended, renewed, supplemented, modified or replaced, including increases in
the principal amount thereof.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Depositary" means, with respect to the Notes issuable or issued in whole or
in part in global form, the Person specified in the Indenture as the Depositary
with respect to the Notes, until a successor shall have been appointed and
become such Depositary pursuant to the applicable provision of the Indenture,
and, thereafter, "Depositary" shall mean or include such successor.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
on which the Senior Notes mature.
"Eligible Accounts Receivable" means at a particular date, all accounts
receivable owned by the Company and Restricted Subsidiaries (i) which are not 90
or more days past due; (ii) which are not owed by an obligor which has taken any
of the actions or suffered any of the events of the kind described in clause
(ix) under "Events of Default"; (iii) which are not subject to any asserted
dispute, off-set, counterclaim or defense on the part of the account debtor or
to any asserted claim on the part of the account debtor denying liability under
such account in whole or in part and (iv) which are not owed by an obligor in
respect of which 50% or more of the accounts receivable are 90 or more days past
due or uncollectible.
"Eligible Inventory" means at the time of any determination thereof, all
inventory (less reserves for obsolescence) of the Company and Restricted
Subsidiaries as to which the following requirements have been fulfilled: (a) the
Company or a Restricted Subsidiary has lawful and absolute title to such
Inventory; and (b) none of such inventory is obsolete, unsalable, damaged or
otherwise unfit for sale or further processing.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that may be made by the Company pursuant to
the Registration Rights Agreement to exchange New Notes for Old Notes.
"Existing Indebtedness" means the Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the Credit Agreement) in
existence on the date of the Indenture, until such amounts are repaid.
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"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), and (ii) the consolidated interest expense of such
Person and its Restricted Subsidiaries that was capitalized during such period,
and (iii) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (whether or
not such Guarantee or Lien is called upon), and (iv) the product of (a) all cash
dividend payments (and non-cash dividend payments in the case of a Person that
is a Restricted Subsidiary) on any series of preferred stock of such Person
payable to a party other than the Company or a Wholly Owned Subsidiary, times
(b) a fraction, the numerator of which is one and the denominator of which is
one minus the then current combined federal, state and local statutory tax rate
of such Person, expressed as a decimal, on a consolidated basis and in
accordance with GAAP, but excluding from the calculation of fixed charges
amortization of financing costs (except to the extent referred to in the
parenthetical in clause (i) of this definition).
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated EBITDA of such Person and its Restricted
Subsidiaries for such period to the Fixed Charges of such Person and its
Restricted Subsidiaries for such period. In the event that the Company or any of
its Restricted Subsidiaries incurs, assumes, Guarantees or repays any
Indebtedness (other than the incurrence or repayment of revolving credit
borrowings used for working capital, except to the extent that a repayment is
accompanied by a permanent reduction in revolving credit commitments) or issues
preferred stock subsequent to the commencement of the four-quarter reference
period for which the Fixed Charge Coverage Ratio is being calculated but prior
to the date on which the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. For purposes of making the
computation referred to above, (i) acquisitions that have been made by the
Company or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and shall give pro forma effect to the
Consolidated EBITDA and Indebtedness of the Person which is the subject of any
such acquisition, and (ii) the Consolidated EBITDA attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
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"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means a Person in whose name a Note is registered on the
Registrar's books.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person), the maximum fixed repurchase price of Disqualified
Stock issued by such Person in each case, if held by any Person other than the
Company or a Wholly Owned Subsidiary of the Company, and, to the extent not
otherwise included, the Guarantee by such Person of any indebtedness of any
other Person.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the books of such person) or capital
contributions (excluding commission, travel, relocation and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP; provided that an acquisition
of assets, Equity Interests or other securities by the Company for consideration
consisting of common equity securities of the Company or of any direct or
indirect parent of the Company shall not be deemed to be an Investment.
"Joint Venture" means each of Clark-Schwebel Corporation, Clark-Schwebel
Tech-Fab Company, CS-Interglas AG and Asahi-Schwebel Co., Ltd. and any other
Person whose sole asset is directly or indirectly a Joint Venture (unless such
Joint Venture or Person is a Restricted Subsidiary by virtue of an Investment
pursuant to clause (f) of the definition of "Permitted Investment").
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, in the city of the Corporate Trust Office
of the Trustee, or at a place of payment are authorized by law, regulation or
executive order to remain closed. If a payment date is a Legal Holiday, payment
may be made on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
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"Liquidated Damages" means all liquidated damages then owing pursuant to the
Registration Rights Agreement.
"Management Advisory Agreement" means the agreement dated as of April 17,
1996, among Vestar, the Company and Holdings as in effect on the date of the
Indenture, with only such amendments, alterations, modifications or waivers
thereto which are not materially adverse to the interests of the Company or the
holders of Notes.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP, and before reduction for
non-cash preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries, (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss) and (iii) fees and expenses related to the
Acquisition in an amount not to exceed $11.5 million.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP and net of any Purchase
Money Obligations relating to the assets comprising such Asset Sale.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Note Custodian" means the Trustee, as custodian with respect to the Global
Senior Notes, or any successor entity thereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the Offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice President of such Person.
"Permitted Investments" means (a) any Investments in the Company or in a
Wholly Owned Subsidiary of the Company that is a Subsidiary Guarantor (or in
CS-Interglas AG to the extent it is a Wholly Owned Subsidiary of the Company)
and that is engaged in the same or a similar line of business as the Company and
its Restricted Subsidiaries were engaged in on the date of the Indenture and
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reasonable extensions or expansions thereof; (b) any Investments in Cash
Equivalents; (c) Investments by the Company or any Restricted Subsidiary of the
Company in a Person if as a result of such Investment (i) such Person becomes a
Wholly Owned Subsidiary of the Company that is engaged in the same or a similar
line of business as the Company and its Restricted Subsidiaries were engaged in
on the date of the Indenture and reasonable extensions or expansions thereof or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Wholly Owned Subsidiary of the Company that is a Subsidiary
Guarantor and that is engaged in the same or a similar line of business as the
Company and its Restricted Subsidiaries were engaged in on the date of the
Indenture and reasonable extensions or expansions thereof; (d) Investments made
as a result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with the covenant described under "--Asset
Sales"; (e) Investments by the Company or any Restricted Subsidiary in cash in
an amount not to exceed $5 million in the aggregate; (f) Investments by the
Company or any Restricted Subsidiary in cash in an amount not to exceed $15
million in the aggregate to enable the Company or any Restricted Subsidiaries to
purchase or otherwise acquire equity interests in the Joint Ventures; provided
that upon the consummation of any such Investment pursuant to this clause (f)
the Joint Venture in which the Investment is made becomes a Restricted
Subsidiary; (g) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company or any
Subsidiary or in satisfaction of judgments; (h) the conversion or exchange of
debt of CS-Interglas AG for common securities of CS-Interglas AG; and (i) the
contribution of shares of stock or other equity securities of an Unrestricted
Subsidiary to another Subsidiary.
"Permitted Liens" means (i) Liens securing (a) Indebtedness permitted by
clause (i) or clause (viii) under the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock" and (b) related Hedging
Obligations; (ii) Liens in favor of the Company or any Subsidiary Guarantor;
(iii) Liens on property of a Person existing at the time such Person is merged
into or consolidated with the Company or any Restricted Subsidiary of the
Company; provided that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company; (iv) Liens on
property of a Person existing at the time such Person becomes a Restricted
Subsidiary of the Company; (v) Liens on property existing at the time of
acquisition thereof by the Company or any Restricted Subsidiary of the Company,
provided that such Liens were in existence prior to the contemplation of such
acquisition; (vi) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vii) Liens existing on the date of
the Indenture; (viii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (ix) carriers',
warehousemen's, mechanics', materialmen's, repairmen's, or other similar Liens
arising in the ordinary course of business which are not overdue for a period of
more than 60 days or which are being contested in good faith by appropriate
proceedings diligently conducted; (x) Liens of landlords or of mortgagees of
landlords arising by operation of law, provided that the rental payments secured
thereby are not yet due and payable; (xi) Liens incurred in the ordinary course
of business of the Company or any Restricted Subsidiary of the Company with
respect to obligations that do not exceed $2.5 million at any one time
outstanding and that (a) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Restricted Subsidiary; (xii)
nonconsensual Liens incurred in the ordinary course of business of any foreign
subsidiary that is a Restricted Subsidiary that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances of credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by such
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Restricted Subsidiary; (xiii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (xiv) 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 business of the
Company or any of its Restricted Subsidiaries; (xv) Purchase Money Liens
(including extensions and renewals thereof); (xvi) judgment and attachment Liens
not giving rise to an Event of Default; (xvii) Liens arising out of consignment
or similar arrangements for the sale of goods; (xviii) any interest or title of
a lessor in property subject to any capital lease obligation or operating lease;
and (xix) Liens arising from filing Uniform Commercial Code financing statements
regarding leases.
"Permitted Refinancing Debt" means any Indebtedness of the Company or any of
its Restricted Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Restricted Subsidiaries; provided
that: (i) the principal amount of such Permitted Refinancing Indebtedness does
not exceed the principal amount of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness
has a final maturity date at least as late as the final maturity date of, and
has a Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (iii) if the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment to the Senior Notes, such Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date of, and is
subordinated in right of payment to, the Senior Notes on terms at least as
favorable to the Holders of Senior Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company, or other business entity or government or agency or political
subdivision thereof (including any subdivision or ongoing business of any such
entity or substantially all of the assets of any such entity, subdivision or
business).
"Public Equity Offering" means an underwritten public offering pursuant to a
registration statement filed with the SEC in accordance with the Securities Act
of (i) Equity Interests other than Disqualified Stock of the Company or (ii) of
Equity Interests other than Disqualified Stock of the Company's parent or
indirect parent corporation to the extent that the cash proceeds therefrom are
contributed to the equity capital of the Company or are used to purchase Equity
Interests (other than Disqualified Stock) of the Company.
"Purchase Money Lien" means a Lien granted on an asset or property to secure
a Purchase Money Obligation permitted to be incurred under the Indenture and
incurred solely to finance the purchase, or the cost of construction or
improvement, of such asset or property; provided however, that such Lien
encumbers only such asset or property and is granted within 180 days of such
acquisition.
"Purchase Money Obligations" of any Person means any obligations of such
Person to any seller or any other Person incurred or assumed to finance the
purchase, or the cost of construction or improvement, of real or personal
property to be used in the business of such person or any of its Restricted
Subsidiaries in an amount that is not more than 100% of the cost, or fair market
value, as appropriate, of such property, and incurred within 180 days after the
date of such acquisition (excluding accounts payable to trade creditors incurred
in the ordinary course of business).
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date of the Indenture, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
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"Representative" means the indenture trustee or other trustee, client or
representative for any Senior Indebtedness.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Exchange Act, as such Regulation is in effect on the date
hereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).
"Subsidiary Guarantors" means any Restricted Subsidiary that executes a
Subsidiary Guarantee in accordance with the provisions of the Indenture, and
their respective successors and assigns.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sec.Sec.
77aaa-77bbbb) as in effect on the date on which the Indenture is qualified under
the TIA.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company; (c) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by the covenant described under the caption
"--Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail
to meet the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture
and any Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted
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Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock," the
Company shall be in default of such covenant). The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under the covenant described
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock," and (ii) no Default or Event of Default would be in existence following
such designation. Notwithstanding anything to the contrary in the foregoing, to
the extent a Joint Venture becomes a Subsidiary, it shall initially be an
Unrestricted Subsidiary except to the extent that it becomes a Subsidiary in
connection with an Investment pursuant to clause (f) of the definition of
"Permitted Investment."
