AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1996
REGISTRATION NO. 333-4723
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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)
<TABLE>
<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)
<TABLE>
<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
<TABLE>
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
<TABLE>
<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>
SUBJECT TO COMPLETION, DATED JULY , 1996
PRELIMINARY PROSPECTUS
, 1996
[CLARK-SCHWEBEL 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 , 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 , 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 , 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL NOR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<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."
-------------------
i
<PAGE>
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.
ii
<PAGE>
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
Since its founding in 1960, the Company has been a leading manufacturer and
marketer of industrial fabrics, including electronics fiber glass fabric,
composite materials fiber glass fabric and high performance fabrics. 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 the 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 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,
2
<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. As the
leading producer of electronics fiber glass fabrics, with an estimated
50% share of the United States market, the Company 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
3
<PAGE>
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."
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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.
</TABLE>
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<S> <C>
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 , 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
</TABLE>
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<TABLE>
<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.
</TABLE>
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<S> <C>
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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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 and pro forma financial data were derived
from the historical consolidated financial statements and the "Unaudited Pro
Forma Financial Statements" of Fort Mill. 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 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
--------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1995 1996 1996
------ ------ ------ --------- ----- ----- -----------
<CAPTION>
(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
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 n/a 26.1x 53.5x n/a
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
Dividends on preferred stock..... $ 4.6 $ 1.1
</TABLE>
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<TABLE>
<CAPTION>
AT MARCH 30, 1996
--------------------
ACTUAL PRO FORMA
------ ---------
<S> <C> <C>
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 1.9:1.
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 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."
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
13
<PAGE>
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 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
14
<PAGE>
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 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
15
<PAGE>
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 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.
16
<PAGE>
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.
[DIAGRAM]
<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):
<TABLE>
<CAPTION>
<S> <C>
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
------
------
</TABLE>
--------------------------
(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.
<TABLE>
<CAPTION>
AT MARCH 30, 1996
---------------------
ACTUAL PRO FORMA
------ -----------
<S> <C> <C>
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
------ -----------
------ -----------
</TABLE>
- ------------
(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 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
---------------------------------------------- -------------
1991 (2) 1992 (2) 1993 1994 1995 1996
-------- -------- ------ ------ ------ -------------
<S> <C> <C> <C> <C> <C> <C>
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).
<TABLE>
<CAPTION>
FISCAL YEAR
----------------
1991 1992
------ ------
<S> <C> <C>
INCOME STATEMENT DATA:
Net sales................................................. $236.0 $200.5
Operating income (loss)................................... 4.2 (4.3)
Net income (loss)......................................... 2.5 (4.0)
------ ------
------ ------
</TABLE>
(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:
<TABLE>
<S> <C>
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)
-----
-----
</TABLE>
(3) The pro forma adjustment to interest expense under the new capital
structure is as follows:
<TABLE>
<S> <C>
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
-----
-----
</TABLE>
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.
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:
<TABLE>
<S> <C>
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.............................................. --
-----
-----
</TABLE>
(3) The pro forma adjustment to interest expense under the new capital
structure is as follows:
<TABLE>
<S> <C>
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
-----
-----
</TABLE>
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:
<TABLE>
<S> <C>
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
------
------
</TABLE>
(1) The pro forma adjustment to net assets represents the step-up to fair
value of the net assets acquired as follows:
<TABLE>
<S> <C>
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
------
------
</TABLE>
(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:
<TABLE>
<S> <C>
Certain retained assets........................................... $(0.4)
Deferred financing costs.......................................... 8.1
-----
Total adjustment.............................................. $ 7.7
-----
-----
</TABLE>
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:
<TABLE>
<S> <C>
Industrial revenue bond obligations retained by Springs
Industries........................................................ $ (5.9)
Credit Agreement.................................................. 50.0
Notes............................................................. 110.0
------
Total adjustment............................................ $154.1
------
------
</TABLE>
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:
<TABLE>
<S> <C>
Equity Contribution, net of loans to
Management Investors............................................ $ 44.2
Elimination of historical equity.................................. (137.0)
-------
Total adjustment............................................ $ (92.8)
-------
-------
</TABLE>
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, 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 reported by Asahi-Schwebel due to
increased sales revenue. This improvement was partially offset by slightly lower
earnings reported by CS Tech-Fab.
32
<PAGE>
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 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.
33
<PAGE>
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.
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<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
Since its founding in 1960, the Company has been a leading manufacturer and
marketer of industrial fabrics, including electronics fiber glass fabric,
composite materials fiber glass fabric and high performance fabrics. 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 the 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.
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<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 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. As the
leading producer of electronics fiber glass fabrics, with an estimated 50%
share of the United States market, the Company 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,
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<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.
[DIAGRAM]
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.
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<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.
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<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.
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<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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<PAGE>
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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<PAGE>
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.
46
<PAGE>
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.
47
<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
48
<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
49
<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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<PAGE>
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. 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.
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 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
53
<PAGE>
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
55
<PAGE>
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. 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 two or
more Subsidiary Guarantors with and into each other or the merger of any
Subsidiary Guarantor into the Company.
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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:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------ -----------
<S> <C>
2001...........................................] 105.25%
2002...........................................] 103.50%
2003...........................................] 101.75%
2004 and thereafter............................] 100.00%
</TABLE>
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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<PAGE>
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 , 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
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
94
<PAGE>
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
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
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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
</TABLE>
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:
<TABLE>
<CAPTION>
<S> <C>
Land improvements........................................... 10 to 20 years
Buildings and improvements.................................. 20 to 40 years
Machinery and equipment..................................... 3 to 11 years
</TABLE>
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:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
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
------- -------
------- -------
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
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
-------- --------
-------- --------
</TABLE>
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:
<TABLE>
<CAPTION>
1994 1995
------ ------
<S> <C> <C>
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
------ ------
------ ------
</TABLE>
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:
<TABLE>
<CAPTION>
<S> <C>
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
------
------
</TABLE>
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:
<TABLE>
<CAPTION>
<S> <C>
1996................................................................ $337
1997................................................................ 304
1998................................................................ 64
1999................................................................ 4
----
$709
----
----
</TABLE>
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:
<TABLE>
<S> <C>
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
------
------
</TABLE>
Principal repayments required in fiscal 1996 total $57.
4. INVENTORIES
As of March 30, 1996 inventories consisted of:
<TABLE>
<S> <C>
Raw material and supplies........................................ $10,546
In-process....................................................... 8,797
Finished goods................................................... 14,153
Less LIFO reserve................................................ (4,936)
-------
$28,560
-------
-------
</TABLE>
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: $500, $1,500, $2,000, $2,500
and $3,000.
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
F-23
<PAGE>
date in the year 2006. Each note is secured by a pledge of the Holdings Common
Stock held by the corresponding management investor.
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 pages 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 SPECTUS IN CONNECTION WITH THE
EXCHANGE OFFER MADE BY THIS PROSPECTUS, AND, [LOGO]
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
PROSPEC TUS DOES NOT CONSTITUTE AN OFFER TO CLARK-SCHWEBEL, INC.
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
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 PROSPECTUS
of Financial Condition and Results ----------------
of Operations...................... 31
The Business......................... 37
Management........................... 47
Security Ownership................... 51
Certain Relationships and Related
Transactions....................... 52
Description of Holdings Participating
Preferred Stock.................... 53 OFFER TO EXCHANGE ITS 10 1/2%
Description of Credit Agreement...... 53
Description of New Notes............. 55 SERIES B SENIOR NOTES DUE
The Exchange Offer................... 84
Certain Federal Income Tax 2006 FOR ANY AND ALL OF ITS
Considerations....................... 92
Plan of Distribution................. 95 OUTSTANDING 10 1/2% SERIES A
Legal Matters........................ 96
Experts.............................. 96 SENIOR NOTES DUE 2006
Index to Financial Statements........ F-1
Until , 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 July 23, 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 July 23, 1996
.....................................
William D. Bennison
/s/ DONALD R. BURNETTE Vice President and Chief Financial July 23, 1996
..................................... Officer
Donald R. Burnette
* Chairman of the Board July 23, 1996
.....................................
Jack P. Schwebel
* Executive Vice President and Director July 23, 1996
.....................................
Richard C. Wolfe
* Director July 23, 1996
.....................................
Norman W. Alpert
* Director July 23, 1996
.....................................
John D. Howard
* Director July 23, 1996
.....................................
Sander M. Levy
* Director July 23, 1996
.....................................
Arthur J. Nagle
* Director July 23, 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 July 23, 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 July 23, 1996
.....................................
William D. Bennison
/s/ DONALD R. BURNETTE Vice President and Chief Financial July 23, 1996
..................................... Officer
Donald R. Burnette
* Chairman of the Board July 23, 1996
.....................................
Jack P. Schwebel
* Executive Vice President and Director July 23, 1996
.....................................
Richard C. Wolfe
* Director July 23, 1996
.....................................
Norman W. Alpert
* Director July 23, 1996
.....................................
John D. Howard
* Director July 23, 1996
.....................................
Sander M. Levy
* Director July 23, 1996
.....................................
Arthur J. Nagle
* Director July 23, 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 Transitional Services Agreement, between Clark-Schwebel Holdings, Inc. and Springs
Industries, Inc.+
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
+ To be filed by amendment
II-7
AGREEMENT AND PLAN OF MERGER
Among
SPRINGS INDUSTRIES, INC.
FORT MILL A INC.
(a wholly owned subsidiary of Springs Industries, Inc.)
VESTAR/CS HOLDING COMPANY, L.L.C.
and
CLARK-S ACQUISITION CORPORATION (a wholly owned subsidiary of
Vestar/CS Holding Company, L.L.C.)
dated as of
February 24, 1996
<PAGE>
AGREEMENT AND PLAN OF MERGER
Among
SPRINGS INDUSTRIES, INC.,
FORT MILL A INC. (a wholly-owned subsidiary of
Springs Industries, Inc.), VESTAR/CS HOLDING COMPANY, L.L.C.
and CLARK-S ACQUISITION CORPORATION
(a wholly-owned subsidiary of Clark-S Holdings, L.L.C.)
dated as of February __, 1996
TABLE OF CONTENTS
PAGE
ARTICLE ITHE MERGER. . . . . . . . . . . . . . . . . . . . . . .1
1.01 The Merger . . . . . . . . . . . . . . . . . . . . . .1
(a) The Merger. . . . . . . . . . . . . . . . . . . .1
(b) Effective Time. . . . . . . . . . . . . . . . . .1
1.02 Surviving Corporation. . . . . . . . . . . . . . . . .1
(a) Certificate of Incorporation. . . . . . . . . . .1
(b) Bylaws. . . . . . . . . . . . . . . . . . . . . .2
(c) Directors and Officers. . . . . . . . . . . . . .2
1.03 The Closing. . . . . . . . . . . . . . . . . . . . . .2
(a) Deliveries by Seller to Holdings. . . . . . . . .2
(b) Deliveries by Holdings to Seller. . . . . . . . .3
(c) Actions of the Surviving Corporation. . . . . . .3
1.04 Conversion . . . . . . . . . . . . . . . . . . . . . .4
(a) Conversion of Purchaser Common Stock. . . . . . .4
(b) Conversion of Fort Mill Common Stock. . . . . . .4
1.05 The Cash Election. . . . . . . . . . . . . . . . . . .4
(a) The Cash Election . . . . . . . . . . . . . . . .4
(b) Consequences of Making the Cash Election. . . . .4
1.06 Adjustment of Cash Purchase Price or Cash Payment. . .5
ARTICLE IIREPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . .6
2.01 Corporate Organization . . . . . . . . . . . . . . . .6
2.02 Capital Stock. . . . . . . . . . . . . . . . . . . . .7
2.03 Ownership of Stock . . . . . . . . . . . . . . . . . .8
2.04 Authorization, Etc.. . . . . . . . . . . . . . . . . .8
2.05 Financial Statements . . . . . . . . . . . . . . . . .9
2.06 No Approvals or Conflicts. . . . . . . . . . . . . . .9
<PAGE>
2.07 No Violation; Governmental Authorizations. . . . . . 10
2.08 Litigation . . . . . . . . . . . . . . . . . . . . . 10
2.09 Title to Assets. . . . . . . . . . . . . . . . . . . 10
2.10 Real Property. . . . . . . . . . . . . . . . . . . . 11
2.11 Undisclosed Liabilities. . . . . . . . . . . . . . . 12
2.12 Changes. . . . . . . . . . . . . . . . . . . . . . . 13
2.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . 14
2.14 Employee Benefits Matters. . . . . . . . . . . . . . 16
2.15 Intellectual Property. . . . . . . . . . . . . . . . 18
2.16 Contracts. . . . . . . . . . . . . . . . . . . . . . 19
2.17 Environmental and Safety Matters . . . . . . . . . . 20
2.18 Labor Relations. . . . . . . . . . . . . . . . . . . 21
2.19 Insurance. . . . . . . . . . . . . . . . . . . . . . 21
2.20 No Brokers' or Other Fees. . . . . . . . . . . . . . 21
2.21 Bank Accounts. . . . . . . . . . . . . . . . . . . . 21
2.22 Business of Fort Mill. . . . . . . . . . . . . . . . 22
2.23 Company Transfer . . . . . . . . . . . . . . . . . . 22
ARTICLE IIIREPRESENTATIONS AND WARRANTIES OF HOLDINGS. . . . . 22
3.01 Organization . . . . . . . . . . . . . . . . . . . . 22
3.02 Authorization, Etc.. . . . . . . . . . . . . . . . . 22
3.03 No Approvals or Conflicts. . . . . . . . . . . . . . 22
3.04 No Distribution. . . . . . . . . . . . . . . . . . . 23
3.05 No Brokers' or Other Fees. . . . . . . . . . . . . . 23
3.06 Business of Holdings and Purchaser . . . . . . . . . 23
3.07 Capitalization of Purchaser. . . . . . . . . . . . . 23
ARTICLE IVCONDITIONS TO SELLER'S AND FORT MILL'S OBLIGATIONS . 23
4.01 Representations and Warranties . . . . . . . . . . . 23
4.02 Performance. . . . . . . . . . . . . . . . . . . . . 24
4.03 Officer's Certificate. . . . . . . . . . . . . . . . 24
4.04 No Action. . . . . . . . . . . . . . . . . . . . . . 24
4.05 HSR Act. . . . . . . . . . . . . . . . . . . . . . . 24
4.06 Payments . . . . . . . . . . . . . . . . . . . . . . 24
4.07 Capital Structure of Purchaser . . . . . . . . . . . 24
4.08 Opinion of Counsel . . . . . . . . . . . . . . . . . 24
4.09 Other Agreements . . . . . . . . . . . . . . . . . . 24
<PAGE>
ARTICLE VCONDITIONS TO PURCHASER'S AND HOLDINGS' OBLIGATIONS . 25
5.01 Representations and Warranties . . . . . . . . . . . 25
5.02 Performance. . . . . . . . . . . . . . . . . . . . . 25
5.03 Certificate. . . . . . . . . . . . . . . . . . . . . 25
5.04 No Action. . . . . . . . . . . . . . . . . . . . . . 25
5.05 Consents . . . . . . . . . . . . . . . . . . . . . . 25
5.06 HSR Act. . . . . . . . . . . . . . . . . . . . . . . 26
5.07 No Changes . . . . . . . . . . . . . . . . . . . . . 26
5.08 Delivery of Shares . . . . . . . . . . . . . . . . . 26
5.09 Resignation of Directors . . . . . . . . . . . . . . 26
5.10 Financing. . . . . . . . . . . . . . . . . . . . . . 26
5.11 Opinion of Counsel . . . . . . . . . . . . . . . . . 26
5.12 Real Property Matters. . . . . . . . . . . . . . . . 26
5.13 Indebtedness and Liens . . . . . . . . . . . . . . . 27
5.14 Fort Mill Assets and Liabilities . . . . . . . . . . 27
5.15 Transition Agreements. . . . . . . . . . . . . . . . 27
ARTICLE VICOVENANTS AND AGREEMENTS . . . . . . . . . . . . . . 27
6.01 Conduct of Business. . . . . . . . . . . . . . . . . 27
6.02 Access to Books and Records; Post-Closing Access . . 29
6.03 Filings and Consents . . . . . . . . . . . . . . . . 30
6.04 Tax Matters. . . . . . . . . . . . . . . . . . . . . 31
(a) Liability of Seller for Pre-Closing Taxes . . . 31
(b) Mutual Cooperation. . . . . . . . . . . . . . . 31
(c) Certain Taxes . . . . . . . . . . . . . . . . . 32
(d) Time of Payment . . . . . . . . . . . . . . . . 32
(e) Contests. . . . . . . . . . . . . . . . . . . . 32
(f) Resolution of Disagreements Between Seller and Purchaser33
(g) Tax Sharing Agreement . . . . . . . . . . . . . 33
(h) No Changes. . . . . . . . . . . . . . . . . . . 34
(i) Affiliated Group Membership . . . . . . . . . . 34
(j) Tax Benefits and Detriments . . . . . . . . . . 34
(k) Tax Returns . . . . . . . . . . . . . . . . . . 35
6.05 WARN Act . . . . . . . . . . . . . . . . . . . . . . 35
6.06 Employee Benefit Provisions. . . . . . . . . . . . . 36
(a) Continuing Employees. . . . . . . . . . . . . . 36
(b) Continuation of Benefit Plans . . . . . . . . . 36
(c) Defined Contribution Plan . . . . . . . . . . . 36
<PAGE>
(d) Medical and Dental - Active Employees . . . . . 38
(e) Medical - Retired Employees . . . . . . . . . . 39
(f) Life and Disability Insurance . . . . . . . . . 40
(g) Executive Compensation Arrangements . . . . . . 40
(h) Special Severance Pay Provisions. . . . . . . . 41
6.07 Supplemental Disclosure. . . . . . . . . . . . . . . 42
6.08 Litigation . . . . . . . . . . . . . . . . . . . . . 42
6.09 Covenant to Satisfy Conditions . . . . . . . . . . . 42
6.10 Financing. . . . . . . . . . . . . . . . . . . . . . 43
6.11 Exclusivity. . . . . . . . . . . . . . . . . . . . . 43
6.12 Confidentiality. . . . . . . . . . . . . . . . . . . 43
6.13 Covenant Not to Compete. . . . . . . . . . . . . . . 44
6.14 Perfection of Title. . . . . . . . . . . . . . . . . 45
6.15 Intercompany Transactions. . . . . . . . . . . . . . 45
6.16 Expenses . . . . . . . . . . . . . . . . . . . . . . 45
6.17 Insurance. . . . . . . . . . . . . . . . . . . . . . 46
6.18 Further Assurances . . . . . . . . . . . . . . . . . 46
6.19 Management Shares. . . . . . . . . . . . . . . . . . 46
6.20 Transfer of Assets and Liabilities . . . . . . . . . 46
6.21 Audited Financial Statements . . . . . . . . . . . . 46
6.22 Public Announcements . . . . . . . . . . . . . . . . 47
6.23 Transfer of Fort Mill's Assets and Liabilities . . . 47
6.24 Cash Transactions. . . . . . . . . . . . . . . . . . 47
6.25 Delivery of Monthly Financial Statements . . . . . . 47
6.26 Transfer of Real Property. . . . . . . . . . . . . . 47
6.27 Transfer of Intellectual Property Rights . . . . . . 48
6.28 Medical Insurance. . . . . . . . . . . . . . . . . . 48
ARTICLE VIITERMINATION . . . . . . . . . . . . . . . . . . . . 48
7.01 Termination. . . . . . . . . . . . . . . . . . . . . 48
7.02 Procedure and Effect of Termination. . . . . . . . . 49
ARTICLE VIIIINDEMNIFICATION. . . . . . . . . . . . . . . . . . 49
8.01 Indemnification. . . . . . . . . . . . . . . . . . . 49
(a) Indemnification by Seller . . . . . . . . . . . 49
(b) Indemnification by Purchaser. . . . . . . . . . 51
(c) Survival of Representations and Warranties. . . 52
(d) Notice and Opportunity to Defend. . . . . . . . 53
<PAGE>
8.02 Environmental Indemnification Procedures . . . . . . 54
ARTICLE IXMISCELLANEOUS. . . . . . . . . . . . . . . . . . . . 56
9.01 Defined Terms. . . . . . . . . . . . . . . . . . . . 56
9.02 Governing Law. . . . . . . . . . . . . . . . . . . . 65
9.03 Amendment. . . . . . . . . . . . . . . . . . . . . . 65
9.04 No Assignment. . . . . . . . . . . . . . . . . . . . 65
9.05 Waiver; Liability. . . . . . . . . . . . . . . . . . 65
9.06 Notices. . . . . . . . . . . . . . . . . . . . . . . 65
9.07 Complete Agreement . . . . . . . . . . . . . . . . . 66
9.08 Counterparts . . . . . . . . . . . . . . . . . . . . 66
9.09 Headings . . . . . . . . . . . . . . . . . . . . . . 66
9.10 Severability . . . . . . . . . . . . . . . . . . . . 66
9.11 Third Parties. . . . . . . . . . . . . . . . . . . . 67
<PAGE>
EXHIBITS
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Exhibit 1.01(b) - Certificate of Merger
Exhibit 1.03(a)(ii) - Proceeds Sharing Provisions
Exhibit 1.03(a)(iii) - Securityholders Agreement
Exhibit 1.06(a)(1) - Closing Date Working Capital Schedule
Exhibit 1.06(a)(2) - Working Capital Projection
Exhibit 4.08 - Kirkland & Ellis Opinion
Exhibit 5.11 - Seller's General Counsel Opinion
Exhibit 5.15 - Transition Agreements
Exhibit 6.27 - Assignment
Exhibit A - Company's 1996 Approved Budget
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February
24, 1996, is entered into by and among VESTAR/CS HOLDING COMPANY, L.L.C., a
Delaware limited liability company ("Holdings"), CLARK-S ACQUISITION
CORPORATION, a Delaware corporation (the "Purchaser"), SPRINGS INDUSTRIES, INC.,
a South Carolina corporation (the "Seller"), and FORT MILL A INC., a Delaware
corporation ("Fort Mill"). Capitalized terms that are used in this Agreement are
defined in Section 9.01.
WHEREAS, Holdings and Seller desire that Purchaser merge with and into Fort
Mill, upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger.
(a) The Merger. On the terms and subject to the conditions contained
in this Agreement, Purchaser will merge with and into Fort Mill with Fort Mill
surviving the Merger (the "Surviving Corporation"). The Merger shall have the
effect set forth in the Delaware General Corporation Law. The Surviving
Corporation may, at any time after the Effective Time, take any action
(including executing and delivering any document) in the name and on behalf of
either Fort Mill or Purchaser in order to carry out and effectuate the
transactions contemplated by this Agreement.
(b) Effective Time. If Purchaser fails to make the Cash Election
pursuant to Section 1.05, the Merger shall become effective at the time (the
"Effective Time") Fort Mill and Purchaser file a certificate of merger in the
form attached hereto as Exhibit 1.01(b) (the "Certificate of Merger") with the
Secretary of State of the State of Delaware.
1.02 Surviving Corporation. If Purchaser fails to make the Cash Election
pursuant to Section 1.05:
(a) Certificate of Incorporation. The Certificate of Merger shall
amend and restate the certificate of incorporation of the Surviving Corporation
in its entirety at and as of the Effective Time to read as set forth in Exhibit
A to the Certificate of Merger (which is included in Exhibit 1.01(b) hereto).
<PAGE>
(b) Bylaws. The bylaws of the Surviving Corporation shall be amended
and restated at and as of the Effective Time to read as did the bylaws of
Purchaser immediately prior to the Effective Time except that the name of the
Surviving Corporation will be "Clark-Schwebel Holdings, Inc."
(c) Directors and Officers. Except as otherwise provided in the
Securityholders Agreement, the directors and officers of the Purchaser shall
become the directors and officers of the Surviving Corporation at and as of the
Effective Time (retaining their respective positions and terms of office).
1.03 The Closing. The closing (the "Closing") of the transactions
contemplated in this Agreement shall take place at the offices of Kirkland &
Ellis, 153 East 53rd Street, New York, New York, commencing at 9:00 a.m., local
time, as soon as practicable but no later than three business days following the
day on which the last to be fulfilled or waived of the conditions set forth in
Articles IV and V shall be fulfilled or waived in accordance herewith (or, if
contemplated to be satisfied simultaneous with the Closing, are capable of being
so satisfied), or at such other time, place and date as is agreed to in writing
by the parties hereto. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
(a) Deliveries by Seller to Holdings. At or prior to the Closing,
Seller shall deliver or cause to be delivered to Holdings the following:
(i) if Purchaser makes the Cash Election pursuant to Section
1.05, certificates evidencing the Shares, which certificates shall be
properly endorsed for transfer or accompanied by duly executed stock
powers, in either case executed in blank or in favor of Purchaser and
otherwise in a form acceptable for transfer on the books of Fort Mill;
(ii) provided that Purchaser has not made the Cash Election
pursuant to Section 1.05, a counterpart of Holdings' operating agreement
(the "Operating Agreement") containing provisions substantially in the form
attached hereto as Exhibit 1.03(a)(ii) (the"Proceeds Sharing Provisions"),
duly executed by Seller;
(iii) provided that Purchaser has not made the Cash Election
pursuant to Section 1.05, a counterpart of the securityholders agreement
substantially in the form attached hereto as Exhibit 1.03(a)(iii) (the
"Securityholders Agreement"), duly executed by Seller;
(iv) complete and correct copies of the minute books containing
the records of meetings of the stockholders, the Boards of Directors, and
any committees of the Boards of Directors of Fort Mill and the Company;
(v) a certification pursuant to Treasury Regulation Section
1.1445-2(b)(2) that Seller is not a foreign person;
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(vi) certificates executed by the Secretary or Assistant
Secretary of each of Seller and Fort Mill certifying as to resolutions of
the Boards of Directors of Seller (on its own behalf and as sole
stockholder of Fort Mill) and Fort Mill, as the case may be, authorizing
the execution, delivery and consummation of the transactions contemplated
by this Agreement and the other agreements to be entered into pursuant to
this Agreement by Seller and Fort Mill on the Closing Date, incumbency, and
other corporate matters; and
(vii) all other previously undelivered documents required by this
Agreement to be delivered by Seller or Fort Mill to Purchaser or Holdings
at or prior to the Closing Date in connection with the transactions
contemplated hereby.
(b) Deliveries by Holdings to Seller. At or prior to the Closing,
Holdings shall deliver or cause to be delivered to Seller the following:
(i) if Purchaser makes the Cash Election pursuant to Section
1.05, the Cash Purchase Price by wire transfer of immediately available
funds to an account designated by Seller;
(ii) provided that Purchaser has not made the Cash Election
pursuant to Section 1.05, a counterpart of the Operating Agreement
containing the Proceeds Sharing Provisions duly executed by Holdings;
(iii) provided that Purchaser has not made the Cash Election
pursuant to Section 1.05, a counterpart of the Securityholders Agreement,
duly executed by Holdings and Management;
(iv) certificates executed by the Secretary or Assistant
Secretary of each of Purchaser and Holdings, certifying as to resolutions
of the Boards of Directors of Purchaser and Holdings (on its own behalf and
as sole stockholder of Purchaser), as the case may be, authorizing the
execution, delivery and consummation of this Agreement and the other
agreements to be entered into pursuant to this Agreement by Purchaser and
Holdings with Seller on the Closing Date, incumbency, and other corporate
matters; and
(v) all other previously undelivered documents required by this
Agreement to be delivered by Purchaser or Holdings to Seller at or prior to
the Closing Date in connection with the transactions contemplated hereby.
(c) Actions of the Surviving Corporation. At the Closing, provided
that Purchaser has not made the Cash Election pursuant to Section 1.05, Fort
Mill and Purchaser will file with the Secretary of State of the State of
Delaware the Certificate of Merger. At the Effective Time, the Surviving
Corporation shall (i) issue certificates representing the Holdings Common and
the Holdings Series B to Holdings, (ii) issue certificates representing the
Seller Common and the Seller Series A to Seller and deliver the Cash Payment due
pursuant to Section 1.04(b) by wire transfer of immediately available funds to
an account designated by Seller, and (iii) execute a counterpart of the
Securityholders Agreement. In addition, at the Effective Time, the Seller shall
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<PAGE>
deliver certificates evidencing the Shares, and Holdings shall deliver
certificates evidencing all of the issued and outstanding shares of Purchaser
Common Stock, to the Surviving Corporation for cancellation.
1.04 Conversion.
(a) Conversion of Purchaser Common Stock. At and as of the Effective
Time, all of the issued and outstanding shares of Purchaser Common Stock shall
be converted into the Holdings Common and the Holdings Series B. No share of
Purchaser Common Stock shall be deemed to be outstanding or to have any rights
other than those set forth in this Section 1.04(a) after the Effective Time.
(b) Conversion of Fort Mill Common Stock. At and as of the Effective
Time, all of the Shares shall be converted into 2,000 shares of Common Stock
(the "Seller Common"), the right to receive $155,250,000 less the amount of
Indebtedness outstanding on the Closing Date under the capital leases listed in
Section 5.13 of the Disclosure Schedule (subject to adjustment as set forth in
Section 1.06) (the "Cash Payment") and 3,000 shares of Series A Preferred Stock
(which shares shall have an aggregate liquidation value of $30,000,000);
provided, however, that if the Closing does not occur on or prior to April 15,
1996 all of the Shares in the aggregate shall be converted into an additional
2.5 shares of Series A Preferred Stock (which shares shall have an aggregate
liquidation value of $25,000) per day for each day after April 15, 1996 until
(and including) the Closing Date (the shares of Series A Preferred Stock
issuable pursuant to this Section 1.04(b) are referred to herein collectively as
the "Seller Series A"). No share of Fort Mill Common Stock shall be deemed to be
outstanding or to have any rights other than those set forth in this Section
1.04(b) after the Effective Time.
1.05 The Cash Election.
(a) The Cash Election. At any time at least one business day prior to
the Closing Date, Purchaser may elect, in its sole discretion, to pay
$192,750,000 less the amount of Indebtedness outstanding under the capital
leases listed in Section 5.13 of the Disclosure Schedule in cash to Seller for
the Shares by delivering a notice in writing to Seller of such election (the
"Cash Election"). If Purchaser makes the Cash Election, on the Closing Date and
subject to the terms and conditions set forth in this Agreement, Seller will
sell, assign, transfer and deliver to Purchaser the Shares, free and clear of
all options, pledges, security interests, voting trusts or similar arrangements,
liens, charges or other encumbrances or restrictions ("Encumbrances"), other
than the restrictions imposed by federal and state securities laws, and in
consideration of the sale, assignment, transfer and delivery of the Shares,
Purchaser will pay to Seller the Cash Purchase Price in accordance with Section
1.03(b)(i).
(b) Consequences of Making the Cash Election. In the event Purchaser
makes the Cash Election, (i) Purchaser shall not merge with and into Fort Mill,
(ii) the parties shall not be bound by the Proceeds Sharing Provisions, (iii)
the parties shall not enter into the Securityholders Agreement, and (iv) any
provision of this Agreement expressly conditioned or dependent upon
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<PAGE>
Purchaser failing to make the Cash Election shall be inoperative and of no
further force and effect without any further action on the part of the parties
hereto.
1.06 Adjustment of Cash Purchase Price or Cash Payment. The Cash Purchase
Price or the Cash Payment, as the case may be, shall be adjusted as follows:
(a) Not later than 90 days after the Closing Date, Seller shall
prepare and deliver to Purchaser a schedule in the form attached hereto as
Exhibit 1.06(a)(1) (the "Closing Date Working Capital Statement") of Seller's
calculation of the Closing Working Capital Amount as of the Closing Date and the
amount payable by Seller to Purchaser, or by Purchaser to Seller, as the case
may be, pursuant to clause (c) of this Section 1.06. The parties agree that (i)
the Closing Date Working Capital Statement and each item therein shall be
prepared, except as otherwise provided in Section 1.06(a) of the Disclosure
Schedule, in accordance with generally accepted accounting principles and
consistent with past practice as to the computation and determination of each
such item as shown under the "Jan. '96" column in Exhibit 1.06(a)(2) (the
"Working Capital Projection"); provided that to the extent that the preparation
of any item included in the Closing Date Working Capital Statement consistent
with past practice in accordance with the foregoing is inconsistent with
generally accepted accounting principles, then, except as otherwise provided in
Section 1.06(a) of the Disclosure Schedule, generally accepted accounting
principles shall govern as to such item, (ii) the amount of inventory shown on
the Closing Date Working Capital Statement under the heading "Balance at
Closing" shall be determined by physical count to be conducted by Purchaser and
its representatives and observed and tested by Seller and its representatives,
and shall be valued by Purchaser and its representatives in the aggregate at the
lower of "cost" or "market," with "cost" being determined under the
last-in-first-out method; provided that during the Objection Period Seller may
object to such physical count and valuation by Purchaser and its
representatives, and any such objection will be resolved in accordance with the
principles set forth in clause (b) of this Section 1.06, (iii) purchase
accounting resulting from the transactions contemplated by this Agreement shall
not be used in connection with the determination of the Closing Working Capital
Amount, and (iv) each liability which is included in Exhibit 1.06(a)(2) under
the heading "Jan. '96" will be included in the Closing Date Working Capital
Statement at its respective amount on the Closing Date regardless of whether
Seller assumes or is otherwise responsible for such liability.
(b) Purchaser shall have 30 business days after delivery by Seller of
the Closing Date Working Capital Statement (the "Objection Period") to object to
any item or items shown on the Closing Date Working Capital Statement. During
the Objection Period, Purchaser shall have access to all work papers of Seller
which were used in the preparation of the Closing Date Working Capital
Statement. If Purchaser does not object during the Objection Period, the Closing
Date Working Capital Statement received by Purchaser shall be conclusive and
binding on the parties hereto and may not be challenged by any of them in any
forum. If Purchaser does object during the Objection Period, Seller shall have
the right, without being prejudiced by the fact that Seller prepared the Closing
Date Working Capital Statement, for ten business days after its receipt of
Purchaser's objection, to deliver to Purchaser a notice setting forth any
additional items which Seller determines to be subject to dispute. If Purchaser
and Seller are unable to resolve any dispute with respect to the Closing Date
Working Capital Statement within 30 business days after delivery by Purchaser of
Purchaser's objections, the matter or matters in dispute shall be submitted to
such firm
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<PAGE>
of Accountants, which has not performed any material services since
January 1, 1993 for either Seller or Vestar or Vestar's Affiliates, as Purchaser
and Seller may agree. If they cannot so agree within fifteen (15) days, then
such Accountant shall be selected by lot from the Accountants listed in Section
6.04(f) of the Disclosure Schedule. The Accountant selected shall be limited to
determining a value for those items on the Closing Date Working Capital
Statement that are disputed by Purchaser or Seller in accordance with this
Section 1.06 and are not resolved by agreement between Purchaser and Seller. The
decision of such Accountant as to the Closing Date Working Capital Statement
shall be within the range of the positions taken by the parties with respect to
the disputed matters, and such decision shall be conclusive and binding upon
Seller and Purchaser, and neither Purchaser nor Seller shall challenge the other
with respect to such decision in any forum, and the fees and costs therefor
shall be borne by the parties in proportion to the difference between the
Accountant's decision and the respective positions taken by the parties.
(c) Within three business days after the later of the expiration of
the Objection Period and the date upon which any disputes are resolved as
provided above, an amount equal to (i) the absolute value of the difference
between the Estimated Working Capital Amount and the Closing Working Capital
Amount minus (ii) $1,000,000, plus interest on such amount accrued from the
Closing Date to the date of payment at the Prime Rate per annum, shall be paid
(x) by Purchaser to Seller, if the Closing Working Capital Amount is greater
than the Estimated Working Capital Amount or (y) by Seller to Purchaser, if the
Estimated Working Capital Amount is greater than the Closing Working Capital
Amount; provided, however, that, notwithstanding the foregoing, unless the
Closing Working Capital Amount is less than $49,000,000 or greater than
$51,000,000, there shall be no adjustment to the Cash Purchase Price or the Cash
Payment, as the case may be, pursuant to this Section 1.06.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Holdings and Purchaser as follows:
2.01 Corporate Organization. Each of Fort Mill, the Company and the
Subsidiaries (other than Tech-Fab) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Tech-Fab is a general partnership created under the laws of the State of New
York and is validly existing. Each of the United States Purchased Entities has
full corporate or partnership power, as applicable, and authority necessary to
own and lease its properties and assets and to carry on its business as now
being conducted. The Company is duly qualified or licensed to do business as a
foreign corporation and is in good standing in the jurisdictions in which the
ownership, use or occupancy of its properties or assets or the conduct of its
business requires such qualification. Section 2.01 of the Disclosure Schedule
relating to this Agreement (the "Disclosure Schedule") lists each Subsidiary,
its state of incorporation or formation, as applicable, and each jurisdiction in
which such Subsidiary is qualified to do business as a foreign corporation or
partnership, as applicable. Section 2.01 of the Disclosure Schedule sets forth
complete and correct copies of (i) the certificates of incorporation and all
amendments thereto, and the by-laws
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<PAGE>
as presently in effect, of the Company, Fort Mill and the Subsidiaries (other
than Tech-Fab) and (ii) the partnership agreement and all amendments thereto of
Tech-Fab. Section 2.01 of the Disclosure Schedule lists the current directors
and officers, or other comparable persons, of each of the United States
Purchased Entities. Seller has made minute books containing the records of
meetings of the stockholders of the Company, and the Board of Directors, and any
committees of the Board of Directors, or other comparable records, of each of
the United States Purchased Entities, available to Purchaser for its inspection.
Except for the ownership interest or investment in the Company, the
Subsidiaries, Interglas and Asahi or as set forth in Section 2.01 of the
Disclosure Schedule, none of the United States Purchased Entities (a) owns,
directly or indirectly, any capital stock or other equity securities of any
corporation or has any direct or indirect equity or ownership interest in any
partnership, joint venture or other business, or (b) has any capital investment
in or any outstanding loan, advance or extension of credit to, and does not own
the securities of, any other Person (excluding (i) extensions of trade credit to
customers in the ordinary course of business, (ii) advances to Seller (none of
which will be outstanding on the Closing Date except to the extent permitted by
Section 6.15(b)), (iii) advances to employees in the ordinary course of
business, and (iv) endorsements of negotiable instruments in the ordinary course
of business, nor is any of them bound by any commitment or agreement to do any
of the foregoing).
2.02 Capital Stock.
(a) The authorized capital stock of Fort Mill consists of 1,000 shares
of Fort Mill Common Stock, of which only the Shares are issued and outstanding.
There are no subscriptions, options, warrants, calls, rights, contracts,
commitments, understandings, restrictions or arrangements relating to the
issuance, sale, transfer or voting of any shares of Fort Mill Common Stock,
including any rights of conversion or exchange under any outstanding securities
or other instruments. The Shares have been validly issued and are fully paid,
nonassessable and free of preemptive rights.
(b) The authorized capital stock of the Company consists of 10,000
shares of common stock, $1.00 par value per share (the "Company Common Stock"),
of which only 5,000 shares (the "Company Shares") are issued and outstanding.
The authorized capital stock of Clark-Schwebel Holding Corporation consists of
100 shares of common stock, par value $10.00 per share (the "Subsidiary Common
Stock"), all of which are issued and outstanding (the "Subsidiary Shares").
There are no subscriptions, options, warrants, calls, rights, contracts,
commitments, understandings, restrictions or arrangements relating to the
issuance, sale, transfer or voting of any shares of Company Common Stock or any
shares of Subsidiary Common Stock, including any rights of conversion or
exchange under any outstanding securities or other instruments. Each of the
Company Shares and the Subsidiary Shares have been validly issued and are fully
paid, nonassessable and free of preemptive rights.
(c) Section 2.02(c) of the Disclosure Schedule sets forth the
partnership interests of Tech-Fab that are issued and outstanding. There are no
subscriptions, options, warrants, calls, rights, contracts, commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
transfer or voting of any partnership interest in Tech-Fab, including any rights
of conversion or exchange under any outstanding securities or other instruments.
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<PAGE>
(d) Section 2.02(d) of the Disclosure Schedule sets forth the
Company's ownership of equity interests and rights to acquire equity interests
in each of Interglas and Asahi and the percentage that such equity interests and
rights to acquire equity interests constitute in relation to all of the issued
and outstanding equity interests in Interglas or Asahi, as applicable. Except
as set forth in Section 2.02(d) of the Disclosure Schedule, neither the Company,
Seller nor Fort Mill holds, or, to the knowledge of Seller or the Company
Executives, no other party holds any subscriptions, options, warrants, calls,
or rights relating to the issuance, sale, transfer or voting of any of the
outstanding equity interests in Interglas or Asahi, including any rights of
conversion or exchange under any outstanding securities or other instruments.
Except as set forth in Section 2.02(d) of the Disclosure Schedule, all of the
outstanding equity interests of each of Interglas and Asahi held by the Company
have been validly issued and are fully paid and nonassessable.
2.03 Ownership of Stock.
(a) The Shares are owned by Seller free and clear of all Encumbrances,
other than the restrictions imposed by federal and state securities laws. If
Purchaser makes the Cash Election pursuant to Section 1.05, upon the
consummation of the transactions contemplated hereby, Purchaser will acquire
title to the Shares, free and clear of all Encumbrances, other than the
restrictions imposed by federal and state securities laws.
(b) The Company Shares are owned by Fort Mill free and clear of all
Encumbrances, other than the restrictions imposed by federal and state
securities laws. The Subsidiary Shares are owned by the Company free and clear
of all Encumbrances, other than the restrictions imposed by federal and state
securities laws.
(c) The partnership interests in Tech-Fab that are owned by the
Company are owned free and clear of all Encumbrances, other than the
restrictions imposed by federal and state securities laws.
(d) The equity interests and rights to acquire equity interests owned
by the Company in each of Interglas and Asahi are owned free and clear of all
Encumbrances, other than those set forth in Section 2.03 of the Disclosure
Schedule.
2.04 Authorization, Etc. Each of Seller and Fort Mill has full corporate
power and authority to execute and deliver this Agreement and the documents and
instruments contemplated hereby and to carry out the transactions contemplated
hereby and thereby. The execution and delivery by each of Seller and Fort Mill
of this Agreement and, prior to the Closing, the documents and instruments
contemplated hereby, and the consummation of the transactions contemplated
hereby and, prior to the Closing, thereby, have been or will be, as the case may
be, approved by all necessary corporate proceedings on the part of Seller and
Fort Mill, respectively. This Agreement constitutes a valid and binding
agreement of each of Seller and Fort Mill, enforceable against each of them in
accordance with its terms, except that (i) the enforcement hereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (ii) the
remedy of specific performance and injunctive
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and other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be brought.
2.05 Financial Statements. Section 2.05 of the Disclosure Schedule sets
forth (a) the Audited Financials in draft form (the "Draft Audited Financials");
and (b) the annual reports of Interglas as of June 30, 1995 and 1994,
respectively, and the audited balance sheets of Asahi as of March 31, 1995 and
1994 and 1993, respectively, and the audited statements of operations and cash
flows of Asahi for the fiscal years then ended, and the unaudited balance sheets
of each of Interglas and Asahi as of December 31, 1995 (the "Unaudited Balance
Sheets") and the unaudited statements of income of Interglas for the six month
period then ended and the unaudited profit and loss statement of Asahi for the
calendar year then ended (collectively, the "Foreign Financials"). The Draft
Audited Financials fairly present the consolidated financial position and
operating results of Fort Mill at the dates and for the periods covered thereby.
To the knowledge of Seller or the Company Executives, except as set forth in
Section 2.05 of the Disclosure Schedule, the audited Foreign Financials
(including the notes thereto) have been prepared in accordance with German (with
respect to Interglas) and United States (with respect to Asahi) generally
accepted accounting principles applied on a consistent basis throughout the
periods covered thereby and fairly present the financial position and operating
results of each of Interglas and Asahi, respectively, at the dates and for the
periods covered thereby. To the knowledge of Seller or the Company Executives,
the unaudited Foreign Financials have been prepared in accordance with German
(with respect to Interglas) and Japanese (with respect to Asahi) generally
accepted accounting principles applied on a consistent basis throughout the
periods covered thereby, and such unaudited Foreign Financials fairly present
the financial position and operating results of each of Interglas and Asahi,
respectively, at the dates and for the periods covered thereby; provided that
such unaudited Foreign Financials, to the knowledge of Seller or the Company
Executives, are subject to normal year-end adjustments and lack footnotes
required for full disclosure under the applicable generally accepted accounting
principles. The Audited Financials (including the notes thereto), when delivered
in accordance with Section 6.21, will have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby and will fairly present the consolidated
financial position and operating results of Fort Mill at the dates and for the
periods covered thereby. The Monthly Financial Statements, when delivered in
accordance with Section 6.25, will, except as set forth in Section 2.05 of the
Disclosure Schedule, (i) have been prepared in a manner consistent with past
practice and (ii) fairly present the consolidated financial position and
operating results of the Company at the dates and for the periods covered
thereby; provided that the Monthly Financial Statements are subject to normal
year-end adjustments and lack footnotes required for full disclosure under
generally accepted accounting principles.
2.06 No Approvals or Conflicts. Except as set forth in Section 2.06 of the
Disclosure Schedule, neither the execution and delivery by Seller or Fort Mill
of this Agreement, nor the consummation by Seller and Fort Mill of the
transactions contemplated hereby will (a) violate, conflict with or result in a
breach of any provision of the certificate of incorporation or bylaws or
partnership documents, as applicable, of Seller or the Purchased Entities, (b)
violate, conflict with or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the creation of any Lien upon any of
the properties of Seller or the Purchased Entities under, or cause the
termination
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or modification of, or give any other Person the right to terminate
or modify, any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, lease, contract, agreement or other instrument to which any
of Seller or the Purchased Entities are parties or by which any of their
respective properties are bound, (c) violate any order, injunction, judgment,
ruling, Law applicable to Seller or the Purchased Entities or any of their
respective properties, or (d) except for applicable disclosure requirements of
the Securities Exchange Act, and the rules and regulations promulgated
thereunder, and filings under the HSR Act and the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, require any
consent, approval or authorization of, or notice to, or declaration, filing or
registration with, any Governmental Body or other third party; provided,
however, that all of the foregoing representations in respect of Interglas and
Asahi are made by Seller only to the knowledge of the Seller or the Company
Executives.