"Vestar" means Vestar Equity Partners, L.P.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Restricted Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) (or in the case of CS-Interglas
AG 90% of the outstanding Capital Stock or other ownership interests) shall at
the time be owned by such Person or by one or more Wholly Owned Subsidiaries of
such Person. Unrestricted Subsidiaries shall not be included in the definition
of Wholly Owned Subsidiary for any purposes of the Indenture.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on April 17, 1996 to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Old Notes to qualified institutional buyers in reliance
on Rule 144A under the Securities Act. As a condition to the Purchase Agreement,
the Company and Holdings entered into the Registration Rights Agreement with the
Initial Purchasers (the "Registration Rights Agreement") pursuant to which the
Company and Holdings agreed, for the benefit of the holders of the Old Notes to,
among other things, (i) file the Exchange Offer Registration Statement with the
Commission on or prior to 45 days after the Closing Date and (ii) use their best
efforts to have the Exchange Offer Registration Statement declared effective by
the Commission on or prior to 120 days after the Closing Date. The Company will
keep the Exchange Offer open for not less than 20 business days (or longer if
required by applicable law) after the date on which notice of the Exchange Offer
is mailed to the holders of the Old Notes. For each Old Note surrendered to the
Company pursuant to the Exchange Offer, the holder of such Old Note will receive
a New Note having a principal amount equal to that of the surrendered Old Note.
Interest on each New Note will accrue from the date of its original issue.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the New Notes would in general be
freely tradeable after the Exchange Offer without further registration under the
Securities Act. However, any purchaser of Old Notes who is an "affiliate" of the
Company or who intends to participate in the Exchange Offer for the purpose of
distributing the New Notes (i) will not be able to rely on the interpretation of
the staff of the Commission, (ii) will not be able to tender its Old Notes in
the Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the Old Notes, unless such sale or transfer is made pursuant to an
exemption from such requirements.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the New Notes are to be
acquired by the holder or the person receiving such New Notes, whether or not
such person is the holder, in the ordinary course of business, (ii) the holder
or any such other person (other than a broker-dealer referred to in the next
sentence) is not engaging and does not intend to engage, in the distribution of
the New Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
Notes, (iv) neither the holder nor any such other person is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act, and (v) the
holder or any such other person acknowledges that if such holder or other person
participates in the Exchange Offer for the purpose of distributing the New Notes
it must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale of the New Notes and cannot rely on
those no-action letters. As indicated above, each Participating Broker-Dealer
that receives a New Note for its own account in exchange for Old Notes must
acknowledge that it (i) acquired the Old Notes for its own account as a result
of market-making activities or other trading activities, (ii) has not entered
into any arrangement or understanding with the Company or any "affiliate" of the
Company (within the meaning of Rule 405 under the Securities Act) to distribute
the New Notes to be received in the Exchange Offer and (iii) will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes. For a description of the procedures for such resales
by Participating Broker-Dealers, see "Plan of Distribution."
In the event that changes in the law or the applicable interpretations of
the staff of the Commission do not permit the Company to effect such an Exchange
Offer, or if for any other reason the Exchange Offer is not consummated or if
any holder of the Old Notes (other than an "affiliate" of the Company or an
Initial Purchaser) is not eligible to participate in the Exchange Offer, the
Company will (a) file the Shelf Registration Statement covering resales of the
Old Notes, (b) use its reasonable best efforts to
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cause the Shelf Registration Statement to be declared effective under the
Securities Act and (c) use its reasonable best efforts to keep effective the
Shelf Registration Statement until the earlier of three years after its
effective date and such time as all of the applicable Old Notes have been sold
thereunder. The Company will, in the event of the filing of the Shelf
Registration Statement, provide to each applicable holder of the Old Notes
copies of the prospectus which is a part of the Shelf Registration Statement,
notify each such holder when the Shelf Registration Statement has become
effective and take certain other actions as are required to permit unrestricted
resales of the Old Notes. A holder of Old Notes that sells such Old Notes
pursuant to the Shelf Registration Statement permit generally will be required
to be named as a selling securityholder 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 Registration Rights Agreement which are
applicable to such a holder (including certain indemnification obligations). In
addition, each holder of the Old Notes will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and to benefit from the provisions set forth
in the following paragraph.
The Registration Rights Agreement provides that (i) Holdings and the Company
will file an Exchange Offer Registration Statement with the Commission on or
prior to 45 days after the Closing Date, (ii) Holdings and the Company will use
their best efforts to have the Exchange Offer Registration Statement declared
effective by the Commission on or prior to 120 days after the Closing Date,
(iii) unless the Exchange Offer would not be permitted by applicable law or
Commission policy, Holdings and the Company will commence the Exchange Offer and
use their best efforts to issue on or prior to 150 days after the Closing Date
(the "Exchange Offer Effectiveness Date"), New Notes (and the related Holdings
guarantee) in exchange for all Old Notes tendered prior thereto in the Exchange
Offer and (iv) if obligated to file the Shelf Registration Statement, Holdings
and the Company will cause to be filed the Shelf Registration Statement with the
Commission on or prior to 45 days after such filing obligation arises and to
cause the Shelf Registration to be declared effective by the Commission on or
prior to 120 days after such obligation arises. If (a) Holdings and the Company
fail to file any of the Registration Statements required by the Registration
Rights Agreement on or before the date specified for such filing, (b) any of
such Registration Statements is not declared effective by the Commission on or
prior to the date specified for such effectiveness (the "Effectiveness Target
Date"), or (c) Holdings and the Company fail to Consummate the Exchange Offer
within 30 business days of the Effectiveness Target Date with respect to the
Exchange Offer Registration Statement, or (d) the Shelf Registration Statement
or the Exchange Offer Registration Statement is declared effective but
thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the period specified in the Registration
Rights Agreement (each such event referred to in clauses (a) through (d) above a
"Registration Default"), then the Company will pay Liquidated Damages to each
Holder of Old Notes, with respect to the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to $.05
per week per $1,000 principal amount of Old Notes held by such Holder. The
amount of the Liquidated Damages will increase by an additional $.05 per week
per $1,000 principal amount of Old Notes with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of Liquidated Damages of $.30 per week per $1,000 principal amount of Old Notes.
All accrued Liquidated Damages will be paid by the Company on each Damages
Payment Date to the Global Note Holder by wire transfer of immediately available
funds or by federal funds check and to Holders of Certificated Securities by
wire transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults, the accrual of Liquidated Damages will cease.
Holders of Old Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will
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be required to deliver information to be used in connection with the Shelf
Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Rights Agreement
in order to have their Old Notes included in the Shelf Registration Statement
and benefit from the provisions regarding Liquidated Damages set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which is filed as an exhibit to the Exchange Offer Registration Statement of
which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for such Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of New Notes
in exchange for each $1,000 principal amount of outstanding Old Notes accepted
in the Exchange Offer. Holders may tender some or all of their Old Notes
pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000.
The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that (i) the New Notes bear a Series B designation and a
different CUSIP Number from the Old Notes, (ii) the New Notes have been
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof and (iii) the holders of the New Notes will not be entitled
to certain rights under the Registration Rights Agreement, including the
provisions providing for an increase in the interest rate on the Old Notes in
certain circumstances relating to the timing of the Exchange Offer, all of which
rights will terminate when the Exchange Offer is terminated. The New Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits of
the Indenture.
As of the date of this Prospectus, $110,000,000 aggregate principal amount
of Old Notes were outstanding. This Prospectus and the Letter of Transmittal
will be mailed initially to the holders of record of the Old Notes as of the
close of business on August 13, 1996.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the General Corporation Law of Delaware or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old 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
for the purpose of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all
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charges and expenses, other than transfer taxes in certain circumstances, in
connection with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
September 11, 1996, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the registered
holders an announcement thereof, each prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled expiration date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders.
INTEREST ON THE NEW NOTES
The New Notes will bear interest from their date of issuance. Holders of Old
Notes that are accepted for exchange will receive, in cash, accrued interest
thereon to, but not including, the date of issuance of the New Notes. Such
interest will be paid with the first interest payment on the New Notes on
October 15, 1996. Interest on the Old Notes accepted for exchange will cease to
accrue upon issuance of the New Notes.
Interest on the Notes is payable semi-annually on each April 15 and October
15, commencing on October 15, 1996.
PROCEDURES FOR TENDERING
Only a holder of Old Notes may tender such Old Notes in the Exchange Offer.
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof have the signatures thereon
guaranteed if required by the Letter of Transmittal and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the Old
Notes and any other required documents, to the Exchange Agent prior to 5:00
p.m., New York City time, on the Expiration Date. To be tendered effectively,
the Old Notes, Letter of Transmittal and other required documents must be
completed and received by the Exchange Agent at the address set forth below
under "Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration
Date. Delivery of the Old Notes may be made by book-entry transfer in accordance
with the procedures described below. Confirmation of such book-entry transfer
must be received by the Exchange Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each holder will make to the Company
the representations set forth above in the third paragraph under the heading
"--Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute 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.
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THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK
OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder to tender on such beneficial ownees behalf. See "Instruction to
Registered Holder and/or Book-Entry Transfer Facility Participant from Owner"
included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of the Medallion System (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered holder
as such registered holder's name appears on such Old Notes with the signature
thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, any evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the Old
Notes at the book-entry transfer facility, The Depository Trust Company (the
"Book-Entry Transfer Facility"), for the purpose of facilitating the Exchange
Offer, and subject to the establishment thereof, any financial institution that
is a participant in the Book-Entry Transfer Facility's system may make
book-entry delivery of Old Notes by causing such Book-Entry Transfer Facility to
transfer such Old Notes into the Exchange Agent's account with respect to the
Old Notes in accordance with the Book-Entry Transfer Facility's procedures for
such transfer. Although delivery of the Old Notes may be effected through
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility, an appropriate Letter of Transmittal properly completed and duly
executed with any required signature guarantee and all other required documents
must in each case be transmitted to and received or confirmed by the Exchange
Agent at its address set forth below on or prior to the Expiration Date, or, if
the guaranteed delivery procedures described below are complied with within the
time period provided under such procedures. Delivery of documents to the
Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by the Company in its sole discretion, which determination
will be Final and binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered or any Old Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the
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right in its sole discretion to waive any defects, irregularities or conditions
of tender as to particular Old Notes. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the instructions in the Letter
of Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Notes must be cured
within such time as the Company shall determine. Although the Company intends,
to notify holders of defects or irregularities with respect to tenders of Old
Notes, neither the Company, the Exchange Agent nor any other person shall incur
any liability for failure to waive such notification. Tenders of Old Notes will
not be deemed to have been made until such defects or irregularities have been
cured or waived. Any Old Notes received by the Exchange Agent that are not
properly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering holders,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, prior to the Expiration
Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five New
York Stock Exchange trading days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof) together with the certificate(s)
representing the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility), and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent; and
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Old Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), and all other documents required by the
Letter of Transmittal are received by the Exchange Agent upon five New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a telegram, telex,
letter or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number(s) and principal amount of such Old Notes, or, in the case of
Old Notes transferred by book-entry transfer, the name and number of the account
at the Book-Entry Transfer Facility to be credited), (iii) be signed by
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the holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to the Old Notes register the transfer of such Old
Notes into the name of the person withdrawing the tender and (iv) specify the
name in which any such Old Notes are to be registered, if different from that of
the Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company whose
determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
Exchange Offer and no New Notes will be issued with respect thereto unless the
Old Notes so withdrawn are validly retendered. Any Old Notes which have been
tendered but which are not accepted for exchange will be returned to the holder
thereof without cost to such holder as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn Old
Notes may be retendered by following one of the procedures described above under
"--Procedures for Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange New Notes for, any Old Notes,
and may terminate or amend the Exchange Offer as provided herein before the
acceptance of such Old Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Company, might materially impair
the ability of the Company to proceed with the Exchange Offer or any
material adverse development has occurred in any existing action or
proceeding with respect to the Company or any of its subsidiaries, or
(b) any law, statute, rule, regulation or interpretation by the staff of
the Commission is proposed, adopted or enacted, which, in the reasonable
judgment of the Company, might materially impair the ability of the Company
to proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its reasonable discretion, deem necessary for the
consummation of the Exchange Offer as contemplated hereby.