2.07 No Violation; Governmental Authorizations. Except as set forth in
Section 2.07 of the Disclosure Schedule, the United States Purchased Entities
and, to the knowledge of Seller or the Company Executives, Interglas and Asahi,
have complied (except for prior incidents of non-compliance which have been
cured and for which no liability exists or will exist) and are in compliance
in all material respects with all Laws, orders, injunctions, judgments, decrees
or rulings of every Governmental Body applicable to the Purchased Entities or
their respective assets or properties. Except as set forth in Section 2.07 of
the Disclosure Schedule, the United States Purchased Entities and, to the
knowledge of Seller or the Company Executives, Interglas and Asahi, have all
material permits, licenses, approvals and other governmental authorizations
that they are required to have in order to own, lease, occupy and use their
respective properties and assets and to carry on their respective businesses
as such businesses are now being conducted and all such permits, licenses,
approvals and other governmental authorizations are valid and in full force
and effect.
2.08 Litigation. Except as set forth in Section 2.08 of the Disclosure
Schedule, there are no Actions pending or, to Seller's or the Company
Executives' knowledge, threatened against the United States Purchased Entities
or any of their respective assets or properties before any Governmental Body
which, if adversely determined, would reasonably be likely to result in payments
by the United States Purchased Entities in excess of $100,000 or would be
reasonably likely to have a material adverse effect on any of the United States
Purchased Entities. Section 2.08 of the Disclosure Schedule lists each Action
that has been settled by Fort Mill or the Company in the last five years and
that involved the payment of at least $100,000 by Fort Mill or the Company in
connection with such settlement. Except as set forth in Section 2.08 of the
Disclosure Schedule, to the knowledge of Seller or the Company Executives, there
are no Actions pending or threatened against Interglas or Asahi which, if
adversely determined, would be reasonably likely to have a material adverse
effect on Interglas or Asahi.
2.09 Title to Assets. Each of the Company and the Subsidiaries has good and
marketable title to all tangible personal properties and personal assets owned
by it (whether or not reflected on the Balance Sheet), free and clear of all
Liens except for (i) Liens which secure Indebtedness or obligations which are
properly reflected on the Balance Sheet (none of which will exist on the Closing
Date) and (ii) Liens arising as a matter of law in the ordinary course of
business; provided that such Lien is not incurred in connection with the
incurrence of Indebtedness and that the
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obligations secured by such Liens are not delinquent (or if delinquent, are
being contested in good faith by appropriate proceedings and are reflected in
appropriate reserves on the Balance Sheet). Each of the Company and the
Subsidiaries and, to the knowledge of Seller or the Company Executives,
Interglas and Asahi, has good and marketable title to, or has valid leasehold
interests in or rights to use, all material personal properties and personal
assets used in the conduct of its respective business.
2.10 Real Property; Leases.
(a) Section 2.10(a) of the Disclosure Schedule contains a legal
description of each parcel of real property that the Company or any Subsidiary
owns (the "Owned Property") and, except as set forth in Section 2.10(a) of the
Disclosure Schedule, to the knowledge of Seller or the Company Executives, such
legal description describes such parcel fully and adequately, the buildings and
improvements are located within the boundary lines of the described parcels of
land, the Owned Property is not in violation of applicable zoning laws and
ordinances (and none of the properties or buildings or improvements thereon are
subject to "permitted non-conforming use" or "permitted non-conforming
structure" classifications), and the Owned Property is not subject to any
restriction for which any permits or licenses necessary to the use thereof have
not been obtained. Except as set forth in Section 2.10(a) of the Disclosure
Schedule, with respect to each such parcel of Owned Property (i) the Company or
a Subsidiary, as appropriate, has good and marketable fee simple title to such
parcel of Owned Property, free and clear of any Lien except for (A) installments
of real estate taxes and special assessments not yet due or payable and (B)
Permitted Liens; (ii) there are no pending or, to Seller's or the Company
Executives' knowledge, threatened condemnation proceedings relating to such
parcel of Owned Property; and (iii) there are no leases, subleases, licenses or
other agreements granting to any party or parties the right to use or occupy any
portion of such parcel of Owned Property.
(b) Section 2.10(b) of the Disclosure Schedule lists the location of
all real property leased or subleased to the Company or any Subsidiary (the
"Leased Property") and sets forth correct and complete copies of the leases or
subleases (including all amendments thereto to date) pursuant to which the
Company or any Subsidiary (as applicable, a "Tenant") leases any Leased Property
(the "Leases"). With respect to each such Lease, except as set forth in Section
2.10(b) of the Disclosure Schedule: (i) the Lease is in full force and effect
and enforceable against the applicable landlord in accordance with its terms;
(ii) (A) the applicable Tenant is not, and, to Seller's or the Company
Executives' knowledge, no other party thereto is, in breach of or default under
such Lease in any material respect, (B) no event has occurred which, with notice
or lapse of time, would constitute such a material breach or default by the
applicable Tenant or permit termination, modification, or acceleration
thereunder by the other party thereto, and (C) no event has occurred which, to
Seller's or the Company Executives' knowledge, with notice or lapse of time
would constitute a material breach or default by the other party thereto or
would permit termination, modification or acceleration thereunder by the
applicable Tenant; (iii) the applicable Tenant has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered its interest in the
applicable Leased Property; and (iv) subject to the terms of the applicable
Lease, the interest of the applicable Tenant is free and clear of all Liens
other than Permitted Liens.
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(c) Except as set forth in Section 2.10(c) of the Disclosure Schedule,
the Real Property (i) constitutes all real property owned, leased or otherwise
occupied or utilized by the Company or the Subsidiaries, (ii) is, together with
all improvements located thereon, in good operating condition and repair
(subject to normal wear and tear), and (iii) is sufficient for the conduct of
the business of the Company and the Subsidiaries as presently conducted and, to
the knowledge of Seller or the Company Executives, has adequate facilities for
utility supply, waste and storm water processing and/or removal.
2.11 Undisclosed Liabilities.
(a) Except as set forth in Section 2.11(a) of the Disclosure Schedule,
neither the Company nor any of the Subsidiaries has any liabilities or
obligations (whether accrued, absolute, contingent or otherwise, and whether
known or unknown) and there is no Basis for any present or future action, suit,
proceeding, hearing, charge, complaint, claim or demand against the Company or
the Subsidiaries that would give rise to any liability or obligation of the
Company or the Subsidiaries, other than (i) liabilities and obligations that are
reflected, accrued or reserved for in the Balance Sheet, (ii) liabilities and
obligations incurred in the ordinary course of the Company's or a Subsidiary's
business and consistent with past practice since the date of the Balance Sheet
(none of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law), and (iii) contractual liabilities and obligations with
respect to executory contracts of the Company or a Subsidiary not required to be
disclosed in financial statements prepared in accordance with generally accepted
accounting principles which contracts are either (A) listed on the Disclosure
Schedule or (B) not listed on the Disclosure Schedule and not required by
Section 2.10, 2.12, 2.13, 2.14, 2.15, 2.16 or 2.18 of this Agreement to be
listed on the Disclosure Schedule.
(b) Except as set forth in Section 2.11(b) of the Disclosure Schedule,
Fort Mill has no liabilities or obligations (whether accrued, absolute,
contingent or otherwise, and whether known or unknown) and there is no Basis for
any present or future action, suit, proceeding, hearing, charge, complaint,
claim or demand against Fort Mill that would give rise to any liability or
obligation of Fort Mill.
(c) Except as set forth in Section 2.11(c) of the Disclosure Schedule,
to the knowledge of Seller or the Company Executives, neither Interglas nor
Asahi has any liabilities or obligations (whether accrued, absolute, contingent
or otherwise, and whether known or unknown) and there is no Basis for any
present or future action, suit, proceeding, hearing, charge, complaint, claim or
demand against Interglas or Asahi that would give rise to any liability or
obligation of Interglas or Asahi, as applicable, other than (i) liabilities and
obligations that are reflected, accrued or reserved for in the Unaudited Balance
Sheets related to Interglas or Asahi, as applicable, (ii) obligations incurred
in the ordinary course of Interglas's or Asahi's business, as applicable, and
consistent with past practice since the date of such Unaudited Balance Sheets
(none of which results from, arises out of, relates to, is in the nature of, or
was caused by any breach of contract, breach of warranty, tort, infringement, or
violation of law) and (iii) contractual liabilities and obligations with respect
to executory contracts of Interglas or Asahi, as applicable, not required to be
disclosed in financial statements prepared in accordance with generally accepted
accounting principles.
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2.12 Changes. Except as set forth in Section 2.12 of the Disclosure
Schedule, since December 31, 1995, there has not been any material adverse
change in the assets, business, operations, financial condition, operating
results, or material business relationships of the Company or any of the
Subsidiaries or, to the knowledge of Seller or the Company Executives, Interglas
or Asahi. Without limiting the generality of the foregoing, since December 31,
1995, except as set forth in Section 2.12 of the Disclosure Schedule, pursuant
to Exempt Contracts, or as otherwise consented to by Purchaser after the date
hereof, none of the Company or the Subsidiaries has, and, with respect to
clauses (g) and (i), Fort Mill has not:
(a) sold, leased, transferred, assigned or otherwise disposed of any
of its assets, tangible or intangible, other than sales in the ordinary course
of business and other than the sale of its interest in ABAEI and the transfer of
the sale proceeds therefrom to Seller;
(b) entered into any contract, lease, sublease, license, or sublicense
(other than purchase and sales orders in the ordinary course of business) either
involving more than $100,000 or outside the ordinary course of business;
(c) committed to the acquisition or construction of any property,
plant or equipment, or entered into any agreement or commitment to make any
other capital expenditure, involving more than $100,000 individually or $500,000
in the aggregate;
(d) created, incurred, assumed, or guaranteed any Indebtedness either
involving more than $100,000 in the aggregate or outside the ordinary course of
business;
(e) delayed or postponed (beyond its normal practice) the payment of
accounts payable and other liabilities or obligations or accelerated (beyond its
normal practice) the collection of accounts receivable or other amounts owed to
it;
(f) cancelled, compromised, waived, or released any rights or claims
(or series of related rights and claims) either involving more than $100,000 in
the aggregate or outside the ordinary course of business;
(g) declared, set aside, or paid any non-cash dividend or distribution
with respect to its capital stock or redeemed, purchased, or otherwise acquired
any of its capital stock, or granted or issued any options relating to the
issuance of capital stock (other than in connection with the disposition of
ABAEI);
(h) experienced any material damage, destruction, or loss to any of
its material properties or assets through the date hereof;
(i) granted any increase outside the ordinary course of business in
the compensation of any of its officers, directors or employees who are or will
be on the payroll of any of the United States Purchased Entities, or adopted any
benefit plan or any retirement, deferred compensation, bonus, fringe benefit,
insurance or pension plan, program or arrangement or made any loan or other
credit accommodation to or for any such officer, employee or director, or made
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an contribution to any benefit plan or any retirement, deferred compensation or
bonus program, plan or arrangement for the benefit of any such employee, officer
or director other than in the ordinary course of business consistent with past
practice or as required by the terms of such program, plan or arrangement as in
effect on the date hereof;
(j) mortgaged, pledged or otherwise encumbered any of its respective
assets; or
(k) made or entered into any agreement or understanding to do any of
the foregoing.
2.13 Taxes.
(a) The United States Purchased Entities have timely filed all Tax
Returns required to be filed by each of them, each such Tax Return has been
prepared in compliance with all applicable laws and regulations, and all such
Tax Returns are true, accurate and complete in all material respects. Each
Affiliated Group has timely filed all income Tax Returns required to be filed in
the United States with respect to each taxable period during which any United
States Purchased Entity was a member of the Affiliated Group, each such income
Tax Return has been prepared in compliance with all applicable laws and
regulations in all respects insofar as such income Tax Returns relate to the
United States Purchased Entities. All Taxes due and payable by the United States
Purchased Entities have been paid. All Taxes (other than income Taxes for which
Seller is liable and has agreed to indemnify Purchaser pursuant to Section 6.04
of this Agreement) of any United States Purchased Entity accrued but not yet due
are accrued on the Balance Sheet. The charges, accruals and reserves for Taxes
(other than income Taxes for which Seller is liable and has agreed to indemnify
Purchaser pursuant to Section 6.04 of this Agreement) with respect to the United
States Purchased Entities for any period or portion thereof ending on or before
the Closing Date reflected on the Balance Sheet are adequate to cover such
Taxes.
(b) Except as set forth in Section 2.13(b) of the Disclosure
Schedule:
(i) no United States Purchased Entity has requested or been
granted an extension of the time for filing any Tax Return which has not yet
been filed;
(ii) no United States Purchased Entity has consented to extend to
a date later than the date hereof the time in which any Tax may be assessed or
collected by any taxing authority;
(iii) no deficiency or proposed adjustment which has not been
settled or otherwise resolved for any amount of Tax has been proposed, asserted
or assessed by any taxing authority against any United States Purchased Entity;
(iv) there is no action, suit, taxing authority proceeding or
audit now in progress, pending or, to Seller's or the Company Executives'
knowledge, threatened against or with respect to any United States Purchased
Entity;
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(v) to the Seller's or the Company's knowledge, no taxing
authority intends or has threatened to claim or assess any amount of additional
Taxes against any United States Purchased Entity;
(vi) since November 8, 1985, no claim has ever been made by a
taxing authority in a jurisdiction where any United States Purchased Entity does
not file Tax Returns that such United States Purchased Entity is or may be
subject to Taxes assessed by such jurisdiction;
(vii) no United States Purchased Entity has made any election
under Section 341(f) of the Code (or any corresponding provision of state, local
or foreign income Tax law);
(viii) there are no Liens for Taxes (other than for current Taxes
not yet due and payable) upon the assets of any United States Purchased Entity;
(ix) no United States Purchased Entity will be required (A) as a
result of a change in method of accounting for a taxable period ending on or
prior to the Closing Date, to include any adjustment in taxable income for any
taxable period (or portion thereof) ending after the Closing Date, or (B) as a
result of any "closing agreement" (with respect to a taxable period ending on or
prior to the Closing Date) as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign income Tax law), to include
any item of income in, or exclude any item of deduction from, taxable income for
any taxable period (or portion thereof) ending after the Closing Date;
(x) for taxable years beginning on or after November 8, 1985, no
United States Purchased Entity has been a member of an Affiliated Group other
than one of which Seller was the common parent, or filed or been included in a
combined, consolidated or unitary income Tax Return, other than one filed by
Seller;
(xi) for taxable years beginning on or after November 8, 1985, no
United States Purchased Entity is a party to or bound by any Tax allocation or
Tax sharing agreement and no United States Purchased Entity has a current or
potential contractual obligation to indemnify any other Person with respect to
Taxes;
(xii) no United States Purchased Entity has made any payments, or
is or will become obligated (under any contract entered into on or before the
Closing Date) to make any payments, that will be non-deductible under Section
280G of the Code (or any corresponding provision of state, local or foreign
income Tax law);
(xiii) no United States Purchased Entity owns any interest in
Real Property in the State of New York or in any other jurisdiction in which a
Tax (other than a net income or franchise tax) is imposed on the gain on a
transfer of an interest in real property; and
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(xiv) Purchaser will not be required to deduct and withhold any
amount pursuant to Section 1445(a) of the Code upon the execution of the
transactions contemplated by this Agreement.
(c) With respect to each United States Purchased Entity, Section
2.13(c) of the Disclosure Schedule contains a list of states, territories and
jurisdictions (whether foreign or domestic) in which such United States
Purchased Entity is required to file Tax Returns relating to Income Taxes of
such United States Purchased Entity.
(d) Section 2.13(b) of the Disclosure Schedule states, with respect to
each taxable period of each United States Purchased Entity beginning on or after
January 1, 1990, (i) whether such taxable period has been or is being audited by
the relevant taxing authority and (ii) any issues (with respect to any ongoing
or past audit) which, to Seller's or the Company Executives' knowledge, are
still open, and an estimate of the amount of any unsettled potential tax
liability with respect to any such issue.
2.14 Employee Benefits Matters.
(a) Section 2.14(a) of the Disclosure Schedule lists or describes: (i)
each "employee benefit plan" (as such term is defined in Section 3(3) of ERISA)
maintained or contributed to since December 31, 1989 by (or required to be
maintained or contributed to by) (A) any of the United States Purchased
Entities, or (B) any Person that, together with any of the United States
Purchased Entities, is treated as a single employer under Section 414 of the
Code (each such person or entity, an "ERISA Affiliate") for the benefit of any
employee of any of the United States Purchased Entities; and (ii) each other
plan, arrangement, policy or understanding (whether written or oral) relating to
retirement, deferred compensation, bonus, severance, fringe benefits or any
other employee benefits currently in effect or maintained or contributed to by
(or required to be maintained or contributed to by) any of the United States
Purchased Entities or any ERISA Affiliate for the benefit of any present or
former employee, consultant, officer or director of any of the United States
Purchased Entities. Each such item listed in Schedule 2.14(a) is referred to
herein as an "Employee Plan."
(b) Except as set forth in Section 2.14(b) of the Disclosure Schedule,
none of the United States Purchased Entities maintains, contributes to, or has
any liability with respect to (i) any "employee pension benefit plan" (as such
term is defined in Section 3(2) of ERISA) that is subject to the requirements of
Section 302 of ERISA or Section 412 of the Code, or (ii) any "multiemployer
plan" (as such term is defined in Section 3(37) of ERISA). None of the United
States Purchased Entities or any ERISA Affiliate is a party to any collective
bargaining agreement which pertains to the employees of any of the United States
Purchased Entities.
(c) Except as set forth in Section 2.14(c) of the Disclosure Schedule,
each Employee Plan that is intended to be qualified within the meaning of
Section 401 of the Code has received a determination letter to that effect from
the Internal Revenue Service (the "IRS"), and nothing material has occurred
since the date of such letter that cannot be cured within the remedial amendment
period provided by Section 401(b) of the Code which would prevent any such
Employee
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Plan from remaining so qualified. Except as set forth in Schedule
2.14(c) of the Disclosure Schedule, each Employee Plan has been maintained in
all material respects in accordance with its terms and with the applicable
provisions of ERISA, the Code and any other applicable laws and collective
bargaining agreements.
(d) The Company has, with respect to each Employee Plan that is
currently maintained or contributed to by the Company or Seller, made available
to Purchaser complete and correct copies of, as applicable, (i) all plan
documents and amendments thereto and related trust agreements, (ii) the most
recent IRS determination letter, (iii) the Annual Report (Form 5500 Series) and
accompanying schedules for the three (3) most recently completed plan years,
(iv) the current summary plan description, and (v) any financial statements and
actuarial valuations for the three (3) most recently completed plan years.
(e) Except as set forth in Schedule 2.14(e) of the Disclosure
Schedule: (i) all contributions to and payments from any Employee Plan that may
have been required to be made in accordance with the terms of the Employee Plan
or ERISA or the Code have been timely made; (ii) neither the United States
Purchased Entities nor any ERISA Affiliate has incurred any liability under
Title IV of ERISA or to the Pension Benefit Guaranty Corporation, and the United
States Purchased Entities have no potential liability under Title IV of ERISA;
and (iii) neither the United States Purchased Entities nor any other
"disqualified person" (within the meaning of Section 4975 of the Code) or any
"party in interest" (within the meaning of Section 3(14) of ERISA) has engaged
in any "prohibited transaction" (within the meaning of Section 4975 of the Code
or Section 406 of ERISA) with respect to any of the Employee Plans which could
subject any of the Employee Plans, any of the United States Purchased Entities
or any officer, director or employee of any of the foregoing to a material
penalty or tax under Section 502(i) of ERISA or Section 4975 of the Code.
(f) Except as set forth in Schedule 2.14(f) of the Disclosure
Schedule, neither the United States Purchased Entities nor any ERISA Affiliate
contributes to, maintains or sponsors or has any liability with respect to any
employee benefit plan, agreement or arrangement applicable to employees of any
of the United States Purchased Entities located outside the United States (the
"Foreign Plans"). Each Foreign Plan is in compliance in all material respects
with all laws applicable thereto and the respective requirements of the
governing documents of such Foreign Plan. There are no pending actions, suits or
claims (other than routine claims for benefits) with respect to any Foreign
Plan.
(g) Except as set forth in Section 2.14(g) of the Disclosure Schedule,
there is no pending or, to Seller's or the Company Executives' knowledge,
threatened claim in respect of any of the Employee Plans. The Purchased Entities
and each ERISA Affiliate have complied with the health care continuation
requirements of Part 6 of Title I of ERISA so as not to result in any loss of
deduction for purposes of federal income taxes and so as not to be liable for
any tax under Section 4980B of the Code.
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2.15 Intellectual Property.
(a) The Intellectual Property Rights comprise all of the intellectual
property rights necessary for the operation of the Company and the Subsidiaries,
as currently conducted. Section 2.15(a) of the Disclosure Schedule sets forth a
complete and correct list of all: (i) patented or registered Intellectual
Property Rights and pending patent applications or other applications for
registrations of Intellectual Property Rights owned or filed by or on behalf of
the Company or the Subsidiaries; (ii) trade names and unregistered trademarks
and service marks owned or used by the Company or the Subsidiaries; (iii)
unregistered copyrights, mask works and non-confidential descriptions of trade
secrets owned or used by the Company or the Subsidiaries and material to the
financial condition, operating results, assets, or operations of the Company or
the Subsidiaries; and (iv) licenses or similar agreements or arrangements for
the Intellectual Property Rights to which the Company or the Subsidiaries is a
party, either as licensee or licensor (correct and complete copies of which,
including all amendments thereto to date, have been delivered to Purchaser).
(b) Except as set forth in Section 2.15(b) of the Disclosure Schedule:
(i) the Company and the Subsidiaries own and possess all right, title and
interest in and to, or have valid and enforceable license to use, the
Intellectual Property Rights necessary for the operation of the Company and the
Subsidiaries as currently conducted free and clear of all Liens (other than
Liens arising with respect to licenses); (ii) no claim by any third party in
writing or, to Seller's or the Company Executives' knowledge, orally, contesting
the validity, enforceability, use or ownership of any of the Intellectual
Property Rights has been made which is currently outstanding or, to Seller's or
the Company Executives' knowledge, is threatened; (iii) except as otherwise
provided in Section 2.15(c)(iv), the loss or expiration of any material
Intellectual Property Right or related group of Intellectual Property Rights is
not pending or, to Seller's or the Company's knowledge, reasonably foreseeable
or threatened; (iv) the Company and the Subsidiaries have not received any
notices of any unresolved infringement or misappropriation by, or conflict with,
any third party with respect to the Intellectual Property Rights (including,
without limitation, any demand or request that the Company or the Subsidiaries
license any rights from a third party); (v) to the knowledge of the Seller or
the Company Executives, the Company or the Subsidiaries have not infringed,
misappropriated or otherwise conflicted with any intellectual property rights or
other rights of any third parties and the Company or the Subsidiaries are not
aware of any infringement, misappropriation or conflict which will occur as a
result of the continued operation of the Company or the Subsidiaries as
currently conducted; and (vi) the Company or the Subsidiaries have not agreed to
indemnify any Person for or against any interference, infringement,
misappropriation or other conflict with respect to the Intellectual Property
Rights.
(c) Except as set forth in Section 2.15(c) of the Disclosure Schedule:
(i) all of the Intellectual Property Rights are owned by, or properly assigned
or licensed to, the Company or the Subsidiaries; (ii) the transactions
contemplated by this Agreement will have no material adverse effect on the
right, title and interest in and to the Intellectual Property Rights; (iii) to
the knowledge of Seller or the Company Executives, the Company and the
Subsidiaries have taken all necessary and desirable action to maintain and
protect the Intellectual Property Rights so as to not materially adversely
affect the validity or enforceability of the Intellectual Property Rights; and
(iv) to Seller's or the Company Executives' knowledge, the owners of any
Intellectual Property Rights licensed to
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the Company and the Subsidiaries have taken all necessary action to maintain and
protect the Intellectual Property Rights subject to such licenses.
2.16 Contracts. Section 2.16 of the Disclosure Schedule lists the following
written agreements (other than Exempt Contracts) to which the Company and, with
respect to clause (f) Interglas or Asahi, is a party or by which the Company
and, with respect to clause (f) Interglas or Asahi, or their respective assets
are bound:
(a) any lease or license of personal property from or to third parties
providing for lease or royalty payments in excess of $100,000 per annum;
(b) any sales or purchase orders, distribution or other agreement for
the purchase or sale of raw materials, commodities, supplies, goods, products,
or other personal property or for the furnishing or receipt of services which
involves consideration of more than the sum of $100,000, in each case
outstanding as of February 20, 1996;
(c) any partnership or joint venture agreement;
(d) any indenture, mortgage, note, bond or other evidence of
Indebtedness, any credit or similar agreement under which the Company has
borrowed money or issued any note, bond, indenture or other evidence of
Indebtedness for more than $100,000 or under which the Company has imposed (or
may impose) a Lien on any of its respective assets, tangible or intangible;
(e) any confidentiality or noncompetition agreement (other than those
benefitting a United States Purchased Entity under which the Company has no
current or future obligations) or any agreement which restricts a United States
Purchased Entity from entering into any new or expanding any existing line of
business or any agreement which contains geographic restrictions on their
respective abilities to conduct business activities;
(f) any agreement with Seller or any of its Affiliates;
(g) any agreement under which the Company could have liabilities or
obligations after the Closing with any current or former directors, officers,
and employees in the nature of a collective bargaining agreement (including
without limitation any collective bargaining pursuant to which any Employee Plan
is maintained), an employment agreement, a consulting agreement or a severance
agreement;
(h) any instrument or agreement whereby the Company grants any other
Person a power of attorney, guarantees the liabilities or obligations of any
other Person or indemnifies any other Person against loss or liability;
(i) any agreement under which any of the United States Purchased
Entities could have liabilities or obligations in the future relating to the
acquisition or disposition of material assets by way of merger, consolidation,
purchase (other than purchase orders disclosed pursuant to clause (b) of this
Section 2.16), sale or otherwise, or granting to any Person a right at such
Person's option
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to purchase or acquire any material asset or property, of the Company or any
interest therein (not including dispositions of inventory in the ordinary course
of business);
(j) any agreement or commitment for the construction or modification
of any building, structure or other fixed asset, or for the incurrence of any
other capital expenditure involving amounts in excess of $100,000;
(k) any agreement with any manufacturer's representative, distributor
or other independent sales agent that is not terminable by the Company without
penalty or payment of compensation on sixty days or less notice;
(l) any agreement not otherwise required to be disclosed pursuant to
this Section 2.16 the consequences of a default or termination would materially
and adversely affect any United States Purchased Entity; and
(m) any agreement not otherwise required to be disclosed pursuant to
this Section 2.16 either involving consideration of more than $100,000 or not
entered into in the ordinary course of business.
Seller has made available to Purchaser a correct and complete copy of each
agreement listed in Section 2.16 of the Disclosure Schedule (as amended to
date), other than agreements disclosed pursuant to clause (b) of this Section
2.16, which Seller has made available to Purchaser only upon Purchaser's
request. Except as otherwise disclosed in Section 2.16 of the Disclosure
Schedule, each such agreement is in full force and effect and the Company is
not, and to Seller's or the Company Executives' knowledge, no other party
thereto is, in material breach or default, and no event has occurred which with
notice or lapse of time would constitute a material breach or default by the
Company, or, to the Seller's or the Company Executives' knowledge, by any other
party, or permit termination, modification, or acceleration by the Company, or,
to the Seller's or the Company Executives' knowledge, by any other party, under
such agreement. Except as set forth in Section 2.16 of the Disclosure Schedule,
the Company is not a party to any oral contract, agreement, or other arrangement
which, if reduced to written form, would be required to be listed in Section
2.16 of the Disclosure Schedule under the terms of this Section 2.16.
2.17 Environmental and Safety Matters. Except as set forth in Section 2.17
of the Disclosure Schedule, (i) the United States Purchased Entities have
complied in all material respects and are in compliance in all material respects
with all Environmental and Safety Requirements (including without limitation all
permits and licenses required thereunder); (ii) neither Seller nor any of the
United States Purchased Entities has received any oral or written notice of any
violation of, or any liability (contingent or otherwise) or corrective or
remedial obligation under, any Environmental and Safety Requirements pertaining
to the Purchased Entities; and (iii) neither Seller nor any United States
Purchased Entity has transported or arranged for the disposal of any hazardous
material, substance, or waste, or owned or operated any property or facility
(and no such property or facility is contaminated with hazardous materials,
substances or wastes) so as to give rise to liabilities under CERCLA, RCRA or
any other Environmental and Safety Requirements. Neither this Agreement nor the
consummation of the transaction that is the subject of this Agreement will
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result in any obligations for site investigation or cleanup, or notification to
or consent of government agencies or third parties, pursuant to any so-called
"transaction-triggered" or "responsible property transfer" Environmental and
Safety Requirements. No Environmental Lien has attached to any property owned,
leased or operated by Seller (in relation to the United States Purchased
Entities) or any United States Purchased Entity. No facts or circumstances with
respect to the past or current operation or facilities of Seller, any United
States Purchased Entity or any predecessor or Affiliate thereof (including,
without limitation any onsite or offsite disposal or release of hazardous
materials, substances or wastes) would give rise to any liability or corrective
or remedial obligation under any Environmental and Safety Requirements with
respect to the United States Purchased Entities.
2.18 Labor Relations. Except as set forth in Section 2.18 of the Disclosure
Schedule, neither Seller nor any Affiliate of Seller (including the United
States Purchased Entities) is a party to any collective bargaining agreement
applicable to employees of any of the United States Purchased Entities and no
organizational effort is presently being made or, to Seller's or the Company's
knowledge, threatened by or on behalf of any labor union with respect to any
employees of the United States Purchased Entities. Except as set forth in
Section 2.18 of the Disclosure Schedule, the United States Purchased Entities
are in compliance in all material respects with all applicable Laws respecting
employment and employment practices, terms and conditions of employment and
wages and hours and are not engaged in any unfair labor practice and there is no
labor strike, dispute, slowdown or stoppage actually pending or, to Seller's or
the Company's knowledge, threatened, against the United States Purchased
Entities.
2.19 Insurance. Section 2.19 of the Disclosure Schedule lists all insurance
policies currently in effect to which the Company is a party covering the
properties, assets, employees or operations of the United States Purchased
Entities (including policies providing property, casualty, liability, or
workers' compensation coverage and bond and surety arrangements), and the
information set forth in Section 2.19 of the Disclosure Schedule, including the
name of the insurer, the name of the policyholder, the policy number, the period
of coverage, a general description of coverage and the amount of coverage
(including limits) with respect to each such policy is true and correct. All
such policies are in full force and effect.
2.20 No Brokers' or Other Fees. Except as set forth in Section 2.20 of the
Disclosure Schedule, no broker, finder or investment banker is entitled to any
fee or commission in connection with the transactions contemplated hereby based
upon arrangements made by or on behalf of Seller or any United States Purchased
Entity.
2.21 Bank Accounts. Section 2.21 of the Disclosure Schedule lists the names
and locations of all banks and other financial institutions with which any
United States Purchased Entity has an account (or to which deposits are made on
behalf of any United States Purchased Entity), in each case listing the type of
account maintained, the account number therefor, and the names of all Persons
authorized to draw thereupon or who have access thereto and lists the locations
of all safe deposit boxes used by any United States Purchased Entity.
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2.22 Business of Fort Mill. Fort Mill has no assets other than the Company
Shares, Fort Mill does not conduct, and has not conducted, any business other
than acting as sole stockholder of the Company or otherwise with respect to the
Company Shares.
2.23 Company Transfer. Except as set forth in Section 2.23 of the
Disclosure Schedule, the transfer of the Company's interest in ABAEI has been
consummated on terms that do not impose any liability or obligation on any
Purchased Entity (whether contingent or otherwise).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HOLDINGS
Holdings represents and warrants to Seller as follows:
3.01 Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Holdings
is a limited liability company duly formed and in good standing under the laws
of the State of Delaware.
3.02 Authorization, Etc. Each of Purchaser and Holdings has full corporate
or other power and authority to execute and deliver this Agreement and the
documents and instruments contemplated hereby, and to carry out the transactions
contemplated hereby and thereby. Each of Purchaser and Holdings has duly
approved and authorized the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and, prior to the Closing,
each of Purchaser and Holdings will have duly approved and authorized the
documents and instruments contemplated hereby and the consummation of the
transactions contemplated thereby by all necessary corporate action. This
Agreement constitutes a valid and binding agreement of each of Purchaser and
Holdings, enforceable against each of Purchaser and Holdings in accordance with
its terms, except that (i) the enforcement hereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
3.03 No Approvals or Conflicts. Neither the execution and delivery by
Purchaser or Holdings of this Agreement nor the consummation by Purchaser and
Holdings of the transactions contemplated hereby will (i) violate, conflict with
or result in a breach of any provision of the certificate of incorporation or
by-laws of Purchaser, (ii) violate, conflict with or result in a breach of any
provision of, conflict with or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the creation of any Lien upon
any of Purchaser's or Holdings' properties under, or cause the termination or
modification of, or give any other Person the right to terminate or modify, any
note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
lease, contract, agreement or other instrument to which either Holdings or
Purchaser or any of their respective properties may be
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bound, (iii) violate any order, injunction, judgment, ruling, Law applicable to
either Holdings or Purchaser or any of its respective properties, or (iv)
require any consent, approval or authorization of, or notice to, or declaration,
filing or registration with, any Governmental Body or other third party other
than filings under the HSR Act and the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware.
3.04 No Distribution. If Purchaser makes the Cash Election pursuant to
Section 1.05, the Shares will not be taken by Purchaser with a view to the
public distribution thereof, and will not be transferred except in a transaction
registered or exempt from registration under the Securities Act.
3.05 No Brokers' or Other Fees. Except as set forth in Section 3.05 of the
Disclosure Schedule, no broker, finder or investment banker is entitled to any
fee or commission in connection with the transactions contemplated hereby based
upon arrangements made by or on behalf of Purchaser, Holdings or Vestar.
3.06 Business of Holdings and Purchaser. Holdings does not own directly or
indirectly, or have any investment in any of the capital stock of, or have any
similar ownership interest in, any Person other than Purchaser. Prior to the
Effective Time, or, if Purchaser makes the Cash Election pursuant to Section
1.05, immediately prior to the Closing, Purchaser will not own directly or
indirectly, or have any investment in any of the capital stock of, or have any
similar ownership interest in, any Person. Prior to the date hereof, neither
Purchaser nor Holdings have incurred any Indebtedness.
3.07 Capitalization of Purchaser. The authorized capital stock of Purchaser
consists of 1,000 shares of Purchaser Common Stock, of which only 100 shares are
outstanding and which shares have been validly issued and are fully paid,
nonassessable and free of preemptive rights. There are no subscriptions,
options, warrants, calls, rights, contracts, commitments, understandings,
restrictions or arrangements relating to the issuance, sale, transfer or voting
of any shares of Purchaser Common Stock, including any rights of conversion or
exchange under any outstanding securities or other instruments. Section 3.07 of
the Disclosure Schedule sets forth a description of the Financing and such
details with respect thereto as are available as of the date hereof.
ARTICLE IV
CONDITIONS TO SELLER'S AND FORT MILL'S OBLIGATIONS
The obligations of Seller and Fort Mill to effect the Closing under this
Agreement are subject to the satisfaction, at or prior to the Closing, of each
of the following conditions, unless waived in writing by Seller; provided that
no such waiver shall constitute a waiver of Seller's rights, or in any way
relieve Purchaser of any obligations, under Article VIII hereof.
4.01 Representations and Warranties. All of the material representations
and warranties made by Holdings in this Agreement or in any written certificate
delivered pursuant to this Agreement shall be true and correct in all material
respects on the Closing Date as though such
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representations and warranties were made at and as of such date, except for
representations and warranties that expressly relate to a date earlier than the
Closing Date and other changes expressly permitted or contemplated by this
Agreement.
4.02 Performance. Purchaser and Holdings shall have performed and complied
in all material respects with all agreements, obligations and conditions
required by this Agreement to be so performed or complied with by Purchaser and
Holdings prior to the Closing and, if Purchaser fails to make the Cash Election
pursuant to Section 1.05, this Agreement shall have been approved by Holdings,
as sole stockholder of Purchaser, in accordance with Section 251 of the Delaware
General Corporation Law.
4.03 Officer's Certificate. Holdings shall have delivered to Seller a
certificate, dated the Closing Date and executed by an executive officer of
Holdings, certifying that the conditions specified in Sections 4.01 and 4.02
(except for those conditions waived by Seller in writing) have been fulfilled at
or prior to the Closing Date.
4.04 No Action. No Action shall have been instituted (and be pending) by
any Governmental Body seeking to restrain and prohibit this Agreement or the
consummation of the transactions contemplated hereby. No Order preventing the
consummation of the sale of the Shares by Seller to Purchaser shall be in
effect.
4.05 HSR Act. The waiting period (including any extensions thereof by
reason of a request for additional information) relating to the notification and
report forms under the HSR Act filed by Purchaser (or its ultimate parent
entity) and Seller with respect to the transactions contemplated by this
Agreement shall have expired or been terminated.
4.06 Payments. If Purchaser makes the Cash Election pursuant to Section
1.05, Purchaser shall have delivered to Seller the Cash Purchase Price in
accordance with the terms of this Agreement, or if Purchaser fails to make the
Cash Election, Purchaser or its Affiliate shall have received financing on terms
satisfactory to Holdings which is sufficient to consummate the transactions
contemplated by this Agreement and the lenders in respect of such financing
shall have indicated that all conditions to the funding of such financing have
been satisfied or waived (other than the condition that evidence of the filing
of the Certificate of Merger shall have been obtained).
4.07 Capital Structure of Purchaser. If Purchaser has not made the Cash
Election pursuant to Section 1.05, (a) Holdings shall have invested at least
$25,000,000 in the equity of Purchaser, and (b) the total Indebtedness incurred
by Purchaser, the Surviving Corporation or the Company at Closing pursuant to
the Financing shall be approximately $140,000,000.
4.08 Opinion of Counsel. Seller shall have received an opinion of Kirkland
& Ellis addressed to Seller and Fort Mill and dated the Closing Date with
respect to the matters described in Exhibit 4.08 hereto in a form reasonably
acceptable to Seller.
4.09 Other Agreements. If Purchaser has not made the Cash Election pursuant
to Section 1.05, Holdings shall have entered into the Securityholders Agreement
and the Voting Trust
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Agreement, and Holdings and Vestar shall have entered into the Operating
Agreement (which shall include the Proceeds Sharing Provisions).
ARTICLE V
CONDITIONS TO PURCHASER'S AND HOLDINGS' OBLIGATIONS
The obligations of Purchaser and Holdings to effect the Closing under this
Agreement are subject to the satisfaction, at or prior to the Closing, of each
of the following conditions, unless waived in writing by Purchaser and Holdings;
provided that no such waiver shall constitute a waiver of the Purchaser
Indemnitees' rights, or in any way relieve Seller of any obligation, under
Article VIII hereof.
5.01 Representations and Warranties. All of the material representations
and warranties made by Seller in this Agreement or in any written certificate
delivered pursuant to this Agreement shall be true and correct in all material
respects on the Closing Date as though such representations and warranties were
made at and as of such date, except for representations and warranties that
expressly relate to a date earlier than the Closing Date and other changes
expressly permitted or contemplated by this Agreement.
5.02 Performance. Seller and Fort Mill shall each have performed and
complied in all material respects with all agreements, obligations and
conditions required by this Agreement to be so performed or complied with by
Seller or Fort Mill prior to the Closing and, if Purchaser fails to make the
Cash Election pursuant to Section 1.05, this Agreement shall have been approved
by Springs, as sole stockholder of Fort Mill, in accordance with Section 251 of
the Delaware General Corporation Law.
5.03 Certificate. Seller shall have delivered to Purchaser and Holdings a
certificate, dated the Closing Date and executed by an executive officer of
Seller, certifying that the conditions specified in Sections 5.01 and 5.02
(except for those conditions waived by Purchaser and Holdings in writing) have
been fulfilled at or prior to the Closing Date.
5.04 No Action. No Action shall have been instituted (and be pending) by
any Governmental Body seeking to restrain and prohibit this Agreement or the
consummation of the transactions contemplated hereby. No Order preventing the
consummation of the sale of the Shares by Seller to Purchaser shall be in
effect.
5.05 Consents. All consents and approvals (including those listed in
Section 5.05 of the Disclosure Schedule) required for the consummation of the
transactions contemplated by this Agreement or where the effect of the failure
to obtain any such consent or approval would result in the breach of a material
agreement that any Purchased Entity is a party to shall have been given and
delivered.
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5.06 HSR Act. The waiting period (including any extensions thereof by
reason of a request for additional information) relating to the notification and
report forms under the HSR Act filed by Purchaser (or its ultimate parent
entity) and Seller with respect to the transactions contemplated by this
Agreement shall have expired or been terminated.
5.07 No Changes. Since December 31, 1995, there shall have been no material
adverse change in the financial condition, operating results, business, business
prospects or material business relationships of the Company, the Subsidiaries,
Interglas or Asahi (provided, however, that the transfer or other disposition of
ABAEI and any transfer in the compliance with Section 6.20 shall not constitute
material adverse changes for purposes of this Section 5.07).
5.08 Delivery of Shares. If Purchaser makes the Cash Election pursuant to
Section 1.05, Seller shall have delivered to Purchaser the Shares.
5.09 Resignation of Directors. Seller shall have delivered to Purchaser the
written resignations of (a) all of the directors of Fort Mill and the Company,
effective as of the Closing Date, (b) all members of the Managing Committee of
Clark-Schwebel Tech-Fab Company, a New York general partnership ("Tech-Fab"),
who were appointed by the Company, effective as of the Closing Date, and (c) all
of the directors of each of Interglas and Asahi who were designated by the
Company, effective as of the Closing Date.
5.10 Financing. Purchaser or its Affiliate shall have received financing on
terms satisfactory to Holdings which is sufficient to consummate the
transactions contemplated by this Agreement and to provide for the operational
needs of the Company (the "Financing").
5.11 Opinion of Counsel. Purchaser and Holdings shall have received an
opinion of each of Sutherland, Asbill and Brennan and Seller's General Counsel
addressed to Purchaser and Holdings and dated the Closing Date with respect to
the matters described in Exhibit 5.11 hereto in a form reasonably acceptable to
Purchaser and Holdings.
5.12 Real Property Matters.
(a) A title insurance company selected by Purchaser (the "Title
Company") shall be willing to insure at standard rates the Company's and the
applicable Subsidiaries' marketable title in and to the Owned Property in fee
simple, and the mortgage lien of Purchaser's (or its Affiliate's) lender on the
Owned Property free and clear of all Liens, defects, claims, leases or rights of
possession (other than Permitted Liens and the matters disclosed in Section
2.10(a) of the Disclosure Schedule) including such endorsements and affirmative
coverages as Purchaser and lender shall reasonably require including without
limitation non-imputation endorsements. Seller shall cause the Company to
provide all such affidavits and indemnities as the Title Company reasonably
shall require in order to afford such coverages. The cost of such title
insurance policies shall be paid by Purchaser or, if the Closing is effected,
the Company.
(b) Purchaser shall have received a survey of each Owned Property in a
form reasonably satisfactory to Purchaser's (or its Affiliate's) lender and the
Title Company and sufficient
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to provide standard survey coverage over all survey related title exceptions on
the policy of title insurance to be obtained by Purchaser, certified to
Purchaser, such lender and the Title Company and showing no defects,
encroachments or encumbrances other than the matters disclosed in Section
2.10(a) of the Disclosure Schedule and Permitted Liens. The cost of such surveys
shall be paid by Purchaser.
(c) Purchaser shall have received from each landlord under a Lease an
estoppel in form and substance reasonably satisfactory to Purchaser.
5.13 Indebtedness and Liens. As of the Closing, (a) all outstanding
Indebtedness (other than obligations related to capital leases set forth in
Section 5.13 of the Disclosure Schedule) of each of Fort Mill and the Company
shall have been paid in full, defeased in a manner that will not result in any
liability or obligation being imposed on the Company, Fort Mill or the Surviving
Corporation, or assumed by Seller, including without limitation the Industrial
Revenue Bond Obligation, and (b) all Liens on the capital stock or other equity
interests of the United States Purchased Entities and on all other assets of the
Company securing such Indebtedness shall have been released, and, if required by
Purchaser's (or its Affiliate's) lender, all public records shall have been
cleared of any such Liens. At the Closing, Seller shall cause the Company to
provide, or arrange to be provided to Purchaser, all releases and other
documents in form and substance reasonably satisfactory to Purchaser either
providing for, or if required by Purchaser's (or its Affiliate's) lender,
demonstrating the release (actual and of record) of such Liens.
5.14 Fort Mill Assets and Liabilities. Fort Mill shall have no assets other
than the Company Shares and no liabilities of any nature whatsoever.
5.15 Transition Agreements. Seller shall have entered into agreements with
the Company containing the terms set forth in Exhibit 5.15 hereto.
ARTICLE VI
COVENANTS AND AGREEMENTS
6.01 Conduct of Business. Seller covenants that, except (i) for actions
taken to implement this Agreement and the transactions contemplated hereby, (ii)
as disclosed in the Disclosure Schedule, (iii) for actions taken pursuant to an
Exempt Contract, or (iv) as consented to by Holdings, from and after the date of
this Agreement and until the Closing Date, Seller shall cause the Company to,
and shall use reasonable best efforts to cause the Subsidiaries to, conduct
their respective businesses only in the ordinary course of business consistent
with past practice, and, without limiting the foregoing, shall cause the Company
to, and shall use reasonable best efforts to cause the Subsidiaries to (and with
respect to clauses (c) and (d), Seller shall cause Fort Mill to):
(a) use commercially reasonable efforts consistent with good business
judgment and in accordance with the Company's practice during the past five
years to: (i) preserve intact the present business organization, material
licenses and operations of the Company and the Subsidiaries;
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(ii) keep available the services of the material employees of the Company and
the Subsidiaries; and (iii) preserve the present relationships of the Company
and the Subsidiaries with customers, suppliers and other entities or Persons
having business dealings with the Company and the Subsidiaries;
(b) except as set forth in Section 6.01(b) of the Disclosure Schedule,
maintain the books and records of the Company and the Subsidiaries in accordance
with past practice;
(c) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any shares of its capital stock, or grant or issue, or
agree to grant or issue, any options relating to the issuance thereof;
(d) not acquire any shares of their respective capital stock in any
transaction other than for cash, or declare any dividends with respect to their
respective shares of capital stock (other than cash dividends) or make any
non-cash distribution with respect to their respective capital stock;
(e) except for sales of inventory in the ordinary course of business
consistent with past practice or other sales of assets in the ordinary course of
business consistent with past practice in arm's length transactions, not sell,
pledge, dispose of or encumber any of their respective assets;
(f) except in the ordinary course of business consistent with past
practice, or as necessary or advisable under applicable Law, not make or permit
to be made any material amendment or termination of any contract required to be
listed in Section 2.16 of the Disclosure Schedule;
(g) not merge with or into, consolidate with or acquire all or
substantially all of the stock or assets of any other Person;
(h) except as contemplated in the Approved Budget, not enter into any
commitment, contract, lease, sublease, license, or sublicense (or series of
related commitments, contracts, leases, subleases, licenses, or sublicenses)
either involving more than $100,000 individually or $500,000 in the aggregate or
outside the ordinary course of business consistent with past practice;
(i) except as contemplated in the Approved Budget, not commit to the
acquisition or construction of any property, plant or equipment in excess of
$100,000 individually or $500,000 in the aggregate;
(j) not create, incur, assume, or guarantee any indebtedness
(including capital lease obligations) involving $100,000 individually or
$350,000 in the aggregate or outside the ordinary course of business consistent
with past practice (other than pursuant to Section 6.20);
(k) not discharge or cancel any material claim or right with respect
to any Intellectual Property Rights;
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(l) (i) not make or grant any increases in the compensation or
benefits payable or to become payable to (A) any of their respective officers or
directors who are or will be on the Company's payroll or (B) other employees
whose current salary exceeds $50,000 per year, (ii) adopt any Employee Plan or
any retirement, deferred compensation, bonus or material fringe benefit plan or
program or any bonus, insurance, pension or similar arrangement (or make any
loan or other credit accommodation) to or for any officer, employee, or director
or (iii) make any contribution to any Employee Plan or any retirement, deferred
compensation or bonus program, plan or arrangement for the benefit of any
employee, officer or director, other than in the ordinary course of business
consistent with past practice;
(m) not make or enter into any agreement or understanding to do any
of the foregoing; or
(n) except as otherwise contemplated or required hereby, not enter
into any transaction or perform any act which would result in any of the
representations and warranties contained in this Agreement not being true and
correct in any material respect at and as of the time immediately after the
occurrence of such transaction or act or on the Closing Date.
6.02 Access to Books and Records; Post-Closing Access.
(a) From the date hereof until the Closing, Seller shall use
reasonable efforts to make available all information (financial or otherwise)
reasonably requested by or on behalf of Purchaser or its financing sources in
connection with their due diligence review of the Purchased Entities, including
at all reasonable times and upon reasonable notice, access to the books,
records, facilities, properties, officers, key employees, accountants and
representatives of the Purchased Entities. Purchaser will use commercially
reasonable best efforts to assure that any disruption to the business of the
Purchased Entities is minimized in connection with due diligence efforts by
Purchaser and its Affiliates and their respective representatives, and the
Purchased Entities shall not be required to incur any out-of-pocket travel
expenses in connection with such due diligence without Seller's prior consent.
Seller shall designate one or more persons who shall be responsible for handling
all due diligence access requests, and Purchaser shall use its commercially
reasonable best efforts to notify Seller of the names of the persons who will be
making such requests. All requests for due diligence information or access to
assets or employees of the Purchased Entities by Purchaser and its Affiliates or
their respective representatives shall be through Seller's designated
representative or representatives. Purchaser shall notify Seller in advance of
the names of any third parties (including prospective lenders and equity
participants) to which Purchaser wishes to furnish any Evaluation Material
involving the Purchased Entities and shall use commercially reasonable best
efforts to cause any such third parties to execute a confidentiality agreement
substantially in the form of the Confidentiality Agreement unless Seller waives
such requirement in writing. Neither Purchaser nor its representatives shall
contact Interglas, Asahi, Clark-Schwebel Tech-Fab Company, or their Affiliates
or any of the Purchased Entities' customers or suppliers regarding the
transactions contemplated by this Agreement without the prior consent of Seller;
provided, however, Seller and Purchaser shall mutually agree upon a schedule for
Purchaser and its representatives to be afforded the opportunity to make such
contact; and, provided further, that no meeting with the aforesaid
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entities shall be scheduled without the prior consent of Seller, or conducted
without the presence of a representative of Seller, without the prior consent of
Seller.
(b) Purchaser and Seller agree to retain for a period of six years
after the Closing Date any and all books and records relating to the assets,
liabilities and business of the Purchased Entities that exist on, or existed
prior to, the Closing Date and that are related to the transactions contemplated
hereby. In the event either party needs access to such books, records, or
accounting personnel of Purchaser and the Company for the purposes of (i)
responding to any inquiries of any Governmental Body, (ii) preparing Tax Returns
and financial statements, or (iii) any other similar business purpose
(including, without limitation, effecting a registration of any securities of
any Purchased Entity under the Securities Act or complying with the terms of
this Agreement), each party will allow authorized representatives of the other
party access to such books, records, and accounting personnel upon reasonable
notice during normal business hours for the sole purpose of obtaining
information for use as aforesaid and will permit the other party to make such
extracts and copies thereof as may be necessary and, if required for such
purpose, to have access to and possession of original documents.
6.03 Filings and Consents.
(a) As promptly as practicable after the date hereof, Purchaser and
Seller shall make, or shall cause to be made, such filings as may be required
pursuant to the HSR Act with respect to the consummation of the transactions
contemplated by this Agreement. Thereafter, Purchaser and Seller will file or
cause to be filed as promptly as practicable with the United States Federal
Trade Commission and the United States Department of Justice any supplemental
information that may be requested pursuant to the HSR Act. All filings referred
to in this Section 6.03 will comply in all material respects with the
requirements of the respective Laws pursuant to which they are made, and all
fees related to such filings shall be paid by Purchaser.
(b) Without limiting the generality or effect of Section 6.03(a), each
party to this Agreement will (i) use reasonable best efforts to comply as
expeditiously as possibly with all lawful requests of Governmental Bodies for
additional information and documents pursuant to the HSR Act, (ii) not (A)
unreasonably extend any waiting period under the HSR Act or (B) enter into any
agreement with any Governmental Body not to consummate the transactions
contemplated by this Agreement, except with the prior written consent of the
other parties, which consent shall not be unreasonably withheld, and (iii)
cooperate with the other party and use reasonable best efforts to cause the
lifting or removal of any temporary restraining order, preliminary injunction or
other Order that may be entered into in connection with the transactions
contemplated by this Agreement.
(c) As promptly as practicable, each of Seller and Purchaser will
make, or cause to be made, all filings with courts or other Governmental Bodies,
and Seller will apply in writing for, and use all commercially reasonable
efforts to obtain, all other third party approvals and consents required to be
made or obtained in order to effectuate the transactions contemplated hereby.
Each of Seller and Purchaser will co-operate with the other in effecting the
foregoing, and will deliver to the other copies of all filings, approvals and
consents made or obtained pursuant to this Section 6.03.
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6.04 Tax Matters.
(a) Liability of Seller for Pre-Closing Taxes. Seller shall be liable
for and shall indemnify Holdings, Purchaser and each of their Affiliates for (i)
all income Taxes, including, without limitation, any income Taxes resulting from
this Agreement, imposed on Seller and Seller's Affiliated Group for all taxable
years or periods, whether ending before or after the Closing Date, (ii) all
income Taxes imposed on the United States Purchased Entities, or for which the
United States Purchased Entities may otherwise be responsible, for any taxable
year or period of the United States Purchased Entities that ends on or before
the Closing Date, and (iii) with respect to any taxable year of the United
States Purchased Entities that begins before the Closing Date and ends after the
Closing Date, a portion of the income Taxes imposed on the United States
Purchased Entities, or for which the United States Purchased Entities may
otherwise be responsible, which relates to the portion of such Taxable period
(computed in accordance with Section 6.04(k)(ii) of this Agreement) ending on
the Closing Date. For purposes of the preceding sentence, a Tax for which a
United States Purchased Entity may otherwise be responsible includes the
liability of a United States Purchased Entity for the unpaid Taxes of any Person
(other than any United States Purchased Entity) under Treasury Regulation
Section 1.1502-6 (or any similar provision of state, local, or foreign Tax law),
as transferee or successor, by contract, or otherwise, accruing during the
applicable period. Seller shall not be responsible for Taxes imposed on any
Purchased Entity and attributable (where applicable in accordance with Section
6.04(k)(ii) of this Agreement) to periods or portions thereof beginning after
the Closing Date.
(b) Mutual Cooperation. As soon as practicable, but in any event
within 30 days after Seller's or Holdings' request, as the case may be, Holdings
shall or shall cause the United States Purchased Entities, as applicable, to
deliver to Seller or Seller shall deliver to Holdings, such information and
other data in the possession of Seller, Holdings, or the United States Purchased
Entities, as the case may be, relating to the Tax Returns and Taxes of such
United States Purchased Entity, including such information and other data
customarily required by Seller or Holdings, as the case may be, to cause the
payment of all Taxes or to permit the preparation of any Tax Returns for which
it has responsibility or liability or to respond to audits by any taxing
authorities with respect to any Tax Returns or Taxes for which it has any
responsibility or liability under this Agreement or otherwise or to otherwise
enable Seller or Holdings, as the case may be, to satisfy its accounting or Tax
requirements, and shall make available such knowledgeable employees of the
United States Purchased Entities or Seller, as the case may be, as Seller or
Holdings may reasonably request. For a period of seven years after the Closing
Date, and, if at the expiration thereof any tax audit or judicial proceeding is
in progress or the applicable statute of limitations has been extended, for such
longer period as such audit or judicial proceeding is in progress or such
statutory period is extended, Holdings shall, and shall cause the United States
Purchased Entities to, maintain and make available to Seller, on Seller's
reasonable request, copies of any and all information, books and records
referred to in this Section 6.04(b). After such period, Holdings and the United
States Purchased Entities may dispose of such information, books and records,
provided that prior to such disposition Holdings shall give Seller a reasonable
opportunity to take possession of such information, books and records. Holdings
and Seller further agree, upon request, to use their reasonable best efforts to
obtain any certificate or other document from any Governmental Body or any other
Person as may be necessary to mitigate, reduce or eliminate any Tax that could
be imposed (including, but not
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limited to, with respect to the transactions contemplated hereby), provided,
however, that neither Holdings nor Seller nor any of their Affiliates shall be
required to obtain a ruling with respect to the tax consequences of this
transaction unless Seller and Holdings mutually agree otherwise. Holdings and
Seller further agree, upon request, to provide the other party with all
information that either party may be required to report pursuant to Section 6043
of the Code and all Treasury Department Regulations promulgated thereunder.
(c) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) imposed as a result of the transactions contemplated by this Agreement
(including any New York State Gains Tax, New York City Transfer Tax and any
similar tax imposed in other states or subdivisions), shall be paid by Seller
when due, and Seller will, at its own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Holdings will, and will cause its Affiliates to, join in the
execution of any such Tax Returns and other documentation.
(d) Time of Payment. Any payment pursuant to this Section 6.04 shall
be made not later than 30 days after receipt by Seller of written notice from
Holdings stating that Taxes for which Seller is responsible have been paid by
Holdings, any of its Affiliates, or (effective upon the Closing) any United
States Purchased Entity, and the amount thereof and of the indemnity payment
requested. Holdings shall make no payment with respect to any claim, assessment
or disputed amount referred to in subsection (e)(i) of this Section 6.04 until
the provisions of subsection (e) have been satisfied with respect to such
amount. Any payment required under this Section 6.04 and not made when due shall
bear interest at the rate per annum determined, from time to time, under the
provisions of Section 6621(a)(2) of the Code for each day until paid.
(e) Contests.
(i) Whenever any taxing authority asserts a claim, makes an
assessment or otherwise disputes or affects the Income Tax reporting position of
the United States Purchased Entities for periods prior to the Closing Date or
the amount of Taxes for which Seller is or may be liable under this Agreement,
Holdings shall, promptly upon receipt by Holdings or the United States Purchased
Entities of notice thereof, inform Seller, and Seller shall have the right to
control any resulting proceedings and to determine whether and when to settle
any such claim, assessment or dispute, to the extent such proceedings or
determinations affect the Income Tax reporting position of the United States
Purchased Entities for periods prior to the Closing Date or the amount of Taxes
for which Seller is liable under this Agreement; provided that Seller shall
consult in good faith with Holdings regarding any such audit, proceeding or
determination to the extent such audit, proceeding or determination would
reasonably be expected to affect Taxes for which the United States Purchased
Entities, Purchaser or Holdings is liable under this Agreement; and, provided
further, that, without the prior written consent of Holdings (such consent not
to be unreasonably withheld), (A) neither Seller nor any of its Affiliates
shall, unless otherwise required by Law, take any position on any Tax Return or
in any contest or proceeding relating to Taxes after the Closing Date not in
accordance with past custom and practice that materially adversely affects the
United States Purchased Entities, their respective Tax attributes or Tax
liability for a taxable period or portion
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thereof beginning after the Closing Date, and (B) neither Seller nor any of its
Affiliates shall agree to any settlement in respect of any contest or proceeding
relating to Taxes (other than federal Income Taxes) after the Closing Date not
in accordance with past custom or practice which would materially adversely
affect the United States Purchased Entities, their respective Tax attributes or
Tax liability for a taxable period or portion thereof beginning after the
Closing Date.
(ii) Whenever any taxing authority asserts a claim, makes an
assessment or otherwise disputes the amount of Taxes for which Purchaser or
Holdings is liable under this Agreement, Seller shall, promptly upon receiving
notice thereof, inform Holdings. Holdings shall have the right to control any
resulting proceedings and to determine whether and when to settle any such
claim, assessment or dispute, but only to the extent such proceedings affect the
amount of Taxes for which Holdings is liable under this Agreement; provided that
Holdings shall consult in good faith with Seller regarding any audits of
Holdings' and the United States Purchased Entities's Tax Returns to the extent
such audits would reasonably be expected to affect Taxes for which Seller is
liable under this Agreement; provided further, that, without the prior written
consent of Seller (such consent not to be unreasonably withheld), (A) neither
Holdings nor any of its Affiliates shall, unless otherwise required by Law, take
any position on any Tax Return or in any contest or proceeding relating to Taxes
after the Closing Date not in accordance with past custom and practice
that materially adversely affects the Tax liability of the United States
Purchased Entities for the Pre-Closing Portion of a taxable period beginning
before and ending after the Closing Date, and (B) neither Holdings nor any of
its Affiliates shall agree to any settlement in respect of any contest or
proceeding relating to Taxes after the date of this Agreement not in accordance
with past custom or practice which would materially adversely affect the Tax
liability of the United States Purchased Entities for the Pre-Closing Portion of
a taxable period beginning before and ending after the Closing Date. The
"Pre-Closing Portion" of a taxable period beginning before and ending after the
Closing Date means the portion of such taxable period that begins on the first
day of such taxable period and ends on (and includes) the Closing Date.
(f) Resolution of Disagreements Between Seller and Purchaser. If
Seller and Holdings disagree as to the amount for which each is liable under
this Section 6.04, Seller and Holdings shall promptly consult with each other in
an effort to resolve such dispute. If any such point of disagreement cannot be
resolved within fifteen (15) days of the date of consultation, Seller and
Holdings shall jointly select from the six major independent certified public
accounting firms in the United States (which are listed in Section 6.04(f) of
the Disclosure Schedule) (any such accounting firm is referred to herein as an
"Accountant"), an Accountant which has not performed any material services since
January 1, 1993, for either Seller or Vestar or an Affiliate of Vestar, to act
as an arbitrator to resolve all points of disagreement concerning tax accounting
matters with respect to this Agreement. If the parties cannot agree on the
selection of an Accountant within fifteen (15) days, then such Accountant shall
be selected by lot from the Accountants listed in Section 6.04(f) of the
Disclosure Schedule.
(g) Tax Sharing Agreement. Any Tax sharing agreement between any
Purchased Entity and any other Person (other than a Purchased Entity) shall be
terminated as of the Closing Date and will have no further effect for any
taxable year (whether the current year, a future year, or a past year).
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(h) No Changes. Without the prior written consent of Holdings (which
consent shall not be unreasonably withheld), neither Seller nor any United
States Purchased Entity shall (if not in accordance with the past custom and
practice of such United States Purchased Entity) make or change any election,
change an annual accounting period, adopt or change any accounting method, file
any amended Tax Return, enter into any closing agreement, settle any Tax claim
or assessment relating to such United States Purchased Entity, surrender any
right to claim a refund of Taxes, or take any other similar action, or omit to
take any action relating to the filing of any Tax Return or the payment of any
Tax, if such election, adoption, change, amendment, agreement, settlement,
surrender, or other action or omission would have the effect of materially
increasing the Tax liability (other than a liability for which Seller is
primarily responsible pursuant to this Section 6.04) or materially decreasing
any Tax benefit (including, without limitation, the basis of any asset, any
deduction, loss, any net operating loss or other carryover or carryback, any
credit, and any claim for refund) of any United States Purchased Entity,
Purchaser, Holdings or any Affiliate of Holdings for periods or portions thereof
beginning after the Closing Date.
(i) Affiliated Group Membership. Seller shall not take any action or
allow any action to be taken, including, without limitation, by any United
States Purchased Entity, which would cause any Purchased Entity that is a member
of Seller's Affiliated Group on the date of this Agreement to cease being a
member of Seller's Affiliated Group prior to the Closing.
(j) Tax Benefits and Detriments. If any income Tax adjustment required
solely as the result of an audit by a taxing authority of a Tax period (or
portion thereof) ending on or before the Closing Date results in (A) any Tax
benefit to the Company, any successor thereto or any Affiliate thereof for any
Taxable period (or portion thereof) beginning after the Closing Date which would
not, but for such adjustment, be available, Holdings shall pay, or shall cause
to be paid, to the Seller an amount equal to the actual Tax Savings produced by
such Tax benefit at the time such Tax Savings is realized by the Company, any
successor thereto or any Affiliate thereof, or (B) any Tax detriment to the
Company, any successor thereto or any Affiliate thereof for any Taxable period
(or portion thereof) beginning after the Closing Date which would not, but for
such adjustment, be incurred, Seller shall pay, or shall cause to be paid, to
Holdings an amount equal to the actual Tax Increase produced by such Tax
detriment at the time such Tax Increase is paid by the Company, any successor
thereto or any Affiliate thereof. "Tax Savings" means, for any Tax period or
portion thereof, the amount of the reduction in Taxes paid to a taxing authority
by the Company, any successor thereto or any Affiliate thereof with respect to
such Tax period or portion thereof as compared to the Taxes that would have been
paid to a taxing authority by the Company, any successor thereto or any
Affiliate thereof with respect to such Tax period or portion thereof in the
absence of the Tax benefit which produces such Tax Savings. "Tax Increase"
means, for any Taxable period or portion thereof, the amount of the increase in
Taxes paid to a taxing authority by the Company, any successor thereto or any
Affiliate thereof with respect to such Tax period or portion thereof as compared
to the Taxes that would have been paid to a taxing authority by the Company, any
successor thereto or any Affiliate thereof with respect to such Tax period or
portion thereof in the absence of the Tax detriment which produces such Tax
Increase.
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(k) Tax Returns.
(i) Seller shall have responsibility for preparing and filing any
Tax Returns of Seller's Affiliated Group. Seller shall prepare or cause to be
prepared all separate income Tax Returns for the United States Purchased
Entities for all periods ending on or prior to the Closing Date which are filed
after the Closing Date. Each such income Tax Return shall be prepared in
accordance with the past custom and practice of the applicable United States
Purchased Entity. Seller shall submit each such income Tax Return to Holdings at
least 30 days prior to the applicable due date (including any extensions
thereof) prescribed by law for filing such income Tax Return. Holdings shall
file or cause to be filed each such income Tax Return as prepared (subject to
any changes mutually agreed by Holdings and Seller) unless Holdings believes
there is no reasonable basis for a position (an "Objectionable Position") taken
on any such income Tax Return; provided, however, that Holdings shall
nevertheless file such income Tax Return as prepared (and modified pursuant to
mutual agreement) if Holdings has received from tax counsel to Seller an opinion
stating that there is a reasonable basis for such Objectionable Position.
(ii) Except as otherwise provided in Section 6.04(c), Holdings
shall prepare or cause to be prepared and file or cause to be filed any Tax
Returns of the United States Purchased Entities for Tax periods which begin
before the Closing Date and end after the Closing Date. Seller shall pay to
Holdings within fifteen (15) days of the date on which Taxes are paid with
respect to such periods an amount equal to the portion of such Taxes which
relates to the portion of such Taxable period ending on the Closing Date to the
extent such Taxes are not reflected on the Closing Date Working Capital
Statement. For purposes of this Section, in the case of any Taxes that are
imposed on a periodic basis and are payable for a Taxable period that includes
(but does not end on) the Closing Date, the portion of such Tax which relates to
the portion of such Taxable period ending on the Closing Date shall (x) in the
case of any Taxes other than Taxes based upon or related to income or receipts,
be deemed to be the amount of such Tax for the entire Taxable period multiplied
by a fraction the numerator of which is the number of days in the Taxable period
ending on the Closing Date and the denominator of which is the number of days in
the entire Taxable period, and (y) in the case of any Tax based upon or related
to income or receipts be deemed equal to the amount which would be payable if
the relevant Taxable period ended on the Closing Date. For purposes of this
Section, in the case of any Tax credit relating to a Taxable period that begins
before and ends after the Closing Date, the portion of such Tax credit which
relates to the portion of such Taxable period ending on the Closing Date shall
be the amount which bears the same relationship to the total amount of such Tax
credit as the amount of Taxes described in (y) above bears to the total amount
of Taxes for such Taxable period. All determinations necessary to give effect to
the foregoing allocations shall be made and each Tax Return prepared pursuant to
this subsection 6.04(k)(ii) shall be prepared in a manner consistent with prior
practice of the applicable United States Purchased Entity (unless Holdings and
Seller agree otherwise).
6.05 WARN Act. Seller and Purchaser agree that for purposes of the United
States Worker Adjustment and Retraining Notification Act of 1989, as amended
(the "WARN Act"), the Closing Date shall be the "effective date" as such term is
used in the WARN Act. Purchaser agrees that it shall be responsible for
compliance with the WARN Act with respect to the United States Purchased
Entities for actions taken by the United States Purchased Entities after the
Closing.
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6.06 Employee Benefit Provisions.
(a) Continuing Employees.
(i) Purchaser shall cause the Company to continue to employ (A)
the employees of the Company who are actively employed by the Company on the
Closing Date, and (B) any employees of the Company who on the Closing Date are
on an approved medical leave of absence, short-term disability leave of absence,
workers' compensation leave of absence, or absent pursuant to the provisions of
the Family and Medical Leave Act of 1993. All such employees shall be referred
to herein as "Continuing Employees."
(ii) At least 10 days prior to the Closing Date, Seller shall
provide to Purchaser a list of all employees of the Company who as of the
Closing Date are on a short-term disability leave of absence from the Company,
setting forth the name, title, compensation, monthly benefit amount, date of
hire, gender and date of commencement of short-term disability leave of absence
of each such employee.
(iii) Notwithstanding any other provision of this Agreement,
nothing in this Agreement shall limit Purchaser's or the Company's ability to
terminate the employment of any Continuing Employee at any time following the
Closing Date for any reason, including without cause.
(b) Continuation of Benefit Plans. For a period of 18 months after the
Closing Date, Purchaser shall cause the Company to maintain for the benefit of
the Continuing Employees employee benefit plans, programs and arrangements
substantially equivalent, in the aggregate, to those employee benefit plans,
programs and arrangements listed at Section 6.06(b) of the Disclosure Schedule.
(c) Defined Contribution Plan.
(i) Effective as of the Closing Date, the Company shall continue
as a participating employer in the "Springs of Achievement Partnership Plan"
(the "Seller's Defined Contribution Plan"), and Seller shall make any necessary
amendment to the Seller's Defined Contribution Plan so that the Company may
continue as such a participating employer. Seller shall permit the Company to
remain as a participating employer under the Seller's Defined Contribution Plan
until the first day of the first month that immediately follows the last day of
the sixth month which follows the month in which the Closing Date occurs (the
"Transition Date").
(ii) No later than one month after the Transition Date (but
effective as of the Transition Date), Purchaser shall cause the Company to adopt
and maintain a defined contribution plan (the "Purchaser's Defined Contribution
Plan") intended to be qualified under Section 401(a) of the Code that is
substantially similar to the Seller's Defined Contribution Plan, has features
concerning the timing and method of distributions such that a mandatory transfer
from the Seller's Defined Contribution Plan to the Purchaser's Defined
Contribution Plan of account balances attributable to the Continuing Employees
will not cause a violation of Section 411(d)(6) of the Code,
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and credits the Continuing Employees with all of their years of service with
Seller for all purposes under the Purchaser's Defined Contribution Plan. As soon
as practicable after the adoption of the Purchaser's Defined Contribution Plan,
Purchaser shall cause the Company to submit the Purchaser's Defined Contribution
Plan to the IRS for a favorable determination that the Purchaser's Defined
Contribution Plan is qualified under Section 401(a) of the Code.
(iii) In accordance with the applicable provisions of Section
414(l) of the Code, Seller shall cause the assets of the Seller's Defined
Contribution Plan attributable to the accounts of each Continuing Employee who
is employed by the Company on the date of transfer of the assets (the "Transfer
Date") (or the beneficiaries or alternate payee(s) of each Continuing Employee)
to be transferred by the trustee of the Seller's Defined Contribution Plan to
the trustee of the Purchaser's Defined Contribution Plan. As of the valuation
date under the Seller's Defined Contribution Plan that immediately precedes such
transfer, Seller shall cause the assets of the Seller's Defined Contribution
Plan attributable to such accounts that are invested in stock of Seller to be
reinvested in equivalent amounts of cash; and the transfer of such assets from
the Seller's Defined Contribution Plan to the Purchaser's Defined Contribution
Plan shall be made in cash. Except as provided in the foregoing sentence, any
transfer of assets from the Seller's Defined Contribution Plan to the
Purchaser's Defined Contribution Plan made pursuant to the terms of this
Agreement shall be in cash or in kind (except that in all events any promissory
notes or other evidences of indebtedness with respect to outstanding loans made
to Continuing Employees shall be transferred to the Purchaser's Defined
Contribution Plan), as mutually agreed by Seller and Purchaser, or in cash if no
such agreement is made, and shall be made as of and as soon as practicable after
a valuation date under the Seller's Defined Contribution Plan occurring
coincident with or immediately preceding the Transition Date, or as of such
later valuation date as may be mutually selected by Seller and Purchaser, but
not before 30 days after Seller and the Company shall have complied with any
requirement to file IRS Forms 5310-A with the IRS. Such transfer shall account
appropriately for earnings during the period from the applicable valuation date
to the Transfer Date.
(iv) From the Transition Date until the Transfer Date, Purchaser
shall cause the Company to make continuous payroll deductions each pay period
from the pay of each Continuing Employee who has a loan(s) outstanding from the
Seller's Defined Contribution Plan of amounts sufficient to pay the installment
payments of principal and interest on each such loan as required by the
promissory note or other evidence of indebtedness relating to such loan. Such
deducted amounts shall be paid by the Company to the Seller's Defined
Contribution Plan for a credit against such loan.
(v) On or prior to the Closing Date, Seller shall cause the
Company to make a contribution to the Seller's Defined Contribution Plan of the
amounts of (A) any salary reduction contributions and matching contributions
attributable to or payable on account of any Continuing Employee under the terms
of the Seller's Defined Contribution Plan for any time period ending on the
Closing Date, and (B) any profit sharing contributions attributable to or
payable on account of any Continuing Employee under the terms of the Seller's
Defined Contribution Plan for the calendar year ending on December 31, 1995. In
the event that any of the contributions described in the preceding sentence
cannot be made on or prior to the Closing Date, the amount of such
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contributions shall be reflected on the Closing Date Working Capital Statement
and Purchaser shall cause the Company to make such contributions after the
Closing Date. The amount of the Company's minimum obligation (as determined
under the terms of the Seller's Defined Contribution Plan) with respect to
profit sharing contributions attributable to or payable on account of the
Continuing Employees for the period commencing on January 1, 1996 and ending on
the Closing Date shall be reflected on the Closing Date Working Capital
Statement.
(vi) Notwithstanding the foregoing, if Seller shall determine
that a transfer of the assets described in subparagraph (iii) above represented
by any insurance company guaranteed investment contract would result in a loss
of the contract rate of interest for any period during such contract's stated
term or the imposition of a penalty or market value adjustment under any such
contract, the assets represented by such contract shall not be so transferred
but shall be held under the Seller's Defined Contribution Plan and administered
pursuant to the terms thereof, as in effect on the Closing Date, until the term
of such contract shall end, at which time the assets held thereunder on behalf
of the Continuing Employees shall be transferred to the Purchaser's Defined
Contribution Plan. Seller shall take any action necessary so that for purposes
of computing the vested interest of the Continuing Employees under the Seller's
Defined Contribution Plan and for purposes of determining when a Continuing
Employee is entitled to a distribution thereunder, employment by the Company
after the Closing Date shall be taken into account as if it were employment by
Seller; and Seller shall take no action which would cause any such contract to
terminate under circumstances which would result in a loss of the contract rate
of interest for any period during its stated term or the imposition of any
penalty or market value adjustment.
(vii) Notwithstanding any other provision of this Agreement,
Seller shall be solely responsible for any liability incurred in connection with
the investigation of the Seller's Defined Contribution Plan by the IRS as
disclosed at Section 2.14(g) of the Disclosure Schedule, and neither Purchaser
nor the Company shall be required to accept any transfer of assets from the
Seller's Defined Contribution Plan unless Purchaser shall be satisfied that the
Seller's Defined Contribution Plan remains qualified under Section 401(a) of the
Code as of the proposed Transfer Date.
(d) Medical and Dental - Active Employees.
(i) Effective as of the Transition Time, the Continuing Employees
shall cease being covered under the medical and dental component of the
"Comprehensive Health Care, Life and Disability Plan of Springs Industries,
Inc." and any other employee welfare benefit plan (as such term is defined in
Section 3(1) of ERISA) maintained by Seller that provides similar benefits
(collectively, the "Seller's Medical Plan") as sponsored and maintained by
Seller. Effective as of the Transition Time, the Continuing Employees shall be
covered by medical and dental plans established and maintained in accordance
with Section 6.06(b) (collectively, the "Purchaser's Medical Plan").
(ii) Effective as of the Transition Time, Purchaser shall cause
the Company to assume all liabilities under the Seller's Medical Plan for all
claims whenever incurred by the Continuing Employees that are submitted for
payment to and received by the third party
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administrator of the Purchaser's Medical Plan after the Closing Date. On and
after the Closing Date, Seller shall retain and have sole responsibility for (A)
all liabilities, obligations and commitments arising under Part 6 of Title I of
ERISA and Section 4980B of the Code relating to any "qualifying event" (as such
term is defined in Section 603 of ERISA) occurring with respect to any employee
of the Company at any time on or prior to the Closing Date, and (B) all
liabilities under the Seller's Medical Plan for all claims incurred by the
Continuing Employees that (1) were submitted for payment to and received by the
third party administrator of the Seller's Medical Plan on or prior to the
Closing Date, and (2) were not paid within ten days after receipt by such third
party administrator of all information necessary to process and pay the claims.
(iii) Notwithstanding any other provision of this Agreement, for
a period of 6 months following the Closing Date, Seller shall provide to the
Company such administrative and support services with respect to the Purchaser's
Medical Plan as are necessary to ensure the proper operation of the Purchaser's
Medical Plan and as are comparable to the administrative and support services
provided by Seller to the Company prior to the Closing Date in connection with
the Seller's Medical Plan. The cost of such administrative and support services
shall be paid by the Company at a rate that is equivalent to the actual and
reasonable cost of such services.
(e) Medical - Retired Employees.
(i) Effective as of the Transition Time, the Continuing Employees
shall cease being covered under the "Springs Industries, Inc. Continued Medical
Sharing Plan" and any other employee welfare benefit plan (as such term is
defined in Section 3(1) of ERISA) maintained by Seller that provides similar
benefits (collectively, the "Seller's Retiree Medical Plan") as sponsored and
maintained by Seller. Effective as of the Transition Time, the Continuing
Employees shall be provided with retiree health coverage established and
maintained in accordance with Section 6.06(b) (the "Purchaser's Retiree Medical
Plan").
(ii) Effective as of the Transition Time, Purchaser shall cause
the Company to assume and have sole responsibility for all liabilities,
obligations and commitments for the post-retirement medical coverage for the
individuals who are listed at Section 6.06(e) of the Disclosure Schedule in
accordance with the terms of the Purchaser's Retiree Medical Plan.
(iii) Notwithstanding any other provision of this Agreement, for
a period of 6 months following the Closing Date, Seller shall provide to the
Company such administrative and support services with respect to the Purchaser's
Retiree Medical Plan as are necessary to ensure the proper operation of the
Purchaser's Retiree Medical Plan and as are comparable to the administrative and
support services provided by Seller to the Company prior to the Closing Date in
connection with the Seller's Retiree Medical Plan. The cost of such
administrative and support services shall be paid by the Company at a rate that
is equivalent to the actual and reasonable cost of such services.
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(f) Life and Disability Insurance.
(i) Effective as of the Transition Time, the Continuing Employees
shall cease being covered under the life and disability components of the
"Comprehensive Health Care, Life and Disability Plan of Springs Industries,
Inc.", the "Springs of Achievement Long Term Disability Excess Plan", the "Long
Term Disability Plan of Springs Industries, Inc. and Affiliates" and under any
other employee welfare benefit plan (as such term is defined in Section 3(1) of
ERISA) maintained by Seller that provides similar benefits (collectively, the
"Seller's Life and Disability Plan"). Effective as of the Transition Time, the
Continuing Employees shall be covered by life and disability insurance plans
established and maintained in accordance with Section 6.06(b) (collectively, the
"Purchaser's Life and Disability Plan").
(ii) Effective as of the Transition Time, except as provided in
subparagraph (iv) below, Purchaser shall cause the Company to assume and have
sole responsibility for the payment of (or, as applicable, the reimbursement to
a third party administrator or insurer of) any life and disability benefits
payable to (or on behalf of) all employees and former employees of the Company
who, as of the Closing Date, are receiving or entitled to receive any benefits
under the Seller's Life and Disability Plan in accordance with the terms of the
Purchaser's Life and Disability Plan.
(iii) Notwithstanding the terms of the Seller's Life and
Disability Plan or any other provision of this Agreement, no contribution shall
be required to be made by Purchaser or the Company to the Seller's Life and
Disability Plan as a result of the Company's withdrawal from such plan in
connection with the transactions contemplated by this Agreement.
(iv) Notwithstanding any other provision of this Agreement, on
and after the Closing Date, Seller shall retain and have sole responsibility for
the payment of any long-term disability benefits payable under the terms of the
Seller's Life and Disability Plan to all employees and former employees of the
Company who are listed at Section 6.06(f)(iv) of the Disclosure Schedule and
Purchaser shall pay to Seller the amount of $99,000 on the Closing Date. If
subsequent to the Closing Date, Seller receives or is entitled to receive any
social security payment on account of any individual listed at Section
6.06(f)(iv) of the Disclosure Schedule, Seller shall pay the amount of any such
social security payment to Purchaser in cash.
(g) Executive Compensation Arrangements.
(i) Purchaser shall be solely responsible for the payment of (A)
any and all amounts deferred pursuant to the "Springs Industries, Inc. Deferred
Compensation Plan" and the "Springs Industries, Inc. Deferred Compensation Plan
for Certain Employees" with respect to the Continuing Employees (which amounts
calculated as of December 31, 1995 are set forth in Section 6.06(g)(i)(A) of the
Disclosure Schedule), and (B) all amounts vested (which amounts calculated as of
December 31, 1995 are set forth in Section 6.06(g)(i)(B) of the Disclosure
Schedule) as of the Closing Date under the "Contingent Compensation Plan of
Springs Industries, Inc.," provided that any such amounts are reflected on the
Closing Date Working Capital Statement.
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(ii) Seller shall be solely responsible for the payment of any
and all amounts deferred pursuant to the "Contingent Compensation Plan of
Springs Industries, Inc." that are not vested as of the Closing Date (but
determined as if such amounts are vested on the Closing Date), the "Springs of
Achievement Excess Benefits Partnership Plan," and any other deferred
compensation arrangements maintained by Seller or the Company with respect to
any Continuing Employee (except as otherwise provided in subparagraph (i)
above). Such amounts (calculated as of December 31, 1995) shall be set forth at
Section 6.06(g)(ii) of the Disclosure Schedule and (except with respect to the
"Contingent Compensation Plan of Springs Industries, Inc.") shall be determined
by immediately vesting all such Continuing Employees in all benefits under such
deferred compensation plans as of the Closing Date, and Seller shall pay such
amounts to the appropriate Continuing Employees on the Closing Date or on such
later date as may be required under the terms of such plans.
(iii) Seller hereby agrees that any Continuing Employee who is a
participant in the "Springs Industries, Inc. 1991 Incentive Stock Plan," the
"Restated and Amended Springs Industries, Inc. Deferred Unit Stock Plan," and
any other stock option, stock purchase, stock ownership or similar plan as may
be maintained by Seller with respect to any Continuing Employee (A) shall be
immediately vested as of the Closing Date in any restricted stock granted under
such plan and shall receive a distribution of such restricted stock on the
Closing Date, (B) shall be immediately vested as of the Closing Date in any
deferred stock units granted under such plan and shall receive distribution in
cash of the amount of any dividends and interest attributable to such deferred
stock units and distribution in stock of such deferred stock units on the
Closing Date or on such later date as may be required under the terms of such
plan, (C) shall be immediately vested on the Closing Date in any performance
unit awards granted under such plan and shall receive distribution in cash and
in stock of such performance unit awards on the Closing Date or on such later
date as may be required under the terms of such plan, and (D) shall be
immediately vested as of the Closing Date in any stock option granted under such
plan and shall be entitled to exercise any such stock option for a period ending
not later than 90 days following the Closing Date. The stock options and other
rights subject to the provisions of this Section 6.06(g)(iii) and the amounts
payable or exercisable pursuant thereto (calculated as of December 31, 1995) are
set forth at Section 6.06(g)(iii) of the Disclosure Schedule. Notwithstanding
the foregoing, Seller shall not be obligated to take any action under such plans
which constitutes a breach of contract with respect to any Continuing Employee,
but Seller shall remain solely responsible for any and all liabilities,
obligations and commitments arising under or attributable to such plans.
(iv) The Company shall be solely responsible for the payment of
any and all amounts payable to any Continuing Employee pursuant to the terms of
the "Springs Industries, Inc. Achievement Incentive Plan" for any time period
ending on or before December 30, 1995, and Seller shall cause the Company to pay
all such amounts prior to the Closing Date. The amounts payable under such plan
with respect to the Continuing Employees for the period commencing on December
31, 1995 and ending on the Closing Date shall be reflected on the Closing Date
Working Capital Statement and shall be payable by the Company.
(h) Special Severance Pay Provisions. Effective as of the Transition
Time, Purchaser shall cause the Company to provide a severance pay plan for the
individuals listed at
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Section 6.06(h) of the Disclosure Schedule who have completed at least 15 years
of service with the Company as of the Closing Date that is identical to the
severance pay plan maintained pursuant to Section 6.06(b) except that, if such
individual's employment with the Company is terminated prior to the first
anniversary of the Closing Date, such individual shall receive payment under the
terms of such plan in an amount that is the greater of (A) the amount of base
salary and pro-rated bonus that would otherwise be payable from the date of
termination of employment until the first anniversary of the Closing Date, and
(B) the amount otherwise payable pursuant to the terms of such severance pay
plan maintained pursuant to Section 6.06(b).
6.07 Supplemental Disclosure. From time to time prior to the Closing and
upon becoming aware of any such matter, condition or occurrence, Seller will
promptly disclose to Purchaser, and Purchaser will promptly disclose to Seller,
(i) any material development affecting the ability of such party to consummate
the transactions contemplated by this Agreement, (ii) any matter, condition,
occurrence or knowledge which, if existing or occurring at the date of this
Agreement, would have been required to be excepted from any representation and
warranty contained herein in order for such representation or warranty to be
true and correct on the date hereof or otherwise set forth or described in their
respective sections of the Disclosure Schedule or (iii) any breach of any
covenant or agreement contained in this Agreement of which such party has
knowledge. No disclosure by any party to this Agreement pursuant to this Section
6.07, however, shall be deemed to amend or supplement this Agreement (including
the Disclosure Schedules hereto) or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant; provided, however, that if, as a
result of a matter, condition, occurrence or knowledge of the type set forth in
clause (ii) of this Section 6.07, the Closing condition contained in either
Section 4.01 or Section 5.01 is incapable of being satisfied, then the
disclosure in writing of such matter, condition, occurrence or knowledge shall
constitute an amendment, effective as of the Closing, to the applicable section
of the Disclosure Schedule or, if the applicable representation or warranty does
not have an associated section of the Disclosure Schedule, such disclosure in
writing shall be deemed to be excepted from such representation and warranty,
effective as of the Closing and, notwithstanding the provisions of Article VIII,
no claim in respect of the matter so disclosed shall be entitled to indemnity
under Section 8.01(a)(i) (with respect to disclosures by Seller) or Section
8.01(b)(i) (with respect to disclosures by Purchaser).
6.08 Litigation. Until the Closing, Seller shall promptly notify Purchaser
of any Actions that, to the knowledge of Seller or the Company are commenced,
made or threatened against Seller or the Purchased Entities that are reasonably
likely to have a material adverse effect on the financial condition, operating
results, business, business prospects, or material business relationships of the
Company, the Subsidiaries, Interglas or Asahi or impair the ability of Seller or
Fort Mill to perform its respective obligations under this Agreement, and
Purchaser shall promptly notify Seller of any Actions that, to the knowledge of
Purchaser, are commenced, made or threatened against Purchaser that are
reasonably likely to impair the ability of Purchaser to perform its obligations
under this Agreement.
6.09 Covenant to Satisfy Conditions. Each party agrees to use all
reasonable best efforts to insure that the conditions set forth in Article IV
and Article V hereof are satisfied, insofar as such matters are within the
control of such party, prior to March 31, 1996. Notwithstanding the
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foregoing, if the Closing has not occurred by March 31, 1996, each party agrees
to use all reasonable best efforts to insure that the conditions set forth in
Article IV and Article V hereof are satisfied, insofar as such matters are
within the control of such party.
6.10 Financing. Until Purchaser makes the Cash Election pursuant to Section
1.05, (a) Purchaser will timely provide Seller with copies of drafts of all
material agreements to be entered into between Purchaser and its financing
sources with respect to the Financing; (b) Purchaser will consult with Seller
with respect to such Financing and will keep Seller reasonably informed of all
material developments related to the Financing; and (c) Seller and its counsel
will be afforded a reasonable opportunity to make comments to Purchaser with
respect to the documents related to the Financing.
6.11 Exclusivity. Neither the Seller, Fort Mill nor the Company will, and
each will cause its respective officers, directors, agents or Affiliates not to,
(a) enter into any written or oral agreement or understanding with any Person
(other than Holdings or Purchaser) regarding a sale of the Purchased Entities or
any substantial part of their stock, or a sale of any material assets (other
than the sale of inventory in the ordinary course of business consistent with
past practice) or business of the Company (other than pursuant to Section 6.24)
or the Subsidiaries, or a merger, consolidation, public offering,
recapitalization or similar transaction involving the Purchased Entities
("Another Transaction"); (b) enter into or continue any negotiations or
discussions with any Person (other than Holdings or Purchaser) regarding the
possibility of Another Transaction; or (c) provide any non-public financial or
other confidential or proprietary information regarding the Purchased Entities
(including this Agreement or any financial information, projections, or
proposals regarding the businesses of the Purchased Entities) to any Person
(other than to Holdings, Purchaser or their financing sources, and their
respective representatives) whom Seller, Fort Mill or the Company knows, or has
reason to believe, would have any interest in acquiring the capital stock,
assets or business of the Purchased Entities, or would disclose such information
to any such Person.
6.12 Confidentiality. Except as otherwise provided in Section 6.02, Seller
will, and will cause its Affiliates to, treat and hold as confidential all of
the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and following the Closing,
deliver promptly to Purchaser or destroy, at the request and option of
Purchaser, all tangible embodiments (and all copies) of the Confidential
Information which are in its possession (other than those documents which Seller
reasonably requests to retain for a proper business purpose that would not
otherwise violate the terms of this Agreement). In the event that Seller or its
Affiliates are requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, Seller will notify Purchaser promptly of the request or requirement
so that Purchaser may seek an appropriate protective order or waive compliance
with the provisions of this Section 6.12. If, in the absence of a protective
order or the receipt of a waiver hereunder, Seller or such Affiliate are, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, that Person may disclose the
Confidential Information to the tribunal; provided, however, that the disclosing
Person shall use reasonable efforts to obtain, at the request and expense of
Purchaser, an order or other assurance that confidential treatment will be
accorded to such portion of the Confidential Information required to
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be disclosed as Purchaser shall designate. The foregoing provisions shall not
apply to any Confidential Information which is generally available to the public
immediately prior to the time of disclosure.