If the Company determines in its reasonable judgement that any of the
conditions are not satisfied, the Company may (i) refuse to accept any Old Notes
and return ail tendered Notes to the tendering holders, (ii) extend the Exchange
Offer and retain all Old Notes tendered prior to the expiration of the Exchange
Offer, subject, however, to the rights of holders to withdraw such Notes (see
"--Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with
respect to the Exchange Offer and accept all properly tendered Old Notes which
have not been withdrawn.
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EXCHANGE AGENT
The Exchange Agent for the Exchange Offer is .
<TABLE>
<S> <C>
By Mail: Overnight Courier:
Fleet National Bank Fleet National Bank
Corporate Trust Operations, CTMO 0224 Corporate Trust Operations, CTMO 0224
777 Main Street 777 Main Street
Hartford, CT 06115 Hartford, CT 06115
Attention: Patricia Williams Attention: Patricia Williams
By Hand: Facsimile Transmission:
Fleet National Bank (860) 986-7908
Corporate Trust Operations, CTMO 0224
777 Main Street
Hartford, CT 06115
Attention: Patricia Williams
Confirm by Telephone:
(860) 986-1271
</TABLE>
DELIVERY OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Officer and will not make any payments to brokers, dealers, or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs among others.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is face value, as reflected in the Company's accounting records on the
date of exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The expenses of the Exchange Offer will be expensed
over the term of the New Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities. Accordingly, such Old Notes may be
resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so
long as the Old Notes are eligible for resale pursuant to Rule 144A, to a person
inside the United States whom the seller reasonably believes is a qualified
institutional buyer within the meaning of Rule 144A under the Securities Act in
meeting the requirements of Rule 144A, in accordance with Rule 144 under the
Securities Act, or pursuant to another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
reasonably acceptable to the Company), (iii) outside the United States to a
foreign person in a transaction meeting the requirements of Rule 904 under the
Securities Act, or (iv) pursuant to an
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effective registration statement under the Securities Act, in each case in
accordance with any applicable securities laws of any state of the United
States.
RESALE OF THE NEW NOTES
With respect to resales of New Notes, based on interpretations by the staff
of the Commission set forth in no-action letters issued to third parties, the
Company believes that a holder or other person who receives New Notes, whether
or not such person is the holder (other than a person that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act) who
receives New Notes in exchange for Old Notes in the ordinary course of business
and who is not participating, does not intend to participate, and has no
arrangement or understanding with person to participate, in the distribution of
the New Notes, will be allowed to resell the New Notes to the public without
further registration under the Securities Act and without delivering to the
purchasers of the New Notes a prospectus that satisfies the requirements of
Section 10 of the Securities Act. However, if any holder acquires New Notes in
the Exchange Offer for the purpose of distributing or participating in a
distribution of the New Notes, such holder cannot rely on the position of the
staff of the Commission enunciated in such no-action letters or any similar
interpretive letters, and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction, unless an exemption from registration is otherwise available.
Further, each Participating Broker-Dealer that receives New Notes for its own
account in exchange for Old Notes, where such New Notes were acquired by such
Participating 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 New Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the New Notes are to be
acquired by the holder or the person receiving such New Notes, whether or not
such person is the holder, in the ordinary course of business, (ii) the holder
or any such other person (other than a broker-dealer referred to in the next
sentence) is not engaging and does not intend to engage, in the distribution of
the New Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
Notes, (iv) neither the holder nor any such other person is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act, and (v) the
holder or any such other person acknowledges that if such holder or other person
participates in the Exchange Offer for the purpose of distributing the New Notes
it must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale of the New Notes and cannot rely on
those no-action letters. As indicated above, each Participating Broker-Dealer
that receives a New Note for its own account in exchange for Old Notes must
acknowledge that it (i) acquired the Old Notes for its own account as a result
of market-making activities or other trading activities, (ii) has not entered
into any arrangement Company (within the meaning of Rule 405 under the
Securities Act or understanding with the Company or any "affiliate" of the
Securities Act) to distribute the New Notes to be received in the Exchange Offer
and (iii) will deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of such New Notes. For a description of the
procedures for such resales by Participating Broker-Dealers, see "Plan of
Distribution."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the principal United States Federal income
tax consequences to holders resulting from the exchange of the Old Notes for the
New Notes pursuant to the Exchange Offer and the ownership and disposition of
the New Notes. This summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations (including proposed and temporary
regulations) promulgated thereunder, rulings, official pronouncements and
judicial decisions,
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all as in effect on the date hereof and all of which are subject to change,
possibly with retroactive effect, and which are subject to different
interpretations. This summary addresses only the Old Notes and the New Notes
that are held as capital assets. Moreover, it does not discuss all of the tax
consequences that may be relevant to the particular circumstances of a holder or
to holders subject to special rules, such as certain financial institutions,
insurance companies, dealers in securities and tax-exempt organizations.
Prospective purchasers of the New Notes should consult their tax advisors with
regard to the application of the United States Federal income tax laws to their
particular situations as well as any tax consequences arising under the laws of
any state, local or foreign taxing jurisdiction.
As used herein, the term "United States Holder" means a holder of a New Note
that is, for United States Federal income tax purposes, (a) a citizen or
resident of the United States, (b) a corporation, partnership or other entity
created under the laws of the United States or of any political subdivision
thereof or (c) an estate or trust the income of which is subject to United
States Federal income taxation regardless of source. The term "Foreign Holder"
means a holder of a New Note that is not a United States Holder.
EXCHANGE OF OLD NOTES
The exchange of the Old Notes for the New Notes pursuant to the Exchange
Offer should not be a taxable event to the holder and thus the holder should not
recognize any taxable gain or loss as a result of the exchange. A holder's
adjusted tax basis in the New Notes will be the same as his adjusted tax basis
in the Old Notes exchanged therefor, and his holding period for the Old Notes
will be included in his holding period for the New Notes. Although the exchange
of the Old Notes for the New Notes will not create additional "market discount"
or "amortizable bond premium" (described below), to the extent that a holder
acquired the Old Notes at a market discount or with amortizable bond premium,
such discount or premium would generally carry over to the New Notes received in
exchange for the Old Notes. Such holders should consult their tax advisors
regarding the United States Federal income tax treatment of such market discount
and amortizable bond premium.
UNITED STATES HOLDERS
Interest paid on a New Note will generally be taxable to a United States
Holder as ordinary interest income in accordance with such holder's method of
accounting for United States Federal income tax purposes.
If a purchaser purchases a New Note for an amount that is less than its
stated redemption price at maturity the amount of the difference will be treated
as market discount for U.S. federal income tax purposes, unless such difference
is less than a specified de minimis amount. Under the market discount rules, a
holder will be required to treat any principal payment on, or any amount
received on the sale, exchange, retirement or other disposition of, a New Note
as ordinary income to the extent of any market discount which has not previously
been included in income and is treated as having accrued on such New Note by the
time of such payment or disposition. If a subsequent holder makes a gift of a
New Note, accrued market discount, if any, will be recognized as if such holder
had sold such New Note for a price equal to its fair market value. In addition,
the holder may be required to defer, until the maturity of the New Note or its
earlier disposition in a taxable transaction, the deduction of a portion of the
interest expense on any indebtedness incurred or continued to purchase or carry
such New Note.
Any market discount will be considered to accrue on a straight-line basis
during the period from the date of acquisition to the maturity date of the New
Notes, unless the holder elects to accrue market discount under a constant
interest method. A holder of New Notes may elect to include market discount in
income currently as it accrues (under either a straight-line or constant
interest method), in which case, the rules described above regarding the
deferral of interest deductions will not apply. This election to include market
discount in income currently, once made, applies to all market discount
obligations
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acquired on or after the first day of the first taxable year to which the
election applies and may not be revoked without the consent of the Internal
Revenue Service.
A purchaser that purchases New Notes for an amount that is greater than the
stated redemption price at maturity of such New Notes will be considered to have
purchased such New Notes with "amortizable bond premium." Under the amortizable
bond premium rules, the amount of interest income market discount, if any, which
such holder must include in its gross income with respect to such New Notes for
any taxable year will be reduced by the portion of such premium properly
allocable to such year.
Upon the sale, exchange or retirement of a New Note, a United States Holder
will generally recognize taxable gain or loss equal to the difference between
the amount realized on the sale, exchange or retirement (except to the extent
such amount is attributable to accrued but previously unrecognized interest,
which is taxable as ordinary interest income) and such holder's adjusted tax
basis in such New Note. Such gain or loss will be capital gain or loss and will
be long-term capital gain or loss if the United States Holder's holding period
in the New Note is more than one year at the time of disposition.
FOREIGN HOLDERS
Payments of principal, retirement premium, if any, interest received or
discount accrued by a Foreign Holder who is not engaged in a trade or business
within the United States will not be subject to United States Federal income or
withholding tax, provided that in the case of interest (a)(i) the Foreign Holder
does not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote, (ii) the Foreign
Holder is not a controlled foreign corporation for United States tax purposes
that is related to the Company through stock ownership, and (iii) such interest
is not received by a bank on an extension of credit made pursuant to a loan
agreement entered into in the ordinary course of business and (b) either (i) the
beneficial owner of the New Note, under penalties of perjury, provides the
Company or its agent with its name and address and certifies that it is not a
United States Holder or (ii) a securities clearing organization, bank, or other
financial institution that holds customers' securities in the ordinary course of
its trade or business (a "financial institution") certifies to the Company or
its agent under penalties of perjury, that such a statement has been received
from the beneficial owner by it or another financial institution and furnishes
the payor a copy thereof. A Foreign Holder, however, may be subject to United
States Federal income tax at the normal graduated rates on its net interest
income if such interest is effectively connected with the conduct of a U.S.
trade or business of such holder.
A Foreign Holder will not be subject to United States Federal income or
withholding tax on any gain realized on the sale or exchange of a New Note,
unless (a) the gain is effectively connected or treated as effectively
connected, with a United States trade or business of the Holder or (b) in the
case of a Foreign Holder who is an individual, such Foreign Holder is present in
the United States for a period or periods aggregating 183 days or more during
the taxable year of the sale or exchange and either (i) the Foreign Holder has a
"tax home," as defined in section 911 (d)(3) of the Code, in the United States
or (ii) the gain is attributable to an office or other fixed place of business
maintained by the Foreign Holder in the United States.