6.13 Covenant Not to Compete.
(a) During the Non-competition Term (as defined below), Seller
covenants that it shall not, either individually or as a partner, joint
venturer, agent, consultant, shareholder or equity owner of another Person, or
otherwise, directly or indirectly, (i) participate in, engage in, or have a
financial or management interest in any business operation of any enterprise if
such business operation engages in the business of designing, manufacturing or
marketing (1) industrial fiberglass fabric or (2) aramid fabric for use in the
ballistics, composites or reinforced plastics markets as conducted by the
Purchased Entities during the 12 months prior to Closing (for purposes of this
Section 6.13, the "Business") anywhere in the world (the "Non-competition
Area"); provided, however, that the Business shall not include the designing,
manufacturing or marketing of spun yarns with fiberglass cores or fabrics from
spun yarns with fiberglass cores, (ii) solicit any other Person to engage in the
Business in the Non-competition Area, or (iii) assist any other Person to engage
in the Business in the Non-competition Area, (such activities described in
clauses (i), (ii) and (iii) shall hereinafter collectively be referred to as
"Engaging in Competition"); provided, however, that the direct or indirect
ownership by Seller of an interest not constituting more than five percent (5%)
in the aggregate of the outstanding voting capital stock in a corporation whose
shares are traded on a recognized stock exchange or in the over-the-counter
market shall not, of itself, constitute Engaging in Competition.
(b) Seller covenants, during the Non-competition Term, (i) not to
induce directly or indirectly any individual who is as of the date hereof, or
was during the twelve (12) months prior to the date hereof, an employee of the
Purchased Entities to leave the employ of the Purchased Entities or Purchaser or
to refuse the employ of Purchaser and (ii) not to hire, without the consent of
Purchaser, any of the persons listed in Section 6.13(b) of the Disclosure
Schedule.
(c) "Non-competition Term" means a period beginning on the Closing
Date and continuing through and including the day before the fifth anniversary
of the Closing Date. If during any calendar month within the Non-competition
Term Seller is not in compliance with this Section 6.13, then Purchaser shall be
entitled, among other remedies, to compliance by Seller with the terms of this
Section 6.13 for an additional number of days that equals the number of days
during which such noncompliance occurred. The term "Non-competition Term" shall
also include this additional period.
(d) Seller hereby agrees that all restrictions in this Section 6.13,
including, without limitation, those relating to duration and the restricted
territory, are necessary and fundamental to the protection of the Business of
Purchaser, and are reasonable and valid, and all defenses to the strict
enforcement thereof by Purchaser are hereby waived by Seller.
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6.14 Perfection of Title. From the date hereof until the Closing, and
except as otherwise provided in this Agreement, Seller shall cause the Company
to execute, deliver or record such instruments of transfer or conveyance and
take such other actions as may be necessary to vest in the Company (legally and
of record) title to all of its owned assets and shall provide evidence
satisfactory to Purchaser (and the Title Company, if applicable) of satisfaction
of all Indebtedness and obligations secured by the Liens listed in Section 6.14
to the Disclosure Schedule.
6.15 Intercompany Transactions.
(a) Except as set forth in Section 6.15(a) of the Disclosure Schedule,
from the date hereof until the Closing, Seller shall cause all intercompany
accounts to be maintained in accordance with and consistent with the past
practices of Seller and its Affiliates in establishing and calculating
intercompany accounts with the Purchased Entities and in the ordinary course of
business. Except as set forth in Section 6.15(a) of the Disclosure Schedule, no
intercompany transactions shall be entered into except in the ordinary course of
business consistent with such past practice.
(b) Any intercompany accounts (both investments and advances) between
Seller, on the one hand, and the Purchased Entities, on the other hand, existing
as of the Closing Date shall be eliminated and forgiven in all respects.
6.16 Expenses.
(a) Seller shall pay and hold Purchaser and the United States
Purchased Entities harmless from all expenses incurred by the Purchased Entities
and Seller in connection with the negotiation and preparation of this Agreement
and the consummation and performance of the transactions contemplated hereby,
including, without limitation, all legal and accounting fees and brokers' and
finders' fees; provided, however, that, if the Closing occurs, the Company shall
reimburse Seller for fifty percent (50%) of the reasonable accounting fees
incurred by Seller in connection with the preparation of the Audited Financials;
and, provided further that, if the Closing fails to occur (other than primarily
as a result of a breach by Seller or Fort Mill of any representation, warranty,
covenant or agreement contained in this Agreement) Purchaser shall reimburse
Seller for fifty percent (50%) of the reasonable accounting fees incurred by
Seller in connection with the preparation of the Audited Financials.
(b) Except as otherwise expressly provided in this Agreement, Seller,
on the one hand, and Purchaser, on the other hand, shall bear its own direct and
indirect expenses incurred in connection with the negotiation and preparation of
this Agreement and the consummation and performance of the transactions
contemplated hereby, including, without limitation, all legal and accounting
fees and brokers' and finders' fees; provided that the foregoing shall not limit
any party's right to include such expenses in any claim for damages against any
other party in breach of this Agreement; and, provided further, if the Closing
occurs, the Company will bear any such expenses incurred by Purchaser or any of
its equity owners (other than Seller); and, provided further, that if Purchaser
does not make the Cash Election pursuant to Section 1.05, the Company shall bear
no more than $10,000,000 of such expenses.
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6.17 Insurance. All insurance coverage and bonds listed in Section 2.19 of
the Disclosure Schedule shall not be terminated, modified, amended or otherwise
adjusted unless such termination, modification, amendment or adjustment shall
not adversely affect any coverage of the United States Purchased Entities for
covered events (i.e., occurrences or claims, as applicable) that have occurred
(whether reported or unreported) prior to the Closing Date. In addition, Seller
will not, nor will it permit any of its Affiliates to, take any action that
would restrict the ability of the United States Purchased Entities to assert or
maintain, or recover in respect of, claims under the policies listed in Section
2.19 of the Disclosure Schedule for claims asserted or occurrences prior to the
Closing Date, it being understood, however, that, except as otherwise provided
in Section 6.06, Purchaser and the United States Purchased Entities, and not
Seller or any of its Affiliates, will be responsible to (i) directly pay third
parties or reimburse Seller within 30 days for any and all costs incurred by
Seller that will not be reimbursed to Seller by the insurance company with
respect to any claim relating to the United States Purchased Entities, and (ii)
pay any co-payment or self-insured portion associated with any insured or
self-insured claim (including any claim under Seller's and the United States
Purchased Entities' self-insured workers compensation programs, whether paid
directly or through a third party administrator) relating to the United States
Purchased Entities; provided, however, that, notwithstanding the foregoing, any
amount that is payable by an insurance company (and not reimburseable to the
insurance company by Seller) in respect of an individual claim under any
insurance policy listed in Section 2.19 of the Disclosure Schedule for covered
events (i.e., occurrences or claims prior to the Closing Date, as applicable)
shall not be the responsibility of Purchaser or its Affiliates. Seller shall
cooperate with Purchaser, and the United States Purchased Entities after the
Closing Date in the processing of any insurance claims made by Purchaser and the
United States Purchased Entities after the Closing Date.
6.18 Further Assurances. From time to time after the Closing Date, without
further consideration, the parties will execute and deliver such documents and
take such actions as any other party may reasonably request in order to more
effectively consummate the transactions contemplated hereby and, if Purchaser
makes the Cash Election pursuant to Section 1.05, to vest in Purchaser title to
the Shares.
6.19 Management Shares. At the Closing, if Purchaser fails to make the Cash
Election pursuant to Section 1.05, the Surviving Corporation shall issue to
Management the Management Shares. If Purchaser makes the Cash Election,
Purchaser will provide Management with the opportunity to invest in Purchaser in
connection with the Closing.
6.20 Transfer of Assets and Liabilities. Prior to the Closing, the assets
and the liability accounts of the Company currently recorded on the books of
Seller and set forth in Section 6.20 of the Disclosure Schedule shall be
recorded on the books of the Company; provided however, that no asset or
liability account recorded on the books of Seller other than those set forth in
Section 6.20 of the Disclosure Schedule shall be recorded on the books of the
Company.
6.21 Audited Financial Statements. Prior to the Closing, Seller shall
prepare consolidated statements of financial position of Fort Mill as of
December 30, 1995 and December 31, 1994, and the related statements of income
and of cash flows for the fiscal years ended December 30, 1995, December 31,
1994, and January 1, 1994, in accordance with generally accepted accounting
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principles and in accordance with SEC rules and regulations (including required
schedules) and Seller shall engage Deloitte & Touche to audit such statements in
accordance with generally accepted auditing standards (the "Audited
Financials"). The report of Deloitte & Touche on the Audited Financials shall be
without limitation as to the scope of the audit. Seller shall deliver the
Audited Financials and an unqualified and unmodified report of Deloitte & Touche
with respect thereto to Purchaser no later than seven days after the date
hereof. Seller shall use its reasonable best efforts to cause Deloitte & Touche
to (i) make its work papers in respect of its audit of the Audited Financials
available to Purchaser, and (ii) consent to the use of its report with respect
to the Audited Financials, and, with appropriate compensation, prepare a similar
report in respect of the Company and thereafter consent to the use of such
report.
6.22 Public Announcements. Prior to the Closing and except as may otherwise
be required by law (in which case the party proposing to issue such publication
or press release shall use reasonable efforts to consult in good faith with the
other party before issuing any such publication or press release), the timing
and content of all press releases and other public announcements and all
announcements by the parties to the customers, suppliers or employees of the
Company, the Subsidiaries, Interglas and Asahi relating to the transactions
contemplated by this Agreement shall be determined jointly by Seller and
Holdings.
6.23 Transfer of Fort Mill's Assets and Liabilities. Seller and Fort Mill
shall take, or cause to be taken, all actions necessary to insure that, on the
Closing Date, Fort Mill has no assets other than the Company Shares and no
liabilities of any nature whatsoever.
6.24 Cash Transactions. Notwithstanding any provision of this Agreement to
the contrary, the parties agree that this Agreement shall not prohibit the
transfer of cash, via dividend or other distribution in respect of the Shares or
in accordance with Seller's normal cash management practices, by or from any
United States Purchased Entity to Seller prior to Closing, and that no such
transfer shall constitute a breach of any provision of this Agreement.
6.25 Delivery of Monthly Financial Statements. Prior to the Closing, Seller
shall deliver, or cause to be delivered, to Purchaser Monthly Financial
Statements for each fiscal month ending after the date of this Agreement within
three days after the date on which such Monthly Financial Statements are
prepared. Except as provided in Section 6.25 of the Disclosure Schedule, all
Monthly Financial Statements delivered pursuant to this Section 6.25 shall be
prepared in a manner consistent with past practice.
6.26 Transfer of Real Property.
(a) Seller shall cause fee simple title to the property described in
Section 6.26 of the Disclosure Schedule to be conveyed to the Company at or
prior to the Closing, and all costs associated with such conveyance shall be
borne by the Seller.
(b) Prior to the Closing Date, Seller shall (i) assign, and otherwise
transfer to the Company all of its right, title and interest in and to, the
Lease dated July 12, 1989, between BFC Holding Company and Seller relating to
the property located at 14063 Borate Street, Santa Fe
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Springs, California and (ii) cause the Company to obtain a lease from Norfolk
Southern Railway Company providing the Company with rights in respect of the
encroachments described in Section 2.10(a) of the Disclosure Schedule, which
Lease shall be on economic terms substantially similar (taking into account
inflation) to those set forth in that certain Lease effective as of May 1, 1985
between the Southern Railway Company and United Merchants & Manufacturing, Inc.
6.27 Transfer of Intellectual Property Rights. Prior to or at the Closing,
Seller shall transfer to the Company all of its right, title and interest in and
to any and all Intellectual Property Rights used primarily by the Company, and
Seller shall have executed and delivered the assignment set forth in Exhibit
6.27 hereto.
6.28 Medical Insurance From and after the date hereof, Seller shall
provide, at its sole cost and expense, medical benefits comparable to those
provided under Seller's existing plan for the benefit of James E. Hendrix
irrespective of whether Mr. Hendrix is employed by the Company or Springs until
such time as Mr. Hendrix either becomes eligible for group medical coverage or
for Medicare.
ARTICLE VII
TERMINATION
7.01 Termination. This Agreement may be terminated and abandoned at any
time prior to the Closing:
(a) by the mutual consent of Seller, Fort Mill, Holdings and
Purchaser;
(b) by Seller and Fort Mill, if Purchaser or Holdings has breached in
any material respect any material representation or warranty, or any covenant or
agreement contained in this Agreement, and such breach has not been remedied
within five business days after receipt of written notice from Seller specifying
such breach and demanding that such breach be remedied;
(c) by Purchaser and Holdings, if Seller or Fort Mill has breached in
any material respect any material representation or warranty, or any covenant or
agreement contained in this Agreement, and such breach has not been remedied
within five business days after receipt of written notice from Holdings
specifying such breach and demanding that such breach be remedied;
(d) by either Seller and Fort Mill or Purchaser and Holdings, in the
event the Closing has not occurred on or before April 26, 1996 (the "Cut-Off
Date"), unless the failure of such consummation shall be due to a breach of any
representation or warranty made by the party seeking to terminate this Agreement
or the failure of such party to comply in all material respects with the
agreements and covenants contained herein to be performed by such party on or
before the Cut-Off Date;
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(e) by either Seller and Fort Mill or Purchaser and Holdings in the
event any Governmental Body shall have issued an Order or taken any other action
restraining, enjoining or otherwise prohibiting the transactions contemplated
hereby and such Order or other action shall have become final and nonappealable;
(f) by Purchaser and Holdings at any time prior to March 30, 1996 if
the results of Purchaser's and its advisors' due diligence investigations of
each of Interglas and Asahi (including but not limited to legal, environmental,
financial and accounting due diligence investigations of each of Interglas and
Asahi) are not satisfactory to Purchaser in its sole discretion; or
(g) by Purchaser and Holdings at any time prior to March 11, 1995 if
Purchaser shall have received the Audited Financials in accordance with Section
6.21 and such Audited Financials are different in any significant respect from
the Draft Audited Financials (other than due to the incorporation of Purchaser's
comments), or, if such Audited Financials are different in any significant and
adverse respect from the Draft Audited Financials, regardless of whether such
difference is due to the incorporation of Purchaser's comments; provided,
however if Seller fails to deliver the Audited Financials to Purchaser on or
before February 23, 1996, this termination right shall be extended by one day
for each day after February 23, 1996 that such Audited Financials remain
undelivered.
7.02 Procedure and Effect of Termination. In the event of the termination
and abandonment of this Agreement by Seller or Purchaser pursuant to Section
7.01 hereof, written notice thereof shall forthwith be given to the other party.
If the transactions contemplated by this Agreement are terminated as provided
herein, this Agreement shall become void and of no further force and effect,
except for the provisions of Section 6.16 relating to expenses and Section 6.22
relating to publicity and except that such termination shall not relieve any
party then in breach of any representation, warranty, covenant or agreement
contained in this Agreement from liability in respect of such breach.
ARTICLE VIII
INDEMNIFICATION
8.01 Indemnification. Claims, obligations, liabilities, covenants and
representations with respect to income Taxes shall be governed solely by the
terms of Section 6.04 (and not this Section 8.01). Claims, obligations,
liabilities, covenants and representations with respect to all other Taxes shall
be governed by this Section 8.01.
(a) Indemnification by Seller. Subject to the limits set forth in this
Section 8.01, Seller agrees to indemnify, defend and hold Holdings, Purchaser
and the United States Purchased Entities, and their respective officers,
directors, agents and Affiliates (not including Seller) (collectively, the
"Purchaser Indemnitees"), harmless from and in respect of any and all losses,
damages, costs, fines, penalties, fees, lost profits of the United States
Purchased Entities, amounts paid in settlement and reasonable expenses
(including, without limitation, reasonable expenses of
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investigation, attorney's fees, enforcement of this Agreement, defense fees,
witness fees, court costs and disbursements of counsel and other professionals)
(collectively,"Damages") that any of them may incur arising out of or due to any
of the following:
(i) the inaccuracy of any representation or the breach of any
warranty made by Seller, Fort Mill or the Company in this Agreement or any
certificate delivered pursuant to this Agreement;
(ii) the breach of any covenant, undertaking or agreement of
Seller contained in this Agreement (other than breaches of the
representations and warranties contained in Article II);
(iii) any liability or obligation arising with respect to (A) any
"employee benefit plan" (as such term is defined in Section 3(3) of ERISA)
at any time maintained or contributed to by (or required to be maintained
or contributed to by) any ERISA Affiliate (excluding any liability or
obligation relating to employment with a United States Purchased Entity,
unless such liability or obligation is caused by an error or omission of
any ERISA Affiliate other than a United States Purchased Entity, and such
liability or obligation has not been expressly assumed by Purchaser
pursuant to Section 6.06 of this Agreement), or (B) any "employee pension
benefit plan" (as such term is defined in Section 3(2) of ERISA) (including
any "multiemployer plan" (as such term is defined in Section 3(37) of
ERISA)) that is subject to the requirements of Section 302 of ERISA or
Section 412 of the Code at any time on or prior to the Closing Date
maintained or contributed to by (or required to be maintained or
contributed to by) the United States Purchased Entities or any ERISA
Affiliate;
(iv) (A) all matters set forth in Section 8.01(a)(iv)(A) of the
Disclosure Schedule (provided that Seller shall have no obligation to
indemnify Purchaser with respect to any matter on such Schedule which is
not designated with an asterisk (*) unless Purchaser incurs an
investigatory, corrective or remedial obligation, or receives a third party
claim, demand or notice, with respect to such matter, and so notifies
Seller in writing pursuant to Section 8.02(c) hereof, within 10 years after
the Closing Date (it being understood and agreed that such 10 year
limitation shall not apply to matters designated with an asterisk on such
Schedule)) and (B) any offsite (i.e. at a location other than a property of
facility of the Purchased Entities) treatment, storage, disposal or
management of hazardous substances (or any arrangement for such offsite
treatment, storage, disposal or management) on or prior to the Closing Date
by or attributed to Seller or the United States Purchased Entities
(provided that Seller shall have no obligation to indemnify Purchaser with
respect to any such matter attributed to the United States Purchased
Entities (other than the matters set forth in Section 2.17 of the
Disclosure Schedule under the heading "Superfund Sites") unless Purchaser
incurs an investigatory, corrective or remedial obligation, or receives a
third party claim, demand or notice, with respect to such matter, and so
notifies Seller in writing pursuant to Section 8.02(c) hereof, within 20
years after the Closing Date (it being understood and agreed that such 20
year limitation shall not apply to the matters set forth in Section 2.17 of
the Disclosure Schedule under the heading "Superfund Sites")) ;
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(v) any liability or obligation of Fort Mill (A) related to the
conduct of any business of any nature whatsoever (other than in respect of
it acting as sole shareholder of the Company) at any time prior to the
Closing or (B) imposed on Fort Mill as the result of facts or circumstances
(other than the ownership of the Company Shares) existing prior to the
Closing;
(vi) any liability or obligation arising out of or resulting from
the Company's prior ownership interest in ABAEI or Clark Schwebel
Distribution Corp.; and
(vii) any liability or obligation resulting from the United
States Purchased Entities' affiliation (whether as a subsidiary, combined,
consolidated or unitary group member or otherwise) on or before the Closing
Date with any other Person (including, without limitation, Seller).
Purchaser's knowledge prior to the Closing of any inaccuracy or breach of any
representation, warranty or covenant made or to be performed by Seller, Fort
Mill or the Company under this Agreement shall not in any way limit or affect
the Purchaser Indemnitees' rights to indemnification under this Section 8.01(a)
if the Closing occurs; provided, however, that if Purchaser or the Company
Executives have actual knowledge prior to the Closing of facts and circumstances
that would constitute a breach of the representation and warranty contained in
Section 2.11 stating that there is no Basis for a specified consequence but
which actual knowledge would not constitute a breach of any other representation
or warranty contained in Section 2.11 or any other section of this Agreement,
then the Purchaser Indemnitees shall not be entitled to indemnification under
this Section 8.01(a) with respect to such breach. In addition, Purchaser agrees
that it will not conduct investigations of the matters set forth in Section
8.01(a)(iv)(A) of the Disclosure Schedule for the purpose of triggering coverage
under this indemnity, however, Seller acknowledges that Purchaser may conduct
any environmental investigation which is, in the reasonable judgment of
Purchaser, consistent with prudent environmental management practices.
(b) Indemnification by Purchaser. Subject to the limits set forth in
this Section 8.01, Purchaser agrees to indemnify, defend and hold Seller, its
officers, directors, agents and Affiliates, harmless from and in respect of any
and all losses, damages, costs, fines, penalties, fees, lost profits of Seller,
amounts paid in settlement and reasonable expenses (including, without
limitation, reasonable expenses of investigation, attorney's fees, enforcement
of this Agreement, defense fees, witness fees, court costs and disbursements of
counsel and other professionals) that they may incur arising out of or due to
(i) any inaccuracy of any representation or the breach of any warranty made by
Holdings in this Agreement or in any certificate delivered pursuant to this
Agreement, (ii) the breach of any covenant, undertaking or other agreement of
Purchaser or Holdings contained in this Agreement or (iii) the operations of the
United States Purchased Entities after the Closing Date to the extent they do
not arise out of a breach of Seller's representations and warranties in, or a
default in the performance of any of Seller's covenants under, this Agreement.
Seller's knowledge prior to the Closing of any inaccuracy or breach of any
representation, warranty or covenant made or to be performed by Purchaser under
this Agreement shall not in any way limit or affect Seller's right to
indemnification under this Section 8.01(b) if the Closing occurs.
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(c) Survival of Representations and Warranties. The several
representations and warranties of the parties contained in this Agreement or in
any certificate delivered pursuant hereto will survive the Closing Date and will
remain in full force and effect thereafter until twenty-four months after
Closing; provided, however, that (i) the representations and warranties
contained in Sections 2.02, 2.03, 2.04, 2.06, 2.13, 2.20, 2.22, 3.02, 3.03,
3.04, and 3.05 shall survive indefinitely, (ii) the representations and
warranties contained in Section 2.17 shall survive for five years, (iii) if
Purchaser makes the Cash Election pursuant to Section 1.05, the representations
and warranties contained in Sections 3.06 and 3.07 shall not survive the Closing
Date, (iv) the representations and warranties contained in Sections 2.07, 2.08
and 2.09, to the extent such representations and warranties relate to Interglas
or Asahi, shall not survive the Closing Date and (v) the representations and
warranties contained in Sections 2.05, 2.11(c) and 2.12, to the extent such
representations and warranties relate to the knowledge of the Company
Executives, shall not survive the Closing Date; and, provided further, that all
such representations or warranties that survive the Closing Date shall survive
beyond such period with respect to any inaccuracy therein or breach thereof,
notice of which shall have been duly given within such applicable period in
accordance with Section 8.01(d) or 8.02(c) hereof. Anything to the contrary
contained herein notwithstanding, the Purchaser Indemnitees shall not be
entitled to recover from Seller pursuant to Section 8.01(a)(i) of this Agreement
(1) unless each claim for Damages pursuant to Section 8.01(a)(i) resulting from
a single inaccuracy or breach is for Damages that Purchaser would be entitled to
be indemnified for hereunder but for the limitations contained in this sentence
equal to or in excess of $100,000 (the "Minimum Claim Amount"); provided that
for purposes of this clause (1) all claims for Damages arising out of the same
facts or events resulting in such inaccuracy or breach shall be treated as a
single claim, and (2) unless and until the total of all claims for Damages
pursuant to Section 8.01(a)(i) that satisfy the Minimum Claim Amount exceeds
$1,500,000 (the "Basket") and then, once the Basket has been exceeded, the
Purchaser Indemnitees shall be entitled to recover from Seller the amount by
which all such claims included in the Basket exceed in the aggregate $1,500,000;
provided, however, that the preceding limitations shall not apply to claims for
Damages with respect to any inaccuracy or breach of any representations and
warranties set forth in Sections 2.02, 2.03, 2.04, 2.06, 2.13 (to the extent
relating to income Taxes), 2.20 or 2.22 of this Agreement or claims for Damages
under clauses (ii), (iii), (iv), (v), (vi) or (vii) of Section 8.01(a),
regardless of whether such indemnity obligations relate to matters covered by
representations and warranties that are subject to the limitations expressed in
this sentence. For purposes of Section 8.01(a)(i), any requirement in any
representation or warranty that an event or fact be material in order for such
event or fact to constitute a misrepresentation or breach of such representation
or warranty shall be ignored. The Minimum Claim Amount and the Basket shall also
apply with respect to Seller's claims for indemnification pursuant to Section
8.01(b)(i) in the same manner as described above: provided, however, that such
limitations shall not apply to claims for Damages with respect to any inaccuracy
or breach of any representations and warranties set forth in Sections 3.02,
3.03, 3.04, 3.05, or 3.07 of this Agreement
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(d) Notice and Opportunity to Defend.
(i) If there occurs an event which a party asserts is an
indemnifiable event pursuant to Section 8.01(a) or 8.01(b), the party
seeking indemnification shall notify the other party or parties obligated
to provide indemnification (the "Indemnifying Party") promptly upon its
determination to seek indemnification; provided, however, that no delay on
the part of the party seeking indemnification in notifying the Indemnifying
Party shall relieve the Indemnifying Party from any liability or obligation
hereunder unless (and then solely to the extent that) the Indemnifying
Party was damaged by such delay.
(ii) If such event involves any claim or the commencement of any
action or proceeding by a third person, the party seeking indemnification
will give such Indemnifying Party prompt written notice of such claim or
the commencement of such action or proceeding; provided, however, that the
failure to provide prompt notice as provided herein will relieve the
Indemnifying Party of its obligations hereunder only to the extent that the
Indemnifying Party was damaged by such delay. In case any such action shall
be brought against any party seeking indemnification and it shall notify
the Indemnifying Party of the commencement thereof, the Indemnifying Party
shall be entitled to participate therein and may elect, within fifteen (15)
days of receiving such notice, to assume the defense thereof, with counsel
reasonably satisfactory to such party seeking indemnification (provided
that the Indemnifying Party shall only be entitled to assume the defense of
such action (A) to the extent that the action seeks only money damages
from, and not injunctive or other equitable relief against, such party
seeking indemnification, (B) if the Indemnifying Party first acknowledges
in writing to the party seeking indemnification that the party seeking
indemnification is entitled to indemnification under this Section 8.01 with
respect to such matter, and (C) upon giving effect to the provisions of
this Section 8.01, the Indemnifying Party would be responsible for a
majority of the damages or liability in respect of such action) and, after
notice from the Indemnifying Party to such party seeking indemnification of
such election so to assume the defense thereof, the Indemnifying Party
shall not be liable to the party seeking indemnification hereunder for any
legal expenses of other counsel or any other expenses subsequently incurred
by such party in connection with the defense thereof. The party seeking
indemnification agrees to cooperate fully with the Indemnifying Party and
its counsel in the defense against any such asserted liability. The party
seeking indemnification shall have the right to participate at its own
expense in the defense of such asserted liability. No settlement shall be
effected by the Indemnifying Party without the consent of the party seeking
indemnification (which consent shall not be unreasonably withheld) unless,
in connection with such settlement, the party seeking indemnification is
fully and unconditionally released from such asserted liability (without
any liability for payment) and the settlement does not contain other terms
or conditions that are adverse to the interests of the party seeking
indemnification. No settlement shall be effected by a party seeking
indemnification without the consent of the Indemnifying Party, such consent
not to be unreasonably withheld, unless the party seeking indemnification
would be liable for at least fifty percent of any payments due pursuant to
the terms of such settlement.
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8.02 Environmental Indemnification Procedures.
(a) Notwithstanding anything in this Agreement to the contrary, the
indemnification procedures in this Section 8.02 shall apply to any claim for
indemnification arising under Section 8.01(a)(iv) hereof and any claims arising
under Section 8.01(a)(i) hereof for indemnification with respect to a breach of
the representations and warranties set forth in Section 2.17 (collectively
"Environmental Claims").
(b) Any Environmental Claim which is of the nature of a third party
claim shall also be governed by the procedures set forth in Section 8.01(d)
hereof. In the event of any inconsistency between such procedures and the
procedures set forth in this Section 8.02, the procedures set forth in this
Section 8.02 shall govern.
(c) Purchaser shall notify the Indemnifying Party in writing promptly
after learning of the existence of any Environmental Claim, which notice shall
describe in reasonable detail the claim, the amount thereof (if known and
quantifiable), and a reasonably detailed description of the facts giving rise to
such claim; provided that the failure to so notify the Indemnifying Party shall
not relieve the Indemnifying Party of their obligations hereunder except to the
extent of (and only to the extent of) any actual prejudice to the Indemnifying
Party. Timely notice shall be deemed given, and the Indemnifying Party shall be
deemed to have assumed Principal Management under this Section 8.02, with
respect to the matters so designated by an asterisk (*) on Schedule
8.01(a)(iv)(A) hereof. "Principal Management" means the authority to direct the
handling of the subject matter of the Environmental Claim, including, without
limitation, selection of consultants, contractors, experts or advisors;
evaluation, selection and implementation of remedial measures; and negotiations
with or challenges to any governmental agencies and third parties.
(d) Upon assertion of an Environmental Claim, the Indemnifying Party
shall be entitled to assume Principal Management of the subject matter of the
Environmental Claim. To assume Principal Management, the Indemnifying Party must
notify Purchaser within thirty days (or such other period as the parties may
agree to in writing or such shorter period as is demanded due to exigent
circumstances) of said notice that they intend to assume Principal Management.
To assume Principal Management, the Indemnifying Party must also in such notice
first acknowledge in writing its obligation to indemnify Purchaser with respect
to the Environmental Claim. In the event the Indemnifying Party does not
undertake Principal Management, Purchaser shall assume Principal Management of
the subject matter of the Environmental Claim.
(e) In the event an Indemnifying Party undertakes Principal Management
with respect to an Environmental Claim, Purchaser shall be entitled, at its sole
cost and expense, to reasonably participate in the management of such
Environmental Claim. Such participation shall include, without limitation: (i)
receiving copies of all reports, work plans and analytical data submitted to
governmental agencies, all notices or other letters or documents received from
governmental agencies, any other documentation and correspondence materially
bearing to the Environmental Claim, and notices of material meetings; (ii) the
opportunity to attend and participate in such material meetings; (iii) the right
of reasonable consultation with the party exercising
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Principal Management; and (iv) the right to approve any material action relating
to the Environmental Claim (which approval shall not be unreasonably withheld).
(f) In the event an Indemnifying Party undertakes Principal Management
with respect to any Environmental Claim, the Indemnifying Party shall, upon
reasonable notice to Purchaser, have reasonable access to the relevant Purchased
Entity property or facility. The Indemnifying Party shall undertake all
activities that it conducts or coordinates hereunder in a manner which does not
unreasonably interfere with the day-to-day operation of such facility.
(g) The party undertaking Principal Management hereunder for any
matter shall manage the matter in good faith and in a responsible manner, and
any activities conducted in connection therewith shall be undertaken promptly
and concluded expeditiously using commercially reasonable efforts, subject to
the schedules and approvals required by the applicable Governmental Authorities.
The parties agree to reasonably cooperate with one another in connection with
addressing any Environmental Claim. Either party may take such action as is
reasonable under the circumstances to respond to an actual or threatened
emergency or imminent endangerment situation arising from an Environmental
Claim, and if such action is taken by the party that has not undertaken
Principal Management for such Environmental Claim hereunder, the costs of such
action shall be included as part of the Environmental Claim.
(h) The adequacy of any action with respect to an Environmental Claim
shall be evaluated using the following criteria. Such action shall be deemed
adequate for purposes of satisfying the obligations hereunder to the extent such
action:
(i) Attains compliance with applicable Environmental and Safety
Requirements, including without limitation, all action levels or cleanup
standards promulgated thereunder, and any lawful order or directive of an
appropriate Governmental Authority;
(ii) Mitigates any significant risk to human health or the
environment; and
(iii) Does not interfere with operations at the affected
property or facility.
Without limiting the generality of the foregoing and solely with respect to any
matter set forth on Disclosure Schedule Section 8.01(a)(iv)(A), Seller's
obligation to conduct remedial or corrective action will be deemed satisfied
upon Seller's receipt of, and delivery to Purchaser of, written determination(s)
from all governmental agencies with jurisdiction over such matter that no
further action on the matter is required (which satisfaction shall be subject to
any conditions placed by such agencies on such determinations and shall not
limit Seller's obligation to indemnify Purchaser for other Damages arising out
of or due to such matters provided Purchaser notifies Seller pursuant to Section
8.02(c) of an Environmental Claim with respect to any such other Damages prior
to the later of (i) 10 years after the Closing Date and (ii) 5 years after
Purchaser's receipt from Seller of the last of such determinations).
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(i) If, after the Indemnifying Party has elected to assume Principal
Management of an Environmental Claim, a dispute arises with respect to the
management, investigation or remediation of such Environmental Claim, the
parties agree to negotiate in good faith in an attempt to resolve such dispute.
In the event such dispute cannot be resolved within twenty days of written
notice of a dispute (or such shorter period as exigent circumstances may
warrant), the parties shall select within fourteen days thereafter (or such
shorter period as exigent circumstances may warrant) a mutually satisfactory
technical consultant, lawyer, or other person (the "Environmental Arbitrator"),
who shall review the information relevant to the dispute provided by the
parties. If an Environmental Arbitrator cannot be agreed upon within the
aforesaid period, the parties shall direct the Center for Public Resources, New
York, New York, to immediately provide a list of six potential arbitrators. From
the list provided, each part shall have the opportunity to strike one name, and
the Center for Public Resources shall appoint the Environmental Arbitrator from
the remaining names. The Environmental Arbitrator shall, and within thirty days
(or such shorter period as exigent circumstances may warrant) render a decision
binding upon the parties hereto (absent mutual agreement of the parties to an
alternate resolution) and the parties may enforce any final determination of the
Environmental Arbitrator in any court of competent jurisdiction. There shall be
no appeal from or reexamination of such final determination except for fraud,
perjury, evident partiality or misconduct by the Environmental Arbitrator
prejudicing the rights of any party, and to correct manifest errors. Any fees
charged by the Environmental Arbitrator shall be allocated as determined by the
Environmental Arbitrator between Purchaser and the Indemnifying Party. In making
its determination, the Environmental Arbitrator shall be bound by the standards
set forth in this Section 8.02.
ARTICLE IX
MISCELLANEOUS
9.01 Defined Terms. As used in this Agreement, the following terms shall
have the following meanings:
"ABAEI" means American Body Armor and Equipment, Inc.
"Accountant" has the meaning set forth in Section 6.04(f).
"Action" means any action, suit, or legal, administrative or arbitral
proceeding or investigation before or by any Governmental Body.
"Affiliate," as applied to any Person, means any other Person directly
or indirectly controlling, controlled by or under common control with that
Person.
"Affiliated Group" means an affiliated group as defined in Section
1504 of the Code (or any analogous combined, consolidated or unitary group
defined under state, local or foreign income Tax law).
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"Agreement" has the meaning set forth in the preface.
"Another Transaction" has the meaning set forth in Section 6.11.
"Approved Budget" means the Company's budget for 1996 (including the
capital expenditure budget) which is attached hereto as Exhibit A.
"Asahi" means Asahi-Schwebel Co., Ltd., a Japanese corporation.
"Audited Financials" has the meaning set forth in Section 6.21.
"Balance Sheet" means the unaudited consolidated statement of
financial position of Fort Mill as of December 30, 1995 included in the Draft
Audited Financials set forth in Section 2.05 of the Disclosure Schedule.
"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that is, as of the date of determination,
the primary cause of any specified loss, injury or damage, provided that such
loss, injury or damage occurred on or prior to the date hereof.
"Basket" has the meaning set forth in Section 8.01(c).
"Business" has the meaning set forth in Section 6.13(a).
"Cash Election" has the meaning set forth in Section 1.05(a).
"Cash Payment" has the meaning set forth in Section 1.04(b).
"Cash Purchase Price" means $192,750,000 less the amount of
Indebtedness outstanding on the Closing Date under the capital leases listed in
Section 5.13 of the Disclosure Schedule (subject to adjustment pursuant to
Section 1.06).
"Certificate of Merger" has the meaning set forth in Section 1.01(b).
"Closing" has the meaning set forth in Section 1.03.
"Closing Date" has the meaning set forth in Section 1.03.
"Closing Date Working Capital Statement" has the meaning set forth in
Section 1.06(a).
"Closing Working Capital Amount" means the amount shown next to the
line item for "Closing Working Capital Amount" on the Closing Date Working
Capital Statement under the heading "Balance at Closing" or such other amount as
is finally determined in accordance with the provisions of Section 1.06(b).
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"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Surviving Corporation's common stock, par
value $.01 per share.
"Common Stock Equivalents" means rights, warrants, options,
convertible securities, or exchangeable securities, exercisable for convertible
into, directly or indirectly, Common Stock, whether at the time of issuance or
upon the passage of time or the occurrence of future events.
"Company" means Clark-Schwebel, Inc., a Delaware corporation.
"Company Common Stock" has the meaning set forth in Section 2.02(b).
"Company Executives" means William Bennison, Donald Burnette and
Richard Wolfe.
"Company Shares" has the meaning set forth in Section 2.02(b).
"Confidential Information" means any confidential or proprietary
information regarding any of the Purchased Entities, their assets or their
operations which is not generally available to the public.
"Confidentiality Agreement" means the Confidentiality Agreement dated
March 18, 1995 between Seller and Vestar.
"Continuing Employees" has the meaning set forth in Section
6.06(a)(i).
"Cut-Off Date" has the meaning set forth in Section 7.01(d).
"Damages" has the meaning set forth in Section 8.01(a).
"Disclosure Schedule" has the meaning set forth in Section 2.01.
"Draft Audited Financials" has the meaning set forth in Section
2.05(a).
"Effective Time" has the meaning set forth in Section 1.01(b).
"Employee Plan" has the meaning set forth in Section 2.14(a).
"Encumbrances" has the meaning set forth in Section 1.05(a).
"Engaging in Competition" has the meaning set forth in Section
6.13(a).
"Environmental and Safety Requirements" means all federal, state,
local and foreign statutes, regulations, ordinances and other provisions having
the force or effect of law, all judicial
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and administrative orders and determinations, all contractual obligations and
all common law in each case concerning worker health and safety and pollution or
protection of the environment, all as now in effect.
"Environmental Claims" has the meaning set forth in Section 8.02(a).
"Environmental Lien" means a Lien, either recorded or unrecorded, in
favor of any governmental entity, relating to any liability arising under
Environmental and Safety Requirements.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 2.14(a).
"Estimated Working Capital Amount" means $50,000,000.
"Evaluation Material" has the meaning assigned to such term in the
Confidentiality Agreement.
"Exempt Contracts" means purchase orders entered into by the Company
in the ordinary course of business consistent with past practice (other than
purchase orders for yarn) and sales orders entered into by the Company in the
ordinary course of business consistent with past practice which involve
consideration of less than $500,000.
"Financing" has the meaning set forth in Section 5.10.
"Foreign Financials" has the meaning set forth in Section 2.05(b).
"Foreign Plans" has the meaning set forth in Section 2.14(f).
"Fort Mill" has the meaning set forth in the preface.
"Fort Mill Common Stock" means the common stock, par value $1.00 per
share, of Fort Mill.
"Fully-Diluted Common Stock" means, as of the close of business on the
Closing Date after giving effect to the transactions contemplated by this
Agreement, the number of shares of Common Stock then-outstanding plus all shares
of Common Stock issuable, whether at such time or upon the passage of time or
the occurrence of future events, upon the exercise, conversion or exchange of
all then-outstanding Common Stock Equivalents.
"Governmental Body" means any government or political subdivision
thereof, whether federal, state, local or foreign, or any agency or
instrumentality of any such government or regulatory or political subdivision
thereof, or any federal, state or foreign court or arbitrator.
"Holdings" has the meaning set forth in the preface.
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"Holdings Common" means 7,000 shares of Common Stock less the
Management Shares.
"Holdings Series B" means 1,000 shares of Series B Preferred Stock.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Income Taxes" means all Taxes imposed on or measured by net income,
including any minimum tax or alternative minimum tax and franchise tax based on
income, and any interest, penalties or additions attributable to any such Income
Taxes.
"Indebtedness" of any Person at any date means without duplication (a)
all indebtedness of such Person for borrowed money (including without limitation
accrued interest) or for the deferred purchase price of property or services
which, in accordance with generally accepted accounting principles, would be
required to be shown as a liability on the face of a balance sheet of such
Person on such date (other than trade liabilities, accrued expenses and
liabilities and deferred payments to employees or former employees for services
rendered, in each case to the extent incurred in the ordinary course of business
and payable in accordance with customary practices), (b) any other indebtedness
of such Person which is evidenced by a note, bond, debenture or similar
instrument, (c) all obligations of such Person under capitalized lease
obligations, (d) all obligations of such Person in respect of bankers'
acceptances issued or created for the account of such Person, (e) all
obligations of such Person in respect of letters of credit issued for the
account of such Person, (f) all guarantees of such Person of any indebtedness or
obligations of any other Person of the types referred to in the preceding
clauses (a) through (e), and (g) all indebtedness or obligations of the types
referred to in the preceding clauses (a) through (f) secured by any Lien on any
property owned by such Person to the extent attributable to such Person's
interest in such property, even though such Person has not assumed or otherwise
become liable for the payment thereof but excluding customer deposits and
interest payable thereon in the ordinary course of business.
"Indemnifying Party" has the meaning set forth in Section 8.01(d)(i).
"Industrial Revenue Bond Obligation" means the $5,850,000 Development
Authority of White County Industrial Development Refunding Revenue Bonds
(Clark-Schwebel Fiber Glass Corporation Project) (Springs Industries, Inc. -
Guarantor), Series 1992.
"Intellectual Property Rights" means all of the following owned by,
issued to or licensed to or used by the Company or any of the Subsidiaries and
any and all corresponding rights that, now or hereafter, may be secured
throughout the world: (i) patents, patent applications, patent disclosures and
inventions (whether or not patentable and whether or not reduced to practice)
and any reissues, continuations, continuations-in-part, revisions, extensions or
reexaminations thereof; (ii) trademarks, service marks, trade dress, logos,
trade names and corporate names, together with all goodwill associated therewith
(including, but not by way of limitation, the use of the current corporate name
and trade name(s) listed in Section 2.15(a) of the Disclosure Schedule and all
translations, adaptations, derivations and combinations of the foregoing); (iii)
copyrights and
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<PAGE>
copyrightable works; mask works; and registrations, applications and renewals
for any of the foregoing; (iv) trade secrets and confidential information
(including, but not by way of limitation, ideas, formulae, compositions,
know-how, manufacturing and production processes and techniques, research and
development information, drawings, specifications, designs, plans, proposals,
technical data, financial and accounting data, business and marketing plans, and
customer and supplier lists and related information); (v) computer software
(including, but not by way of limitation, data, data bases and documentation);
and (vi) all copies and tangible embodiments of the foregoing (in whatever form
or medium), in each case including, but not by way of limitation, the items set
forth in Section 2.15(a) of the Disclosure Schedule attached hereto.
"Interglas" means CS Interglas AG, a German corporation.
"IRS" has the meaning set forth in Section 2.14(c).
"Law" means any law, statute, code, ordinance, rule, regulation or
other requirement of any Governmental Body.
"Leased Property" has the meaning set forth in Section 2.10(b).
"Leases" has the meaning set forth in Section 2.10(b).
"Lien" means any mortgage, pledge, lien, charge, security interest,
adverse claim, option, right, restriction on transfer or other encumbrance of
any nature.
"Management" means certain members of management of the Purchased
Entities as determined by Purchaser in its sole discretion.
"Management Shares" means the number of shares of Common Stock and/or
options to acquire a number of shares of Common Stock determined by Purchaser in
its sole discretion to be issuable to Management on the Closing Date, which
number of shares of Common Stock shall not constitute less than 12.5% nor more
than 15% of the Fully-Diluted Common Stock.
"Minimum Claim Amount" has the meaning set forth in Section 8.01(c).
"Monthly Financial Statements" means, with respect to any fiscal
month, an unaudited balance sheet of the Company for such month and the
unaudited statement of operations of the Company for the number of months of the
fiscal year then-ended.
"Non-competition Area" has the meaning set forth in Section 6.13(a).
"Non-competition Term" has the meaning set forth in Section 6.13(c).
"Objection Period" has the meaning set forth in Section 1.06(b).
"Objectionable Position" has the meaning set forth in Section
6.04(k)(i).
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<PAGE>
"Operating Agreement" has the meaning set forth in Section
1.03(a)(ii).
"Order" means any order, judgment, injunction, award, decree or writ
of any Governmental Body.
"Owned Property" has the meaning set forth in Section 2.10(a).
"Permitted Liens" means easements, covenants, conditions, and
restrictions, including any zoning or other governmentally established
restrictions or encumbrances which do not materially interfere with the present
conduct of the business of the Company and the Subsidiaries or the use,
occupancy, enjoyment or value of, or the marketability of title to the Real
Property.
"Person" means an individual, a partnership, a joint venture, a
corporation, an association, a joint stock company, a limited liability company,
a trust, an unincorporated organization or a government or any department or
agency or political subdivision thereof.
"Pre-Closing Portion" has the meaning set forth in Section 6.04(e).
"Prime Rate" means the base rate of interest that Purchaser's lender
charges its corporate customers, as publicly announced from time to time.
"Proceeds Sharing Provisions" has the meaning set forth in Section
1.03(a)(ii).
"Purchased Entities" means Fort Mill, the Company, the Subsidiaries,
Interglas and Asahi.
"Purchaser" has the meaning set forth in the preface.
"Purchaser Common Stock" means the common stock, par value $.01 per
share, of Purchaser.
"Purchaser Indemnitees" has the meaning set forth in Section 8.01(a).
"Purchaser's Defined Contribution Plan" has the meaning set forth in
Section 6.06(c)(ii).
"Purchaser's Life and Disability Plan" has the meaning set forth in
Section 6.06(f)(i).
"Purchaser's Medical Plan" has the meaning set forth in Section
6.06(d)(i).
"Purchaser's Retiree Medical Plan" has the meaning set forth in
Section 6.06(e)(i).
"Real Property" means the Owned Property and the Leased Property.
"SEC" shall mean the United States Securities and Exchange Commission.
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<PAGE>
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Securityholders Agreement" has the meaning set forth in Section
1.03(a)(iii).
"Seller" has the meaning set forth in the preface.
"Seller Common" has the meaning set forth in Section 1.04(b).
"Seller's Affiliated Group" means an Affiliated Group of which Seller
is or has been the common parent, and any analogous group under state, local or
foreign law which consists or consisted of Seller and an Affiliate of Seller.
"Seller's Basic Disability Plan" has the meaning set forth in Section
6.06(f)(i).
"Seller's Defined Contribution Plan" has the meaning set forth in
Section 6.06(c)(i).
"Seller's Excess Disability Plan" has the meaning set forth in
Section 6.06(f)(i).
"Seller's Life and Disability Plan" has the meaning set forth in
Section 6.06(f)(i).
"Seller's Medical Plan" has the meaning set forth in Section
6.06(d)(i).
"Seller's Retiree Medical Plan" has the meaning set forth in Section
6.06(e)(i).
"Seller Series A" has the meaning set forth in Section 1.04(b).
"Series A Preferred Stock" means the Series A Preferred Stock, par
value $.01 per share, issued by the Surviving Corporation and having the terms
set forth in the Certificate of Designations.
"Series B Preferred Stock" means the Series B Preferred Stock, par
value $.01 per share, issued by the Surviving Corporation and having the terms
set forth in the Certificate of Designations.
"Shares" means 100 shares of Fort Mill Common Stock.
"Subsidiary" means any Person of which at least 50% of the outstanding
shares, partnership interests, or other equity interests having ordinary voting
power for the election of directors or comparable managers of such Person are
owned, directly or indirectly, by the Company, any one or more Subsidiaries of
the Company, or by the Company and one or more Subsidiaries of the Company.
"Subsidiary Common Stock" has the meaning set forth in Section
2.02(b).
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<PAGE>
"Subsidiary Shares" has the meaning set forth in Section 2.02(b).
"Surviving Corporation" has the meaning set forth in Section 1.01(a).
"Tax" means any (A) federal, state, local or foreign income, gross
receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use,
transfer, registration, value added, excise, natural resources, severance,
stamp, occupation, premium, windfall profit, environmental, customs, duties,
real property, personal property, capital stock, social security, unemployment,
disability, payroll, license, employee or other withholding, or other tax, of
any kind whatsoever, including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing; (B) liability of any Purchased
Entity for the payment of any amounts of the type described in clause (A)
arising as a result of being (or ceasing to be) a member of any Affiliated Group
(or being included (or required to be included) in any Tax Return relating
thereto); and (C) liability of any Purchased Entity for the payment of any
amounts of the type described in clause (A) as a result of any express or
implied obligation to indemnify or otherwise assume or succeed to the liability
of any other Person.
"Tax Increase" has the meaning set forth in Section 6.04(j).
"Tax Returns" means returns, declarations, reports, claims for refund,
information returns or other documents (including any related or supporting
schedules, statements or information) filed or required to be filed in
connection with (i) the determination, assessment or collection of Taxes of any
party or (ii) the administration of any laws, regulations or administrative
requirements relating to any Taxes.
"Tax Savings" has the meaning set forth in Section 6.04(j).
"Tech-Fab" has the meaning set forth in Section 5.09(b).
"Tenant" has the meaning set forth in Section 2.10(b).
"Title Company" has the meaning set forth in Section 5.12(a).
"Transfer Date" has the meaning set forth in Section 6.06(c)(iii).
"Transition Date" has the meaning set forth in Section 6.06(c)(i).
"Transition Time" means 12:01 a.m. on the day immediately following
the Closing Date.
"Unaudited Balance Sheets" has the meaning set forth in Section
2.05(b).
"United States Purchased Entities" means Fort Mill, the Company and
the Subsidiaries.
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<PAGE>
"Vestar" means Vestar Equity Partners, L.P., a Delaware limited
partnership.
"WARN Act" has the meaning set forth in Section 6.05.
"Working Capital Projection" has the meaning set forth in Section
1.06(a).
9.02 Governing Law. This Agreement shall be construed under and governed by
the laws of the State of New York without regard to the conflicts of laws
provisions thereof.
9.03 Amendment. This Agreement may not be amended, modified or supplemented
except upon the execution and delivery of a written agreement executed by the
parties hereto.
9.04 No Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any party hereto without the prior
written consent of the other parties hereto; provided that Purchaser may assign
all of its rights and obligations hereunder to any Affiliate of Purchaser
without the consent of Seller or Fort Mill; and, provided further, that
Purchaser may assign any or all of its rights hereunder, without the consent of
Seller or Fort Mill (i) to any lender providing financing to Purchaser or its
Affiliates, and (ii) following the Closing, in connection with any sale of all
or substantially all of the assets, capital stock or business of Purchaser
(whether effected by sale, exchange, merger, consolidation or other
transaction).
9.05 Waiver; Liability. Any of the terms or conditions of this Agreement
which may be lawfully waived may be waived in writing at any time by each party
which is entitled to the benefits thereof. Any waiver of any of the provisions
of this Agreement by any party hereto shall be binding only if set forth in an
instrument in writing signed on behalf of such party. No failure to enforce any
provision of this Agreement shall be deemed to or shall constitute a waiver of
such provision and no waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver. None of the
officers or directors of any of the parties to this Agreement shall be
personally liable for breaches of any representation, warranty or covenant
contained in this Agreement.
9.06 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given by delivery, by
telex, telecopier or by mail (registered or certified mail, postage prepaid,
return receipt requested) to the respective parties as follows:
If to Purchaser, Holdings or the Surviving Corporation:
Clark-S Acquisition Corporation
c/o Vestar Equity Partners
245 Park Avenue, 41st Floor
New York, New York 10167
(212) 808-4922 (telecopier)
(212) 949-6500 (telephone)
Attention: Sander M. Levy
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<PAGE>
with a copy to:
Kirkland & Ellis
655 Fifteenth Street, N.W., Suite 1200
Washington, D.C. 20005
(202) 879-5200 (telecopier)
(202) 879-5040 (telephone)
Attention: Jack M. Feder, Esq.
If to Seller:
Springs Industries, Inc.
205 North White Street
Fort Mill, South Carolina 29715
(803) 547-3766 (telecopier)
(803) 547-3755 (telephone)
Attention: General Counsel
or to such other address as any party hereto may, from time to time, designate
in a written notice given in like manner.
9.07 Complete Agreement. This Agreement, the Confidentiality Agreement (it
being agreed that the Confidentiality Agreement shall be terminated on and as of
the Closing Date) and the other documents and writings referred to herein,
delivered pursuant hereto or executed and delivered concurrent with the
execution and delivery hereof, contain the entire understanding of the parties
with respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and thereof. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
9.08 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
9.09 Headings. The headings contained in this Agreement are for reference
only and shall not affect in any way the meaning or interpretation of this
Agreement.
9.10 Severability. Any provision of this Agreement which is invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity, illegality or unenforceability,
without affecting in any way the remaining provisions hereof in such
jurisdiction or rendering that or any other provision of this Agreement invalid,
illegal or unenforceable in any other jurisdiction.
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<PAGE>
9.11 Third Parties. Except as specifically set forth or referred to herein,
nothing herein expressed or implied is intended or shall be construed to confer
upon or give to any person or corporation, other than the parties hereto and
their permitted successors or assigns, any rights or remedies under or by reason
of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, each of Seller, Fort Mill, Holdings, and Purchaser
have caused this Agreement and Plan of Merger to be executed by their duly
authorized officers as of the day and year first above written.
SPRINGS INDUSTRIES, INC.
By:
------------------------------------
Name: Walter Y. Elisha
Title: Chief Executive Officer
FORT MILL A INC.
By:
------------------------------------
Name:
Title:
CLARK-S ACQUISITION CORPORATION
By:
------------------------------------
Name:
Title:
VESTAR/CS HOLDING COMPANY, L.L.C.
By:
------------------------------------
Name:
Title:
Exhibit 2.2
AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER
-----------------------------------------------
This Amendment No. 1 (this "Amendment") to the Agreement and Plan of
---------
Merger dated as of February 24, 1996 (the "Agreement"), by and among Springs
---------
Industries, Inc., a South Carolina corporation ("Seller"), Fort Mill A Inc., a
------
Delaware corporation ("Fort Mill"), Vestar/CS Holding Company, L.L.C., a
----------
Delaware limited liability company ("Holdings"), and Clark-S Acquisition
--------
Corporation, a Delaware corporation ("Purchaser") is entered into by the parties
---------
to the Agreement as of April 16, 1996. Capitalized terms used but not defined
herein have the respective meanings set forth in the Agreement.
The parties to the Agreement desire to amend the Agreement in
accordance with Section 9.03 thereof in the manner specified below.
The parties hereto agree as follows:
1. Section 9.01 of the Agreement is hereby amended by adding the
following terms in the appropriate alphabetical order:
"'CS Holdings' means Clark-Schwebel Holdings, Inc., a
------------
Delaware corporation."
"'CS Finance' means CS Finance of Delaware, a Delaware
-----------
corporation."
"'Gibraltar' means Gibraltar P.R., Inc., a Puerto Rico
---------
corporation."
"'Gibraltar Receivable' means the obligation of Gibraltar to
--------------------
the Company for payment in respect of merchandise sold by the Company
to Gibraltar, the outstanding balance of which was $3,264,135.89 as of
March 31, 1996."
2. Section 2.05 of the Disclosure Schedule (Financial Statements) is
hereby amended by adding the following disclosure:
"The attached Draft Audited Financials of Fort Mill as of
December 31, 1995 do not reflect any write-down and/or write-off of
the Gibraltar Receivable."
3. Holdings hereby consents to the assignment of the Gibraltar
Receivable from the Company to Seller, and Seller hereby acknowledges and agrees
that the Gibraltar Receivable will be excluded from the Closing Date Working
Capital Statement.
4. Section 8.01(a) of the Agreement is hereby amended by:
(a) deleting the word "and" following the semi-colon at the end of
Section 8.01(a)(vi);
<PAGE>
(b) deleting the period at the end of Section 8.01(a)(vii) and
substituting a semicolon and the word "and" in its place; and
(c) adding a new Section 8.01(a)(viii) to read in its entirety as
follows:
"(viii) any liability or obligation arising under U.S.
Bankruptcy Code Section 547, 548, 549 or 550 (or any similar state or
common law) to disgorge or repay to any party, including, without
limitation, Gibraltar or any receiver, conservator or trustee in
bankruptcy, any amounts paid to the Company, Seller or any of their
respective affiliates prior to the Closing by Gibraltar in respect of
merchandise sold to Gibraltar by the Company."
5. Section 8.01(c) of the Agreement is hereby amended by deleting
the second sentence of Section 8.01(c) and substituting in its place the
following sentence:
"Anything to the contrary contained herein notwithstanding,
the Purchaser Indemnitees shall not be entitled to recover from Seller
pursuant to Section 8.01(a)(i) or 8.01(a)(viii) of this Agreement
(1) unless each claim for Damages pursuant to either of such Sections
resulting from a single event, inaccuracy or breach is for Damages
that Purchaser would be entitled to be indemnified for hereunder but
for the limitations contained in this sentence equal to or in excess
of $100,000 (the "Minimum Claim Amount"); provided that for purposes
of this clause (1) all claims for Damages arising out of the same
facts or events resulting in such event, inaccuracy or breach shall be
treated as a single claim, and (2) unless and until the total of all
claims for Damages pursuant to either of such Sections that satisfy
the Minimum Claim Amount exceeds $1,500,000 (the "Basket") and then,
once the Basket has been exceeded, the Purchaser Indemnitees shall be
entitled to recover from Seller the amount by which all such claims
included in the Basket exceed in the aggregate $1,500,000; provided,
however, that the preceding limitations shall not apply to claims for
Damages with respect to any inaccuracy or breach of any
representations and warranties set forth in Sections 2.02, 2.03, 2.04,
2.06, 2.13 (to the extent relating to income Taxes), 2.20 or 2.22 of
this Agreement or claims for Damages under clauses (ii), (iii), (iv),
(v), (vi) or (vii) of Section 8.01(a), regardless of whether such
indemnity obligations relate to matters covered by representations and
warranties that are subject to the limitations expressed in this
sentence."
6. Section 3.06 of the Agreement is hereby amended to read in its
entirety as follows:
3.06 Business of Holdings, CS Holdings, Purchaser and CS Finance.
-----------------------------------------------------------
Prior to the Effective Time, or, if Purchaser makes the Cash Election
pursuant to Section 1.05, immediately prior to the Closing, (a)
Holdings will not own directly or indirectly, or have any investment
in any of the capital stock of, or have any similar ownership interest
in, any Person other than CS Holdings, Purchaser or CS Finance; (b) CS
Holdings will not own directly or indirectly, or have any investment
in any of the capital stock of, or have any similar ownership interest
in, any Person other than Purchaser or CS Finance; (c) Purchaser will
not own directly or indirectly, or have any investment in any of
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<PAGE>
the capital stock of, or have any similar ownership interest in, any Person
other than CS Finance; and (d) CS Finance will not own directly or
indirectly, or have any investment in any of the capital stock of, or have
any similar ownership interest in, any Person. Prior to the date hereof,
none of Holdings, CS Holdings, Purchaser or CS Finance have incurred any
Indebtedness.
7. Section 6.26 of the Disclosure Schedule is hereby amended by
adding the disclosure attached hereto as Schedule I.
8. The parties hereto agree that the pieces, parcels and tracts of
land set forth in Section 6.26 of the Disclosure Schedule (the "Transferred Real
----------------
Estate") shall be included for all purposes of the Agreement as Owned Property
- ------
and otherwise as property and assets of the Company owned by the Company prior
to the Closing and that all representations and warranties made by Seller with
respect to the Transferred Real Estate shall be deemed to be made as if the
Company, and not Seller, owned such property prior to the date of the Agreement
(so that, for example, undisclosed environmental liabilities in respect of the
Transferred Real Estate would constitute a breach of the representation set
forth in Section 2.17 of the Agreement).
9. The parties hereto acknowledge that the Seller made a wire
transfer to pay payroll-related taxes on behalf of the Company in the amount of
$153,290 on April 16,1996.
10. Each of Section 1.05(a) of the Agreement and the definition of
"Cash Purchase Price" in Section 9.01 of the Agreement is amended by
substituting the number $192,903,290 for the number $192,750,000.
11. Exhibit 1.06(a)(1) of the Agreement is amended by adding the
following line item as an adjustment: "subtract $153,290."
12. Page 5 of Exhibit 1.06(a)(2) to the Agreement is amended by
adding in the amounts to be excluded under the heading "Exclude": "Subtract the
amount of $153,290."
13. Except to the extent expressly amended hereby, the Agreement
shall remain in full force and effect in accordance with its terms.
14. This Amendment may be executed in separate counterparts, each of
which will be deemed an original but all of which together will constitute one
and the same instrument.
15. This Agreement shall be construed under and governed by the laws
of the State of New York without regard to the conflicts of laws provisions
thereof.
16. The language used in this Amendment will be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of
strict construction will be applied against any Party.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
No. 1 to the Agreement and Plan of Merger as of the date first above written.
SPRINGS INDUSTRIES, INC.
By:
-------------------------------------
Title:
----------------------------------
FORT MILL A INC.
By:
-------------------------------------
Title:
----------------------------------
CLARK-S ACQUISITION CORPORATION
By:
-------------------------------------
Title:
----------------------------------
VESTAR/CS HOLDING COMPANY, L.L.C.
By:
-------------------------------------
Title:
----------------------------------
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<PAGE>
SCHEDULE I
----------
BALLFIELD LEGAL DESCRIPTION
---------------------------
All that certain piece, parcel or tract of land situate, lying and being in the
county of Anderson, State of South Carolina, Varennes Township, and in School
District No. 5, containing 6.909 acres as shown on a plat of same made by R .D.
Garrison, RLS #3972, dated December 16, 1994, being more particularly described
as follows: BEGINNING at an iron pin corner on Lewis Street, said corner being
common with Lot No. 298 and running thence S 38-42-41 E 474.57 feet to an iron
pin corner; thence S 02-36-00 W 202.86 feet to an iron pin; thence North 78-50-
00 W 817.50 feet to an iron pin corner; thence North 18-41-00 East 498.63 feet
to an iron pin corner; thence South 60-25-11 East 48.60 feet to an iron pin;
thence South 50-03-11 East 48.50 feet to an iron pin; thence South 42-50-11 East
189.10 feet to an iron pin corner; thence North 47-09-49 East 200.00 feet to the
beginning corner.
-5-
Exhibit 2.3
MANAGEMENT COMMON STOCK SUBSCRIPTION AGREEMENT
----------------------------------------------
THIS MANAGEMENT COMMON STOCK SUBSCRIPTION AGREEMENT (this "Agreement")
---------
is made as of April 17, 1996, by and between Clark-Schwebel Holdings, Inc., a
Delaware corporation (the "Company"), and the individual named on the signature
-------
page hereto (the "Executive").
---------
WHEREAS, on the terms and subject to the conditions hereof, the
Executive desires to subscribe for and acquire from the Company, and the Company
desires to issue and sell to the Executive, the number of shares of common
stock, par value $.01 per share, of the Company set forth on Schedule I attached
----------
hereto (the "Common Stock"), as hereinafter set forth; and
------------
WHEREAS, this Agreement is one of several agreements being entered
into by the Company on or after the date hereof with certain persons who are or
will be key employees of the Company (collectively with the Executive, the
"Management Investors") as part of a management equity purchase plan designed to
--------------------
comply with Rule 701 promulgated under the Securities Act (as defined below);
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
1. Definitions.
-----------
1.1 Acquisition. The term "Acquisition" means the consummation of the
----------- -----------
transactions contemplated by the Merger Agreement dated as of February 24, 1996,
by and among Vestar, Clark-S Acquisition Corporation, a Delaware corporation,
Springs Industries, Inc., a South Carolina corporation, and Fort Mill A Inc., a
Delaware corporation.
1.2 Agreement. The term "Agreement" shall have the meaning set forth in
--------- ---------
the preface.
1.3 Applicable Percentage. The term "Applicable Percentage" shall mean
---------------------- ---------------------
(a) 20% during the one-year period commencing on the first anniversary of the
Closing Date; (b) 40% during the one-year period commencing on the second
anniversary of the Closing Date; (c) 60% during the one-year period commencing
on the third anniversary of the Closing Date; (d) 80% during the one-year period
commencing on the fourth anniversary of the Closing Date; and (e) 100% on and
after the fifth anniversary of the Closing Date; provided that upon and after
--------
the occurrence of a Sale of the Company, the Applicable Percentage shall mean
100%.
1.4 Board. The "Board" shall mean the Company's Board of Directors.
----- -----
1.5 Book Value; Termination Book Value. The term "Book Value" shall mean,
---------------------------------- ----------
as to each share of Common Stock on any date of determination, an amount equal
to (i) the sum of stated capital in respect of the
1
<PAGE>
Company's common stock plus additional paid in capital in respect of the
----
Company's common stock plus retained earnings of the Company (net of the value
----
of all accrued and unpaid dividends on the Company's preferred stock), each
determined as of such date in accordance with generally accepted accounting
principles on a basis consistent with prior periods, divided by (ii) the number
of shares of the Company's common stock outstanding on a fully diluted basis.
The term "Termination Book Value" shall mean Book Value as of the last day of
-----------------------
the month during which the termination of employment giving rise to a purchase
of shares of Common Stock pursuant to this Agreement occurs.
1.6 Cause. The term "Cause" used in connection with the termination of
----- -----
employment of the Executive shall mean a termination of employment of the
Executive by the Company or any subsidiary thereof due to (i) the commission by
the Executive of an act of fraud or embezzlement (including the unauthorized
disclosure of confidential or proprietary information of the Company or any of
its subsidiaries which results in material financial loss to the Company or any
of its subsidiaries), (ii) the indictment of the Executive for a felony, (iii)
the willful misconduct of the Executive as an employee of the Company or any of
its subsidiaries which is reasonably likely to result in material injury or
financial loss to the Company or any of its subsidiaries or (iv) the wilful
failure of the Executive to render services to the Company or any of its
subsidiaries in accordance with Executive's employment which failure amounts to
a material neglect of the Executive's duties to the Company or any of its
subsidiaries.
1.7 Closing. The term "Closing" shall have the meaning set forth in
------- -------
Section 2.2.
1.8 Closing Date. The term "Closing Date" shall have the meaning set
------------ -------------
forth in Section 2.2.
1.9 Common Stock. The term "Common Stock" shall have the meaning set
------------- -------------
forth in the preface.
1.10 Company. The term "Company" shall have the meaning set forth in the
------- -------
preface.
1.11 Cost. The term "Cost" shall mean, with respect to shares of Common
---- ----
Stock, the price per share paid by the Executive (as proportionately adjusted
for all subsequent stock splits, stock dividends and other recapitalizations).
1.12 Disability. The term "Disability" of the Executive shall mean the
---------- ----------
inability of the Executive to perform the essential functions of Executive's
job, with or without reasonable accommodation, by reason of a physical or mental
infirmity, for a continuous period of six months. The period of six months
shall be deemed continuous unless Executive returns to work for at least 30
consecutive business days during such period and performs during such period at
the level and competence that existed prior to the beginning of the six-month
period. The date of such Disability shall be on the first day of such six-month
period.
1.13 Employee and Employment. The term "employee" shall mean any employee
----------------------- --------
(as defined in accordance with the regulations and revenue rulings then
applicable under Section 3401(c) of the Internal Revenue Code of 1986, as
amended) of the Company or any of its subsidiaries, and
2
<PAGE>
the term "employment" shall include service as a part- or full-time employee to
----------
the Company or any of its subsidiaries.
1.14 Executive. The term "Executive" shall have the meaning set forth in
--------- ---------
the preface.
1.15 Executive Group. The term "Executive Group" shall have the meaning
--------------- ---------------
set forth in Section 4.1(a).
1.16 Fair Market Value. The term "Fair Market Value" used in connection
------------------ ------------------
with the value of shares of Common Stock shall mean the average of the closing
prices of the sales of the Company's Common Stock on all securities exchanges on
which the Common Stock may at the time be listed, or, if there have been no
sales on any such exchange on any day, the average of the highest bid and lowest
asked prices on all such exchanges at the end of such day, or, if on any day the
Common Stock is not so listed, the average of the representative bid and asked
prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any
day the Common Stock is not quoted in the NASDAQ System, the average of the
highest bid and lowest asked prices on such day in the domestic over-the-counter
market as reported by the National Quotation Bureau Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which the Fair Market Value is being determined and
the 20 consecutive business days prior to such day. If at any time the Common
Stock is not listed on any securities exchange or quoted in the NASDAQ System or
the over-the-counter market, the Fair Market Value shall be the fair value of
the Common Stock determined in good faith by the Board (without taking into
account the effect of any contemporaneous repurchase of Common Stock at less
than Fair Market Value under Section 4).
1.17 Financing Default. The term "Financing Default" shall mean an event
----------------- -----------------
which would constitute (or with notice or lapse of time or both would
constitute) an event of default under any of the following as they may be
amended from time to time: (i) the Credit Agreement and the Indenture
(collectively the "Senior Financing Agreements") dated on or about the Closing
----------------------------
Date among the Company and the other financial institutions, agents and trustees
party thereto, and any extensions, renewals, refinancings or refundings thereof
in whole or in part; (ii) any other agreement under which an amount of
indebtedness of the Company in excess of $1,000,000 is outstanding as of the
time of the aforementioned event, and any extensions, renewals, refinancings or
refundings thereof in whole or in part; (iii) any provision of the Company's or
any of its subsidiary's certificate of incorporation as in effect on the Closing
Date; (iv) any amendment of, supplement to or other modification of any of the
instruments referred to in clauses (i) through (iii) above; and (v) any of the
securities issued pursuant to or whose terms are governed by the terms of any of
the agreements set forth in clauses (i) through (iv) above, and any extensions,
renewals, refinancings or refundings thereof in whole or in part.
1.18 Good Reason. The term "Good Reason" shall mean a material reduction
----------- -----------
of the Executive's duties and responsibilities or a change in Executive's duties
and responsibilities which are materially inconsistent with the then type of
duties and responsibilities of such Executive, or a material reduction in
compensation paid to the Executive (excluding any reduction in Executive's
salary that is part of an overall plan to reduce the aggregate amount of salary
paid to all Management Investors) .
3
<PAGE>
1.19 Management Investors. The term "Management Investors" shall have the
-------------------- --------------------
meaning set forth in the preface.
1.20 Note. The term "Note" shall mean the promissory note made by the
---- ----
Executive as of the date hereof in favor of the Company as partial consideration
for the sale of the Common Stock to the Executive pursuant hereto, which
promissory note shall be in the form of Exhibit A attached hereto.
---------
1.21 Permitted Transferee. The term "Permitted Transferee" means any
--------------------- ---------------------
transferee of Common Stock pursuant to clauses (f) or (g) of the definition of
"Exempt Employee Transfer" as defined in the Securityholders Agreement.
1.22 Person. The term "Person" shall mean any individual, corporation,
------ ------
partnership, limited liability company, trust, joint stock company, business
trust, unincorporated association, joint venture, governmental authority or
other entity of any nature whatsoever.
1.23 Pledge Agreement. The term "Pledge Agreement" shall mean the pledge
---------------- ----------------
agreement made by the Executive as of the date hereof for the benefit of the
Company pursuant to which the Executive shall pledge the Common Stock purchased
hereunder (or voting trust certificates issued in exchange therefore) to the
Company as security for the payment of the Note, which pledge agreement shall be
in the form of Exhibit B attached hereto.
---------
1.24 Public Offering. The term "Public Offering" shall have the meaning
--------------- ---------------
set forth in the Securityholders Agreement.
1.25 Purchase Price. The term "Purchase Price" shall have the meaning set
-------------- --------------
forth in Section 2.1.
1.26 Retirement. The term "Retirement" shall mean, with respect to the
---------- ----------
Executive, the Executive's retirement as an employee of the Company or any of
its subsidiaries on or after reaching age 65 or such earlier age as may be
otherwise determined by the Board after at least three years employment with the
Company after the Closing Date.
1.27 Sale of the Company. The term "Sale of the Company" shall have the
-------------------- -------------------
meaning set forth in the Securityholders Agreement.
1.28 Securities Act. The term "Securities Act" shall mean the Securities
-------------- --------------
Act of 1933, as amended, and all rules and regulations promulgated thereunder,
as the same may be amended from time to time.
1.29 Securityholders Agreement. The term "Securityholders Agreement" shall
------------------------- -------------------------
mean the Securityholders Agreement dated as of the Closing Date among Vestar,
the Management Investors, other stockholders of the Company and the Company.
1.30 Termination Date. The term "Termination Date" means the date upon
---------------- ----------------
which Executive's employment with the Company and its subsidiaries is
terminated.
4
<PAGE>
1.31 Vestar. The term "Vestar" means Vestar/CS Holding Company, L.L.C., a
------ ------
Delaware limited liability company.
1.32 Voting Trust Agreement. The term "Voting Trust Agreement" shall have
---------------------- ----------------------
the meaning set forth in the Securityholders Agreement.
2. Subscription for and Purchase of Common Stock.
---------------------------------------------
2.1 Purchase of Common Stock. Pursuant to the terms and subject to the
-------------------------
conditions set forth in this Agreement, the Executive hereby subscribes for and
agrees to purchase, and the Company hereby agrees to issue and sell to the
Executive, on the Closing Date the number of shares of Common Stock set forth in
Schedule I attached hereto at a price per share and for the aggregate amount
- ----------
(the "Purchase Price") set forth in Schedule I attached hereto.
-------------- ----------
2.2 The Closing. The closing (the "Closing") of the purchase of Common
----------- -------
Stock hereunder shall take place simultaneously with or immediately prior to the
consummation of the Acquisition on such date (the "Closing Date"). At the
------------
Closing, the Executive shall deliver to the Company the Purchase Price, payable
by delivery of (i) the amount in cash set forth on Schedule I attached hereto,
by delivery of a cashier's or certified check or by wire transfer in immediately
available funds, and (ii) the Note in the principal amount set forth on Schedule
I attached hereto. At the Closing, the Executive shall deliver to the Company
the Pledge Agreement, duly executed by the Executive, and the Company shall
thereafter hold on behalf of the Executive the certificate(s) representing the
shares of Common Stock being purchased by the Executive at the Closing pursuant
to the terms of the Voting Trust Agreement and/or the Pledge Agreement.
2.3 Section 83(b) Election. Within 30 days after the Closing, Executive
----------------------
shall make a timely election with the Internal Revenue Service under Section
83(b) of the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder in the form of Exhibit C attached hereto.
---------
3. Investment Representations and Covenants of the Executive.
---------------------------------------------------------
3.1 Common Stock Unregistered. The Executive acknowledges and represents
--------------------------
that Executive has been advised by the Company that:
(a) the offer and sale of the Common Stock have not been registered
under the Securities Act;
(b) the Common Stock must be held indefinitely and the Executive must
continue to bear the economic risk of the investment in the Common Stock
unless the offer and sale of such Common Stock is subsequently registered
under the Securities Act and all applicable state securities laws or an
exemption from such registration is available;
5
<PAGE>
(c) there is no established market for the Common Stock and it is not
anticipated that there will be any public market for the Common Stock in
the foreseeable future;
(d) a restrictive legend in the form set forth below shall be placed
on the certificates representing the Common Stock:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN REPURCHASE OPTIONS AND OTHER PROVISIONS SET FORTH
IN A MANAGEMENT COMMON STOCK SUBSCRIPTION AGREEMENT BETWEEN
THE ISSUER AND __________ DATED AS OF APRIL 17, 1996, AS
AMENDED AND MODIFIED FROM TIME TO TIME, A COPY OF WHICH MAY
BE OBTAINED BY THE HOLDER HEREOF AT THE ISSUER'S PRINCIPAL
PLACE OF BUSINESS WITHOUT CHARGE"; and
(e) a notation shall be made in the appropriate records of the
Company indicating that the Common Stock is subject to restrictions on
transfer and, if the Company should at some time in the future engage the
services of a securities transfer agent, appropriate stop-transfer
instructions will be issued to such transfer agent with respect to the
Common Stock.
3.2 Additional Investment Representations. The Executive represents and
--------------------------------------
warrants that:
(a) the Executive's financial situation is such that Executive can
afford to bear the economic risk of holding the Common Stock for an
indefinite period of time, has adequate means for providing for Executive's
current needs and personal contingencies, and can afford to suffer a
complete loss of Executive's investment in the Common Stock;
(b) the Executive's knowledge and experience in financial and
business matters are such that Executive is capable of evaluating the
merits and risks of the investment in the Common Stock;
(c) the Executive understands that the Common Stock is a speculative
investment which involves a high degree of risk of loss of Executive's
investment therein, there are substantial restrictions on the
transferability of the Common Stock, and, on the Closing Date and for an
indefinite period following the Closing, there will be no public market for
the Common Stock and, accordingly, it may not be possible for the Executive
to liquidate Executive's investment in case of emergency, if at all;
(d) the terms of this Agreement provide that in the event that the
Executive ceases to be an employee of the Company or its subsidiaries, the
Company has the right to repurchase the Common Stock at a price which may
be less than the Fair Market Value of such stock;
(e) the Executive understands and has taken cognizance of all the
risk factors related to the purchase of the Common Stock, and, other than
as set forth in this Agreement,
6
<PAGE>
no representations or warranties have been made to the Executive or
Executive's representatives concerning the Common Stock or the Company or
their prospects or other matters;
(f) the Executive has been given the opportunity to examine all
documents and to ask questions of, and to receive answers from, the Company and
its representatives concerning the Company and its subsidiaries, the
Acquisition, the Securityholders Agreement, the Company's Certificate of
Incorporation and Bylaws and the terms and conditions of the purchase of the
Common Stock and to obtain any additional information which the Executive deems
necessary; and
(g) all information which the Executive has provided to the Company
and Executive's representatives concerning the Executive and Executive's
financial position is complete and correct as of the date of this
Agreement.
4. Certain Sales Upon Termination of Employment.
--------------------------------------------
4.1 Put Option.
----------
(a) If the Executive's employment with the Company and its
subsidiaries terminates due to the Disability, death or Retirement of the
Executive prior to the earlier of (i) a Public Offering and (ii) a Sale of the
Company, each of the Executive and the Executive's Permitted Transferees
(hereinafter sometimes collectively referred to as the "Executive Group") shall
---------------
have the right, subject to the provisions of Section 5 hereof, for 90 days
following the later of (A) the date of such termination of employment of the
Executive and (B) the fifth anniversary of the Closing Date, to sell to the
Company, and the Company shall be required to purchase (subject to the
provisions of Section 5 hereof), on one occasion from each member of the
Executive Group, all (but not less than all) of the shares of Common Stock then
held by such member, at a price per share equal to the applicable purchase price
determined pursuant to Section 4.1(c).
(b) If the Executive Group desires to exercise its option to require
the Company to repurchase shares pursuant to Section 4.1(a), the members of the
Executive Group shall send one written notice to the Company setting forth such
members' intention to collectively sell all of their shares of Common Stock
pursuant to Section 4.1(a) within the 90-day period described therein, which
notice shall include the signature of each member of the Executive Group.
Subject to the provisions of Section 5.1, the closing of the purchase shall take
place at the principal office of the Company on a date specified by the Company
no later than the 60th day after the giving of such notice.
(c) In the event of a purchase by the Company pursuant to Section
4.1(a), the purchase price shall be with respect to the number of shares being
sold which are the product of (x) the total number of shares being sold and (y)
the Applicable Percentage (measured as of the Termination Date), a price per
share equal to the Fair Market Value (measured as of the Termination Date), and
(if the Applicable Percentage (measured as of the Termination Date) is less than
100%) the purchase price with respect to the remaining shares being sold shall
be a price per share equal to
7
<PAGE>
the greater of (A) Termination Book Value and (B) Cost; provided that in any
--------
case the Board shall have the right, in its sole discretion, to increase any of
the foregoing purchase prices.
4.2 Call Options.
------------
(a) If the Executive's employment with the Company or any of its
subsidiaries terminates for any of the reasons set forth in clauses (i), (ii),
(iii) or (iv) below prior to a Sale of the Company, the Company and/or Vestar
shall have the right and option to purchase, for a period of 90 days following
the date of such termination of employment of the Executive, and each member of
the Executive Group shall be required to sell to the Company and/or Vestar, any
or all of the shares of Common Stock then held by such member of the Executive
Group (it being understood that the Company and/or Vestar may elect to
repurchase only the portion of Common Stock subject to repurchase hereunder
which may be repurchased for less than Fair Market Value, if any), at a price
per share equal to the applicable purchase price determined pursuant to Section
4.2(c):
(i) if the Executive's active employment with the Company and its
subsidiaries is terminated due to the Disability, death or Retirement of
the Executive;
(ii) if the Executive's active employment with the Company and its
subsidiaries is terminated by the Company and its subsidiaries without
Cause or by the Executive for Good Reason;
(iii) if the Executive's active employment with the Company and
its subsidiaries is terminated by the Executive after the fifth anniversary
of the date of this Agreement for any reason not set forth in Sections
4.2(a)(i), (a)(ii) or (a)(iv)(A); or
(iv) if the Executive's active employment with the Company and its
subsidiaries is terminated (A) by the Company or any of its subsidiaries
for Cause or (B) by the Executive for any other reason not set forth in
Sections 4.2(a)(i) or (a)(ii) prior to the fifth anniversary of the date of
this Agreement.
(b) If the Company desires to exercise its option to purchase any
shares pursuant to this Section 4.2, the Company shall, not later than 90 days
after the date of termination of Executive's employment, send written notice to
each member of the Executive Group of its intention to purchase shares,
specifying the number of shares to be purchased (the "Call Notice"). If for any
-----------
reason the Company does not elect to purchase all of the shares held by the
Executive Group, Vestar shall be entitled to purchase the shares the Company has
not elected to purchase (the "Available Shares"). As soon as practicable after
----------------
the Company has determined that there will be Available Shares, but in any event
within 45 days after Executive's termination, the Company shall give written
notice (the "Option Notice") to Vestar setting forth the number of Available
-------------
Shares and the purchase price for the Available Shares. Vestar may elect to
purchase any or all of the Available Shares by giving written notice to the
Company within 30 days after the Option Notice has been given by the Company.
As soon as practicable, and in any event within fifteen days after the
expiration of the 30-day period set forth above, the Company shall notify each
member of the Executive Group as to the number of shares being purchased from
such holder by Vestar (the "Supplemental Call Notice"). At the time the Company
------------------------
delivers the Supplemental Call Notice to the members of the Executive Group,
8
<PAGE>
the Company shall also deliver written notice to Vestar setting forth the number
of shares Vestar is entitled to purchase, the aggregate purchase price and the
time and place of the closing of the transaction. If the shares to be
repurchased by the Company and Vestar are to be repurchased at more than one
price, the shares of varying price shall be allocated among the Company and
Vestar pro rata according to the aggregate number of shares to be purchased by
each of them. Subject to the provisions of Section 5, the closing of the
purchase shall take place at the principal office of the Company on a date
specified by the Company no later than the 60th day after the giving of the
later of the Call Notice or the Supplemental Call Notice.
(c) In the event of a purchase by the Company and/or Vestar pursuant
to Section 4.2(a), the purchase price shall be:
(i) in the case of a termination of employment described in
Section 4.2(a)(i), with respect to the number of shares being purchased
which are the product of (x) the total number of shares being purchased and
(y) the Applicable Percentage (measured as of the Termination Date), a
price per share equal to the Fair Market Value (measured as of the
Termination Date), and (if the Applicable Percentage (measured as of the
Termination Date) is less than 100%) the purchase price with respect to the
remaining shares being sold shall be a price per share equal to the greater
of (A) Termination Book Value and (B) Cost;
(ii) in the case of a termination of employment described in
Section 4.2(a)(ii), with respect to the number of shares being purchased
which are the product of (x) the total number of shares being purchased and
(y) the Applicable Percentage (measured as of the Termination Date), a
price per share equal to the Fair Market Value (measured as of the
Termination Date), and (if the Applicable Percentage (measured as of the
Termination Date) is less than 100%) the purchase price with respect to the
remaining shares being sold shall be a price per share equal to the greater
of (A) Termination Book Value and (B) Cost;
(iii) in the case of a termination of employment described in
Section 4.2(a)(iii), a price per share equal to the greater of (A)
Termination Book Value and (B) Cost; and
(iv) in the case of a termination of employment described in
Section 4.2(a)(iv), a price per share equal to the lesser of (A)
Termination Book Value and (B) Cost;
provided that in any case the Board shall have the right, in its sole
- --------
discretion, to increase any purchase price set forth above.
4.3 Obligation to Sell Several. In the event there is more than one
---------------------------
member of the Executive Group, the failure of any one member thereof to perform
its obligations hereunder shall not excuse or affect the obligations of any
other member thereof, and the closing of the purchases from such other members
by the Company shall not excuse, or constitute a waiver of its rights against,
the defaulting member.
5. Certain Limitations on the Company's Obligations to Purchase Common Stock.
-------------------------------------------------------------------------
9
<PAGE>
5.1 Deferral of Purchases. (a) Notwithstanding anything to the
-----------------------
contrary contained herein, the Company shall not be obligated to purchase any
shares of Common Stock at any time pursuant to Section 4, regardless of whether
it has delivered a notice of its election to purchase any such shares, (i) to
the extent that the purchase of such shares (together with any other purchases
of Common Stock pursuant to Section 4 or pursuant to similar provisions in the
agreements with other Management Investors of which the Company has at such time
been given or has given notice) would result (A) in a violation of any law,
statute, rule, regulation, policy, order, writ, injunction, decree or judgment
promulgated or entered by any federal, state, local or foreign court or
governmental authority applicable to the Company or any of its subsidiaries or
any of its or their property or (B) after giving effect thereto, in a Financing
Default, or (ii) if immediately prior to such purchase there exists a Financing
Default which prohibits such purchase. The Company shall within fifteen days of
learning of any such fact so notify the members of the Executive Group that it
is not obligated to purchase shares hereunder.
(b) Notwithstanding anything to the contrary contained in Section 4,
any shares of Common Stock which a member of the Executive Group has elected to
sell to the Company or which the Company has elected to purchase from members of
the Executive Group, but which in accordance with Section 5.1(a) are not
purchased at the applicable time provided in Section 4, shall be purchased by
the Company on or prior to the fifteenth day after such date or dates that
(after taking into account any purchases to be made at such time pursuant to the
agreements with other Management Investors) it is no longer prohibited from
purchasing such shares under Section 5.1(a), and the Company shall give the
members of the Executive Group five days prior notice of any such purchase.
5.2 Payment for Common Stock. If at any time the Company elects or is
--------------------------
required to purchase any shares of Common Stock pursuant to Section 4, the
Company shall pay the purchase price for the shares of Common Stock it purchases
(i) first, by the cancellation of any indebtedness (including, without
limitation, indebtedness under the Note), if any, owing from the Executive to
the Company or any of its subsidiaries (which indebtedness shall be applied pro
rata against the proceeds receivable by each member of the Executive Group
receiving consideration in such repurchase) and (ii) then, by the Company's
delivery of a check or wire transfer of immediately available funds for the
remainder of the purchase price, if any, against delivery of the certificates or
other instruments representing the Common Stock so purchased, duly endorsed;
provided that if any of the conditions set forth in Section 5.1(a) exists which
- --------
prohibits such cash payment, the portion of the cash payment so prohibited may
be made, to the extent such payment is not prohibited, by the Company's delivery
of a junior subordinated promissory note (which shall be subordinated and
subject in right of payment to the prior payment of any debt outstanding under
the Senior Financing Agreements and any modifications, renewals, extensions,
replacements and refunding of all such indebtedness) of the Company (a "Junior
------
Subordinated Note") in a principal amount equal to the balance of the purchase
- -----------------
price, payable in up to five equal annual installments commencing on the first
anniversary of the issuance thereof and bearing interest payable annually at the
publicly announced prime rate of Chemical Bank, on the date of issuance;
provided further that in the case of a purchase pursuant to Section 4.1(a) or
- -------- -------
Section 4.2(a)(iv) the Company may elect to deliver a Junior Subordinated Note
in a principal amount equal to all or a portion of the cash purchase price (in
lieu of paying such portion of the purchase price in cash), which Junior
Subordinated Note shall mature on the fifth anniversary of its issuance, require
principal payments to be made in equal, annual installments and
10
<PAGE>
bear interest payable annually at the publicly announced prime rate of Chemical
Bank on the date of issuance. The Company shall use its reasonable efforts to
repurchase Common Stock pursuant to Section 4.1(a) with cash and/or to prepay
any Junior Subordinated Notes issued in connection with a repurchase of Common
Stock pursuant to Section 4.1(a). The Company shall have the right set forth in
clause (i) of the first sentence of this Section 5.2 whether or not the member
of the Executive Group selling such shares is an obligor of the Company.
6. Miscellaneous.
-------------
6.1 Transfers to Permitted Transferees. Prior to the transfer of Common
-----------------------------------
Stock to a Permitted Transferee (other than a transfer subsequent to a Sale of
the Company), the Executive shall deliver to the Company a written agreement of
the proposed transferee (a) evidencing such Person's undertaking to be bound by
the terms of this Agreement and (b) acknowledging that the Common Stock
transferred to such Person will continue to be Common Stock for purposes of this
Agreement in the hands of such Person. Any transfer or attempted transfer of
Common Stock in violation of any provision of this Agreement or the
Securityholders Agreement shall be void, and the Company shall not record such
transfer on its books or treat any purported transferee of such Common Stock as
the owner of such Common Stock for any purpose.
6.2 Recapitalizations, Exchanges, Etc., Affecting Common Stock. The
---------------------------------------------------------------
provisions of this Agreement shall apply, to the full extent set forth herein
with respect to Common Stock, to any and all shares of capital stock of the
Company or any successor or assign of the Company (whether by merger,
consolidation, sale of assets or otherwise) which may be issued in respect of,
in exchange for, or in substitution of the Common Stock, by reason of any stock
dividend, stock split, stock issuance, reverse stock split, combination,
recapitalization, reclassification, merger, consolidation or otherwise.
6.3 Executive's Employment by the Company. Nothing contained in this
---------------------------------------
Agreement shall be deemed to obligate the Company or any subsidiary of the
Company to employ the Executive in any capacity whatsoever or to prohibit or
restrict the Company (or any such subsidiary) from terminating the employment of
the Executive at any time or for any reason whatsoever, with or without Cause.
6.4 Binding Effect. The provisions of this Agreement shall be binding
--------------
upon and accrue to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and assigns; provided, however, that no
-------- -------
transferee shall derive any rights under this Agreement unless and until such
transferee has executed and delivered to the Company a valid undertaking and
becomes bound by the terms of this Agreement.
6.5 Amendment; Waiver. This Agreement may be amended only by a written
-----------------
instrument signed by the parties hereto. No waiver by any party hereto of any
of the provisions hereof shall be effective unless set forth in a writing
executed by the party so waiving.
11
<PAGE>
6.6 Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of New York without regard to
the conflicts of law principles thereof.
6.7 Jurisdiction. Any suit, action or proceeding with respect to this
------------
Agreement, or any judgment entered by any court in respect of any thereof, shall
be brought in any court of competent jurisdiction in the State of New York, and
each of the Company and the members of the Executive Group hereby submits to the
exclusive jurisdiction of such courts for the purpose of any such suit, action,
proceeding or judgment. Each of the members of the Executive Group and the
Company hereby irrevocably waives any objections which it may now or hereafter
have to the laying of the venue of any suit, action or proceeding arising out of
or relating to this Agreement brought in any court of competent jurisdiction in
the State of New York, and hereby further irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in
any inconvenient forum.
6.8 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed to have been duly given when personally delivered,
telecopied (with confirmation of receipt), one day after deposit with a
reputable overnight delivery service (charges prepaid) and three days after
deposit in the U.S. Mail (postage prepaid and return receipt requested) to the
address set forth below or such other address as the recipient party has
previously delivered notice to the sending party.
(a) If to the Company:
Clark-Schwebel Holdings, Inc.
c/o Vestar Equity Partners, L.P.
245 Park Avenue, 41st Floor
New York, NY 10167
Attn: Sander M. Levy
Telecopy: (212) 808-4922
with a copy to:
Kirkland & Ellis
655 Fifteenth Street, N.W.
Washington, D.C. 20005
Attn: Jack M. Feder
Telecopy: (202) 879-5200
(b) If to the Executive, to the address as shown on the stock
register of the Company.