BACKUP WITHHOLDING AND INFORMATION REPORTING ON NEW NOTES
Certain noncorporate United States Holders generally will be subject to
information reporting and may be subject to backup withholding at a rate of 31%
on payments of principal, premium, if any, and interest (including original
issue discount and market discount) on, and the proceeds of disposition of, a
New Note. Backup withholding will apply only if the United States Holder (a)
fails to furnish its Taxpayer Identification Number ("TIN"), which for an
individual would be the holder's Social Security number, (b) furnishes an
incorrect TIN, (c) is notified by the Internal Revenue Service that it
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has failed to properly report payments of interest and dividends or (d) under
certain circumstances, fails to certify, under penalty of perjury, that it has
furnished a correct TIN and has not been notified by the Internal Revenue
Service that it is subject to backup withholding for failure to report interest
and dividend payments. Holders should consult their own tax advisors regarding
their qualification for exemption from backup withholding and the procedure for
obtaining such an exemption if applicable.
Information reporting and backup withholding will not apply to payments of
principal, premium, if any, and interest made by the Company or a paying agent
to a Foreign Holder of a New Note if the certification described in clause (b)
of the first paragraph under "Foreign Holders" above is received, provided that
the payor does not have actual knowledge that the holder is a United States
person.
Payments of the proceeds from the sale by a Foreign Holder of a New Note
made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is a
United States person, a controlled foreign corporation for United States Federal
income tax purposes or a foreign person 50% or more of whose gross income is
effectively connected with a United States trade or business for a specified
three year period, information reporting may apply to such payments. Payments of
the proceeds from the sale of a New Note to or through the United States office
of a broker is subject to information reporting and backup withholding unless
the holder or beneficial owner certifies as to its non-United States status or
otherwise establishes an exemption from information reporting and backup
withholding.
The amount of any backup withholding from a payment to a holder will be
allowed as a credit against such holder's United States Federal income tax
liability and may entitle such holder to a refund, provided that the required
information is furnished to the Internal Revenue Service.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired 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, it will make this
Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
November 8, 1996, all dealers effecting transactions in the New Notes may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sales of the New Notes by
Participating Broker-Dealers. New Notes received by Participating Broker-Dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions through the writing of options on the New Notes or a combination of
such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchaser or to or through brokers or dealers who
may receive compensation in the form of commissions or concessions from any such
Participating BrokerDealer and/or the purchasers of any such New Notes. Any
Participating Broker-Dealer that resells the New Notes that were received by it
for its own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New 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 Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
95
<PAGE>
For a period of 180 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 Participating Broker-Dealer that requests such documents
in the Letter of Transmittal.
LEGAL MATTERS
The validity of the issuance of the New Notes will be passed upon for the
Company by Kirkland & Ellis, New York, New York. Certain partners of Kirkland &
Ellis are among the investors in Vestar/CS Holding.
EXPERTS
The financial statements of Fort Mill A, Inc. as of December 31, 1994 and
December 30, 1995, and for the three fiscal years in the period ended December
30, 1995 included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein and have been
so included in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The financial statements of Clark-Schwebel Holdings, Inc. as of April 2,
1996 included in this Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
96
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
----
FORT MILL A, INC.
Audited Financial Statements
Independent Auditors' Report...................................... F-2
Balance Sheets.................................................... F-3
Statements of Income.............................................. F-4
Statements of Cash Flows.......................................... F-5
Notes to Financial Statements..................................... F-6
Unaudited Condensed Financial Statements
Condensed Balance Sheet........................................... F-16
Condensed Statements of Income.................................... F-17
Statements of Cash Flows.......................................... F-18
Notes to Condensed Financial Statements........................... F-19
CLARK-SCHWEBEL HOLDINGS, INC.
Report of Independent Public Accountants.......................... F-21
Balance Sheet..................................................... F-22
Notes to Balance Sheet............................................ F-23
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Springs Industries, Inc.
Fort Mill, South Carolina
We have audited the accompanying balance sheets of Fort Mill A Inc. (the
"Company") (a wholly-owned subsidiary of Springs Industries, Inc.) as of
December 31, 1994 and December 30, 1995, and the related statements of income
and cash flows for the three fiscal years in the period ended December 30, 1995.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Fort Mill A Inc. as of December 31, 1994 and
December 30, 1995, and the results of its operations and its cash flows for each
of the three fiscal years in the period ended December 30, 1995 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
February 9, 1996
(February 24, 1996 as to Note 2)
F-2
<PAGE>
FORT MILL A INC.
BALANCE SHEETS
DECEMBER 31, 1994 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................. $ 29 $ 584
Accounts receivable, net............................. 25,054 33,298
Inventories, net..................................... 25,860 28,791
Other................................................ 5,304 2,069
-------- --------
Total current assets............................. 56,247 64,742
-------- --------
PROPERTY, PLANT AND EQUIPMENT.......................... 90,687 96,791
Accumulated depreciation............................. (37,287) (43,777)
-------- --------
Property, plant and equipment, net............... 53,400 53,014
-------- --------
EQUITY INVESTMENTS..................................... 60,016 62,904
NET ASSETS OF DISCONTINUED OPERATION................... 2,445 2,600
OTHER ASSETS AND DEFERRED CHARGES...................... 7,490 5,469
-------- --------
TOTAL ASSETS........................................... $179,598 $188,729
-------- --------
-------- --------
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable..................................... $ 5,851 $ 9,032
Accrued liabilities.................................. 6,961 7,328
Deferred tax liabilities--current.................... 2,203 2,024
Current maturities of long-term debt................. 79 79
-------- --------
Total current liabilities........................ 15,094 18,463
LONG-TERM DEBT......................................... 5,994 5,907
DEFERRED TAX LIABILITIES............................... 14,457 14,826
LONG-TERM BENEFIT PLANS AND DEFERRED COMPENSATION...... 6,536 5,570
COMMITMENTS AND CONTINGENCIES (Note 12)
-------- --------
TOTAL LIABILITIES...................................... 42,081 44,766
-------- --------
EQUITY:
Common stock (par value--$1)--1,000 shares
authorized, 100 shares outstanding................. 1 1
Investment by Springs................................ 127,930 134,357
Cumulative translation adjustment.................... 9,586 9,605
-------- --------
Total equity..................................... 137,517 143,963
-------- --------
TOTAL LIABILITIES AND EQUITY........................... $179,598 $188,729
-------- --------
-------- --------
</TABLE>
See notes to financial statements.
F-3
<PAGE>
FORT MILL A INC.
STATEMENTS OF INCOME
YEARS ENDED JANUARY 1, 1994, DECEMBER 31, 1994 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
NET SALES................................................... $163,691 $189,419 $231,306
COST OF SALES............................................... 139,170 160,747 191,978
-------- -------- --------
GROSS PROFIT................................................ 24,521 28,672 39,328
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES................ 15,489 14,370 17,750
IDLE EQUIPMENT WRITE-OFF.................................... 1,836
-------- -------- --------
OPERATING INCOME............................................ 9,032 12,466 21,578
OTHER INCOME (EXPENSES):
Interest expense.......................................... (401) (401) (401)
Other, net................................................ (11) (28) 12
-------- -------- --------
INCOME BEFORE INCOME TAXES.................................. 8,620 12,037 21,189
PROVISION FOR INCOME TAX.................................... (3,657) (4,896) (8,444)
INCOME (LOSS) FROM EQUITY INVESTEES, NET.................... (3,397) 1,176 2,553
-------- -------- --------
INCOME FROM CONTINUING OPERATIONS........................... 1,566 8,317 15,298
DISCONTINUED OPERATIONS:
Income from discontinued operations, net.................. 695 426 111
Gain on sale of discontinued operation, net............... 2,573
-------- -------- --------
NET INCOME.................................................. $ 2,261 $ 11,316 $ 15,409
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to financial statements.
F-4
<PAGE>
FORT MILL A INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 1, 1994, DECEMBER 31, 1994 AND DECEMBER 30, 1995
<TABLE>
<CAPTION>
1993 1994 1995
------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.................................................... $2,261 $11,316 $15,409
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................... 9,965 10,028 11,128
Idle equipment write-off.................................... 1,836
Deferred tax provision...................................... (384) 577 176
Loss (income) from equity investments, net.................. 3,397 (1,176) (2,553)
Income from discontinued operations, net.................... (695) (426) (111)
Gain on sale of discontinued operation, net................. (2,573)
Changes in assets and liabilities:
Accounts receivable....................................... (3,394) (831) (8,244)
Inventories............................................... 925 (1,825) (2,931)
Prepaid expenses and other................................ (178) (2,055) 1,465
Accounts payable.......................................... 3,132 833 3,181
Accrued expenses.......................................... (247) 261 367
Other..................................................... 2,548 200 124
------ ------- -------
Net cash provided by operating activities............... 17,330 16,165 18,011
------ ------- -------
INVESTING ACTIVITIES:
Purchases of equipment........................................ (8,810) (11,543) (8,429)
Proceeds from sale of discontinued operation.................. 19,130
Proceeds from sale of assets.................................. 114 18 42
------ ------- -------
Net cash provided by (used in) investing activities..... (8,696) 7,605 (8,387)
------ ------- -------
FINANCING ACTIVITIES:
Investment by Springs......................................... (8,704) (23,774) (8,982)
Principal payments under capital lease obligations............ (43) (87)
------ ------- -------
Net cash used in financing activities................... (8,704) (23,817) (9,069)
------ ------- -------
NET CHANGE IN CASH.............................................. (70) (47) 555
CASH, BEGINNING OF YEAR......................................... 146 76 29
------ ------- -------
CASH, END OF YEAR............................................... $ 76 $ 29 $ 584
------ ------- -------
------ ------- -------
CASH PAID FOR INTEREST.......................................... $ 401 $ 401 $ 401
------ ------- -------
------ ------- -------
</TABLE>
See notes to financial statements.
F-5
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS ENDED JANUARY 1, 1994, DECEMBER 31, 1994 AND DECEMBER 30, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION
Fort Mill A Inc., a wholly-owned subsidiary of Springs Industries, Inc.
("Springs"), is a holding company whose sole asset is 100% of the outstanding
stock of Clark-Schwebel, Inc. The accompanying financial statements include the
assets, liabilities and results of operations of Fort Mill A Inc. and Clark-
Schwebel, Inc. on a consolidated basis, and also include certain liabilities and
expenses that historically were accounted for only at the Springs--parent
company level. The consolidated entity is referred to herein as the "Company".
The Company consists primarily of the operations, assets and liabilities of
manufacturing facilities located in Anderson, SC, Statesville, NC, Cleveland,
GA, and Washington, GA, which produce woven fiber glass and aramid fabrics. The
Company's products are used in electronic circuit boards, coated and laminated
composites, aircraft construction and protective apparel such as anti-ballistic
vests and helmets.
The financial statements have been prepared generally as if the Company had
operated as a stand-alone entity for all periods presented. The financial
information included herein is not necessarily indicative of the financial
position and results of operations of the Company in the future. In addition,
these financial statements do not reflect any effects of the proposed change in
ownership transactions described in Note 2. The Company has not had significant
borrowings, and there was no allocation of Springs' consolidated borrowings or
related interest expense.
The Company's financial statements include intercompany charges allocated by
Springs for certain administrative services totaling $3,545, $2,452 and $3,041
for fiscal 1993, 1994 and 1995, respectively. Management considers the
allocation methods to be reasonable for the operations of the Company as a
subsidiary of Springs. As a stand-alone ongoing entity, the Company will not
incur such intercompany charges from Springs. Throughout the period covered by
these financial statements, the Company participated in Springs' centralized
cash management system and its cash funding requirements were met by Springs.
Intercompany balances with Springs have been included in "Investment by
Springs."
2. PROPOSED CHANGE IN OWNERSHIP TRANSACTIONS
On February 24, 1996, the Company and Springs signed an agreement with
certain affiliates of Vestar Equity Partners, L.P. which would result in a
change in the controlling ownership of the Company and a substantial payment of
cash to Springs.