6.9 Integration. This Agreement and the documents referred to herein or
-----------
delivered pursuant hereto which form a part hereof contain the entire
understanding of the parties with respect to the subject matter hereof and
thereof. There are no restrictions, agreements, promises, representations,
warranties, covenants or undertakings with respect to the subject matter hereof
other
12
<PAGE>
than those expressly set forth herein and therein. This Agreement supersedes
all prior agreements and understandings between the parties with respect to such
subject matter.
6.10 Counterparts. This Agreement may be executed in separate
------------
counterparts, and by different parties on separate counterparts each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument.
6.11 Injunctive Relief. The Executive and Executive's Permitted
-------------------
Transferees each acknowledges and agrees that a violation of any of the terms of
this Agreement will cause the Company irreparable injury for which adequate
remedy at law is not available. Accordingly, it is agreed that the Company
shall be entitled to an injunction, restraining order or other equitable relief
to prevent breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any court of competent
jurisdiction in the United States or any state thereof, in addition to any other
remedy to which it may be entitled at law or equity.
6.12 Rights Cumulative; Waiver. The rights and remedies of the Executive
-------------------------
and the Company under this Agreement shall be cumulative and not exclusive of
any rights or remedies which either would otherwise have hereunder or at law or
in equity or by statute, and no failure or delay by either party in exercising
any right or remedy shall impair any such right or remedy shall impair any such
right or remedy or operate as a waiver of such right or remedy, nor shall any
single or partial exercise of any power or right preclude such party's other or
further exercise or the exercise of any other power or right. The waiver by any
party hereto of a breach of any provision of this Agreement shall not operate or
be construed as a waiver of any preceding or succeeding breach and no failure by
either party to exercise any right or privilege hereunder shall be deemed a
waiver of such party's rights or privileges hereunder or shall be deemed a
waiver of such party's rights to exercise the same at any subsequent time or
times hereunder.
* * * * *
13
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Management Common
Stock Subscription Agreement as of the date first above written.
CLARK-SCHWEBEL HOLDINGS, INC.
By:
-------------------------------------
Its:
------------------------------------
----------------------------------------
[Executive]
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Executive hereby acknowledges that I have
read the foregoing Management Common Stock Subscription Agreement (the
"Agreement") and that I understand its contents. I am aware that the Agreement
---------
provides for the repurchase of my spouse's shares of Common Stock (as defined in
the Agreement) under certain circumstances and imposes other restrictions on the
transfer of such Common Stock. I agree that my spouse's interest in the Common
Stock is subject to the Agreement and any interest I may have in such Common
Stock shall be irrevocably bound by the Agreement and further that my community
property interest, if any, shall be similarly bound by the Agreement.
I am aware that the legal, financial and other matters contained in
the Agreement are complex and I am free to seek advice with respect thereto from
independent counsel. I have either sought such advice or determined after
carefully reviewing the Agreement that I will waive such right.
----------------------------------------
Name:
-----------------------------------
----------------------------------------
Witness
<PAGE>
SCHEDULE I
----------
Principal Shares of
Executive Cash Purchase Price Amount of Note Common Stock
--------- ------------------- -------------- ------------
<PAGE>
EXHIBIT A
THIS EXECUTIVE NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW. THIS
EXECUTIVE NOTE MAY NOT BE SOLD OR OFFERED FOR SALE UNLESS
REGISTERED UNDER SUCH LAWS OR UNLESS AN EXEMPTION FOR SUCH
REGISTRATION IS AVAILABLE.
EXECUTIVE NOTE
--------------
$________________April 17, 1996
FOR VALUE RECEIVED, the undersigned (the "Executive") hereby promises
---------
to pay to Clark-Schwebel Holdings, Inc., a Delaware corporation (the "Company"
-------
and, in its capacity as lender, the "Lender"), or its registered assigns, at its
------
office c/o Vestar Equity Partners, L.P., 245 Park Avenue, 41st Floor, New York,
NY 10167, or at such other address in the United States as the Lender or any
subsequent holder of this Executive Note (this "Note") shall stipulate in
----
written notice to the Executive, the aggregate principal amount of all loans
(individually, a "Loan" collectively, the "Loans") made by the Lender to the
---- -----
Executive evidenced hereby, all in accordance with the following terms and
provisions. This Note is being issued to evidence Loans made by the Lender to
the Executive on a recourse basis (as set forth herein), the proceeds of which
will be used by the Executive to purchase shares of the Company's common stock,
par value $.01 per share. Capitalized terms not otherwise defined herein shall
have the meanings specified in the Pledge Agreement between the Executive and
the Lender, dated as of the date hereof (as amended, modified or otherwise
supplemented from time to time, the "Pledge Agreement").
----------------
1. Payment of Principal.
--------------------
(a) Acceleration of Note. Upon the sale or disposition of any
--------------------
Collateral, the Executive shall be required to apply the net proceeds realized
from such sale or disposition to the repayment of the Loans, and the Loans
evidenced by this Note shall become due and payable in an amount equal to such
Net Proceeds; provided that any such proceeds shall first be applied against any
--------
interest accrued but unpaid on the Loans before being applied to the principal
amount of the Loans. The Loans shall in any event become due and payable on the
date on which payment thereof is accelerated pursuant to Section 6 of the Pledge
Agreement. All payments hereunder shall be made in lawful money of the United
States of America.
(b) Right to Prepay. The Executive shall have the right to prepay
---------------
this Note at any time, in whole or in part, without the consent of the Lender
and without penalty or premium.
(c) Principal Amount. The principal amount of the loan evidenced by
----------------
this Note is the amount set forth on Schedule I attached hereto under the
----------
caption "Principal Amount."
----------------
A-1
<PAGE>
(d) Scheduled Payment Term. The Executive shall be required to repay
----------------------
the entire principal amount hereof by (i) making payment to the Lender in
installments in accordance with the schedule described on Schedule I attached
----------
hereto under the caption "Installments" (it being understood that such
------------
installment amounts shall be applied first to accrued and unpaid interest on the
outstanding principal amount of the Note and then to outstanding principal) and
(ii) by repaying the entire remaining principal amount hereof outstanding, if
any, on the date set forth on Schedule I attached hereto under the caption
----------
"Final Maturity."
--------------
2. Interest. Interest will accrue on the outstanding principal
--------
amount of this Note at the rate per annum set forth on Schedule I attached
----------
hereto under the caption "Interest Rate." All payments received hereunder shall
-------------
be applied first to accrued and unpaid interest and thereafter to the
outstanding balance of the principal amount. All accrued and unpaid interest is
due upon the final maturity of the Note.
3. Mandatory Prepayments.
---------------------
(a) Cash Dividends. So long as this Note is outstanding, any cash
--------------
dividends payable in respect of the Collateral shall be applied promptly to the
payment first of any accrued interest hereon and then to principal of this Note.
(b) Severance Obligations. Upon the termination of Executive's
---------------------
employment with the Company or any of its subsidiaries in circumstances where
severance obligations are payable by the Lender, whether payable pursuant to an
employment agreement or a severance benefit policy of the Company or any of its
subsidiaries (but excluding any pension or retirement benefit), the Lender shall
have the right, without prior notice to the Executive (any such notice being
expressly waived by the Executive to the extent permitted by applicable law), to
set-off and appropriate and apply against the aggregate amount of such severance
obligations any and all amounts (whether then due and payable or not) held or
owing to the Lender and evidenced by this Note, and the Executive agrees that
the amount of such severance obligations may, under such circumstances, at the
option of the Company or the Lender, be reduced by such amounts.
4. Security. The Loans are and shall be secured pursuant to the
--------
terms of the Pledge Agreement. The holder of this Note is entitled to the
benefits of the Pledge Agreement and the security referred to therein, to which
reference is hereby made for a description of the properties and rights included
in such security, the nature of such security and the rights of the parties with
respect to such security. The Lender may enforce the agreement of the Executive
contained therein and exercise the remedies provided for thereby or otherwise
available in respect thereof, all in accordance with the terms thereof.
5. Consideration. In order to induce the Lender to accept this Note
-------------
and with full knowledge that the Lender will rely on the representations and
agreements contained herein, the Executive hereby represents, warrants and
agrees that this Note is a valid and binding obligation of the undersigned,
enforceable against the undersigned in accordance with its terms and the
Executive agrees that he will make indefeasible payment in full of all amounts
due under this Note as and when due hereunder in accordance with the terms of
this Note without claiming or asserting any set-off. The obligations
represented by this Note shall be absolute irrespective of any set-off, claim,
A-2
<PAGE>
counterclaim, defense or other right which the Executive may have against anyone
for any reason whatsoever.
6. Events of Default. In case a default under Section 6 of the
-----------------
Pledge Agreement shall occur and be continuing, the entire unpaid principal
balance of the Loans may become or may be declared to be due and payable in the
manner and with the effect provided in the Pledge Agreement.
7. Miscellaneous.
-------------
(a) Waiver of Presentment. The Executive and any endorser of this
---------------------
Note hereby expressly waive presentment for payment, demand, notice of
nonpayment and dishonor, protest, notice of protest and notice of any other
kind.
(b) Information. The Executive hereby acknowledges that neither the
-----------
Company nor any of their affiliates has made any representations or
recommendations whatsoever to the Executive concerning the Company (including,
without limitation, the financial condition, prospects or any other matters
relating to the Company) or the Executive's purchase of any shares of the common
stock of, or other equity interest in, the Company. The Executive assumes all
responsibility of keeping himself or herself informed of the affairs and
business of the Company and its subsidiaries. The Executive acknowledges and
agrees that Lender does not have any obligation to inform the Executive of any
matter relating to the Company and its subsidiaries or their business and
affairs.
(c) Successors and Assigns. This Note shall be binding upon and
----------------------
enforceable against the Executive and the Executive's heirs, successors and
assigns. The Executive shall not have the right to assign all or any part of
the Executive's rights or obligations under this Note without the consent of the
Lender, which consent may be withheld in the sole discretion of the Lender. The
Lender may assign its rights and obligations under this Note without having to
obtain the consent of the Executive.
(d) Obligations Independent. The obligations of the Executive
-----------------------
hereunder and under the Pledge Agreement shall not be contingent upon or
affected by any similar undertaking of any other employee of the Company or its
subsidiaries. The Executive agrees that the Lender may proceed to enforce this
Note and the Pledge Agreement without also proceeding to enforce any comparable
note or pledge agreement executed by any other such employee or employees.
(e) Governing Law. The rights and liabilities of the parties hereto
-------------
shall be determined in accordance with the laws of the State of New York,
without regard to conflict of law principles. The Executive hereby waives and
agrees not to assert in any such proceeding a claim that the Executive is not
personally subject to the jurisdiction of the court referred to above, that the
suit or action was brought in an inconvenient forum or that the venue of the
suit or action is improper.
(f) No Waiver; Remedies. No failure to exercise and no delay in
-------------------
exercising, on the part of the Lender, any right, remedy, power or privilege
hereunder shall operate as a
A-3
<PAGE>
waiver thereof, nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
(g) Severability. If any provision of this Note is invalid or
------------
unenforceable under any applicable law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed
modified to confirm with such applicable law. Any provision hereof which may be
held invalid or unenforceable under any applicable law shall not affect the
validity or enforceability of any other provision hereof, and to this extent the
provisions hereof shall be severable.
(h) Amendment. Except as expressly provided herein, this Note may
---------
not be amended or otherwise modified except by a written instrument signed by
the Executive and the Lender.
(i) Waiver of Jury Trial. The Executive and the Lender hereby
--------------------
irrevocably and unconditionally waive trial by jury in any legal action or
proceeding relating to this Note or the Pledge Agreement and for any
counterclaim therein.
(j) Notices. All notices and other communications hereunder shall be
-------
in writing and shall be delivered in accordance with and to the addresses set
forth in the Pledge Agreement.
(k) Recourse. The obligations of the Executive under this Note and
--------
the Pledge Agreement are personal obligations of the Executive, and the Lender
shall have recourse to the Executive or Executive's property for payment,
satisfaction, or discharge of this Note or the Pledge Agreement.
* * * * *
A-4
<PAGE>
IN WITNESS WHEREOF, the Executive has caused this Executive Note to be
executed as of the date hereof.
----------------------------------------
[Executive]
A-5
<PAGE>
SCHEDULE I
----------
[Executive]
Principal Amount Interest Rate Installments Final Maturity
---------------- ------------- ------------ --------------
$___________ 6.51% per annum, _______________1, April 17, 2006
compounded annually payable on April 17
of each of 1997,
1998, 1999, 2000 and
2001
1 Amount toequal 20% of the difference between(i) 2/3 of the
aggregate purchase price for the common stock and (ii) cash paid
for the common stock at closing.
A-6
<PAGE>
EXHIBIT B
PLEDGE AGREEMENT
----------------
THIS PLEDGE AGREEMENT (this "Agreement") is made as of April 17, 1996,
---------
by and between _______________________ ("Pledgor"), and Clark-Schwebel Holdings,
-------
Inc., a Delaware corporation (the "Company").
-------
The Company and Pledgor are parties to a Management Common Stock
Subscription Agreement, dated as of the date hereof, pursuant to which Pledgor
purchased ____ shares of the Company's Common Stock, $.01 par value (the
"Pledged Shares"), for an aggregate purchase price of $______. The Company has
--------------
allowed Pledgor to purchase a portion of the Pledged Shares by delivery to the
Company of an executive note (the "Note") in the aggregate principal amount of
----
$_________. This Pledge Agreement provides the terms and conditions upon which
the Note is secured by a pledge to the Company of the Pledged Shares.
NOW, THEREFORE, in consideration of the premises contained herein and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, and in order to induce the Company to accept the Note as
partial payment for the Pledged Shares, Pledgor and the Company hereby agree as
follows:
1. Pledge and Grant of Security Interest. As security for the
----------------------------------------
prompt and complete payment when due of the unpaid principal of and interest on
the Note and full payment and performance of the obligations and liabilities of
Pledgor hereunder and thereunder, Pledgor hereby pledges to the Company, and
grants to the Company a security interest in, all of Pledgor's right, title and
interest in and to the following (collectively, the "Collateral"):
----------
(a) the Pledged Shares;
(b) all securities or other instruments in addition to, in
substitution of, or in exchange for any of the Pledged Shares (whether as a
distribution in connection with any recapitalization, reorganization or
reclassification, a stock dividend or otherwise), including, without limitation,
the voting trust certificate (the "Voting Trust Certificate") issued to Pledgor
------------------------
upon tender of the Pledged Shares to the trustee under that certain Voting Trust
Agreement dated as of the date hereof by and among the Company, as trustee,
Pledgor and the other parties thereto (the "Voting Trust Agreement") and any
-----------------------
voting trust certificates thereafter issued to the Pledgor pursuant to the
Voting Trust Agreement;
(c) any distributions of cash or property in respect of the
Collateral described in the preceding clauses (a) and (b); and
(d) any proceeds of any of the foregoing Collateral.
B-1
<PAGE>
2. Delivery of Collateral; After Acquired Collateral.
-------------------------------------------------
(a) Upon the execution of this Pledge Agreement, Pledgor shall
deliver to the Company the Voting Trust Certificate, together with duly executed
forms of assignment sufficient to transfer title thereto to the Company.
(b) Subject to the Voting Trust Agreement, while this Pledge
Agreement is in effect, Pledgor becomes entitled to receive or receives any
additional Collateral, including, without limitation the certificates
representing the Pledged Shares upon the termination of the Voting Trust
Agreement, Pledgor shall accept such Collateral on behalf of and for the benefit
of the Company and shall promptly deliver such additional Collateral to the
Company together with duly executed forms of assignment, and such additional
Collateral shall be deemed to be part of the Collateral hereunder.
3. Voting Rights; Cash Dividends.
-----------------------------
(a) During the term of this Agreement until such time as there exists
a default in the payment of principal or interest on the Note or any other
default hereunder or thereunder, Pledgor shall be entitled to all voting rights
with respect to the Collateral, subject to the terms and conditions of the
Voting Trust Agreement and the Securityholders Agreement (as defined in the
Voting Trust Agreement); provided that upon the occurrence of and during the
--------
continuance of any default in the payment of principal or interest on the Note
or any other default hereunder or thereunder, Pledgor shall no longer be
entitled to any voting rights with respect to the Collateral.
(b) During the term of this Agreement, all cash dividends payable
with respect to the Collateral shall be applied promptly to the payment first of
accrued interest and then to principal under the Note.
4. Representations and Warranties of the Pledgor.
---------------------------------------------
(a) Pledgor either owns the Collateral or has the right to grant the
security interest provided for herein, and none of the Collateral is subject to
any lien, pledge, charge, encumbrance or security interest or right or option on
the part of any third person to purchase or otherwise acquire the Collateral or
any part thereof (other than as provided in any agreement to which the Company
is a party).
(b) No security agreement, financing agreement or other public notice
with respect to all or any part of the Collateral is on file or of record in any
public office, except such as may have been filed in favor of the Company
pursuant to this Agreement.
(c) The execution, delivery and performance by the Pledgor of this
Agreement will not constitute or result in a breach or default under or conflict
with any order, ruling or regulation of any court or other tribunal or of any
governmental commission or agency, or any agreement or other undertaking, to
which the Pledgor is a party or by which the Pledgor is bound (other than any
agreement to which the Company is a party).
B-2
<PAGE>
(d) The Pledgor's signatures on the Note and this Agreement are
genuine and the Pledgor has the legal competence and capacity to execute the
same.
(e) This Agreement constitutes the legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its terms.
5. Covenants of the Pledgor. Pledgor hereby covenants that, until
-------------------------
such time as all of the outstanding principal of and interest on the Note has
been repaid and all other obligations of the Pledgor hereunder or thereunder
have been discharged, Pledgor shall:
(a) not create, incur, assume or suffer to exist any pledge, security
interest, encumbrance, lien or charge of any kind against the Collateral or
Pledgor's rights or a holder thereof, other than pursuant to this Agreement and
the Voting Trust Agreement;
(b) not sell or otherwise transfer any Collateral or any interest
therein (except pursuant to the Securityholders Agreement);
(c) execute and deliver such further documents (including UCC
financing statements) and do such further acts and things as the Company may
reasonably request in order to effect the purposes of this Pledge Agreement.
6. Default. If Pledgor defaults in the payment of the principal or
-------
interest under the Note when it becomes due (whether upon demand, acceleration
or otherwise) or any other event of default under the Note or this Pledge
Agreement occurs (including the bankruptcy or insolvency of Pledgor), the
Company may exercise any and all the rights, powers and remedies of any owner of
the Collateral (including, without limitation, the right to vote the Voting
Trust Certificates or Pledged Shares and receive dividends and distributions
with respect to the Collateral) and shall have and may exercise without demand
any and all the rights and remedies granted to a secured party upon default
under the Uniform Commercial Code of New York or otherwise available to the
Company under applicable law. Without limiting the foregoing, the Company is
authorized to sell, assign and deliver at its discretion, from time to time, all
or any part of the Collateral at any private sale or public auction, on not less
than ten days written notice to Pledgor, at such price or prices and upon such
terms as the Company may deem advisable. Pledgor shall have no right to redeem
any of the Collateral after any such sale or assignment. At any such sale or
auction, the Company may bid for, and become the purchaser of, the whole or any
part of the Collateral offered for sale. In case of any such sale, after
deducting the costs, attorneys' fees and other expenses of sale and delivery,
the remaining proceeds of such sale shall be applied to the principal of and
accrued interest on the Note; provided that after payment in full of the
--------
indebtedness evidenced by the Note, the balance of the proceeds of sale then
remaining shall be paid to Pledgor and Pledgor shall be entitled to the return
of any of the Collateral remaining in the hands of the Company. Pledgor shall
be liable for any deficiency if the remaining proceeds are insufficient to pay
the indebtedness under the Note in full, including the fees of any attorneys
employed by the Company to collect such deficiency.
7. Recourse. The obligations of the Pledgor under this Agreement
--------
and the Note are personal obligations of the Pledgor, and the Company shall have
recourse to the Pledgor or the Pledgor's property for payment, satisfaction, or
discharge of this Agreement and the Note.
B-3
<PAGE>
8. Costs and Attorneys' Fees. All costs and expenses (including
--------------------------
reasonable attorneys' fees) incurred in exercising any right, power or remedy
conferred by this Pledge Agreement or in the enforcement thereof, shall become
part of the indebtedness secured hereunder and shall be paid by Pledgor or
repaid from the proceeds of the sale of Collateral hereunder.
9. Payment of Indebtedness and Release of Collateral. Upon payment
--------------------------------------------------
in full of the indebtedness evidenced by the Note and the discharge of all
Pledgor's obligations hereunder and thereunder, the Company shall surrender the
Collateral to Pledgor together with all forms of assignment.
10. No Waiver; Cumulative Remedies. The Company shall not by any
-------------------------------
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
the Company, and then only to the extent therein set forth. A waiver by the
Company of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Company would otherwise have
on any future occasion. No failure to exercise nor any delay in exercising on
the part of the Company, any right, power or privilege hereunder shall preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided are cumulative and may be
exercised singly or concurrently, and are not exclusive of any rights or
remedies provided by law.
11. Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed to have been duly given when personally
delivered, telecopied (with confirmation of receipt), one day after deposit with
a reputable overnight delivery service (charges prepaid) and three days after
deposit in the U.S. Mail (postage prepaid and return receipt requested) to the
address set forth below or such other address as the recipient party has
previously delivered notice to the sending party.
(a) Notices to the Pledgor:
_________________________
_________________________
_________________________
(b) Notices to the Company:
Clark-Schwebel Holdings, Inc.
c/o Vestar Equity Partners, L.P.
245 Park Avenue, 40th Floor
New York, NY 10167
Attn: Sander M. Levy
Telecopy: (212) 808-4922
B-4
<PAGE>
with a copy to:
Kirkland & Ellis
655 Fifteenth Street, N.W.
Washington, D.C. 20005
Attn: Jack M. Feder
Telecopy: (202) 879-5200
12. Modifications. No amendment, modification, termination,
-------------
discharge or waiver of any provision of this Agreement shall be effective unless
the same shall be set forth in writing and signed by the Pledgor and the
Company, and then only to the extent specifically set forth therein.
13. Severability. Any provision of this Pledge Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14. Governing Law. The rights and liabilities of the parties hereto
-------------
shall be determined in accordance with the laws of the State of New York,
without regard to conflicts of law principles. The Pledgor hereby waives and
agrees not to assert any such proceeding a claim that the Pledgor is not
personally subject to the jurisdiction of the court referred to above, that the
suit or action was brought in an inconvenient forum or that the venue of the
suit or action is improper.
15. Successors and Assigns. If a successor to the Company shall be
-----------------------
designated by the Company, such successor shall automatically be substituted for
the Company hereunder and shall take free from any defenses the Pledgor may have
against the Company or any other person whatsoever. This Agreement shall be
binding on the Pledgor and the Pledgor's heirs, executors, administrators,
successors and assigns and shall inure to the benefit of the Company and its
successors and assigns. This Agreement may not be assigned by the Pledgor
without the prior written consent of the Company and may be assigned by the
Company without the consent of the Pledgor.
16. Construction. Captions and headings are for convenience only,
------------
are not a part of, and shall not be used to construe any provision of, this
Agreement.
* * * * *
B-5
<PAGE>
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the
date first above written.
CLARK-SCHWEBEL HOLDINGS, INC.
By:
-------------------------------------
Its:
------------------------------------
----------------------------------------
[Pledgor]
B-6
<PAGE>
EXHIBIT C
April 17, 1996
ELECTION TO INCLUDE STOCK IN GROSS
INCOME PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
---------------------
The undersigned purchased shares of Common Stock, par value $.01 per
share (the "Shares"), of Clark-Schwebel Holdings, Inc., (the "Company") on April
------ -------
17, 1996. Under certain circumstances, the Company has the right to repurchase
the Shares at cost from the undersigned (or from the holder of the Shares, if
different from the undersigned) should the undersigned cease to be employed by
the Company and its subsidiaries. Hence, the Shares are subject to a
substantial risk of forfeiture and are nontransferable. The undersigned desires
to make an election to have the Shares taxed under the provision of Section
83(b) of the Internal Revenue Code of 1986, as amended ("Code Sec.83(b)") at the
-----------
time the undersigned purchased the Shares.
Therefore, pursuant to Code Sec.83(b) and Treasury Regulation
Sec.1.83-2 promulgated thereunder, the undersigned hereby makes an election,
with respect to the Shares (described below), to report as taxable income for
calendar year 1996 the excess (if any) of the Shares' fair market value on April
17, 1996 over the purchase price thereof.
The following information is supplied in accordance with Treasury
Regulation Sec.1.83-2(e):
1. The name, address and social security number of the undersigned:
______________________________
______________________________
______________________________
SSN:__________________________
2. A description of the property with respect to which the election
is being made: _______ shares of Common Stock of the Company, par value $.01 per
share.
3. The date on which the property was transferred: April 17, 1996.
The taxable year for which such election is made: calendar 1996.
4. The restrictions to which the property is subject: If during the
first five years after the purchase of the Shares the undersigned ceases to be
employed by the Company or any of its subsidiaries, the unvested portion of the
Shares may be subject to repurchase by the Company at cost. Twenty percent
(20%) of the Shares shall become vested shares on each of the first five
anniversary dates of the purchase of the Shares.
C-1
<PAGE>
5. The fair market value on April 17, 1996 of the property with
respect to which the election is being made, determined without regard to any
lapse restrictions: $1,000.00 per share of Common Stock.
6. The amount paid for such property: $1,000.00 per share of Common
Stock.
A copy of this election has been furnished to the Secretary of the
Company pursuant to Treasury Regulations Sec.1.83-2(e)(7).
Dated: April 17, 1996
---------------------------------------------
[Name]
C-2
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CLARK-SCHWEBEL HOLDINGS, INC.
(The original certificate of incorporation of Clark-Schwebel Holdings, Inc. was
filed with the Secretary of the State of Delaware on April 2, 1996.)
FIRST: The name of the corporation (hereinafter referred to as the
"Corporation") is Clark-Schwebel Holdings, Inc.
SECOND: The address of its registered office in the State of Delaware is
1209 Orange Street, in the City of Wilmington, County of New Castle. The name of
its registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH:
A. AUTHORIZED SHARES
The total number of shares of capital stock which the Corporation has
authority to issue is 110,000 shares, consisting of:
(1) 10,000 shares of 12.5% Preferred Stock, par value $.01 per share
(the "Preferred Stock"); and
(2) 100,000 shares of Common Stock, par value $.01 per share (the
"Common Stock").
The Preferred Stock and the Common Stock are hereinafter collectively
referred to as "Capital Stock." Certain capitalized terms used in this
Certificate of Incorporation are defined in Section 7 of Part B of this Article
FOURTH.
B. PROVISIONS APPLICABLE TO PREFERRED STOCK
Section 1. Dividends.
1A. General Obligation. When and as declared by the Corporation's
board of directors and to the extent permitted under the General Corporation Law
of Delaware, the Corporation shall pay preferential dividends to the holders of
the Preferred Stock as provided in this Section 1. Except as otherwise provided
herein, dividends on each share of the Preferred Stock (a "Share") shall accrue
on an annual basis at the rate of 12.5% per annum on the sum of (i) the
Liquidation Value thereof plus (ii) all accumulated and unpaid dividends
thereon, from and including the date of issuance of such Share to and including
the date on which the Liquidation Value of such Share (plus all accrued but
unpaid dividends thereon) is paid. Such dividends shall accrue whether or not
they have been declared and whether or not there are profits, surplus or other
<PAGE>
funds of the Corporation legally available for the payment of dividends. The
date on which the Corporation initially issues any Share shall be deemed to be
its "date of issuance" regardless of the number of times transfer of such Share
is made on the stock records maintained by or for the Corporation and regardless
of the number of certificates which may be issued to evidence such Share.
1B. Dividend Reference Dates. To the extent not paid in cash on July
17, October 17, January 17 and April 17 of each year (the "Dividend Reference
Dates"), beginning July 17, 1997, all dividends which have accrued on each Share
outstanding during the three-month period (or other period in the case of the
initial Dividend Reference Date) ending upon each such Dividend Reference Date
shall be accumulated and shall remain accumulated dividends with respect to such
Share until paid. All dividends paid on a Share shall be applied first to and to
the extent of unpaid dividends that have not been accumulated and then to and to
the extent of accumulated dividends, if any.
1C. Distribution of Partial Dividend Payments. Except as otherwise
provided herein, if at any time the Corporation pays in cash less than the total
amount of unpaid dividends accrued on the Preferred Stock then outstanding, such
payment shall be distributed ratably among the holders of Preferred Stock based
on the number of Shares held by each such holder.
1D. Participation in Common Dividends. The holders of Preferred
Stock shall be entitled to participate, on a share for share basis with the
Common Stock, in all dividends declared or paid on the Common Stock.
Section 2. Liquidation. Upon any Liquidation of the Corporation, each
holder of Preferred Stock shall be entitled to be paid, before any distribution
or payment is made upon any Junior Securities, an amount in cash equal to the
aggregate Liquidation Value (plus all accrued but unpaid dividends) of all
Shares held by such holder, and thereafter the holders of Preferred Stock shall
be entitled to participate, on a share for share basis with the Common Stock, in
all amounts available to be distributed to the holders of the Common Stock in
any Liquidation of the Corporation. If upon any such Liquidation of the
Corporation, the assets to be distributed among the holders of the Preferred
Stock are insufficient to permit payment to such holders of the aggregate amount
which they are entitled to be paid in respect of their Preferred Stock, then the
entire assets to be distributed shall be distributed ratably among the holders
of Preferred Stock based on the number of Shares of Preferred Stock held by each
such holder. The Corporation shall mail written notice of such Liquidation, not
less than 60 days prior to the payment date stated therein, to each record
holder of Preferred Stock.
Section 3. Priority of Preferred Stock. So long as any Preferred Stock
remains outstanding, (1) the Corporation shall not authorize or issue any class
or series of capital stock of the Corporation that is senior to the Preferred
Stock in priority with respect to dividends or distributions or upon
Liquidation, and (2) neither the Corporation nor any Subsidiary shall redeem,
purchase or otherwise acquire directly or indirectly, or set apart funds for the
redemption, purchase or acquisition of, any Junior Securities, nor shall the
Corporation directly or indirectly pay or declare any dividend or make any
distribution upon any Junior Securities (other than a dividend payable solely in
Junior Securities); provided, however, that the Corporation may purchase Junior
Securities
-2-
<PAGE>
(a) in accordance with the provisions of the Securityholders
Agreement or the Management Subscription Agreements or (b) as may otherwise be
approved by the Corporation's board of directors from (i) any employee, or
former employee, of the Corporation or its Subsidiaries, (ii) any member of such
employee's Family Group, or (iii) any transferee of any such employee or member
of such employee's Family Group who takes pursuant to the applicable laws of
descent and distribution.
Section 4. Voting Rights. Except as otherwise required by applicable
law or in this Certificate of Incorporation, the Preferred Stock shall vote
together with the Common Stock as one class and each holder of Preferred Stock
shall be entitled to one vote per Share on all matters to be voted on by the
Corporation's stockholders.
Section 5. Redemptions.
5A. General. Subject to and in accordance with this Section 5, the
Corporation may at any time and from time to time redeem all or any portion of
the Preferred Stock then outstanding.
5B. Redemption Payment. For each Share which is to be redeemed, the
Corporation shall be obligated on the Redemption Date (as defined below) to pay
to the holder thereof (upon surrender by such holder at the Corporation's
principal office or such other place of which the Corporation notifies such
holder in writing of the certificate representing such Share) an amount, in
immediately available funds or by certified or cashiers check, at the option of
the Corporation, equal to the Liquidation Value of such Share (plus all accrued
but unpaid dividends thereon), and to issue certificates representing shares of
Common Stock issuable pursuant to paragraph 5D.
5C. Notice of Redemption. The Corporation shall mail written notice of
any redemption of Preferred Stock to each record holder of Preferred Stock not
more than 60 nor less than 10 days prior to the date on which such redemption is
to be made (the "Redemption Date"). Upon mailing any notice of redemption, the
Corporation shall become obligated to redeem the total number of Shares
specified in such notice upon the Redemption Date unless such notice of
redemption is rescinded by the Corporation prior to the Redemption Date. In case
fewer than the total number of Shares represented by any certificate are
redeemed, a new certificate representing the number of unredeemed Shares shall
be issued to the holder thereof without cost to such holder within three
business days after surrender of the certificate representing the redeemed
Shares.
5D. Determination of the Number of Each Holder's Shares to be
Redeemed; Issuance of Common Stock on Redemption. If the Corporation redeems
less than all of the outstanding Preferred Stock, then the funds to be used by
the Corporation to effect any such redemption shall be applied by the
Corporation to redeem Shares ratably among the holders of Preferred Stock based
on the number of Shares of Preferred Stock held by each such holder. In
addition, each holder of Preferred Stock shall be entitled to receive in any
redemption under this Article FOURTH a number of shares of Common Stock equal to
the number of Shares of Preferred Stock to be redeemed from such holder in such
redemption.
-3-
<PAGE>
5E. Dividends After Redemption Date. No Share is entitled to any
dividends accruing after the date on which the Liquidation Value of such Share
(plus all accrued but unpaid dividends thereon) is paid to the holder thereof.
On such date all rights of the holder of such Share with respect to such Share
shall cease, and such Share shall not be deemed to be outstanding.
5F. Redeemed or Otherwise Acquired Shares. Any Shares which are
redeemed or otherwise acquired by the Corporation shall be canceled and shall
not be reissued, sold or transferred.
Section 6. Conversion.
6A. General. Concurrent with or after the occurrence of an Initial
Public Offering, subject to and in accordance with this Section 6, the Vestar
Holders (as defined in the Securityholders Agreement) may at any time and from
time to time cause the conversion of all or any portion of the Preferred Stock
then outstanding.
6B. Conversion. The Corporation shall on the Conversion Date (as
defined below) convert the number of shares of Preferred Stock to be converted
(the "Conversion Shares") into a number of shares of Common Stock computed by
dividing (a) the sum of (1) the product of the number of Conversion Shares and
the applicable Liquidation Value thereof plus (2) all accrued but unpaid
dividends on such Conversion Shares by (b) the Conversion Price. In addition to
the shares of Common Stock issuable pursuant to the foregoing sentence, each
Share of Preferred Stock that constitutes a Conversion Share shall be converted
into one additional share of Common Stock.
6C. Conversion Procedure.
(i) The Corporation shall mail written notice of any conversion of
Preferred Stock to each record holder of Preferred Stock not more than 60 nor
less than 10 days prior to the date on which such conversion is to be made (the
"Conversion Date"). Upon mailing any notice of conversion, the Corporation shall
become obligated to convert the total number of Shares specified in such notice
upon the Conversion Date unless such notice of conversion is rescinded by the
Corporation prior to the Conversion Date. In case fewer than the total number of
Shares represented by any certificate are converted, a new certificate
representing the number of unconverted Shares shall be issued to the holder
thereof without cost to such holder within three business days after surrender
of the certificate representing the Conversion Shares.
(ii) The conversion of Preferred Stock shall be deemed to have
been effected as of the Conversion Date, and the certificate or certificates
representing the Conversion Shares shall be surrendered at the principal office
of the Corporation on such date or as soon as practicable thereafter (or at such
other place of which the Corporation notifies in writing the holders of the
certificate or certificates representing such Conversion Shares). At such time
as such conversion has been effected, the rights of the holder of such
Conversion Shares as such holder shall cease and the Person or Persons in whose
name or names any certificate or certificates for shares of Common Stock are to
be issued upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Common Stock represented thereby.
-4-
<PAGE>
(iii) As soon as possible after a conversion has been effected,
the Corporation shall deliver to the converting holder:
(a) a certificate or certificates representing the number of
shares of Common Stock issuable by reason of such conversion in such name
or names and such denomination or denominations as the converting holder
has specified; and
(b) payment of the amount payable under subparagraph (v) below
with respect to such conversion.
(iv) The issuance of certificates for shares of Common Stock upon
conversion of Preferred Stock shall be made without charge to the holders of
such Preferred Stock for any issuance tax in respect thereof or other cost
incurred by the Corporation in connection with such conversion and the related
issuance of shares of Common Stock.
(v) If any fractional amount of a share of Common Stock would,
except for the provisions of this subparagraph, be deliverable upon any
conversion of a holder's Preferred Stock, the Corporation, in lieu of delivering
the fractional share therefor, shall pay an amount to the holder thereof equal
to the product of the Conversion Price and such fractional amount.
6D. Conversion Price. The price per share at which each Share of
Preferred Stock shall be subject to conversion pursuant to paragraph 6B (the
"Conversion Price") shall be (i) in the event the conversion of any shares of
Preferred Stock is concurrent with an Initial Public Offering, the price per
share received by the Corporation (net of underwriting discounts and
commissions) in respect of a share of Common Stock in the Initial Public
Offering or (ii) at any time after an Initial Public Offering, the Fair Market
Value of a share of Common Stock.
Section 7. Definitions. As used in this Certificate of
Incorporation, the following terms shall have the following meanings:
"Fair Market Value" means, as of any date of determination, the
average of the closing prices of the sales of the Corporation's Common Stock on
all securities exchanges on which the Common Stock may at the time be listed,
or, if there have been no sales on any such exchange on any day, the average of
the highest bid and lowest asked prices on all such exchanges at the end of such
day, or, if on any day the Common Stock is not so listed, the average of the
representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M.,
New York time, or, if on any day the Common Stock is not quoted in the NASDAQ
System, the average of the highest bid and lowest asked prices on such day in
the domestic over-the-counter market as reported by the National Quotation
Bureau Incorporated, or any similar successor organization, in each such case
averaged over a period of 21 days consisting of the day as of which the Fair
Market Value is being determined and the 20 consecutive business days prior to
such day.
"Family Group" means, with respect to any individual, such
individual's spouse and descendants (whether natural or adopted) and any trust
established and maintained for the benefit of such individual, such individual's
spouse or such individual's descendants.
-5-
<PAGE>
"Initial Public Offering" means the Corporation's first Public
Offering.
"Junior Securities" means (a) any class or series of capital stock of
the Corporation, whether now existing or hereafter authorized, that is junior to
the Preferred Stock in priority with respect to dividends or distributions or
upon Liquidation and (b) any rights, warrants, options, convertible or
exchangeable securities, exercisable for or convertible or exchangeable into,
directly or indirectly, any class or series of capital stock described in clause
(a) above, whether at the time of issuance or upon the passage of time or the
occurrence of some future event.
"Liquidation," with respect to the Corporation, means the liquidation,
dissolution or winding up of the Corporation. Neither the consolidation or
merger of the Corporation into or with any other Person or Persons, nor the sale
by the Corporation of all or any part of its assets, nor the reduction of the
capital stock of the Corporation shall constitute a Liquidation.
"Liquidation Value" means $35,000.00 per Share of the Preferred Stock,
subject to adjustment as provided in Section 4 of Part C of this Article FOURTH.
"Management Subscription Agreements" has the meaning set forth in the
Securityholders Agreement.
"Person" means an individual, a partnership, a joint venture, a
corporation, an association, a joint stock company, a limited liability company,
a trust, an unincorporated association and any other entity or organization.
"Public Offering" means a sale by the Corporation of Common Stock of
the Corporation to the public in an offering pursuant to an effective
registration statement filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as then in effect; provided that a
Public Offering shall not include an offering made in connection with a
business acquisition or combination or an employee benefit plan.
"Securityholders Agreement" means the Securityholders Agreement to be
entered into on or about April 17, 1996 among the Corporation and the other
parties thereto, as the same may be amended or modified from time to time.
"Subsidiary" means any corporation with respect to which another
specified corporation has the power to vote or direct the voting of sufficient
securities to elect directors having a majority of the voting power of
the board of directors of such corporation.
C. PROVISIONS APPLICABLE TO COMMON STOCK
Section 1. Voting Rights. Except as otherwise required by
applicable law and the provisions of this Certificate of Incorporation, the
holders of Common Stock shall be entitled to one vote per share on all matters
to be voted on by the Corporation's stockholders.
-6-
<PAGE>
Section 2. Dividends. As and when dividends are declared or paid on
the Common Stock, whether in cash, property or securities of the Corporation,
subject to paragraph 1D of Part B of this Article FOURTH, the holders of Common
Stock shall be entitled to participate in such dividends ratably on a per share
basis. The rights of the holders of Common Stock to receive dividends are
subject to the provisions of the Preferred Stock.
Section 3. Liquidation. Subject to the provisions of the Preferred
Stock, the holders of the Common Stock shall be entitled to participate ratably
on a per share basis in all amounts available to be distributed to the holders
of the Common Stock in any Liquidation of the Corporation.
Section 4. Subdivision or Combination of Common Stock. If the
Corporation at any time (i) subdivides (by any stock split, stock dividend,
recapitalization or otherwise) shares of Common Stock into a greater number of
shares or (ii) combines (by reverse stock split or otherwise) shares of Common
Stock into a smaller number of shares, then the Shares of Preferred Stock shall
be subdivided or combined, as the case may be, in the same manner and the
Liquidation Value (and all accrued but unpaid dividends thereon) shall be
proportionately adjusted.
D. PROVISIONS APPLICABLE TO CAPITAL STOCK
Section 1. Registration of Transfer. The Corporation shall keep at its
principal office a register for the registration of Capital Stock. Upon the
surrender of any certificate representing Capital Stock at such place, the
Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
shares represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such number of shares as is
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and dividends
shall accrue on the Capital Stock represented by such new certificate from the
date to which dividends have been fully paid on such Capital Stock represented
by the surrendered certificate. The issuance of new certificates shall be made
without charge to the holders of the surrendered certificates for any issuance
tax in respect thereof or other cost incurred by the Corporation in connection
with such issuance.
Section 2. Replacement. Upon receipt of evidence reasonably
satisfactory to the Corporation (an affidavit of the registered holder shall be
satisfactory) of the ownership and the loss, theft, destruction or mutilation of
any certificate evidencing shares of any series of Capital Stock, and in the
case of any such loss, theft or destruction, upon receipt of indemnity
reasonably satisfactory to the Corporation (provided that if the holder is a
financial institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
shares of such series represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate, and dividends shall accrue on the Capital Stock
-7-
<PAGE>
represented by such new certificate from the date to which dividends have been
fully paid on such lost, stolen, destroyed or mutilated certificate.
Section 3. Amendment and Waiver. No amendment, modification or waiver
shall be binding or effective with respect to any provision of (i) Part B of
this Article FOURTH (or any definitions used therein) without the prior approval
of the holders of a majority of the Preferred Stock outstanding at the time such
action is taken and (ii) Part C of this Article FOURTH (or any definitions used
therein) without the prior approval of the holders of a majority of the Common
Stock and the Preferred Stock, in each case outstanding at the time such action
is taken, voting together as one class. Any approval required by this Section 3
may be obtained by vote at an annual or special meeting of the Corporation's
stockholders or without a meeting by written consent.
Section 4. Notices. Except as otherwise expressly provided hereunder,
all notices referred to herein shall be in writing and shall be delivered by
registered or certified mail, return receipt requested and postage prepaid, or
by reputable overnight courier service, charges prepaid, and shall be deemed to
have been given when so mailed or sent (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's address as it
appears in the stock records of the Corporation (unless otherwise indicated by
any such holder).
FIFTH: The Corporation is to have perpetual existence.
SIXTH: In furtherance and not in limitation of the powers conferred by
statute, the Corporation's board of directors is hereby authorized to adopt,
amend or repeal the bylaws of the Corporation.
SEVENTH: Meetings of stockholders may be held within or without the State
of Delaware, as the bylaws may provide. The books of the Corporation may be kept
outside the State of Delaware at such place or places as may be designated from
time to time by the Corporation's board of directors or in the bylaws of the
Corporation. Elections of directors need not be by written ballot unless the
bylaws of the Corporation so provide.
EIGHTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors, and/or the stockholders
or class of stockholders of the Corporation, as the case may be, to be summoned
in such manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be
-8-
<PAGE>
binding on all the creditors or class of creditors, and/or on all the
stockholders, or class of stockholders, of the Corporation, as the case may be,
and also on this Corporation.
NINTH: To the fullest extent permitted by the General Corporation Law of
the State of Delaware (including, without limitation, Section 102(b)(7)), as
amended from time to time, no director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. Any repeal or amendment of this Article NINTH or adoption of
any provision of the Certificate of Incorporation inconsistent with this Article
NINTH shall have prospective effect only and shall not adversely affect the
liability of a director of the Corporation with respect to any act or omission
occurring at or before the time of such repeal, amendment or adoption of an
inconsistent provision.
TENTH: The Corporation shall, to the fullest extent permitted by the
General Corporation Law of the State of Delaware (including, without limitation,
Section 145 thereof), as amended from time to time, indemnify any promoter,
director or officer whom it shall have power to indemnify from and against any
and all of the expenses, liabilities or other losses of any nature. The
indemnification provided in this Article TENTH shall not be deemed exclusive of
any other rights to which those indemnified may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased to
be promoter, director or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ELEVENTH: The Corporation elects out of and shall not be governed by
Section 203 of the General Corporation Law of the State of Delaware.
TWELFTH: The name and mailing address of the incorporator are as follows:
Maureen L. Maher, c/o Kirkland & Ellis, 200 East Randolph Drive, 57th Floor,
Chicago, Illinois 60601.
THIRTEENTH: The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation in the manner now
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
-9-
Exhibit 3.3
CERTIFICATE OF INCORPORATION
OF
CLARK-SCHWEBEL, INC.
FIRST: The name of the corporation (hereinafter referred to as the
"Corporation") is Clark-Schwebel, Inc.
SECOND: The address of its registered office in the State of Delaware is
1209 Orange Street, in the City of Wilmington, County of New Castle. The name of
its registered agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 1,000, all of which shares shall be Common Stock, par
value $.01 per share.
FIFTH: The name and mailing address of the incorporator are as follows:
James A. Grayer c/o Sutherland, Asbill & Brennan, 999 Peachtree Street, N.E.,
Atlanta, GA 30309-3996.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is hereby authorized to adopt, amend or repeal
the bylaws of the Corporation.
EIGHTH: Meetings of stockholders may be held within or without the State of
Delaware, as the bylaws may provide. The books of the Corporation may be kept
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the bylaws of the Corporation.
Elections of directors need not be by written ballot unless the bylaws of the
Corporation so provide.
NINTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors, and/or the stockholders
or class of stockholders of the Corporation, as the case may be, to be summoned
in such manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors,
<PAGE>
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders, or class of
stockholders, of the Corporation, as the case may be, and also on this
Corporation.
TENTH: To the fullest extent permitted by the General Corporation Law of
the State of Delaware (including, without limitation, Section 102(b)(7)), as
amended from time to time, no director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. Any repeal or amendment of this Article TENTH or adoption of
any provision of the Certificate of Incorporation inconsistent with this Article
TENTH shall have prospective effect only and shall not adversely affect the
liability of a director of the Corporation with respect to any act or omission
occurring at or before the time of such repeal, amendment or adoption of an
inconsistent provision.
ELEVENTH: The Corporation shall, to the fullest extent permitted by the
General Corporation Law of the State of Delaware (including, without limitation,
Section 145 thereof), as amended from time to time, indemnify any promoter or
director whom it shall have power to indemnify from and against any and all of
the expenses, liabilities or other losses of any nature. The indemnification
provided in this Article ELEVENTH shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his or her official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be
promoter or director and shall inure to the benefit of the heirs, executors and
administrators of such a person.
TWELFTH: The Corporation elects not to be governed by Section 203 of the
General Corporation Law of the State of Delaware.
THIRTEENTH: The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
Exhibit 4.1
Clark-S Acquisition Corporation
and
CS Finance Corporation of Delaware
as Issuer
and
Clark-Schwebel Holdings, Inc.
and
The Subsidiary Guarantors
Named Herein
$110,000,000
10-1/2% Senior Notes due 2006
---------------
INDENTURE
Dated as of April 17, 1996
---------------
FLEET NATIONAL BANK
Trustee
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act SectionIndenture Section
310(a)(1) ................................................ 7.10
(a)(2) ................................................ 7.10
(a)(3) ................................................ N.A.
(a)(4) ................................................ N.A.
(b) ................................................ 7.8; 7.10; 12.2
(c) ................................................ N.A.
311(a) ................................................ 7.11
(b) ................................................ 7.11
(c) ................................................ N.A.
312(a) .......................................... 2.5
(b) ................................................ 12.3
(c) ................................................ 12.3
313(a) ................................................ 7.6
(b)(1) ................................................ N.A.
(b)(2) ......................................... 7.6
(c) ......................................... 7.6; 12.2
(d) ......................................... 7.6
314(a) .......................................... 4.9; 12.2
(b) ......................................... N.A.
(c)(1) ......................................... 12.4
(c)(2) ......................................... 7.2; 12.4
(c)(3) ......................................... N.A.
(d) ......................................... N.A.
(e) ......................................... 12.5
(f) ......................................... N.A.
315(a) .......................................... 7.1(2)
(b) ......................................... 7.5; 12.2
(c) ......................................... 7.1(1)
(d) ......................................... 7.1(3)
(e) ......................................... 6.11
316(a)(last sentence) ....................................... 2.9
(a)(1)(A) ............................................... 6.5
(a)(1)(B) ............................................... 6.4
(a)(2) ................................................ N.A.
(b) ................................................ 6.7
317(a)(1) ................................................ 6.8
(a)(2) ................................................ 6.9
(b) ................................................ 2.4
318(a) ................................................ 12.1
-----------------------------------
N.A. means not applicable.
* This Cross-Reference is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE.............................. 1
SECTION 1.1 DEFINITIONS............................................. 1
SECTION 1.2 OTHER DEFINITIONS....................................... 16
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST
INDENTURE ACT........................................... 17
SECTION 1.4 RULES OF CONSTRUCTION................................... 17
ARTICLE 2
THE SENIOR NOTES............................ 18
SECTION 2.1 FORM AND DATING......................................... 18
SECTION 2.2 EXECUTION AND AUTHENTICATION............................ 18
SECTION 2.3 REGISTRAR AND PAYING AGENT.............................. 19
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST..................... 19
SECTION 2.5 HOLDER LISTS............................................ 19
SECTION 2.6 TRANSFER AND EXCHANGE................................... 20
SECTION 2.7 REPLACEMENT SENIOR NOTES................................ 20
SECTION 2.8 OUTSTANDING SENIOR NOTES................................ 21
SECTION 2.9 TREASURY SENIOR NOTES................................... 21
SECTION 2.10 TEMPORARY SENIOR NOTES.................................. 21
SECTION 2.11 CANCELLATION............................................ 22
SECTION 2.12 DEFAULTED INTEREST...................................... 22
SECTION 2.13 BOOK-ENTRY PROVISIONS FOR GLOBAL
SENIOR NOTES............................................ 22
SECTION 2.14 SPECIAL TRANSFER PROVISIONS............................ 24
ARTICLE 3
REDEMPTION AND PREPAYMENT....................... 26
SECTION 3.1 NOTICES TO TRUSTEE...................................... 26
SECTION 3.2 SELECTION OF SENIOR NOTES TO BE REDEEMED................ 26
SECTION 3.3 NOTICE OF REDEMPTION.................................... 26
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION.......................... 27
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE............................. 27
SECTION 3.6 SENIOR NOTES REDEEMED IN PART........................... 28
SECTION 3.7 OPTIONAL REDEMPTION..................................... 28
SECTION 3.8 NO MANDATORY REDEMPTION................................. 29
ARTICLE 4
COVENANTS............................... 29
SECTION 4.1 PAYMENT OF SENIOR NOTES................................. 29
SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY......................... 29
SECTION 4.3 REPORTS ............................................... 30
SECTION 4.4 COMPLIANCE CERTIFICATE.................................. 30
SECTION 4.5 TAXES................................................... 31
SECTION 4.6 STAY, EXTENSION AND USURY LAWS.......................... 31
SECTION 4.7 CHANGE OF CONTROL....................................... 31
SECTION 4.8 ASSET SALES............................................. 33
SECTION 4.9 RESTRICTED PAYMENTS..................................... 36
SECTION 4.10 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF
PREFERRED STOCK......................................... 39
SECTION 4.11 SALE AND LEASEBACK TRANSACTIONS......................... 41
SECTION 4.12 LIENS................................................... 41
SECTION 4.13 DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES.................................. 41
SECTION 4.14 TRANSACTIONS WITH AFFILIATES............................ 42
SECTION 4.15 LINE OF BUSINESS........................................ 43
SECTION 4.16 ADDITIONAL SUBSIDIARY GUARANTEES........................ 43
SECTION 4.17 CORPORATE EXISTENCE .................................... 43
ARTICLE 5
SUCCESSORS............................... 44
SECTION 5.1 MERGER, CONSOLIDATION OR SALE OF ASSETS................. 44
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED....................... 44
ARTICLE 6
DEFAULTS AND REMEDIES......................... 45
SECTION 6.1 EVENTS OF DEFAULT....................................... 45
SECTION 6.2 ACCELERATION............................................ 47
SECTION 6.3 OTHER REMEDIES.......................................... 47
SECTION 6.4 WAIVER OF PAST DEFAULTS................................. 48
SECTION 6.5 CONTROL BY MAJORITY..................................... 48
SECTION 6.6 LIMITATION ON SUITS..................................... 48
SECTION 6.7 RIGHTS OF HOLDERS OF SENIOR NOTES TO RECEIVE
PAYMENT................................................. 49
SECTION 6.8 COLLECTION SUIT BY TRUSTEE.............................. 49
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM........................ 49
SECTION 6.10 PRIORITIES............................................. 50
SECTION 6.11 UNDERTAKING FOR COSTS.................................. 50
ARTICLE 7
TRUSTEE................................ 50
<PAGE>
SECTION 7.1 DUTIES OF TRUSTEE....................................... 50
SECTION 7.2 RIGHTS OF TRUSTEE....................................... 51
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE............................ 52
SECTION 7.4 TRUSTEE'S DISCLAIMER.................................... 53
SECTION 7.5 NOTICE OF DEFAULTS...................................... 53
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS OF THE SENIOR
NOTES................................................... 53
SECTION 7.7 COMPENSATION AND INDEMNITY.............................. 53
SECTION 7.8 REPLACEMENT OF TRUSTEE.................................. 54
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC........................ 55
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION........................... 55
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS
AGAINST COMPANY......................................... 56
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE................ 56
SECTION 8.1 OPTION TO EFFECT LEGAL DEFEASANCE
OR COVENANT DEFEASANCE.................................. 56
SECTION 8.2 LEGAL DEFEASANCE AND DISCHARGE.......................... 56
SECTION 8.3 COVENANT DEFEASANCE..................................... 57
SECTION 8.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.............. 57
SECTION 8.5 DEPOSITED MONEY AND GOVERNMENT SECURITIES
TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS..... 58
SECTION 8.6 REPAYMENT TO COMPANY.................................... 59
SECTION 8.7 REINSTATEMENT........................................... 59
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER.................... 60
SECTION 9.1 WITHOUT CONSENT OF HOLDERS OF SENIOR NOTES.............. 60
SECTION 9.2 WITH CONSENT OF HOLDERS OF SENIOR NOTES................. 60
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT..................... 62
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS....................... 62
SECTION 9.5 NOTATION ON OR EXCHANGE OF SENIOR NOTES................. 62
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC......................... 63
ARTICLE 10
HOLDINGS GUARANTEE........................... 63
SECTION 10.1 HOLDINGS GUARANTEE..................................... 63
SECTION 10.2 EXECUTION AND DELIVERY OF HOLDINGS
GUARANTEE.............................................. 64
SECTION 10.3 LIMITATION ON GUARANTOR'S ACTIVITY..................... 65
ARTICLE 11
SUBSIDIARY GUARANTEES......................... 65
SECTION 11.1 SUBSIDIARY GUARANTEE................................... 65
SECTION 11.2 EXECUTION AND DELIVERY OF SUBSIDIARY
GUARANTEES............................................. 67
SECTION 11.3 SUBSIDIARY GUARANTORS MAY CONSOLIDATE,
ETC., ON CERTAIN TERMS................................. 67
SECTION 11.4 RELEASES FOLLOWING SALE OF ASSETS...................... 68
SECTION 11.5 LIMITATION OF SUBSIDIARY GUARANTOR'S
LIABILITY.............................................. 69
SECTION 11.6 APPLICATION OF CERTAIN TERMS AND PROVISIONS
TO THE SUBSIDIARY GUARANTORS............................... 69
ARTICLE 12
MISCELLANEOUS............................. 70
SECTION 12.1 TRUST INDENTURE ACT CONTROLS........................... 70
SECTION 12.2 NOTICES................................................ 70
SECTION 12.3 COMMUNICATION BY HOLDERS OF SENIOR NOTES
WITH OTHER HOLDERS OF.................................. 71
SECTION 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT.............................................. 71
SECTION 12.5 STATEMENTS REQUIRED IN CERTIFICATE OR
OPINION................................................ 72
SECTION 12.6 RULES BY TRUSTEE AND AGENTS............................ 72
SECTION 12.7 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
EMPLOYEES AND STOCKHOLDERS............................. 72
SECTION 12.8 GOVERNING LAW.......................................... 72
SECTION 12.9 NO ADVERSE INTERPRETATION OF OTHER
AGREEMENTS............................................. 73
SECTION 12.10 SUCCESSORS............................................ 73
SECTION 12.11 SEVERABILITY.......................................... 73
SECTION 12.12 COUNTERPART ORIGINALS................................. 73
SECTION 12.13 TABLE OF CONTENTS, HEADINGS, ETC...................... 73
SECTION 12.14 JOINT AND SEVERAL LIABILITY........................... 73
- i -
<PAGE>
INDENTURE, dated as of April 17, 1996, among Clark-S Acquisition
Corporation, a Delaware corporation and CS Finance Corporation of Delaware, a
Delaware corporation (together, the "Company"), Clark-Schwebel Holdings, Inc.
("Holdings"), the Subsidiary Guarantors (as defined herein) and Fleet National
Bank, as trustee (the "Trustee").
Each party agrees as follows for the benefit of each other and for
the equal and ratable benefit of the Holders of the 10-1/2 % Series A Senior
Notes due 2006 (the "Series A Senior Notes") and the 10-1/2% Series B Senior
Notes due 2006 (the "Series B Senior Notes" and, together with the Series A
Senior Notes, the "Senior Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.1 DEFINITIONS
"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 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
<PAGE>
2
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 Section 5.1, (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 Section 4.9.
"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.
"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,
<PAGE>
3
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
<PAGE>
4
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 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 described in Section 4.18 shall not be deemed to
constitute a "Change of Control."
"Company Order" means a written order or request signed in the name
of an Officer and delivered to the Trustee.
"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
<PAGE>
5
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 this 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
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.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 12.2 hereof or such other address as to which
the Trustee may give notice to the Company.
"Credit Agreement" means, collectively, (i) that certain Credit
Agreement, as in effect on the date of this 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.
<PAGE>
6
"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.
"Definitive Senior Notes" means Senior Notes that are in the form of
the Senior Note attached hereto as Exhibit A, that do not include the
information called for by footnote 1 thereof.
"Depositary" means, with respect to the Senior Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.3
hereof as the Depositary with respect to the Senior Notes, until a successor
shall have been appointed and become such Depositary pursuant to the applicable
provision of this 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 Section 6.1; (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 Series B Senior Notes
for Series A Senior Notes.
<PAGE>
7
"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 this Indenture, until such amounts are repaid.
"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
<PAGE>
8
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 this Indenture.
"Global Senior Note" means a Senior Note that contains the paragraph
referred to in footnote 1 to the form of the Senior Note attached hereto as
Exhibit A.
"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.
"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 Senior Note is registered on
the Registrar's books.
"Holdings Guarantee" means the guarantee provided for in Section
10.1.
"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
<PAGE>
9
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.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"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
<PAGE>
10
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"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 this 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 Senior Notes.
"Maturity Date" means April 15, 2006.
"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
<PAGE>
11
writing that they shall not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"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 Senior 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.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 12.5 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
12.5 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"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 this Indenture and
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 this 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 this
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 Section 4.8; (e) Investments by the
Company or any Restricted Subsidiary in cash in an amount not to exceed $5.0
million in the aggregate; (f) Investments by the Company or any Restricted
Subsidiary in cash in an amount not to exceed $15.0 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
<PAGE>
12
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 Section 4.10 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 this 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 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
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13
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, 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).
"Private Placement Legend" means the legend initially set forth on
the Senior Notes in the form set forth on Exhibit A.
"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.
<PAGE>
14
"Purchase Money Lien" means a Lien granted on an asset or property
to secure a Purchase Money Obligation permitted to be incurred under this
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).
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this 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.
"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.
"Rule 144A" means Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
<PAGE>
15
"Senior Note Custodian" means the Trustee, as custodian with respect
to the Global Senior Notes, or any successor entity thereto.
"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 this
Indenture, and their respective successors and assigns.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Transfer Restricted Senior Notes" means securities that bear or are
required to bear the Private Placement Legend.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"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
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16
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 Section 4.9. 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 this Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under Section 4.10, 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 Section 4.10 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 shall 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 this
Indenture.
SECTION 1.2 OTHER DEFINITIONS
Defined
Term in Section
"Affiliate Transaction" 4.14
"Agent" 2.14
"Asset Sale Offer" 4.8
"Asset Sale Offer Period" 4.8
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17
"Asset Sale Offer Amount" 4.8
"Asset Sale Purchase Date" 4.8
"Bankruptcy Law" 6.1
"Benefitted Party" 11.1
"Change of Control Offer" 4.7
"Change of Control Offer Period" 4.7
"Change of Control Payment" 4.7
"Change of Control Purchase Date" 4.7
"Covenant Defeasance" 8.3
"Custodian" 6.1
"DTC" 2.13
"Event of Default" 6.1
"Excess Proceeds" 4.8
"Holdings" 10.1
"Interest" 2.13
"Legal Defeasance" 8.2
"Notice of Default" 6.1
"Paying Agent" 2.3
"Payment Blockage Notice" 10.3
"Payment Default" 6.1
"Registrar" 2.3
"Restricted Payments" 4.9
"Securities Act" 2.6
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Senior Notes;
"indenture security Holder" means a Holder of a Senior Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Senior Notes means the Company, Holdings, any
Subsidiary Guarantor and any successor thereto.
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All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.4 RULES OF CONSTRUCTION
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections
or rules adopted by the SEC from time to time.
ARTICLE 2
THE SENIOR NOTES
SECTION 2.1 FORM AND DATING
The Senior Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Senior Notes may
have notations, legends or endorsements required by law, stock exchange rule or
usage. Each Senior Note shall be dated the date of its authentication. The
Senior Notes shall be in denominations of $1,000 and integral multiples thereof.
The Series A Senior Notes and the Series B Senior Notes will be the same except
that the Private Placement Legend will be omitted from the Series B Senior
Notes.
The terms and provisions contained in the Senior Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
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Senior Notes offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent Global Senior Notes in
registered form, substantially in the form set forth in Exhibit A (including the
text referred to in footnote 1 thereto), deposited with, or on behalf of, The
Depositary Trust Company (the "Depositary") and registered in the name of Cede &
Co. or such other nominee, as nominee of the Depositary. The aggregate principal
amount of any Global Senior Note may from time to time be increased or decreased
by adjustments made on the records of the Registrar and the Depositary.
Senior Notes offered and sold in reliance on any exemption from
registration under the Securities Act other than Rule 144A shall be issued, and
Senior Notes offered and sold in reliance on Rule 144A may be issued, in certain
circumstances provided for in this Indenture, in the form of Definitive Senior
Notes in registered form in substantially the form set forth in Exhibit A (but
without including the text referred to in footnote 1 thereto).
SECTION 2.2 EXECUTION AND AUTHENTICATION
Two Officers shall sign the Senior Notes for the Company by manual
or facsimile signature. The Company's seal shall be reproduced on the Senior
Notes and may be in facsimile form.
If an Officer whose signature is on a Senior Note no longer holds
that office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Senior Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Senior Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers, authenticate Senior Notes for original issue up to the aggregate
principal amount stated in paragraph 4 of the Senior Notes. The aggregate
principal amount of Senior Notes outstanding at any time may not exceed such
amount except as provided in Section 2.7 hereof. The authentication order shall
specify which series of Senior Notes shall be authenticated and issued.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Senior Notes. An authenticating agent may authenticate
Senior Notes whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
SECTION 2.3 REGISTRAR AND PAYING AGENT
The Company shall maintain an office or agency where Senior Notes
may be presented for registration of transfer or for exchange ("Registrar") and
an office or agency where Senior Notes may be presented for payment ("Paying
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20
Agent"). The Registrar shall keep a register of the Senior Notes and of their
transfer and exchange. The Company may appoint one or more co-registrars and one
or more additional paying agents. The term "Registrar" includes any co-registrar
and the term "Paying Agent" includes any additional paying agent. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company shall notify the Trustee in writing of the name and address of any Agent
not a party to this Indenture. If the Company fails to appoint or maintain
another entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints the Trustee to act as the Registrar
and Paying Agent and to act as Senior Note Custodian with respect to the Global
Senior Notes.
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST
The Company shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Senior
Notes, and shall notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Senior Notes.
SECTION 2.5 HOLDER LISTS
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Senior Notes, and the Company shall otherwise comply with TIA ss. 312(a).
SECTION 2.6 TRANSFER AND EXCHANGE
(a) Subject to the provisions of Sections 2.13 and 2.14, when Senior
Notes are presented to the Registrar with a request to register the transfer of
such Senior Notes or to exchange such Senior Notes for an equal principal amount
of Senior Notes of other authorized denominations, the Registrar shall register
the transfer or make the exchange as requested if the requirements for such
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21
transaction are met; provided, however, that the Senior Notes surrendered for
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Registrar,
duly executed by the Holder thereof or his attorney duly authorized in writing.
To permit registrations of transfers and exchanges, the Company shall execute
and the Trustee shall authenticate Senior Notes at the Registrar's written
request. No service charge shall be made for any registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith
(other than any such transfer taxes or other governmental charge payable upon
exchanges or transfers pursuant to Section 2.10 or 9.5).
Any Holder of the Global Senior Note shall, by acceptance of such
Global Senior Note, agree that transfers of beneficial interests in such Global
Senior Note may be effected only through a book-entry system maintained by the
Holder of such Global Senior Note (or its agent), and that ownership of a
beneficial interest in the Global Senior Note shall be required to be reflected
in a book-entry system.
SECTION 2.7 REPLACEMENT SENIOR NOTES
If any mutilated Senior Note is surrendered to the Trustee, or
the Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Senior Note, the Company shall issue and the
Trustee, upon the written order of the Company signed by two Officers of the
Company, shall authenticate a replacement Senior Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Senior Note
is replaced. The Company may charge for its expenses in replacing a Senior Note.
Every replacement Senior Note is an additional obligation of the
Company and shall be entitled to all of the benefits of this Indenture equally
and proportionately with all other Senior Notes duly issued hereunder.
SECTION 2.8 OUTSTANDING SENIOR NOTES
The Senior Notes outstanding at any time are all the Senior Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Senior Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section as not outstanding. Except as set forth in Section 2.9
hereof, a Senior Note does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Senior Note.
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If a Senior Note is replaced pursuant to Section 2.7 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Senior Note is held by a bona fide purchaser.
If the principal amount of any Senior Note is considered paid under
Section 4.1 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Senior Notes payable on that date, then on and after that date
such Senior Notes shall be deemed to be no longer outstanding and shall cease to
accrue interest.
SECTION 2.9 TREASURY SENIOR NOTES
In determining whether the Holders of the required principal amount
of Senior Notes have concurred in any direction, waiver or consent, Senior Notes
owned by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Senior Notes that a Trustee knows are so
owned shall be so disregarded.
SECTION 2.10 TEMPORARY SENIOR NOTES
Until definitive Senior Notes are ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary Senior Notes upon a
written order of the Company signed by two Officers of the Company. Temporary
Senior Notes shall be substantially in the form of definitive Senior Notes but
may have variations that the Company considers appropriate for temporary Senior
Notes and as shall be reasonably acceptable to the Trustee. Without unreasonable
delay, the Company shall prepare and the Trustee shall authenticate definitive
Senior Notes in exchange for temporary Senior Notes.
Holders of temporary Senior Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11 CANCELLATION
The Company at any time may deliver Senior Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Senior Notes surrendered to them for registration of transfer, exchange or
payment. The Trustee and no one else shall cancel all Senior Notes surrendered
for registration of transfer, exchange, payment, replacement or cancellation and
shall destroy cancelled Senior Notes (subject to the record retention
requirement of the Exchange Act). Certification of the destruction of all
cancelled Senior Notes shall be delivered to the Company. The Company may not
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23
issue new Senior Notes to replace Senior Notes that it has paid or that have
been delivered to the Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST
If the Company defaults in a payment of interest on the Senior
Notes, it shall pay the defaulted interest in any lawful manner plus, to the
extent lawful, interest payable on the defaulted interest, to the Persons who
are Holders on a subsequent special record date, in each case at the rate
provided in the Senior Notes and in Section 4.1 hereof. The Company shall notify
the Trustee in writing of the amount of defaulted interest proposed to be paid
on each Senior Note and the date of the proposed payment. The Company shall fix
or cause to be fixed each such special record date and payment date, provided
that no such special record date shall be less than 10 days prior to the related
payment date for such defaulted interest. At least 15 days before the special
record date, the Company (or, upon the written request of the Company, the
Trustee in the name and at the expense of the Company) shall mail or cause to be
mailed to Holders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
SECTION 2.13 BOOK-ENTRY PROVISIONS FOR GLOBAL SENIOR NOTES
(a) The Global Senior Notes initially shall (i) be registered in the
name of Cede & Co., as the nominee of the Depositary.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Senior Note
held on their behalf by the Depositary, or the Trustee as the Senior Note
Custodian, or under the Global Senior Note, and the Depositary may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of the Global Senior Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Senior Note.
(b) Transfers of Global Senior Notes shall be limited to transfers
in whole, but not in part, to the Depositary, its successors or their respective
nominees. Interests of beneficial owners in the Global Senior Notes (each an
"Interest") may be transferred to one beneficial owner to another Agent Member
or exchanged for Definitive Senior Notes in accordance with the rules and
procedures of the Depositary and the provisions of this Indenture (including the
restrictions on transfer contained in Section 2.14 which shall fully apply in
all respects to transfer of such Interests as if such Interests are evidenced by
a Definitive Senior Note ). In addition, Definitive Senior Notes shall be
transferred to all beneficial owners in exchange for their beneficial interests
in Global Senior Notes if (i) the Depositary for the Senior Notes notifies the
Company that the Depositary is unwilling or unable to continue as Depositary for
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24
the Global Senior Notes and a successor Depositary for the Global Senior Notes
is not appointed by the Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Trustee in writing that
it elects to cause the issuance of Definitive Senior Notes under this Indenture,
then the Company shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.2 hereof, authenticate and
deliver, Definitive Senior Notes in an aggregate principal amount equal to the
principal amount of the Global Senior Notes in exchange for such Global Senior
Notes.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Senior Note to beneficial owners taking a
Definitive Senior Note pursuant to paragraph (b), the Registrar shall reflect on
its books and records the date and a decrease in the principal amount of the
Global Senior Note in an amount equal to the principal amount of the beneficial
interest in the Global Senior Note to be transferred, and the Company shall
execute, and the Trustee shall authenticate and deliver, one or more Definitive
Senior Notes of like tenor and amount.
(d) In connection with the transfer of any Interest from one
beneficial owner to another Agent Member not taking a Definitive Senior Note,
but an Interest, pursuant to paragraph (b), the Depositary shall reflect on its
books and records the date, the name of the transferor and transferee, and the
amount of the Interest transferred.
(e) In connection with the transfer of Global Senior Notes as an
entirety to beneficial owners pursuant to the second sentence of paragraph (b),
the Global Senior Notes shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depositary in exchange
for its beneficial interest in the Global Senior Notes, an equal aggregate
principal amount of Definitive Senior Notes of authorized denominations.
(f) Any Definitive Senior Note constituting a Transfer Restricted
Senior Note delivered in exchange for an interest in a Global Senior Note
pursuant to paragraph (b) shall, except as otherwise provided by paragraphs
(a)(i)(x) and (y) of Section 2.14, bear the Private Placement Legend.
(g) The Holder of any Global Senior Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Senior Notes.
SECTION 2.14 SPECIAL TRANSFER PROVISIONS
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of a Senior Note constituting a Transfer Restricted Senior
Note, or an Interest in a Global Senior Note constituting a Transfer Restricted
Senior Note to any Institutional Accredited Investor which is not a QIB:
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(i) The Registrar shall register the transfer of any Definitive
Senior Note constituting a Transfer Restricted Senior Note, whether or not
such Senior Note bears the Private Placement Legend, if (x) the requested
transfer is after April 24, 1999, or (y) in the case of a transfer to an
Institutional Accredited Investor which is not a QIB, the proposed
transferee has delivered to the Registrar a certificate substantially in
the form of Exhibit B hereto and the Trustee and Registrar have received
both an Opinion of Counsel and an Officers' Certificate directing
transfer; and
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in a Global Senior Note, upon receipt by the Registrar
of (x) the certificate and opinions, if any, required by paragraph (i)
above and (y) instructions given in accordance with the Depositary's and
the Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Definitive Senior
Notes) a decrease in the principal amount of a Global Senior Note in an amount
equal to the principal amount of the beneficial interest in a Global Senior Note
to be transferred, and (b) the Company shall execute and the Trustee shall
authenticate upon receipt of a Company Order, and deliver one or more Definitive
Senior Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Senior Note
constituting a Transfer Restricted Senior Note, or an Interest in a Global
Senior Note constituting a Transfer Restricted Senior Note to a QIB:
(i) The Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for
on the form of Senior Note (or a similar certificate) stating, or has
otherwise advised the Company and the Registrar in writing, that the sale
has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form of
Senior Note (or a similar certificate) stating, or has otherwise advised
the Company and the Registrar in writing, that it is purchasing the Senior
Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a QIB
within the meaning of Rule 144A, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule
144A or has determined not to request such information and that it is
aware that the transferor is relying upon its foregoing representations in
order to claim the exemption from registration provided by Rule 144A and
covering the other matters covered in the form of Senior Note; and
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26
(ii) If the proposed transferee is an Agent Member, and the Senior
Notes to be transferred consist of Definitive Senior Notes which after
transfer are to be evidenced by an interest in the Global Senior Note,
upon receipt by the Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures and the proposed transferee
has advised the Company and the Registrar in writing that the transferee
is a QIB and that the sale has been made in compliance with the provisions
of Rule 144A, the Registrar and the Depositary shall reflect on its books
and records the date and an increase in the principal amount of the Global
Senior Note in an amount equal to the principal amount of the Definitive
Senior Notes to be transferred, and the Trustee shall cancel the
Definitive Senior Notes so transferred.
(c) Private Placement Legend. All Senior Notes originally issued
shall bear the Private Placement Legend. Upon the transfer, exchange or
replacement of Senior Notes (or Interest in a Global Senior Note) not bearing,
and not required to bear, the Private Placement Legend, the Registrar shall
deliver Senior Notes that do not bear the Private Placement Legend and, in the
case of an Interest, remove any corresponding indication on its books and
records. Upon the transfer, exchange or replacement of Senior Notes bearing the
Private Placement Legend, the Registrar shall deliver only Senior Notes that
bear the Private Placement Legend (and in the case of an Interest, continue to
denote corresponding indications on its books and records) unless (i) the
circumstances contemplated by paragraph (a)(i)(x) of this Section 2.14 exist,
(ii) there is delivered to the Registrar and the Trustee an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act or (iii)
such Senior Note has been sold pursuant to an effective registration statement
under the Securities Act.
(d) General. By its acceptance of any Senior Note, each Holder of
such a Senior Note acknowledges the restrictions on transfer of such Senior Note
set forth in this Indenture and in the Private Placement Legend and agrees that
it will transfer such Senior Note only as provided in this Indenture.
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.13 or this Section 2.14
until at least 6 years after the Maturity Date. The Company shall have the right
to inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable written
notice to the Registrar.
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27
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.1 NOTICES TO TRUSTEE
If the Company elects to redeem Senior Notes pursuant to the
optional redemption provisions of Section 3.7 hereof, it shall furnish to the
Trustee, at least 45 days (unless a shorter period is acceptable to the Trustee)
but not more than 60 days before a redemption date, an Officers' Certificate
setting forth (i) the clause of this Indenture pursuant to which the redemption
shall occur, (ii) the redemption date, (iii) the principal amount of Senior
Notes to be redeemed and (iv) the redemption price.
SECTION 3.2 SELECTION OF SENIOR NOTES TO BE REDEEMED
If less than all of the Senior Notes are to be redeemed at any time,
the Trustee shall select the Senior Notes to be redeemed among the Holders of
the Senior Notes in compliance with the requirements of the principal national
securities exchange, if any, on which the Senior Notes are listed or, if the
Senior Notes are not so listed, on a pro rata basis, by lot or in accordance
with any other method the Trustee considers fair and appropriate. In the event
of partial redemption by lot, the particular Senior Notes to be redeemed shall
be selected, unless otherwise provided herein, not less than 30 nor more than 60
days prior to the redemption date by the Trustee from the outstanding Senior
Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the
Senior Notes selected for redemption and, in the case of any Senior Note
selected for partial redemption, the principal amount thereof to be redeemed.
Senior Notes and portions of Senior Notes selected shall be in amounts of $1,000
or integral multiples of $1,000; except that if all of the Senior Notes of a
Holder are to be redeemed, the entire outstanding amount of Senior Notes held by
such Holder, even if not an integral multiple of $1,000, shall be redeemed.
Except as provided in the preceding sentence, provisions of this Indenture that
apply to Senior Notes called for redemption also apply to portions of Senior
Notes called for redemption.
SECTION 3.3 NOTICE OF REDEMPTION
At least 30 days but not more than 60 days before a redemption date,
the Company shall mail or cause to be mailed, by first class mail, a notice of
redemption to each Holder whose Senior Notes are to be redeemed at its
registered address.
The notice shall identify the Senior Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
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28
(c) if any Senior Note is being redeemed in part, the portion of the
principal amount of such Senior Note to be redeemed and that, after the
redemption date upon surrender of such Senior Note, a new Senior Note or Senior
Notes in principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Senior Note;
(d) the name and address of the Paying Agent;
(e) that Senior Notes called for redemption (other than a Global
Senior Note) must be surrendered to the Paying Agent to collect the redemption
price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Senior Notes called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Senior Notes and/or Section of this
Indenture pursuant to which the Senior Notes called for redemption are being
redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Senior
Notes.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date (unless a shorter time is acceptable to the Trustee), an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with Section 3.3
hereof, Senior Notes called for redemption become irrevocably due and payable on
the redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.5 DEPOSIT OF REDEMPTION PRICE
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent immediately available funds
sufficient to pay the redemption price of and accrued interest on and Liquidated
Damages on all Senior Notes to be redeemed on that date. The Trustee or the
Paying Agent shall promptly return to the Company any money deposited with the
Trustee or the Paying Agent by the Company in excess of the amounts necessary to
pay the redemption price of, and accrued interest on, all Senior Notes to be
redeemed.
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If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Senior Notes or the portions of Senior Notes called for redemption. If a
Senior Note is redeemed on or after an interest record date but on or prior to
the related interest payment date, then any accrued and unpaid interest shall be
paid to the Person in whose name such Senior Note was registered at the close of
business on such record date. If any Senior Note called for redemption shall not
be so paid upon surrender for redemption because of the failure of the Company
to comply with the preceding paragraph, interest shall be paid on the unpaid
principal, from the redemption date until such principal is paid, and to the
extent lawful on any interest not paid on such unpaid principal, in each case at
the rate provided in the Senior Notes and in Section 4.1 hereof.
SECTION 3.6 SENIOR NOTES REDEEMED IN PART
Upon surrender of a Senior Note that is redeemed in part, the
Company shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Senior Note
equal in principal amount to the unredeemed portion of the Senior Note
surrendered. The records of the Registrar and the Depositary shall reflect any
partial redemption of any Global Senior Note.
SECTION 3.7 OPTIONAL REDEMPTION
(a) Except as set forth in clause (b) of this Section 3.7, the
Senior Notes shall not be redeemable at the Company's option prior to April 15,
2001. Thereafter, the Senior Notes shall be 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%
(b) Notwithstanding the provisions of clause (a) of this Section
3.7, during the first 36 months after April 15, 1996, the Company may (but shall
not have the obligation to) redeem up to 35% of the original aggregate principal
amount of the Senior 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 Senior Notes remains outstanding immediately after the occurrence of such
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30
redemption; and provided, further, that such redemption shall occur within 60
days of the date of the closing of such Public Equity Offering.
(c) Any redemption pursuant to this Section 3.7 shall be made
pursuant to the provisions of Section 3.1 through 3.6 hereof.
SECTION 3.8 NO MANDATORY REDEMPTION
The Company shall not be required to make mandatory redemption
payments with respect to the Senior Notes.
ARTICLE 4
COVENANTS
SECTION 4.1 PAYMENT OF SENIOR NOTES
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Senior Notes on the dates and in the manner provided
in the Senior Notes. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date
money deposited by the Company in immediately available funds and designated for
and sufficient to pay all principal, premium, if any, and interest then due. The
Company shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Registration Rights Agreement. The
Company will promptly notify the Trustee of a Registration Default under the
Registration Rights Agreement and any cure thereof.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Senior
Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace period)
at the same rate to the extent lawful.
SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Senior Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Senior Notes and this Indenture
may be served. The Company shall give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
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31
presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Senior Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.3 hereof.
SECTION 4.3 REPORTS
(a) Whether or not required by the rules and regulations of the SEC,
so long as any Senior Notes are outstanding, Holdings or the Company shall
furnish to all Holders of Senior Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the SEC on
Forms 10-Q and 10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report thereon
by the Company's certified independent accountants and (ii) all current reports
that would be required to be filed with the SEC on Form 8-K if the Company were
required to file such reports. In addition, whether or not required by the rules
and regulations of the SEC, at any time after the Company files a registration
statement with respect to the Exchange Offer, the Company shall file a copy of
all such information and reports with the SEC for public availability (unless
the SEC will not accept such a filing) and shall promptly make such information
available to securities analysts and prospective investors upon request.
(b) For so long as any Senior Notes remain outstanding, the Company
and the Subsidiary Guarantors shall furnish to all 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.
SECTION 4.4 COMPLIANCE CERTIFICATE
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
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32
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Senior Notes
is prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.3(a) hereof shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article Four or Article Five hereof or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Senior Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SECTION 4.5 TAXES
The Company shall pay, and shall cause each of its Restricted
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Senior Notes.
SECTION 4.6 STAY, EXTENSION AND USURY LAWS
The Company covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, that may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law, and covenants that it shall not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as though
no such law has been enacted.
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33
SECTION 4.7 CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Senior
Notes shall 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 Senior 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 shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase Senior Notes pursuant to the procedures required by this Indenture
and described in such notice. The Company shall comply with the requirements of
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Senior Notes as a result of a Change of Control.
The Change of Control Offer shall 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 shall purchase all
Senior Notes tendered in response to the Change of Control Offer. Payment for
any Senior Notes so purchased shall 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 shall be paid to the Person in whose name a Senior Note is
registered at the close of business on such record date, and no additional
interest shall be payable to Holders who tender Senior Notes pursuant to the
Change of Control Offer.
Upon the commencement of a Change of Control Offer, the Company
shall send, by first class mail, a notice to each of the Holders, with a copy of
each such notice to the Trustee. The notice shall contain all instructions and
materials necessary to enable such Holders to tender Senior Notes pursuant to
the Change of Control Offer. The Change of Control Offer shall be made to all
Holders. The notice, which shall govern the terms of the Change of Control
Offer, shall state:
(a) that the Change of Control Offer is being made pursuant to this
covenant and the length of time the Change of Control Offer shall remain
open;
(b) the purchase price and the Change of Control Purchase Date;
(c) that any Senior Note not tendered or accepted for payment shall
continue to accrete or accrue interest;
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34
(d) that, unless the Company defaults in making such payment, any
Senior Note accepted for payment pursuant to the Change of Control Offer
shall cease to accrete or accrue interest after the Change of Control
Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to any
Change of Control Offer shall be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Note completed, or transfer by book-entry transfer, to the Company, a
depositary, if appointed by the Company, or a Paying Agent at the address
specified in the notice at least three days before the Change of Control
Purchase Date; and
(f) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Change of Control Offer Period, a
telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Note the Holder delivered for
purchase and a statement that such Holder is withdrawing his election to
have such Note purchased.
On the Change of Control Purchase Date, the Company shall, to the
extent lawful, (1) accept for payment all Senior 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
Senior Notes or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail to
each Holder of Senior Notes so tendered the Change of Control Payment for such
Senior Notes, and the Trustee shall promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a new Senior Note equal in
principal amount to any unpurchased portion of the Senior Notes surrendered, if
any; provided that each such new Senior Note shall be in a principal amount of
$1,000 or an integral multiple thereof.
SECTION 4.8 ASSET SALES
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, engage in an Asset Sale in excess of $1.0 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
<PAGE>
35
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 Senior 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), shall 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 this Indenture. Any Net Proceeds from
Asset Sales that are not applied or invested as provided in the preceding
sentence of this paragraph shall be deemed to constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $5.0 million, the Company will
be required to make an offer to all Holders of Senior Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of Senior 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
this Indenture. To the extent that the aggregate amount of Senior 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 Senior Notes surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Senior 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 shall 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 shall purchase the
principal amount of Senior 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 Senior Notes tendered in response to the Asset
Sale Offer. Payment for any Senior Notes so purchased shall be made in the same
manner as interest payments are made.
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 shall 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 shall be
payable to Holders who tender Senior Notes pursuant to the Asset Sale Offer.
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36
Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the Holders, with
a copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Senior Notes pursuant to the Asset
Sale Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this
covenant and the length of time the Asset Sale Offer shall remain open;
(b) the Asset Sale Offer Amount, the purchase price and the Asset
Sale Purchase Date;
(c) that any Senior Note not tendered or accepted for payment shall
continue to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any
Senior Note accepted for payment pursuant to the Asset Sale Offer shall
cease to accrete or accrue interest after the Asset Sale Purchase Date;
(e) that Holders electing to have a Senior Note purchased pursuant
to any Asset Sale Offer shall be required to surrender the Senior Note,
with the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Senior Note completed, or transfer by book-entry transfer, to the
Company, a depositary, if appointed by the Company, or a Paying Agent at
the address specified in the notice at least three days before the Asset
Sale Purchase Date;
(f) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Senior Note the Holder delivered for purchase and
a statement that such Holder is withdrawing his election to have such
Senior Note purchased;
(g) that, if the aggregate principal amount of Senior Notes
surrendered by Holders exceeds the Asset Sale Offer Amount, the Company
shall select the Senior Notes to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only
Notes in denominations of $1,000, or integral multiples thereof, shall be
purchased); and
(h) that Holders whose Senior Notes were purchased only in part
shall be issued new Senior Notes equal in principal amount to the
unpurchased portion of the Senior Notes surrendered (or transferred by
book-entry transfer).
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37
On or before the Asset Sale Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Asset Sale Offer Amount of Senior 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 shall deliver to the Trustee an
Officers' Certificate stating that such Senior 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,
shall 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 Senior Notes tendered by such Holder and accepted by the
Company for purchase, and the Company shall promptly issue a new Senior Note,
and the Trustee, upon delivery of an Officers' Certificate from the Company,
shall authenticate and mail or deliver such new Senior Note to such Holder, in a
principal amount equal to any unpurchased portion of the Senior Note
surrendered. Any Senior Note not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Asset Sale Offer on the Asset Sale Purchase Date.
SECTION 4.9 RESTRICTED PAYMENTS
The Company shall not, and shall 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 Senior 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 shall 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 Section 4.10; and
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38
(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 this 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 after the date of this 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 this 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 this 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 this Indenture,
plus (v) to the extent that any Restricted Investment that was made after
the date of this 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 shall 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 this
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
<PAGE>
39
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 shall not exceed $1.0 million in any fiscal year
(plus any amount available for such payments hereunder since the date of this
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 filed with the SEC 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 Senior Notes out
of Excess Proceeds available for general corporate purposes after consummation
of purchases of Senior 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 shall have occurred and be continuing
immediately after such transaction. In determining the aggregate amount of
Restricted Payments made after the date of this 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 shall be deemed to be Restricted Payments at the time of such
designation and shall reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments shall 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
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40
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 this Indenture. Such designation shall 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) shall 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
shall 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.
SECTION 4.10 INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Company shall not, and shall not permit any of its Restricted
Subsidiaries and Unrestricted Subsidiaries to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Indebtedness) and that the Company shall not
issue any Disqualified Stock and shall 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 shall 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 shall 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
<PAGE>
41
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) $70.0
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 Section 4.8 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 Senior 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 $10.0 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 this 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 shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Subsidiary, as the case may be;
(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 this
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
<PAGE>
42
permitted by any other clause of this paragraph) in an aggregate principal
amount at any time outstanding not to exceed $15.0 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 $5.0 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 shall 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 this Indenture at the time such
Indebtedness was incurred shall not constitute a separate incurrence of
Indebtedness.
SECTION 4.11 SALE AND LEASEBACK TRANSACTIONS
The Company shall not, and shall 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 Section 4.10 and (b) incurred a Lien to
secure such Indebtedness pursuant to Section 4.12, (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, Section 4.8.
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SECTION 4.12 LIENS
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens.
SECTION 4.13 DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES
The Company shall not, and shall 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 this Indenture, (b) the Credit Agreement as in effect as
of the date of this 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 this
Indenture, (c) this Indenture and the Senior 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
this 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 this 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 this Indenture in respect of the assets being
sold pursuant to such contract.
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44
SECTION 4.14 TRANSACTIONS WITH AFFILIATES
The Company shall not, and shall 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 this 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
shall not be deemed to be 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 Section 4.9.
SECTION 4.15 LINE OF BUSINESS
The Company shall not, and shall 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 this Indenture.
SECTION 4.16 ADDITIONAL SUBSIDIARY GUARANTEES
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 shall be Subsidiary Guarantors. In
addition, the Company shall not, and shall not permit any of the Subsidiary
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45
Guarantors to, make any Investment in any Subsidiary that is not a Subsidiary
Guarantor unless such Investment is permitted by Section 4.9.
SECTION 4.17 CORPORATE EXISTENCE
Subject to Article 5 hereof, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Senior Notes.
SECTION 4.18 CERTAIN REQUIRED MERGERS
On the date hereof, immediately after the issuance of the Senior
Notes, Clark-S Acquisition Corporation shall be merged with and into Fort Mill A
Inc. and CS Finance Corporation of Delaware shall be merged with and into
Clark-Schwebel, Inc. and on the day immediately after the date hereof, Fort Mill
A Inc. shall be merged with and into Clark-Schwebel, Inc. and Clark-Schwebel,
Inc. shall thereafter be deemed to be the "Company" hereunder and under the
Senior Notes and shall succeed to all of the obligations of CS Finance
Corporation of Delaware and Clark-S Acquisition Corporation hereunder and under
the Senior Notes. The Company shall deliver an Officers' Certificate and an
Opinion of Counsel to the Trustee stating that such mergers have been completed
and that Clark-Schwebel, Inc. has succeeded to all of the obligations of CS
Finance Corporation of Delaware and Clark-S Acquisition Corporation hereunder
and under the Senior Notes.
ARTICLE 5
SUCCESSORS
SECTION 5.1 MERGER, CONSOLIDATION OR SALE OF ASSETS
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 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
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46
which such sale, assignment, transfer, lease, conveyance or other disposition
shall 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 shall have been made assumes
all the obligations of the Company, under the Senior Notes and this 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 shall have been
made (A) shall 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) shall, 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 Section 4.10; and (v) the Company shall
have delivered 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 Clark-Schwebel, Inc. and CS Finance Corporation of Delaware,
Clark-S Acquisition Corporation and Fort Mill A Inc., Clark-Schwebel, Inc. and
Fort Mill A Inc., Clark-Schwebel, Inc. and any Wholly Owned Subsidiary and
between Wholly Owned Subsidiaries.
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.1 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor of the Company shall not be relieved from the obligation to pay
the principal of and interest on the Senior Notes except in the case of a sale
of all of the Company's assets that meets the requirements of Section 5.1
hereof.