Pursuant to an Agreement and Plan of Merger ("Agreement"), Vestar/CS Holding
Company L.L.C. ("Holding", a Delaware limited liability company), may elect to
purchase all of the outstanding stock of Fort Mill A Inc. for approximately
$192,500 (the "Cash Election").
If the Cash Election is not made, a subsidiary of Holding would merge with
the Company and a recapitalization of the Company would occur in which Springs
would receive (i) approximately $155,000 in cash ("the Cash Distribution"), (ii)
common stock equivalent to 20% ownership on a fully diluted basis, and (iii)
14.223% Series A Preferred Stock, par value $.01 per share, having an aggregate
liquidation value of approximately $30,000 ("Series A Preferred Stock"). On the
closing date, Holding and certain members of the Company's management would own
(i) 80% of the fully diluted common stock and (ii) 14.223% Series B
Participating Preferred Stock, par value $.01 per share, having an aggregate
liquidation value of approximately $25,000 ("Series B Preferred Stock").
F-6
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. PROPOSED CHANGE IN OWNERSHIP TRANSACTIONS--(CONTINUED)
The purchase price under the Cash Election and the amount of the Cash
Distribution in the recapitalization are both subject to adjustment based on the
level of working capital, as defined, as of the closing date. Both the Cash
Election and the recapitalization are subject to certain conditions and
approvals required by the Agreement.
As of December 30, 1995, the authorized capital stock of the Company
consisted of 1,000 shares of common stock, 100 of which were outstanding and
owned by Springs. If the Cash Election is not made, the authorized capital stock
of the merged company will include shares of Series A Preferred Stock; shares of
Series B Preferred Stock; and shares of Common Stock. In certain circumstances,
dividends on the Series A and B Preferred Stock may be non-cash. The merged
company, under certain circumstances, may be required to redeem a portion or all
of the Series A and B Preferred Stock. Under other circumstances involving a
public offering of Common Stock, the merged company may require holders of
Series A and B Preferred Stock to convert their shares to Common Stock. A
Securityholders Agreement also contains certain transfer restrictions,
registration rights and other matters applicable to the Series A and B Preferred
Stock and Common Stock, including voting rights and board representation.
Under both the Cash Election and the recapitalization, Springs has agreed to
(i) assume responsibility for repayment of the Industrial Revenue Bonds
described in Note 6, (ii) pay certain accrued employee benefits (which totaled
approximately $487 as of December 30, 1995), (iii) provide indemnification for
certain environmental, tax and other matters (including the environmental matter
described in Note 12 for which the Company had an accrual of $175 as of December
30, 1995) and (iv) to retain the accounts receivable from one customer (which
totaled $2,782 as of December 30, 1995) and related $1,400 reserve described in
Note 3. At the closing date, all payable and receivable accounts between the
Company and Springs will be cancelled. Funds for the Cash Distribution or the
Cash Election are to come from a new bank credit facility, a proposed debt
offering by the Company and an equity contribution by Holding. At closing, the
Company is expected to incur significant transaction costs, including the
payment of a fee to an affiliate of Vestar Equity Partners, L.P.
Additional agreements include Transition Agreements for specified periods in
which Springs would be compensated for certain services provided to the Company,
and a Management Agreement that will specify services to be provided to the
Company by Holding or its affiliates.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of the significant accounting policies used in the
preparation of the financial statements of the Company.
FISCAL YEAR--The Company's operations are based on a fifty-two or
fifty-three week fiscal year ending on the Saturday closest to December 31. The
fiscal years ended January 1, 1994, December 31, 1994 and December 30, 1995 are
referred to herein as 1993, 1994 and 1995, respectively. The 1993, 1994 and 1995
fiscal years each consist of 52 weeks.
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
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. These estimates
F-7
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
include the allowance for doubtful accounts receivable and the liabilities for
certain long-term benefit plans such as described in Note 8. Actual results
could differ from such estimates.
REVENUE RECOGNITION--Revenue from product sales is recognized at the time
ownership of the goods transfers to the customer and the earnings process is
complete. This generally occurs when goods are shipped.
ACCOUNTS RECEIVABLE--The Company establishes an allowance for doubtful
accounts based upon factors including the credit risk of specific customers,
historical trends and other information. The Company performs ongoing credit
evaluations of its customers' financial condition and generally requires no
collateral. The reserve for doubtful accounts was $641 at December 31, 1994 and
$2,133 at December 30, 1995. The reserve at December 30, 1995 included $1,400
applicable to $2,782 of accounts receivable from one customer (see Note 2). The
provision for uncollectible amounts was $344, $240 and $1,842 for fiscal 1993,
1994 and 1995, respectively. Write-offs in such years were $3,212, $29 and $349,
respectively.
INVENTORIES--Inventories are valued at the lower of cost or market. Cost is
determined using the last-in, first-out (LIFO) method for substantially all
inventories.
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment is recorded at
cost and depreciation is computed on a straight-line basis over the estimated
useful lives of the related assets. Estimated useful lives are as follows:
Land improvements........................................... 10 to 20 years
Buildings and improvements.................................. 20 to 40 years
Machinery and equipment..................................... 3 to 11 years
EQUITY INVESTMENTS--The Company owns equity interests in CS-Interglas AG
(headquartered in Germany), Asahi-Schwebel Co., Ltd. (located in Japan) and
Clark Schwebel Tech-Fab Company (located in Anderson, SC), which are accounted
for using the equity method of accounting.
FOREIGN CURRENCY--The foreign equity investments are translated at year-end
exchange rates. Equity income and losses are translated at the average rate
during the year. Cumulative translation adjustments are reflected as a separate
component of stockholder's equity. The effect of exchange rate changes on the
Convertible Notes (See Note 10) resulted in foreign currency transaction gains
(losses) of ($677), $1,405 and $1,016, in 1993, 1994 and 1995, respectively.
Because of the long-term nature of the Convertible Notes, such gains and losses
are also included in the cumulative translation adjustment.
POSTRETIREMENT BENEFITS--Postretirement benefits are accounted for pursuant
to Statement of Financial Accounting Standards ("SFAS") No. 106, Employers
Accounting for Postretirement Benefits Other Than Pensions. SFAS No. 106
requires that the projected future cost of providing postretirement benefits,
such as health care and life insurance, be recognized as an expense as employees
render service rather than when claims are incurred.
CERTAIN COMPENSATION PLANS--Certain key employees of the Company have been
granted stock options and certain types of deferred compensation related to
Springs' common stock under Springs' executive plans. Compensation expense
allocated from Springs for these grants was approximately $69, $125 and $145 for
1993, 1994 and 1995, respectively.
F-8
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
INCOME TAXES--Income taxes are accounted for pursuant to SFAS 109,
Accounting for Income Taxes. Under SFAS No. 109, deferred income tax assets and
liabilities represent the future income tax effect of temporary differences
between the book and tax bases of assets and liabilities assuming they will be
realized and settled at the amounts reported in the financial statements. The
provision for income taxes included in the accompanying financial statements is
computed in a manner consistent with SFAS No. 109, as if the Company filed
separate income tax returns.
The operating results of the Company are included in the consolidated
federal income tax return of Springs.
PER SHARE AMOUNTS--Historical per share amounts have been omitted because
the Company was a wholly-owned subsidiary of Springs for all periods presented.
4. INVENTORIES
Inventories consisted of the following:
1994 1995
------- -------
Finished goods.......................................... $10,903 $10,145
In process.............................................. 12,946 12,828
Raw materials and supplies.............................. 5,730 9,868
------- -------
Total at standard cost (which approximates average
cost)................................................. 29,579 32,841
Less LIFO reserve....................................... (3,719) (4,050)
------- -------
Inventories, net........................................ $25,860 $28,791
------- -------
------- -------
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
1994 1995
-------- --------
Land................................................... $ 1,306 $ 1,306
Buildings and improvements............................. 22,415 22,479
Machinery and equipment................................ 61,729 69,438
Construction in progress............................... 5,237 3,568
-------- --------
Total.................................................. 90,687 96,791
Less accumulated depreciation.......................... (37,287) (43,777)
-------- --------
Property, plant and equipment, net..................... $ 53,400 $ 53,014
-------- --------
-------- --------
The nonrecurring asset write-off in 1994 resulted from the retirement of
certain production equipment.
F-9
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. LONG-TERM DEBT
Long-term debt consisted of the following:
1994 1995
------ ------
Industrial Revenue Bonds, payable in 2010, interest at
6.85% (see Note 2)...................................... $5,850 $5,850
Capitalized lease obligation payable in equal monthly
installments of $7, through August 1997................... 223 136
------ ------
Total..................................................... 6,073 5,986
Less current maturities................................... 79 79
------ ------
Long-term debt............................................ $5,994 $5,907
------ ------
------ ------
Principal repayments required in fiscal 1996 through 2000 are $79, $57, $0,
$0 and $0, respectively. Property, plant and equipment with a net book value of
$3,385 as of December 30, 1995 was pledged as collateral for the Industrial
Revenue Bonds.
7. INVESTMENT BY SPRINGS
The changes in Investment by Springs were as follows:
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Beginning of year............................................ $140,707 $143,044 $127,930
Net income................................................... 2,261 11,316 15,409
Cash contributed by Springs to Interglas on behalf of the
Company.................................................... 8,780
Intercompany charge for current income tax provision......... 2,367 6,905 9,919
Intercompany charge for certain administrative services...... 3,545 2,452 3,041
Net cash paid to Springs, other intercompany charges and cash
paid by Springs on behalf of the Company..................... (14,616) (35,787) (21,942)
-------- -------- --------
End of year.................................................. $143,044 $127,930 $134,357
-------- -------- --------
-------- -------- --------
Weighted average of Investment by Springs.................... $144,071 $135,487 $131,144
-------- -------- --------
-------- -------- --------
</TABLE>
8. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company participates in the defined benefit postretirement medical plan
of Springs which covers substantially all salaried and nonsalaried employees.
The plan provides medical coverage to age 65 for employees who retire at age 62
or later, have at least 25 years of service and participated in the plan prior
to retirement. The plan is funded on a "pay-as-you-go" basis and is
contributory, with retiree contributions adjusted periodically. The financial
statements include a charge of approximately $400 for postretirement benefit
cost in each of 1993, 1994 and 1995. Such charge consists of approximately $300
of interest costs and $100 of service costs. Management believes such allocated
amounts are reasonable and approximate the amounts that would have resulted from
a SFAS 106 calculation of postretirement benefit cost on a separate company
basis.
The Company will assume responsibility for the accrued benefits attributable
to employees of the Company. Pursuant to the Agreement, the Company will
establish employee benefit plans which are substantially similar to Springs'
employee benefit plans.
F-10
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
8. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS--(CONTINUED)
The following table sets forth the status of the Company's obligation under
SFAS No. 106 at December 30, 1995:
Accumulated postretirement benefit obligation ("APBO")
Retirees........................................................... $1,200
Fully eligible active plan participants............................ 800
Other active participants.......................................... 2,000
------
Accumulated postretirement benefit obligation...................... $4,000
------
------
The December 31, 1994 and 1995 balance sheets include a liability of $4,000
which is classified in "Long-Term Benefit Plans and Deferred Compensation."
For measurement purposes, an 11.2 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed. This 11.2 percent rate
is assumed to decrease gradually to 5.5 percent until the year 2006 and remain
at that level thereafter. If the health care cost trend rate were increased by
one percent, the APBO would increase by 11 percent and postretirement benefit
cost would increase by approximately 12 percent. The discount rate used in
determining the APBO at December 30, 1995 was 7 percent.
9. INCOME TAXES
The following tables present the components of the provision for income
taxes, a reconciliation of the statutory U.S. income tax rate to the effective
income tax rate, and the principal items of deferred income tax assets and
liabilities at the end of 1994 and 1995.
Components of the total income tax provision were as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ -------
<S> <C> <C> <C>
Current federal................................................... $2,043 $6,002 $ 8,622
Current state..................................................... 324 903 1,297
------ ------ -------
Total current..................................................... 2,367 6,905 9,919
------ ------ -------
Deferred federal.................................................. (334) 502 129
Deferred state.................................................... (50) 75 47
------ ------ -------
Total deferred.................................................... (384) 577 176
------ ------ -------
Total provision................................................... $1,983 $7,482 $10,095
------ ------ -------
------ ------ -------
</TABLE>
F-11
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. INCOME TAXES--(CONTINUED)
The total provision is included in the statements of income as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ -------
<S> <C> <C> <C>
Provision on income before income taxes........................... $3,657 $4,896 $ 8,444
Income (loss) from equity investees............................... (2,105) 728 1,582
Income of discontinued operations................................. 431 264 69
Gain on sale of discontinued operations........................... 1,594
------ ------ -------
Total provision................................................... $1,983 $7,482 $10,095
------ ------ -------
------ ------ -------
</TABLE>
The difference between the federal statutory tax rate and the effective tax
rate on income before income taxes was as follows:
<TABLE>
<CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Provision at federal statutory tax rate.................................. 35.0% 35.0% 35.0%
State income tax, net of federal tax effect.............................. 3.6 3.5 3.4
Amortization of acquisition price not deductible for tax purposes........ 1.8 1.2 .7
Other.................................................................... 2.0 1.0 .8
----- ----- -----
Effective tax rate....................................................... 42.4% 40.7% 39.9%
----- ----- -----
----- ----- -----
</TABLE>
Temporary differences and the related balances of deferred tax assets and
liabilities were as follows:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Employee benefit accruals................................................ $ 1,968 $ 1,975
Deferred compensation.................................................... 173 186
Equity investments....................................................... 3,326 2,562
Environmental reserve.................................................... 172 67
Other items.............................................................. 508 940
------- -------
Total deferred tax assets................................................ 6,147 5,730
------- -------
Property................................................................. 7,017 6,638
Equity investments....................................................... 12,486 12,719
Inventories.............................................................. 2,788 2,943
Other items.............................................................. 516 280
------- -------
Total deferred tax liabilities........................................... 22,807 22,580
------- -------
Net deferred tax liabilities............................................. $16,660 $16,850
------- -------
------- -------
</TABLE>
10. EQUITY INVESTMENTS
CS-INTERGLAS AG ("INTERGLAS")--In March 1993, the Company contributed two
European subsidiaries and $8.8 million to Interglas, a company which
manufactures fiber glass, aramid and carbon fabrics, in exchange for a 24.9%
common stock interest and convertible notes with face value of 20 million
Deutsche marks (the "Convertible Notes"). No gain or loss was recognized as a
result of this exchange. The Company's common stock investment in Interglas had
a carrying value of $11,813 and $12,809 at
F-12
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. EQUITY INVESTMENTS--(CONTINUED)
December 31, 1994 and December 30, 1995, respectively. Such carrying value at
December 30, 1995 exceeds 24.9% of Interglas' total equity by approximately
$13,000, which is being amortized on a straight-line basis through 2013.
The Convertible Notes, which had a carrying value of $12,906 and $13,922 at
December 31, 1994 and December 30, 1995, respectively, are convertible into
common stock of Interglas at any time after December 31, 1996. At the Company's
option, conversion would result in the Company owning a total of 42% of the
outstanding common stock of Interglas as of December 30, 1995. Interest on the
Convertible Notes, which is included in income (loss) from equity investees, is
at 8% through December 31, 1996 and 5% thereafter. Interest income on the
Convertible Notes was not accrued by the Company in 1993 due to the financial
results of Interglas. Interest income in 1994 and 1995 was recognized on an
accrual basis with the 1994 amount including approximately $846 of interest
relating to 1993. If Convertible Notes are not converted, the principal balance
plus outstanding interest becomes due on June 30, 2007.
ASAHI-SCHWEBEL CO., LTD. ("ASCO")--The Company owns a 39% common equity
interest in ASCO, a company which manufactures fiber glass fabrics. The
Company's investment in ASCO had a carrying value of $33,037 and $33,205 at
December 31, 1994 and December 30, 1995, respectively. The carrying value at
December 30, 1995 exceeds 39% of ASCO's total equity by approximately $3,000,
which is being amortized on a straight-line basis through 2008.
CLARK-SCHWEBEL TECH-FAB COMPANY ("TECH-FAB")--The Company owns a 50%
partnership interest in Tech-Fab, a joint venture which manufactures nonwoven
fabrics using fiber glass and other synthetic materials. The Company's
investment in Tech-Fab had a carrying value of $2,260 and $2,968 at December 31,
1994 and December 30, 1995, respectively.
COMBINED SUMMARIZED FINANCIAL INFORMATION--The following table provides
combined summarized balance sheet information for these investees as of December
31, 1994 and 1995:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Current assets......................................................... $132,641 $139,541
Noncurrent assets...................................................... 107,435 101,538
-------- --------
Total assets........................................................... $240,076 $241,079
-------- --------
-------- --------
Current liabilities.................................................... $ 49,937 $ 47,883
Noncurrent liabilities................................................. 100,571 92,345
Redeemable equity instrument........................................... 21,341 21,341
Equity................................................................. 68,227 79,510
-------- --------
Total liabilities and equity........................................... $240,076 $241,079
-------- --------
-------- --------
</TABLE>
The following table provides combined summarized income statement
information for these investees for the years ended December 31, 1993, 1994 and
1995:
<TABLE>
<CAPTION>
1993 1994 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales.................................................... $208,044 $266,251 $328,145
Operating income (loss)...................................... $(12,699) $ 8,303 $ 20,761
Net income (loss)............................................ $(13,917) $ 3,045 $ 13,207
</TABLE>
F-13
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. MAJOR CUSTOMERS, CERTAIN CONCENTRATIONS, AND FAIR VALUE OF
FINANCIAL INSTRUMENTS
Sales to two customers exceeded 10% of net sales during fiscal 1993, 1994
and 1995. Sales to the two customers represented as a percentage of net sales
26.2% and 10.9% in 1993, 29.6% and 10.6% in 1994, and 29.1% and 13.2% in 1995.
Accounts receivable due from the these two customers as a percent of total
accounts receivable was 50% at December 31, 1994 and 52% at December 30, 1995.
Although the Company's exposure to credit risk could be affected by conditions
or occurrences within these customers' industry, no indication of such adverse
circumstances existed at December 30, 1995.
The Company currently buys substantially all of its fiberglass yarn, an
important component of its products, from two suppliers and substantially all of
its aramid yarn from one supplier. There are a limited number of manufacturers
of fiberglass yarn and aramid yarn.
The Company's financial instruments include cash, accounts receivable,
Convertible Notes, accounts payable and long-term debt. Management estimates
that the carrying value of such instruments approximates fair value.
12. COMMITMENTS AND CONTINGENCIES
The Company leases certain machinery and equipment under noncancelable
operating leases. Rent expense attributed to such leases was $583 in 1993, $432
in 1994, and $384 in 1995.
Future minimum payments under the non-cancelable operating leases as of
December 30, 1995 were as follows:
1996................................................................ $337
1997................................................................ 304
1998................................................................ 64
1999................................................................ 4
----
$709
----
----
The Company is involved in administrative proceedings governed by
environmental laws and regulations, including proceedings under the
Comprehensive Environmental Response, Compensation and Liability Act. The
potential costs related to environmental matters are uncertain due to such
factors as: the unknown magnitude of possible pollution and cleanup costs; the
complexity and evolving nature of governmental laws and regulations and their
interpretations; the timing, varying costs and effectiveness of alternative
cleanup technologies; the determination of the liability in proportion to the
respective liabilities of other potential responsible parties; and the extent,
if any, to which such costs are recoverable from insurance or other parties. The
Company has accrued $175 as of December 30, 1995, which represents management's
best estimate of the probable liability concerning all known environmental
matters. This accrual has not been reduced by any potential insurance recovery.
There was no material provision for environmental matters in 1993, 1994 or 1995.
In the opinion of management, the ultimate disposition of these matters will not
materially affect the Company's financial position or results of operations (see
Note 2).
F-14
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
12. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
The Company is subject to legal proceedings and claims which arise in the
ordinary course of business. In the opinion of management, the amount of
ultimate liability with respect to these matters will not materially affect the
Company's financial position or results of operations.
13. DISCONTINUED OPERATIONS
In June 1994, the Company sold substantially all the assets of certain
subsidiaries engaged in a separate line of business which had revenues of
$83,011 and $42,925 for fiscal 1993 and the first six months of 1994,
respectively. The Company reported a gain on this transaction of $2,573, net of
taxes of $1,594.
In January 1996, the Company sold its equity investment in a company engaged
in a separate line of business for an amount which approximated book value. The
proceeds received were distributed to Springs. The equity earnings from this
investment also are included in Discontinued Operations in the Company's
financial statements.
F-15
<PAGE>
FORT MILL A INC.
BALANCE SHEET
MARCH 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 30,
1996
--------------
<S> <C>
(IN THOUSANDS)
ASSETS
CURRENT ASSETS:
Cash....................................................................... $ 75
Accounts receivable, net................................................... 31,887
Inventories, net........................................................... 28,560
Other...................................................................... 1,447
--------------
Total current assets................................................... 61,969
PROPERTY, PLANT AND EQUIPMENT.................................................. 93,069
Accumulated depreciation..................................................... (42,065)
--------------
Property, plant and equipment, net......................................... 51,004
--------------
EQUITY INVESTMENTS............................................................. 62,863
NET ASSETS OF DISCONTINUED OPERATIONS.......................................... 0
OTHER ASSETS AND DEFERRED CHARGES.............................................. 5,734
--------------
TOTAL ASSETS................................................................... $181,570
--------------
--------------
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable........................................................... $ 9,414
Accrued liabilities........................................................ 6,560
Deferred tax liabilities--current.......................................... 2,024
Current maturities of long-term debt....................................... 79
--------------
Total current liabilities.............................................. 18,077
LONG-TERM DEBT................................................................. 5,885
DEFERRED TAX LIABILITIES....................................................... 15,323
LONG-TERM BENEFIT PLANS, DEFERRED COMPENSATION AND OTHER....................... 5,320
--------------
COMMITMENTS AND CONTINGENCIES..................................................
TOTAL LIABILITIES.............................................................. 44,605
--------------
EQUITY:
Common stock (par value--$1)--1,000 shares authorized, 100 shares
outstanding............................................................... 1
Investment by Springs...................................................... 128,719
Cumulative translation adjustment.......................................... 8,245
--------------
Total equity........................................................... 136,965
--------------
TOTAL LIABILITIES AND EQUITY................................................... $181,570
--------------
--------------
</TABLE>
See notes to financial statements.
F-16
<PAGE>
FORT MILL A INC.
STATEMENTS OF INCOME
THIRTEEN WEEKS ENDED APRIL 1, 1995 AND MARCH 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------
APRIL 1, MARCH 30,
1995 1996
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Net sales.......................................................... $ 49,239 $60,170
Cost of goods sold................................................. 42,115 47,851
-------- ---------
Gross profit....................................................... 7,124 12,319
Selling, general and administrative
expenses......................................................... 4,124 3,875
-------- ---------
Operating income............................................... 3,000 8,444
Other income (expense):
Interest expense................................................. (101) (128)
Other, net....................................................... (5) 0
-------- ---------
Income before income taxes......................................... 2,894 8,316
Provision for income tax........................................... (1,151) (3,328)
Income from equity investees, net.................................. 386 907
-------- ---------
Income from continuing operations.................................. 2,129 5,895
Income from discontinued operations, net........................... 18 0
-------- ---------
Net income..................................................... $ 2,147 $ 5,895
-------- ---------
-------- ---------
</TABLE>
See notes to financial statements.
F-17
<PAGE>
FORT MILL A INC.
STATMENTS OF CASH FLOWS
THIRTEEN WEEKS APRIL 1, 1995 AND MARCH 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 1, MARCH 30,
1995 1996
-------- ---------
<S> <C> <C>
(IN THOUSANDS)
OPERATING ACTIVITIES:
Net income.............................................................. $ 2,147 $ 5,895
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization..................................... 2,847 3,012
Deferred tax provision............................................ (242) 1,404
Income from equity investments, net............................... (386) (907)
Income from discontinued operations, net.......................... (18) 0
Changes in assets and liabilities:
Accounts receivable............................................. (1,903) (450)
Inventories..................................................... (6,114) 231
Accounts payable................................................ 4,014 382
Accrued liabilities............................................. (337) (768)
Other........................................................... 223 (1,132)
-------- ---------
Net cash provided by operating activities..................... 231 7,667
-------- ---------
INVESTING ACTIVITIES--Purchases of equipment............................ (2,001) (1,082)
-------- ---------
Net cash used in investing activities......................... (2,001) (1,082)
-------- ---------
FINANCING ACTIVITES:
Investment by Springs............................................... 1,963 (11,533)
Transfer of assets retained by Springs.............................. 0 4,461
Principal payments under capital lease obligation................... (22) (22)
-------- ---------
Net cash provided by (used in) financing activities........... 1,941 (7,094)
-------- ---------
NET CHANGE IN CASH...................................................... 171 (509)
CASH, BEGINNING OF YEAR................................................. 29 584
-------- ---------
CASH, END OF YEAR....................................................... $ 200 $ 75
-------- ---------
-------- ---------
CASH, PAID FOR INTEREST................................................. $ 100 $ 100
-------- ---------
-------- ---------
</TABLE>
See notes to financial statements.
F-18
<PAGE>
FORT MILL A INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
Fort Mill A Inc., a wholly-owned subsidiary of Springs Industries, Inc.
("Springs"), is a holding company whose sole asset is 100% of the outstanding
stock of Clark-Schwebel, Inc. The accompanying financial statements include the
assets, liabilities and results of operations of Fort Mill A Inc. and
Clark-Schwebel, Inc. on a consolidated basis, and also include certain
liabilities and expenses that historically were accounted for only at the
Springs-parent company level. The consolidated entity is referred to herein as
the "Company".
The financial statements have been prepared generally as if the Company had
operated as a stand-alone entity for all periods presented. In addition, these
financial statements do not reflect any effects of the proposed change in
ownership transactions described in Note 2. The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The balance sheet at December 30, 1995 has been derived from the audited
financial statements at that date. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the thirteen week period
ended March 30, 1996 are not necessarily indicative of the results that may be
expected for the year ended December 28, 1996. For further information, refer to
the Company's consolidated financial statements and footnotes for the year ended
December 30, 1995 included elsewhere herein.
2. CHANGE IN OWNERSHIP TRANSACTION
On February 24, 1996, the Company, Springs and affiliates of Vestar Equity
Partners, L.P. (Vestar), entered into an Agreement and Plan of Merger
(Agreement) whereby affiliates of Vestar would acquire the Company. Pursuant to
the Agreement, on April 17, 1996, (Closing Date) Vestar/CS Holding Company, Inc.
(Vestar/CS) purchased all of the issued and outstanding capital stock of Fort
Mill A Inc. from Springs for approximately $192,895. The sources of cash for
this purchase included $110,000 of senior notes, an equity contribution of
$45,000 and bank debt. On the day following the Closing Date, Vestar/CS had an
82% common equity interest in Clark-Schwebel Holdings, Inc. (Holdings) and
Management Investors had an 18% common equity interest in Holdings, and Holdings
had as its sole asset all of the capital stock of the Company.
Under the agreement, Springs has agreed to (i) assume responsibility for
repayment of the Industrial Revenue Bonds payable in 2010 and related accrued
interest, (ii) pay certain accrued employee benefits, (iii) provide
indemnification for certain environmental, tax and other matters and (iv) retain
the accrued obligation related to the Company's Long-Term Disability Plan. At
the Closing Date, all payable and receivable accounts between the Company and
Springs were cancelled.
Additional agreements include Transition Agreements for specified periods in
which Springs would be compensated for certain services provided to the Company,
and a Management Agreement that specifies services to be provided to the Company
by Holdings or its affiliates.
F-19
<PAGE>
FORT MILL A INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS)
2. CHANGE IN OWNERSHIP TRANSACTION--(CONTINUED)
In accordance with agreements related to the change of ownership
transaction, certain assets (net accounts receivable from one customer--see Note
2 on page F-7 and equity investment--see Note 13 on page F-15) totaling $4,461
were transferred to Springs in the first quarter of 1996. This balance has been
separately disclosed on the face of the accompanying first quarter 1996
statement of cash flows.
3. LONG-TERM DEBT
As of March 30, 1996 long-term debt consisted of:
Industrial Revenue Bonds payable in 2010, interest at 6.85% (See
Note 2)......................................................... $5,850
Capitalized lease obligation payable in equal monthly installments
of $7, through August 1997...................................... 114
------
Total....................................................... 5,964
Less current maturities........................................... (79)
------
Long-term debt.................................................... $5,885
------
------
Principal repayments required in fiscal 1996 total $57.
4. INVENTORIES
As of March 30, 1996 inventories consisted of:
Raw material and supplies........................................ $10,546
In-process....................................................... 8,797
Finished goods................................................... 14,153
Less LIFO reserve................................................ (4,936)
-------
$28,560
-------
-------
F-20
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Clark-Schwebel Holdings, Inc.:
We have audited the accompanying balance sheet of Clark-Schwebel Holdings,
Inc. (a Delaware corporation) as of April 2, 1996. This financial statement is
the responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. 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 audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Clark-Schwebel Holdings, Inc. as of
April 2, 1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
May 17, 1996
F-21
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
BALANCE SHEET--APRIL 2, 1996
<TABLE>
<CAPTION>
ASSETS
- ---------------------------------------------------------------------------------
<S> <C>
Cash............................................................................. $ 0
--------
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
- ---------------------------------------------------------------------------------
<S> <C>
Commitments and contingencies....................................................
Shareholders' equity--Common stock, $.01 par value, 1,000 shares authorized, no
shares issued.................................................................... $ 0
--------
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-22
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO BALANCE SHEET
APRIL 2, 1996
1. ORGANIZATION AND ACQUISITION:
Clark-Schwebel Holdings, Inc. (the Company) was incorporated on April 2,
1996. As of April 2, 1996, the Company had not commenced operations, had no
assets or liabilities and the acquisition described below had not been
consummated.
The Company, its wholly owned subsidiary, Clark-S Acquisition and Clark-S
Acquisition's wholly owned subsidiary, CS Finance Corporation of Delaware, were
organized by affiliates of Vestar Equity Partners, L.P. (collectively, Vestar)
to effect the acquisition of Fort Mill A, Inc. (Fort Mill) and Clark-Schwebel,
Inc. (Clark-Schwebel). Effective April 17, 1996, the Company completed the
acquisition transaction and related stock and debt issuances as discussed below.
Consideration for the acquisition was approximately $192.9 million pursuant to
an agreement and plan of merger. The transactions occurred as follows: Clark-S
Acquisition purchased all of the issued and outstanding capital stock of Fort
Mill from Springs Industries, Inc. (Springs). Concurrently with the consummation
of the acquisition, Clark-S Acquisition merged into Fort Mill, with Fort Mill
being the surviving corporation. Also, CS Finance Corporation merged into
Clark-Schwebel, with Clark-Schwebel being the surviving corporation. On the day
following the closing, Fort Mill merged into Clark-Schwebel. Immediately
following the merger, the Company's sole asset was all of the capital stock of
Clark-Schwebel.
2. FINANCING:
The acquisition discussed in Note 1 was financed by obtaining $110 million
in senior debt through an offering of senior notes due 2006 by Clark-S
Acquisition, which was fully and unconditionally guaranteed by the Company.
Additional financing was obtained through a $15 million term loan, a $55 million
revolving credit facility guaranteed by the Company and equity financing of $36
million and $9 million from the sale of preferred and common stock,
respectively. Approximately $35 million from the revolving credit facility was
used to finance the acquisition.
The senior notes accrue interest at a fixed rate of 10 1/2% per annum and
will be payable semiannually in arrears on April 15 and October 15. The senior
notes are not redeemable at the option of the Company prior to April 15, 2001.
The debt under the credit facility bears interest which varies with LIBOR plus a
margin which varies with the Company's leverage ratio. On April 17, 1996, the
interest rate under the credit facility was 7 1/2% per annum. Interest is
typically payable monthly. Future maturities of the debt over the next five
calendar years beginning in 1996 are as follows: $0.5 million, $1.5 million,
$2.0 million, $2.5 million and $3.0 million.
The bank credit facility and the senior notes contain certain restrictive
covenants which, among other things, provide limitations on the Company with
respect to restricted payments, indebtedness, liens, investments, dividends,
distributions, transactions with affiliates, debt repayments, capital
expenditures, mergers and consolidations.
The bank facility and senior note covenants also require maintenance of
certain financial ratios.
3. COMMON AND PREFERRED STOCK:
The equity contribution was comprised of: (1) a contribution of $43.2
million from Vestar in exchange for (a) $36 million of the Company's 12.5%
participating preferred stock and (b) $7.2 million of the common stock of the
Company; and (2) a contribution of $1.8 million from management investors in
exchange for $1.8 million of the Company's common stock. $0.8 million of the
contribution from the management investors was financed by loans from the
Company which were made in exchange for individual notes which bear interest at
a rate of 6.51%, and are to be repaid in five equal installments in the years
1997, 1998, 1999, 2000 and 2001 with a balloon note payable for the balance at
the maturity date in the year 2006. Each note is secured by a pledge of the
Holdings Common Stock held by the corresponding management investor.
F-23
<PAGE>
The Common Stock purchased by management of the Company ("Management Stock")
is subject to various puts and calls prior to the sale of the Company or an
initial public offering. In the event of the termination of the management
investor's employment (i) such management investor's Management Stock may be put
to the Company following the later of such termination and April 17, 2001 and
(ii) the Company and/or Vestar/CS Holding will have a call on such Management
Stock. The exercise price for the puts ranges from (i) the greater of the book
value of Management Stock and the cost of Management Stock to such management
investor to (ii) the fair market value of Management Stock. The exercise price
for the calls ranges from (i) the lesser of the book value of the Management
Stock and the cost of Management Stock to such management investor to (ii) the
fair market value of the Management Stock.
In connection with the acquisition, the Company issued 1,000 shares of the
Company's participating preferred stock, par value $.01 per share, with an
initial liquidation value of $35 million and a value of $1.0 million for the
participating common equity interest. The participating preferred stock is
perpetual and dividends accrue at a rate of 12.5% per annum of the aggregate
initial liquidation value, and accumulate and compound on a quarterly basis,
with certain exceptions, until its redemption or cancellation. The preferred
stock votes and receives dividends and other distributions with the Company's
common stock on a share for share basis. The preferred stock is redeemable by
the Company at any time.
4. COMMITMENTS AND CONTINGENCIES:
ACQUISITION AGREEMENT
Certain affiliates of Vestar signed a merger agreement dated February 24,
1996, relating to the acquisition of Fort Mill and Clark-Schwebel as discussed
in Note 1. Consummation of the acquisition was subject to the satisfaction or
waiver of certain conditions set forth in the merger agreement, including: (1)
obtaining financing for the acquisition; (2) the absence of any material adverse
change in the business of the Company; (3) the receipt of certain third-party
consents and approvals and (4) other customary conditions.
TRANSACTION COSTS
The balance sheet does not include any accrual for certain legal, accounting
and other organization costs, some of which were contingent upon consummation of
the acquisition (estimated to be approximately $11.3 million at the time of the
closing of the acquisition). The Company paid these transaction costs out of the
proceeds of the financing discussed in Note 2. Substantially all of the debt
financing costs were capitalized by the Company.
TRANSITION AND MANAGEMENT AGREEMENTS
The transition agreement is for specified periods in which Springs will be
compensated for certain services provided to the Company. The management
agreement specifies services to be provided to Clark-Schwebel by the Company,
Vestar or its affiliates.
ADDITIONAL AGREEMENTS
In connection with the Acquisition, Springs Industries assumed
responsibility for repayment of $5.9 million of Industrial Revenue Bonds held by
Clark-Schwebel, assumed certain liabilities, provided indemnification for
certain environmental, tax and other matters and retained the accounts
receivable from one customer totaling approximately $1.4 million.
F-24
<PAGE>
=========================================== ==================================
- ------------------------------------------- ----------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS [LOGO]
IN CONNECTION WITH THE EXCHANGE OFFER MADE BY
THIS PROSPECTUS, AND, IF GIVEN OR MADE BY
THIS PROSPECTUS, AND, 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 CLARK-SCHWEBEL, INC.
AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES OR ANY OFFER
TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
-------------------
TABLE OF CONTENTS
PAGE ----------------
PROSPECTUS
Available Information................ ii ----------------
Prospectus Summary................... 1
Risk Factors......................... 12
The Transactions..................... 18
Use of Proceeds...................... 20
Capitalization....................... 20
Selected Historical Financial Data... 21
Unaudited Pro Forma Financial
Statements......................... 23
Management's Discussion and Analysis OFFER TO EXCHANGE ITS 10 1/2%
of Financial Condition and Results
of Operations...................... 31 SERIES B SENIOR NOTES DUE
The Business......................... 37
Management........................... 47 2006 FOR ANY AND ALL OF ITS
Security Ownership................... 51
Certain Relationships and Related OUTSTANDING 10 1/2% SERIES A
Transactions......................... 52
Description of Holdings Participating SENIOR NOTES DUE 2006
Preferred Stock...................... 53
Description of Credit Agreement...... 53
Description of New Notes............. 55
The Exchange Offer................... 84
Certain Federal Income Tax
Considerations....................... 92
Plan of Distribution................. 95
Legal Matters........................ 96
Experts.............................. 96
Index to Financial Statements........ F-1
-------------------
Until November 8, 1996, (90 days after
the date of this Prospectus), 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. , 1996
=========================================== ==================================
- ------------------------------------------- ----------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Each of Holdings and the Company is incorporated under the laws of the State
of Delaware. Section 145 of the General Corporation Law of the State of
Delaware, inter alia, ("Section 145") provides that a Delaware corporation may
indemnify any persons who were, are or are threatened to be made, parties 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 such corporation), by reason of the fact that such person is or was an
officer, director, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer employee or agent of
another corporation or enterprise. The indemnity may include 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, provided such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best interests
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe that his conduct was illegal. A Delaware corporation may indemnify
any persons who are, were or are threatened to be made, a party to any
threatened, pending or completed action or suit by or in the right of the
corporation by reason of the fact that such person was a director, officer,
employee or agent of such corporation, or is or was serving at the request of
such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit, provided such person
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the corporation's best interests, provided that no indemnification is
permitted without judicial approval if the officer, director, employee or agent
is adjudged to be liable to the corporation. Where an officer, director,
employee or agent is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses which such officer or director has actually and reasonably incurred.
Each of Holdings and the Company's Certificate of Incorporation provides for
the indemnification of their respective directors and officers of the Company to
the fullest extent permitted by the General Corporation Law of the State of
Delaware, as it currently exists or may hereafter be amended.
Section 145 further authorizes a corporation 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 or enterprise,
against any liability asserted against him and incurred by him in any such
capacity, arising out of his status as such, whether or not the corporation
would otherwise have the power to indemnify him under Section 145.
Holdings and the Company maintain and have in effect insurance policies
covering all of their respective directors and officers against certain
liabilities for actions taken in such capacities, including liabilities under
the Securities Act of 1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
See Exhibit Index
(b) Financial Statement Schedules.
II-1
<PAGE>
None required.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(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;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(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 the time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering; and
(4) 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 reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(5) 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, 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described under
Item 20 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 Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by
II-2
<PAGE>
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes that:
(6) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
(8) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus
pursuant to Item 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.
(9) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Anderson,
State of South Carolina, on August 12, 1996.
CLARK-SCHWEBEL HOLDINGS, INC.
By: /s/ WILLIAM D. BENNISON
..................................
Name: William D. Bennison
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------ ------------------------------------ ----------------
<S> <C> <C>
/s/ WILLIAM D. BENNISON President and Director August 12, 1996
....................................
William D. Bennison
/s/ DONALD R. BURNETTE Vice President and Chief Financial August 12, 1996
.................................... Officer
Donald R. Burnette
* Chairman of the Board August 12, 1996
....................................
Jack P. Schwebel
* Executive Vice President and August 12, 1996
.................................... Director
Richard C. Wolfe
* Director August 12, 1996
....................................
Norman W. Alpert
* Director August 12, 1996
....................................
John D. Howard
* Director August 12, 1996
....................................
Sander M. Levy
* Director August 12, 1996
....................................
Arthur J. Nagle
* Director August 12, 1996
....................................
Daniel S. O'Connell
</TABLE>
*Executed by Donald R. Burnette as attorney-in-fact.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Anderson,
State of South Carolina, on August 12, 1996.
CLARK-SCHWEBEL, INC.
By: /s/ WILLIAM D. BENNISON
..................................
Name: William D. Bennison
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------ ------------------------------------ ----------------
<S> <C> <C>
/s/ WILLIAM D. BENNISON President and Director August 12, 1996
....................................
William D. Bennison
/s/ DONALD R. BURNETTE Vice President and Chief Financial August 12, 1996
.................................... Officer
Donald R. Burnette
* Chairman of the Board August 12, 1996
....................................
Jack P. Schwebel
* Executive Vice President and August 12, 1996
.................................... Director
Richard C. Wolfe
* Director August 12, 1996
....................................
Norman W. Alpert
* Director August 12, 1996
....................................
John D. Howard
* Director August 12, 1996
....................................
Sander M. Levy
* Director August 12, 1996
....................................
Arthur J. Nagle
* Director August 12, 1996
....................................
Daniel S. O'Connell
</TABLE>
*Executed by Donald R. Burnette as attorney-in-fact.
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
- -------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of February 24, 1996, among Springs
Industries, Inc., Fort Mill A Inc., Vestar/CS Holding Company, L.L.C. and Clark-S
Acquisition Corporation.*
2.2 Amendment No. 1 to Agreement and Plan of Merger, among Springs Industries, Inc.,
Fort Mill A, Inc., Vestar/CS Holding Company, L.L.C. and Clark-S Acquisition
Corporation.*
2.3 Form of Management Common Stock Subscription Agreement, dated as of April 17, 1996,
between Clark-Schwebel Holdings, Inc. and the Management Investors.*
3.1 Amended and Restated Certificate of Incorporation of Clark-Schwebel Holdings, Inc.*
3.2 By-laws of Clark-Schwebel Holdings, Inc.*
3.3 Certificate of Incorporation of Clark-Schwebel, Inc.*
3.4 By-laws of Clark-Schwebel, Inc.*
4.1 Indenture, dated as of April 17, 1996, among Clark-Schwebel Holdings, Inc., Clark-S
Acquisition Corporation, CS Finance Corporation of Delaware and Fleet National
Bank, as Trustee.*
4.2 First Supplemental Indenture, dated as of April 18, 1996, between Clark-Schwebel,
Inc. and Fleet National Bank.*
4.3 Forms of Series A and Series B 10 1/2% Senior Notes (included in Exhibit 4.1 as
Exhibit A thereto).*
4.4 Purchase Agreement, dated as of April 12, 1996, among Clark-Schwebel Holdings, Inc.,
Clark-S Acquisition Corporation, CS Finance Corporation of Delaware, Donaldson,
Lufkin & Jenrette Securities Corporation, Bear, Stearns & Co. Inc., CS First
Boston Corporation and Lazard Freres & Co. LLC.*
4.5 Registration Rights Agreement, dated as of April 17, 1996, by and among
Clark-Schwebel Holdings, Inc., Clark-S Acquisition Corporation, CS Finance
Corporation of Delaware, Donaldson, Lufkin & Jenrette Securities Corporation,
Bear, Stearns & Co. Inc., CS First Boston Corporation and Lazard Freres & Co.
LLC.*
4.6 Securityholders Agreement, dated April 17, 1996, by and among Clark-Schwebel
Holdings, Inc., Vestar/CS Holding Company, L.L.C. and certain other parties
thereto.*
4.7 Form of Holdings Guarantee (included in Exhibit 4.1 as Exhibit D thereto).*
4.8 Form of Subsidiary Guarantee (included in Exhibit 4.1 as Exhibit C thereto).*
5.1 Opinion and consent of Kirkland & Ellis.
9.1 Voting Trust Agreement, made as of April 17, 1996, by and among Clark-Schwebel
Holdings, Inc., Vestar/CS Holding Company, L.L.C. and other parties thereto.*
10.1 Credit Agreement, dated as of April 17, 1996, among the several banks and other
financial institutions from time to time parties thereto and Chemical Bank (the
"Agent").*
10.2 Intentionally Omitted.
10.3 Intentionally Omitted.
10.4 Form of Security Agreement, dated as of April 17, 1996, made by each Guarantor in
favor of the Agent.*
10.5 Form of Pledge Agreement, dated as of April 17, 1996, made by each Guarantor in
favor of the Agent.*
10.6 Form of Guarantee Agreement, dated as of April 17, 1996, made by each Guarantor in
favor of the Agent.*
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
- -------
<C> <S>
10.7 Intentionally Omitted.
10.8 Management Agreement, dated as of April 17, 1996, between Clark-Schwebel Holdings,
Inc. and Springs Industries, Inc.*
10.9 Form of Intellectual Property Security Agreement, among Clark-Schwebel Holdings,
Inc., Clark-Schwebel, Inc. and the other parties thereto.*
12.1 Statement Regarding Computation of Ratios of Earnings to Fixed Charges.*
21.1 Subsidiaries of the Registrants.*
23.1 Consent of Arthur Andersen LLP.*
23.2 Consent of Deloitte & Touche LLP.*
23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1)*
24.1 Powers of Attorney.*
25.1 Statement of Eligibility of Trustee on Form T-1.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Tender Instructions.*
</TABLE>
- ------------
* Previously filed
II-7