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.1 EVENTS OF DEFAULT
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on, or
Liquidated Damages with respect to, any Senior Note when the same becomes
due and payable and the Default continues for a period of 30 days;
(2) the Company defaults in the payment of the principal of or
premium, if any, on any Senior Note when the same becomes due and payable
at maturity, upon redemption or otherwise;
(3) the Company fails to observe or perform any covenant, condition
or agreement on the part of the Company to be observed or performed
pursuant to Sections 4.7, 4.8, 4.9, 4.10, 4.11 or 5.1 hereof;
(4) the Company fails to comply with any of its other agreements or
covenants in, or provisions of, the Senior Notes or this Indenture and the
Default continues for the period and after the notice specified below;
(5) a default occurs 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 shall be created hereafter,
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 (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 such Indebtedness,
together with the principal amount of any other Indebtedness as to which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more;
(6) a final judgment or final judgments for the payment of money
(not fully covered by insurance) are entered by a court or courts of
competent jurisdiction against the Company or any of its Restricted
Subsidiaries or Holdings and such judgment or judgments remain
undischarged and unpaid for a period (during which execution shall not be
effectively stayed) of 60 days, provided that the aggregate of all such
undischarged and unpaid judgments exceeds $5.0 million;
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(7) (a) except as permitted by this Indenture, any Subsidiary
Guarantee shall be held in any judicial proceeding to be unenforceable or
invalid or shall 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, shall deny or disaffirm its obligations under the Subsidiary
Guarantee; or (b) the Holdings Guarantee shall be held in any judicial
proceeding to be unenforceable or invalid or shall 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 Holdings
Guarantee;
(8) Holdings, the Company or any of its Significant Subsidiaries
pursuant to or within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in
an involuntary case,
(c) consents to the appointment of a Custodian of it or for
all or substantially all of its property,
(d) makes a general assignment for the benefit of its
creditors, or
(e) generally is not paying its debts as they become due; or
(9) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(a) is for relief against Holdings, the Company or any
Subsidiary in an involuntary case, or
(b) appoints a Custodian of Holdings, the Company or any
Subsidiary or for all or substantially all of the property of the
Company or any Subsidiary, or
(c) orders the liquidation of Holdings, the Company or any
Subsidiary,
(d) and in each case the order or decree remains unstayed and
in effect for 60 consecutive days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
An Event of Default shall not be deemed to have occurred under
clause (3), (5), (6) or (7) until the Trustee shall have received written notice
from the Company or any of the Holders or unless a Responsible Officer shall
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49
have knowledge of such Event of Default. A Default under clause (4) is not an
Event of Default until the Trustee notifies the Company, or the Holders of at
least 25% in principal amount of the then outstanding Senior Notes notify the
Company and the Trustee, of the Default and the Company does not cure the
Default within 60 days after receipt of the notice. The notice must specify the
Default, demand that it be remedied and state that the notice is a "Notice of
Default."
SECTION 6.2 ACCELERATION
If an Event of Default (other than an Event of Default specified in
clauses (8) and (9) of Section 6.1 relating to Holdings, the Company, any
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary) occurs and is continuing, the Trustee by
notice to the Company, or the Holders of at least 25% in principal amount of the
then outstanding Senior Notes by written notice to the Company and the Trustee
may declare the unpaid principal of and any accrued interest on all the Senior
Notes to be due and payable. Upon such declaration the principal and interest
shall be due and payable immediately (together with the premium referred to in
Section 6.1, if applicable). If an Event of Default specified in clause (8) or
(9) of Section 6.1 relating to Holdings, the Company, any Significant Subsidiary
or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary occurs, such an amount shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. The Holders of a majority in principal amount of the
then outstanding Senior Notes by written notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
principal or interest that has become due solely because of the acceleration)
have been cured or waived.
SECTION 6.3 OTHER REMEDIES
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Senior Notes or to enforce the performance of any
provision of the Senior Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Senior Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Senior Note in exercising
any right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default. All
remedies are cumulative to the extent permitted by law.
SECTION 6.4 WAIVER OF PAST DEFAULTS
Holders of not less than a majority in aggregate principal amount of
the then outstanding Senior Notes by notice to the Trustee may on behalf of the
Holders of all of the Senior Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
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in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Senior Notes (including in connection with an offer to
purchase)(provided, however, that the Holders of a majority in aggregate
principal amount of the then outstanding Senior Notes may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration). Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereon.
SECTION 6.5 CONTROL BY MAJORITY
Holders of a majority in principal amount of the then outstanding
Senior Notes may direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee or exercising any trust or
power conferred on it. However, the Trustee may refuse to follow any direction
that conflicts with law or this Indenture or that the Trustee determines may be
unduly prejudicial to the rights of other Holders of Senior Notes or that may
involve the Trustee in personal liability.
SECTION 6.6 LIMITATION ON SUITS
A Holder of a Senior Note may pursue a remedy with respect to this
Indenture or the Senior Notes only if:
(a) the Holder of a Senior Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Senior Notes make a written request to the Trustee to pursue
the remedy;
(c) such Holder of a Senior Note or Holders of Senior Notes offer
and, if requested, provide to the Trustee indemnity satisfactory to the
Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Senior Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Senior Note may not use this Indenture to prejudice the rights of
another Holder of a Senior Note or to obtain a preference or priority over
another Holder of a Senior Note.
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SECTION 6.7 RIGHTS OF HOLDERS OF SENIOR NOTES TO RECEIVE PAYMENT
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Senior Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Senior Note, on or after the
respective due dates expressed in the Senior Note (including in connection with
an offer to purchase), or to bring suit for the enforcement of any such payment
on or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.8 COLLECTION SUIT BY TRUSTEE
If an Event of Default specified in Section 6.1(a) or (b) occurs and
is continuing, the Trustee is authorized to recover judgment in its own name and
as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Senior Notes and interest on overdue principal and, to the extent
lawful, interest and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Senior Notes allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Senior Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.7 hereof. To the extent that the payment
of any such compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section 7.7
hereof out of the estate in any such proceeding, shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of, any
and all distributions, dividends, money, securities and other properties that
the Holders may be entitled to receive in such proceeding whether in liquidation
or under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Senior Notes or the rights of any
Holder, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
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SECTION 6.10 PRIORITIES
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.7 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Senior Notes for amounts due and unpaid on the
Senior Notes for principal and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Senior Notes for principal, premium and Liquidated
Damages, if any and interest, respectively; and
Third: to the Company or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment
to Holders of Senior Notes pursuant to this Section 6.10.
SECTION 6.11 UNDERTAKING FOR COSTS
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Senior Note pursuant to Section 6.7 hereof, or a suit by Holders of more than
10% in principal amount of the then outstanding Senior Notes.
ARTICLE 7
TRUSTEE
SECTION 7.1 DUTIES OF TRUSTEE
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
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(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need
perform only those duties that are specifically set forth in this
Indenture and no others, and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform
to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts;
and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.5 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 7.2 RIGHTS OF TRUSTEE
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(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
(g) Except with respect to Section 4.1 hereof, the Trustee shall
have no duty to inquire as to the performance of the Company's covenants in
Article 4 hereof. In addition, the Trustee shall not be deemed to have knowledge
of any Default or Event of Default except (i) any Event of Default occurring
pursuant to Sections 6.1(1), 6.1(2) and 4.1 or (ii) any Default or Event of
Default of which a Responsible Officer of the Trustee shall have received
written notification or obtained actual knowledge.
(h) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Trustee may, in its discretion, make such further inquiry or investigation
into such facts or matters as it may see fit and if the Trustee shall determine
to make such further inquiry or investigation, it shall be entitled to examine
the books, records and premises of the Company personally or by agent or
attorney.
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SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE
The Trustee in its individual or any other capacity may become the
owner or pledgee of Senior Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest (as defined in the TIA) it must eliminate such conflict within 90 days,
apply to the SEC for permission to continue as trustee or resign. Any Agent may
do the same with like rights and duties. The Trustee is also subject to Sections
7.10 and 7.11 hereof.
SECTION 7.4 TRUSTEE'S DISCLAIMER
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Senior Notes, it shall
not be accountable for the Company's use of the proceeds from the Senior Notes
or any money paid to the Company or upon the Company's direction under any
provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Senior Notes or any other document in connection with the sale
of the Senior Notes or pursuant to this Indenture other than its certificate of
authentication.
SECTION 7.5 NOTICE OF DEFAULTS
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders of Senior Notes a
notice of the Default or Event of Default within 90 days after it occurs. Except
in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Senior Note, the Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of the Holders of the
Senior Notes.
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS OF THE SENIOR NOTES
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Senior Notes remain outstanding,
the Trustee shall mail to the Holders of the Senior Notes a brief report dated
as of such reporting date that complies with TIA ss. 313(a) (but if no event
described in TIA ss. 313(a) has occurred within the twelve months preceding the
reporting date, no report need be transmitted). The Trustee also shall comply
with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all reports as
required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Senior Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Senior Notes are listed in accordance with TIA ss.
313(d). The Company shall promptly notify the Trustee when the Senior Notes are
listed on any stock exchange.
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SECTION 7.7 COMPENSATION AND INDEMNITY
The Company shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities or expenses (including reasonable attorneys' fees) incurred by it
arising out of or in connection with the acceptance or administration of its
duties under this Indenture, including the costs and expenses of enforcing this
Indenture against the Company (including this Section 7.7) and defending itself
against any claim (whether asserted by the Company or any Holder or any other
Person) or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except to the extent any such loss, liability or
expense may be attributable to its negligence or bad faith. The Trustee shall
notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company of
its obligations hereunder. The Company shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The obligations of the Company under this Section 7.7 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Senior Notes on all money or property
held or collected by the Trustee, except that held in trust to pay principal and
interest on particular Senior Notes. Such Lien shall survive the satisfaction
and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Sections 6.1(8) or 6.1(9) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to
the extent applicable.
SECTION 7.8 REPLACEMENT OF TRUSTEE
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A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Senior
Notes of a majority in principal amount of the then outstanding Senior Notes may
remove the Trustee by so notifying the Trustee and the Company in writing. The
Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Senior Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Senior Notes of at least 10% in principal amount of the then
outstanding Senior Notes may petition any court of competent jurisdiction for
the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Senior Note
who has been a Holder of a Senior Note for at least six months, fails to comply
with Section 7.10, such Holder of a Senior Note may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Senior Notes. The retiring Trustee shall promptly
transfer all property held by it as Trustee to the successor Trustee, provided
all sums owing to the Trustee hereunder have been paid and subject to the Lien
provided for in Section 7.7 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.8, the Company's obligations under Section 7.7 hereof
shall continue for the benefit of the retiring Trustee.
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SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $50.0 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS
AGAINST COMPANY
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1 OPTION TO EFFECT LEGAL DEFEASANCE
OR COVENANT DEFEASANCE
The Company may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time, elect to
have either Section 8.2 or 8.3 hereof be applied to all outstanding Senior Notes
upon compliance with the conditions set forth below in this Article Eight.
SECTION 8.2 LEGAL DEFEASANCE AND DISCHARGE
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.4 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Senior Notes on
the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
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59
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Senior Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.5 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Senior Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Senior Notes to receive solely from the trust fund described in
Section 8.4 hereof, and as more fully set forth in such Section, payments in
respect of the principal of, premium, if any, and interest and Liquidated
Damages on such Senior Notes when such payments are due, (b) the Company's
obligations with respect to such Senior Notes under Article 2 and Section 4.2
hereof, (c) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and the Company's obligations in connection therewith and (d) this
Article Eight. Subject to compliance with this Article Eight, the Company may
exercise its option under this Section 8.2 notwithstanding the prior exercise of
its option under Section 8.3 hereof.
SECTION 8.3 COVENANT DEFEASANCE
Upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.4 hereof, be released from its
obligations under the covenants contained in Sections 4.7, 4.8, 4.9, 4.10, 4.11,
4.12, 4.13, 4.14, 4.15 and 4.16 hereof with respect to the outstanding Senior
Notes on and after the date the conditions set forth below are satisfied
(hereinafter, "Covenant Defeasance"), and the Senior Notes shall thereafter be
deemed not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Senior Notes
shall not be deemed outstanding for accounting purposes). For this purpose,
Covenant Defeasance means that, with respect to the outstanding Senior Notes,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.1 hereof, but,
except as specified above, the remainder of this Indenture and such Senior Notes
shall be unaffected thereby. In addition, upon the Company's exercise under
Section 8.1 hereof of the option applicable to this Section 8.3 hereof, subject
to the satisfaction of the conditions set forth in Section 8.4 hereof, Sections
6.1(5) through 6.1(7) hereof shall not constitute Events of Default.
SECTION 8.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE
The following shall be the conditions to the application of either
Section 8.2 or 8.3 hereof to the outstanding Senior Notes:
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In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, cash in United States 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
and Liquidated Damages, if any, and interest on the outstanding Senior
Notes on the stated date for payment thereof or on the applicable
redemption date, as the case may be, and the Company must specify whether
the Senior Notes are being defeased to maturity or to a particular
redemption date;
(b) in the case of an election under Section 8.2 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date of this Indenture, there
has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall
confirm that, the Holders of the outstanding Senior 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;
(c) in the case of an election under Section 8.3 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of
the outstanding Senior 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;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of
Default resulting from the incurrence of Indebtedness all or a portion of
the proceeds of which will be used to defease the Senior Notes pursuant to
this Article Eight concurrently with such incurrence) or insofar as
Sections 6.1(8) or 6.1(9) hereof is concerned, at any time in the period
ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this 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;
(f) the Company shall 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
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61
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company
or with the intent of defeating, hindering, delaying or defrauding any
other creditors of the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.5 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO
BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS
Subject to Section 8.6 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.5, the
"Trustee") pursuant to Section 8.4 hereof in respect of the outstanding Senior
Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Senior Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as Paying Agent) as the Trustee may determine, to the Holders of such
Senior Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.4 hereof or the principal
and interest received in respect thereof.
Anything in this Article Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.4 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.4(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.6 REPAYMENT TO COMPANY
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, Liquidated Damages or interest on any Senior Note and remaining unclaimed
for two years after such principal, and premium, if any, Liquidated Damages, if
any, or interest has become due and payable shall be paid to the Company on its
request or (if then held by the Company) shall be discharged from such trust;
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and the Holder of such Senior Note shall thereafter, as a creditor, look only to
the Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining will be repaid to the Company.
SECTION 8.7 REINSTATEMENT
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.2 or
8.3 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Senior
Notes shall be revived and reinstated as though no deposit had occurred pursuant
to Section 8.2 or 8.3 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.2 or 8.3 hereof,
as the case may be; provided, however, that, if the Company makes any payment of
principal of, premium,
if any, or interest on any Senior Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Senior Notes to receive such payment from the money held by the Trustee or
Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.1 WITHOUT CONSENT OF HOLDERS OF SENIOR NOTES
Notwithstanding Section 9.2 of this Indenture, the Company and the
Trustee may amend or supplement this Indenture or the Senior Notes without the
consent of any Holder of a Senior Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Senior Notes in addition to or in
place of certificated Senior Notes;
(c) to provide for the assumption of the Company's obligations to
the Holders of the Senior Notes in the case of a merger or consolidation
pursuant to Article Five hereof;
(d) to provide for additional Subsidiary Guarantors as set forth in
Section 4.15;
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(e) to make any change that would provide any additional rights or
benefits to the Holders of the Senior Notes or that does not adversely
affect the legal rights hereunder of any Holder of the Senior Notes; or
(f) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.2 hereof, the Trustee shall join with the Company in the execution of any
amended or supplemental Indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.2 WITH CONSENT OF HOLDERS OF SENIOR NOTES
Except as provided below in this Section 9.2, the Company and the
Trustee may amend or supplement this Indenture (including Sections 4.7 and 4.8
hereof) and the Senior Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the Senior Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for the Senior Notes), and, subject to Sections 6.4 and 6.7
hereof, any existing Default or Event of Default (other than a Default or Event
of Default in the payment of the principal of, premium, if any, or interest on
the Senior Notes, except a payment default resulting from an acceleration that
has been rescinded) or compliance with any provision of this Indenture or the
Senior Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Senior Notes (including consents
obtained in connection with a tender offer or exchange offer for the Senior
Notes).
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Senior Notes as aforesaid, and upon
receipt by the Trustee of the documents described in Section 7.2 hereof, the
Trustee shall join with the Company in the execution of such amended or
supplemental Indenture unless such amended or supplemental Indenture affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion, but shall not be obligated to,
enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Senior
Notes under this Section 9.2 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
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After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Senior Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.4 and 6.7 hereof, the
Holders of a majority in aggregate principal amount of the Senior Notes then
outstanding may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Senior Notes. However, without the
consent of each Holder affected, an amendment or waiver may not (with respect to
any Senior Notes held by a non-consenting Holder):
(a) reduce the principal amount of Senior Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Senior Note or alter or waive any of the provisions with respect to the
redemption of the Senior Notes, except as provided above with respect to
Sections 4.7 and 4.8 hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Senior Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Senior Notes (except a
rescission of acceleration of the Senior Notes by the Holders of at least
a majority in aggregate principal amount of the then outstanding Senior
Notes and a waiver of the payment default that resulted from such
acceleration);
(e) make any Senior Note payable in money other than that stated in
the Senior Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Senior Notes to
receive payments of principal of, premium or Liquidated Damages, if any,
or interest on the Senior Notes;
(g) waive a redemption payment with respect to any Senior Note
(other than a payment required by Sections 4.7 or 4.8 hereof); or
(h) make any change in Section 6.4 or 6.7 hereof or in the foregoing
amendment and waiver provisions.
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT
Every amendment or supplement to this Indenture or the Senior Notes
shall be set forth in an amended or supplemental Indenture that complies with
the TIA as then in effect.
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SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Senior Note is a continuing consent by the Holder
of a Senior Note and every subsequent Holder of a Senior Note or portion of a
Senior Note that evidences the same debt as the consenting Holder's Senior Note,
even if notation of the consent is not made on any Senior Note. However, any
such Holder of a Senior Note or subsequent Holder of a Senior Note may revoke
the consent as to its Senior Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.5 NOTATION ON OR EXCHANGE OF SENIOR NOTES
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Senior Note thereafter authenticated. The Company in
exchange for all Senior Notes may issue and the Trustee shall authenticate new
Senior Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Senior Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive indemnity reasonably satisfactory to it
and to receive and (subject to Section 7.1) shall be fully protected in relying
upon, an Officer's Certificate and an Opinion of Counsel stating that the
execution of such amended or supplemental indenture is authorized or permitted
by this Indenture.
ARTICLE 10
HOLDINGS GUARANTEE
SECTION 10.1 HOLDINGS GUARANTEE
Subject to the provisions of this Article 10, Clark-Schwebel
Holdings, Inc., a Delaware corporation ("Holdings") hereby unconditionally
guarantees on a senior unsecured basis to each Holder of a Senior Note
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, that: (a) the principal of, and premium, if any, and interest and
Liquidated Damages on the Senior Notes shall be duly and punctually paid in full
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66
when due, whether at maturity, by acceleration or otherwise, and interest on
overdue principal, and premium, if any, and (to the extent permitted by law)
interest on any interest, if any, on the Senior Notes and all other obligations
of the Company to the Holders or the Trustee hereunder or under the Senior Notes
(including fees, expenses or other) shall be promptly paid in full or performed,
all in accordance with the terms hereof; and (b) in case of any extension of
time of payment or renewal of any Senior Notes or any of such other obligations,
the same shall be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise. Failing payment when due of any amount so guaranteed
or failing performance of any other obligation of the Company to the Holders,
for whatever reason, Holdings shall be obligated to pay, or to perform or to
cause the performance of, the same immediately. An Event of Default under this
Indenture or the Senior Notes shall constitute an event of default under this
Holdings Guarantee, and shall entitle the Trustee or the Holders of Senior Notes
to accelerate the obligations of Holdings hereunder in the same manner and to
the same extent as the obligations of the Company. Holdings hereby agrees that
its obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Senior Notes or this Indenture, the absence
of any action to enforce the same, any waiver or consent by any Holder of the
Senior Notes with respect to any thereof, the entry of any judgment against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of Holdings.
Holdings hereby waives and relinquishes: (a) any right to require the Trustee,
the Holders or the Company (each, a "Benefitted Party") to proceed against the
Company, the Subsidiaries or any other Person or to proceed against or exhaust
any security held by a Benefitted Party at any time or to pursue any other
remedy in any secured party's power before proceeding against Holdings; (b) any
defense that may arise by reason of the incapacity, lack of authority, death or
disability of any other Person or Persons or the failure of a Benefitted Party
to file or enforce a claim against the estate (in administration, bankruptcy or
any other proceeding) of any other Person or Persons; (c) demand, protest and
notice of any kind (except as expressly required by this Indenture), including
but not limited to notice of the existence, creation or incurring of any new or
additional Indebtedness or obligation or of any action or non-action on the part
of Holdings, the Company, the Subsidiaries, any Benefitted Party, any creditor
of Holdings, the Company or the Subsidiaries or on the part of any other Person
whomsoever in connection with any obligations the performance of which are
hereby guaranteed; (d) any defense based upon an election of remedies by a
Benefitted Party, including but not limited to an election to proceed against
Holdings for reimbursement; (e) any defense based upon any statute or rule of
law which provides that the obligation of a surety must be neither larger in
amount nor in other respects more burdensome than that of the principal; (f) any
defense arising because of a Benefitted Party's election, in any proceeding
instituted under the Bankruptcy Law, of the application of Section 1111(b)(2) of
the Bankruptcy Code; and (g) any defense based on any borrowing or grant of a
security interest under Section 364 of the Bankruptcy Code. Holdings hereby
covenants that the Holdings Guarantee shall not be discharged except by payment
in full of all principal, premium, if any, and interest on the Senior Notes and
all other costs provided for under this Indenture, or as provided in Section
8.1.
<PAGE>
67
If any Holder or the Trustee is required by any court or otherwise
to return to either the Company, Holdings or any Subsidiary Guarantor, or any
trustee or similar official acting in relation to any of the Company, Holdings
or any Subsidiary Guarantor, any amount paid by the Company, Holdings or a
Subsidiary Guarantor to the Trustee or such Holder, the Holdings Guarantee, to
the extent theretofore discharged, shall be reinstated in full force and effect.
Holdings agrees that it shall not be entitled to any right of subrogation in
relation to the Holders in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby. Holdings agrees that, as
between it, on the one hand, and the Holders of Senior Notes and the Trustee, on
the other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article 6 hereof for the purposes hereof,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (y) in the
event of any acceleration of such obligations as provided in Article 6 hereof,
such obligations (whether or not due and payable) shall forthwith become due and
payable by Holdings for the purpose of the Holdings Guarantee.
SECTION 10.2 EXECUTION AND DELIVERY OF HOLDINGS
GUARANTEE
To evidence the Holdings Guarantee set forth in Section 10.1 hereof,
Holdings agrees that a notation of the Holdings Guarantee in substantially the
form included as Exhibit C hereto shall be endorsed on each Senior Note
authenticated and delivered by the Trustee and that this Indenture shall be
executed on behalf of Holdings by the Chairman of the Board, any Vice Chairman,
the President or one of the Vice Presidents of Holdings, under a facsimile of
its seal reproduced on this Indenture and attested to by an Officer other than
the Officer executing this Indenture.
Holdings agrees that the Holdings Guarantee set forth in this
Article 10 will remain in full force and effect and apply to all the Senior
Notes notwithstanding any failure to endorse on each Senior Note a notation of
the Holdings Guarantee.
If an Officer whose facsimile signature is on a Senior Note no
longer holds that office at the time the Trustee authenticates the Senior Note
on which the Holdings Guarantee is endorsed, the Holdings Guarantee shall be
valid nevertheless.
The delivery of any Senior Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Holdings
Guarantee set forth in this Indenture on behalf of Holdings.
SECTION 10.3 LIMITATION ON GUARANTOR'S ACTIVITY
Holdings will 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.
<PAGE>
68
ARTICLE 11
SUBSIDIARY GUARANTEES
SECTION 11.1 SUBSIDIARY GUARANTEES
Subject to the provisions of this Article 11, each Subsidiary
Guarantor, jointly and severally, hereby unconditionally guarantees to each
Holder of a Senior Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, that: (a) the principal of, and premium,
if any, and interest and Liquidated Damages on the Senior Notes shall be duly
and punctually paid in full when due, whether at maturity, by acceleration or
otherwise, and interest on overdue principal, and premium, if any, and (to the
extent permitted by law) interest on any interest, if any, on the Senior Notes
and all other obligations of the Company to the Holders or the Trustee hereunder
or under the Senior Notes (including fees, expenses or other) shall be promptly
paid in full or performed, all in accordance with the terms hereof; and (b) in
case of any extension of time of payment or renewal of any Senior Notes or any
of such other obligations, the same shall be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise. Failing payment when due of any
amount so guaranteed or failing performance of any other obligation of the
Company to the Holders, for whatever reason, each Subsidiary Guarantor shall be
obligated to pay, or to perform or to cause the performance of, the same
immediately. An Event of Default under this Indenture or the Senior Notes shall
constitute an event of default under this Subsidiary Guarantee, and shall
entitle the Trustee or the Holders of Senior Notes to accelerate the obligations
of each Subsidiary Guarantor hereunder in the same manner and to the same extent
as the obligations of the Company. Each Subsidiary Guarantor hereby agrees that
its obligations hereunder shall be unconditional, irrespective of the validity,
regularity or enforceability of the Senior Notes or this Indenture, the absence
of any action to enforce the same, any waiver or consent by any Holder of the
Senior Notes with respect to any thereof, the entry of any judgment against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a Guarantor.
Each Subsidiary Guarantor hereby waives and relinquishes: (a) any right to
require the Trustee, the Holders or the Company (each, a "Benefitted Party") to
proceed against the Company, the Subsidiaries or any other Person or to proceed
against or exhaust any security held by a Benefitted Party at any time or to
pursue any other remedy in any secured party's power before proceeding against
the Subsidiary Guarantors; (b) any defense that may arise by reason of the
incapacity, lack of authority, death or disability of any other Person or
Persons or the failure of a Benefitted Party to file or enforce a claim against
the estate (in administration, bankruptcy or any other proceeding) of any other
Person or Persons; (c) demand, protest and notice of any kind (except as
expressly required by this Indenture), including but not limited to notice of
the existence, creation or incurring of any new or additional Indebtedness or
obligation or of any action or non-action on the part of the Subsidiary
Guarantors, the Company, the Subsidiaries, any Benefitted Party, any creditor of
the Subsidiary Guarantors, the Company or the Subsidiaries or on the part of any
other Person whomsoever in connection with any obligations the performance of
which are hereby guaranteed; (d) any defense based upon an election of remedies
<PAGE>
69
by a Benefitted Party, including but not limited to an election to proceed
against the Subsidiary Guarantors for reimbursement; (e) any defense based upon
any statute or rule of law which provides that the obligation of a surety must
be neither larger in amount nor in other respects more burdensome than that of
the principal; (f) any defense arising because of a Benefitted Party's election,
in any proceeding instituted under the Bankruptcy Law, of the application of
Section 1111(b)(2) of the Bankruptcy Code; and (g) any defense based on any
borrowing or grant of a security interest under Section 364 of the Bankruptcy
Code. The Subsidiary Guarantors hereby covenant that the Subsidiary Guarantees
shall not be discharged except by payment in full of all principal, premium, if
any, and interest on the Senior Notes and all other costs provided for under
this Indenture, or as provided in Section 8.1.
If any Holder or the Trustee is required by any court or otherwise
to return to either the Company, Holdings or the Subsidiary Guarantors, or any
trustee or similar official acting in relation to either the Company, Holdings
or the Subsidiary Guarantors, any amount paid by the Company, Holdings or the
Subsidiary Guarantors to the Trustee or such Holder, the Subsidiary Guarantees,
to the extent theretofore discharged, shall be reinstated in full force and
effect. Each of the Subsidiary Guarantors agrees that it shall not be entitled
to any right of subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all obligations
guaranteed hereby. Each Subsidiary Guarantor agrees that, as between it, on the
one hand, and the Holders of Senior Notes and the Trustee, on the other hand,
(x) the maturity of the obligations guaranteed hereby may be accelerated as
provided in Article 6 hereof for the purposes hereof, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any acceleration of such
obligations as provided in Article 6 hereof, such obligations (whether or not
due and payable) shall forthwith become due and payable by such Subsidiary
Guarantor for the purpose of the Subsidiary Guarantee.
SECTION 11.2 EXECUTION AND DELIVERY OF SUBSIDIARY
GUARANTEES
To evidence the Subsidiary Guarantees set forth in Section 11.1
hereof, each of the Subsidiary Guarantors agrees that a notation of the
Subsidiary Guarantees substantially in the form included as Exhibit D hereto
shall be endorsed on each Senior Note authenticated and delivered by the Trustee
and that this Indenture shall be executed on behalf of the Subsidiary Guarantors
by the Chairman of the Board, any Vice Chairman, the President or one of the
Vice Presidents of the Subsidiary Guarantors, under a facsimile of its seal
reproduced on this Indenture and attested to by an Officer other than the
Officer executing this Indenture.
Each of the Subsidiary Guarantors agree that the Subsidiary
Guarantees set forth in this Article 11 will remain in full force and effect and
apply to all the Senior Notes notwithstanding any failure to endorse on each
Senior Note a notation of the Subsidiary Guarantees.
<PAGE>
70
If an Officer whose facsimile signature is on a Senior Note no
longer holds that office at the time the Trustee authenticates the Senior Note
on which the Subsidiary Guarantees are endorsed, the Subsidiary Guarantees shall
be valid nevertheless.
The delivery of any Senior Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantees set forth in this Indenture on behalf of the Subsidiary
Guarantors.
SECTION 11.3 SUBSIDIARY GUARANTORS MAY CONSOLIDATE, ETC.,
ON CERTAIN TERMS
(a) Nothing contained in this Indenture or in the Senior Notes shall
prevent any consolidation or merger of a Subsidiary Guarantor with or into the
Company or another Subsidiary Guarantor, or shall prevent the transfer of all or
substantially all of the assets of a Subsidiary Guarantor to the Company or
another Subsidiary Guarantor. Upon any such consolidation, merger, transfer or
sale, the Subsidiary Guarantee of such Subsidiary Guarantor shall no longer have
any force or effect.
(b) Each Subsidiary Guarantor shall not, in a single transaction or
series of related transactions, consolidate or merge with or into (whether or
not such Subsidiary Guarantor is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another
corporation, Person or entity other than the Company or another Subsidiary
Guarantor unless (i) subject to the provisions of Section 11.4 hereof, the
entity or Person formed by or surviving any such consolidation or merger (if
other than such Subsidiary Guarantor) or the entity or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made assumes all the obligations of such Subsidiary Guarantor under its
Guarantee and this Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee; (ii) immediately after such transaction
no Default or Event of Default exists; (iii) such Subsidiary Guarantor or the
entity or Person formed by or surviving any such consolidation or merger (if
other than Subsidiary Guarantor), or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made (A) shall have
Consolidated Net Worth immediately after the transaction equal to or greater
than the Consolidated Net Worth of such Subsidiary Guarantor immediately
preceding the transaction and (B) shall, 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 Section 4.10; and (iv) such Subsidiary
Guarantor shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel addressed to the Trustee, each stating that such
consolidation, merger, sale, assignment, transfer, lease, conveyance or
disposition and such supplemental indenture, if any, comply with this Indenture
and that such supplemental indenture is enforceable. In case of any such
consolidation, merger or transfer of assets and upon the assumption by the
successor corporation, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the Subsidiary Guarantees
<PAGE>
71
endorsed upon the Senior Notes and the due and punctual performance of all of
the covenants and conditions of this Indenture to be performed by such
Guarantor, such successor corporation shall succeed to and be substituted for
such Subsidiary Guarantor with the same effect as if it had been named herein as
a Subsidiary Guarantor. Such successor corporation thereupon may cause to be
signed any or all of the Subsidiary Guarantees to be endorsed upon all of the
Senior Notes issuable hereunder which theretofore shall not have been signed by
the Company and delivered to the Trustee. All the Subsidiary Guarantees so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Subsidiary Guarantees theretofore and thereafter issued in
accordance with the terms of this Indenture as though all of such Subsidiary
Guarantees had been issued at the date of the execution hereof.
(c) The Trustee, subject to the provisions of Section 11.4 hereof,
shall be entitled to receive an Officers' Certificate and an Opinion of Counsel
as conclusive evidence that any such consolidation, merger, sale or conveyance,
and any such assumption of Obligations, comply with the provisions of this
Section 11.3. Such Officers' Certificate and Opinion of Counsel shall comply
with the provisions of Section 12.5.
SECTION 11.4 RELEASES FOLLOWING SALE OF ASSETS
In the event of a sale or other disposition of all or substantially
all of the assets of any Subsidiary Guarantor, by way of merger, consolidation
or otherwise, or a sale or other disposition of all (or substantially all) of
the Capital Stock of any Subsidiary Guarantor, which sale or other disposition
otherwise complies with the terms of this Indenture, then such Subsidiary
Guarantor (in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all or substantially 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 or substantially all of the assets
of such Subsidiary Guarantor) shall be released from and relieved of any
obligations under its Subsidiary Guarantee; provided that the Net Proceeds from
such sale or other disposition are treated in accordance with the provisions of
Section 4.8 hereof. Upon delivery by the Company to the Trustee of an Officer's
Certificate and Opinion of Counsel, to the effect that such sale or other
disposition was made by the Company in accordance with the provisions of this
Indenture, including without limitation Section 4.8 hereof, the Trustee shall
execute any documents reasonably required in order to evidence the release of
any such Subsidiary Guarantor from its obligations under its Subsidiary
Guarantee. Any Subsidiary Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount of principal of and
interest on the Senior Notes and for the other obligations of any Subsidiary
Guarantor under this Indenture as provided in this Article 11.
SECTION 11.5 LIMITATION OF SUBSIDIARY GUARANTOR'S LIABILITY
Each Subsidiary Guarantor, and by its acceptance hereof each Holder,
hereby confirms that it is the intention of all such parties that the guarantee
by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute
a fraudulent transfer or conveyance for purposes of the Bankruptcy Law, the
<PAGE>
72
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar federal or state law. To effectuate the foregoing intention, the Holders
and such Subsidiary Guarantor hereby irrevocably agree that the obligations of
such Subsidiary Guarantor under this Article 11 shall be limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
this Article 11, result in the obligations of such Subsidiary Guarantor under
the Subsidiary Guarantee of such Subsidiary Guarantor not constituting a
fraudulent transfer or conveyance.
SECTION 11.6 APPLICATION OF CERTAIN TERMS AND PROVISIONS
TO THE SUBSIDIARY GUARANTORS
(a) For purposes of any provision of this Indenture which provides
for the delivery by any Subsidiary Guarantor of an Officers' Certificate and/or
an Opinion of Counsel, the definitions of such terms in Section 1.1 shall apply
to such Subsidiary Guarantor as if references therein to the Company were
references to such Subsidiary Guarantor.
(b) Any request, direction, order or demand which by any provision
of this Indenture is to be made by any Guarantor, shall be sufficient if
evidenced as described in Section 12.2 as if references therein to the Company
were references to such Subsidiary Guarantor.
(c) Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the holders of
Senior Notes to or on any Subsidiary Guarantor may be given or served as
described in Section 12.2 as if references therein to the Company were
references to such Subsidiary Guarantor.
(d) Upon any demand, request or application by any Subsidiary
Guarantor to the Trustee to take any action under this Indenture, such
Subsidiary Guarantor shall furnish to the Trustee such certificates and opinions
as are required in Section 12.4 hereof as if all references therein to the
Company were references to such Subsidiary Guarantor.
ARTICLE 12
MISCELLANEOUS
SECTION 12.1 TRUST INDENTURE ACT CONTROLS
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA ss. 318(c), the imposed duties shall control.
<PAGE>
73
SECTION 12.2 NOTICES
Any notice or communication by the Company or the Trustee to the
others is duly given if in writing and delivered in Person or mailed by first
class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company or Subsidiary Guarantors:
Clark-Schwebel, Inc.
2200 South Murray Avenue
Anderson, SC 29622
Attention: William D. Bennison
Telephone No.: (803) 225-7028
Telecopier No.: (803) 260-3377
If to Holdings:
Clark-Schwebel Holdings, Inc.
c/o Vestar Equity Partners, L.P.
245 Park Avenue, 41st Floor
New York, New York 10167
Telephone No.: (212) 949-6500
Telecopier No.: (212) 808-4922
Attention: Sander M. Levy
If to the Trustee:
Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
Attention: Corporation Trust Administration
Telephone No.: (860) 986-2064
Telecopier No.: (860) 986-7920
The Company or the Trustee, by notice to the others may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
<PAGE>
74
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA ss. 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 12.3 COMMUNICATION BY HOLDERS OF SENIOR NOTES
WITH OTHER HOLDERS OF SENIOR NOTES
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Senior Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA ss. 312(c).
SECTION 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company, upon request, shall furnish
to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.5 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.5 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been satisfied.
SECTION 12.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA
ss. 314(e) and shall include:
<PAGE>
75
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 12.6 RULES BY TRUSTEE AND AGENTS
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.7 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS,
EMPLOYEES AND STOCKHOLDERS
No past, present or future director, officer, employee, incorporator
or stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Senior Notes, this Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Senior Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Senior Notes.
SECTION 12.8 GOVERNING LAW
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED
TO CONSTRUE THIS INDENTURE, THE SENIOR NOTES AND THE SUBSIDIARY GUARANTEES.
SECTION 12.9 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS
This Indenture may not be used to interpret any other indenture,
loan or debt agreement of the Company or its Subsidiaries or of any other
Person. Any such indenture, loan or debt agreement may not be used to interpret
this Indenture.
<PAGE>
76
SECTION 12.10 SUCCESSORS
All agreements of the Company in this Indenture and the Senior Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 12.11 SEVERABILITY
In case any provision in this Indenture or in the Senior Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 12.12 COUNTERPART ORIGINALS
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.13 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
SECTION 12.14 JOINT AND SEVERAL LIABILITY
All obligations of Clark-S Acquisition Corporation and CS Finance
Corporation of Delaware hereunder and under the Senior Notes shall be joint and
several.
<PAGE>
77
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed,
as of the date first written above.
CLARK-S ACQUISITION CORPORATION
By:
----------------------------------
Name:
Title:
CS FINANCE CORPORATION OF DELAWARE
By:
----------------------------------
Name:
Title:
CLARK-SCHWEBEL HOLDINGS, INC.
By:
----------------------------------
Name:
Title:
FLEET NATIONAL BANK
By:
----------------------------------
Name:
Title:
<PAGE>
Exhibit A
(Face of Senior Note)
10-1/2% [Series A] [Series B] Senior
Notes due 2006
No. $___________
CLARK-S ACQUISITION CORPORATION AND CS FINANCE CORPORATION OF DELAWARE
promise to pay to _______________________________ or registered assigns,
the principal sum of __________________________ Dollars on ________, 2006.
Interest Payment Dates:
Record Dates:
Dated:
CLARK-S ACQUISITION CORPORATION CS FINANCE CORPORATION OF
DELAWARE
By: By:
---------------------------- ------------------------
Name: Name:
Title: Title:
By: By:
---------------------------- ------------------------
Name: Name:
Title: Title:
Certificate of Authentication:
A-1
<PAGE>
This is one of the Senior Notes
referred to in the within-mentioned Indenture:
FLEET NATIONAL BANK, as Trustee
By:
---------------------------
Authorized Signatory
Dated:
A-2
<PAGE>
(Back of Senior Note)
10 1/2% [Series A] [Series B] Senior
Notes due 2006
[Unless and until it is exchanged in whole or in part for Senior
Notes in definitive form, this Senior Note may not be transferred except as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary or a nominee of such
successor Depositary. Unless this certificate is presented by an authorized
representative of [The Depository Trust Company (55 Water Street, New York, New
York) ("DTC")], to the issuer or its agent for registration of transfer,
exchange or payment, and any certificate issued is registered in the name of
[Cede & Co.] or such other name as may be requested by an authorized
representative of DTC (and any payment is made to [Cede & Co.] or such other
entity as may be requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, [Cede & Co.], has an
interest herein.]
THE SENIOR NOTE (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SENIOR
NOTE EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SENIOR NOTE EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE SECURITIES ACT.
THE HOLDER OF THE SENIOR NOTE EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SENIOR NOTE MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3)
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PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SENIOR NOTE
EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (1) ABOVE.
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. Interest. Clark-S Acquisition Corporation, a Delaware corporation
and CS Finance Corporation of Delaware, a Delaware corporation (together, the
"Company") [Clark-Schwebel, Inc., a Delaware corporation (the "Company")],
jointly and severally, promise to pay interest on the principal amount of this
Senior Note at 10 1/2% per annum from April 17, 1996 until maturity and shall
pay the Liquidated Damages payable pursuant to Section 5 of the Registration
Rights Agreement referred to below. The Company will pay interest and Liquidated
Damages semi-annually in arrears on April 15 and October 15 of each year, or if
any such day is not a Business Day, on the next succeeding Business Day (each an
"Interest Payment Date"). Interest on the Senior Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Senior Note is authenticated between a record
date referred to on the face hereof and the next succeeding Interest Payment
Date, interest shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be October 15,
1996. The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the rate
then in effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. Method of Payment. The Company will pay interest on the Senior
Notes (except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Senior Notes at the close of business on the April 1 or
October 1 next preceding the Interest Payment Date, even if such Senior Notes
are cancelled after such record date and on or before such Interest Payment
Date, except as provided in Section 2.12 of the Indenture with respect to
defaulted interest. The Senior Notes will be payable as to principal, premium,
interest and Liquidated Damages 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 at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest,
premium, if any, and Liquidated Damages on, all Global Senior Notes and all
other Senior Notes the Holders of which shall have provided wire transfer
instructions to the Company or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
3. Paying Agent and Registrar. Initially, the Trustee under the
Indenture, will act as Paying Agent and Registrar. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company or any of
its Subsidiaries may act in any such capacity.
4. Indenture. The Company issued the Senior Notes under an Indenture
dated as of April 17, 1996 ("Indenture") among the Company, Clark-Schwebel
Holdings, Inc., the subsidiary guarantors named therein, and the Trustee. The
terms of the Senior Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Senior Notes are subject to all
such terms, and Holders are referred to the Indenture and such Act for a
statement of such terms. The Senior Notes are unsecured obligations of the
Company limited to $110.0 million in aggregate principal amount.
5. Optional Redemption.
(a) Except as set forth in clause (b) of this Senior Note, the
Senior Notes will not be redeemable at the Company's option prior to April 15,
2001. Thereafter, the Senior Notes will be 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%
(b) Notwithstanding the provisions of clause (a) of this Senior
Note, during the first 36 months after April 15, 1996, the Company may (but will
not have the obligation to) redeem up to 35% of the original aggregate principal
amount of the Senior 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 Senior 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.
(c) Notice of redemption will be mailed at least 30 days but not
more than 60 days before the redemption date to each Holder whose Senior Notes
are to be redeemed at its registered address. Senior Notes in denominations
larger than $1,000 may be redeemed in part but only in integral multiples of
$1,000, unless all of the Senior Notes held by a Holder are to be redeemed.
Unless the Company defaults in making such redemption payment, on and after the
redemption date interest ceases to accrue on Senior Notes or portions thereof
called for redemption.
6. Mandatory Redemption.
The Company shall not be required to make mandatory redemption
payments with respect to the Senior Notes.
7. Repurchase at Option of Holder.
(a) Upon the occurrence of a Change of Control, each Holder of
Senior 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 Senior
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 Senior 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 Senior Notes as a result of a Change of Control.
On the Change of Control Purchase Date, the Company will, to the
extent lawful, (1) accept for payment all Senior 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
Senior Notes or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the Senior Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Senior Notes or portions
thereof being purchased by the Company. The Paying Agent will promptly mail to
each Holder of Senior Notes so tendered the Change of Control Payment for such
Senior Notes, and the Trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a new Senior Note equal in
principal amount to any unpurchased portion of the Senior Notes surrendered, if
any; provided that each such new Senior Note will be in a principal amount of
$1,000 or an integral multiple thereof.
(b) The Company will not, and will not permit any of its Restricted
Subsidiaries to, engage in an Asset Sale in excess of $1.0 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 Senior 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), shall 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 $5.0 million, the Company will be
required to make an offer to all Holders of Senior Notes (an "Asset Sale Offer")
to purchase the maximum principal amount of Senior 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 Senior 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 Senior Notes surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Trustee shall select the Senior 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.
8. Denominations, Transfer, Exchange. The Senior Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Senior Notes may be registered and Senior
Notes may be exchanged as provided in 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
need not exchange or register the transfer of any Senior Note or portion of a
Senior Note selected for redemption, except for the unredeemed portion of any
Senior Note being redeemed in part. Also, it need not exchange or register the
transfer of any Senior Notes for a period of 15 days before a selection of
Senior Notes to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.
9. Persons Deemed Owners. The registered Holder of a Senior Note may
be treated as its owner for all purposes.
10. Amendment, Supplement and Waiver. Subject to certain exceptions,
the Indenture or the Senior Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Senior Notes, and any existing default or compliance with any
provision of the Indenture or the Senior Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Senior
Notes. Without the consent of any Holder of a Senior Note, the Indenture or the
Senior Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Senior Notes in addition to or in
place of certificated Senior Notes, to provide for the assumption of the
Company's obligations to Holders of the Senior Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Senior Notes or that does not adversely affect
the legal rights under the Indenture of any such Holder, or to comply with the
requirements of the SEC in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act.
11. Defaults and Remedies. Events of Default include: (i) default
for 30 days in the payment when due of interest on, or Liquidated Damages with
respect to, the Senior Notes; (ii) default in payment when due of the principal
of or premium, if any, on the Senior Notes; (iii) failure by the Company to
comply with Section 4.7, 4.8, 4.9, 4.10, 4.11 or 5.1 of the Indenture; (iv)
failure by the Company for 60 days after notice to comply with any of its other
agreements in the Indenture or the Senior 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 $5.0 million or more; (vi) failure by the
Company or any of its Restricted Subsidiaries or Holdings to pay final judgments
aggregating in excess of $5.0 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 Holdings 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 Holdings Guarantee and (ix)
certain events of bankruptcy or insolvency with respect to Holdings, the 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 Senior Notes may declare all the Senior
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 Senior Notes will become due and payable without
further action or notice. Holders of the Senior Notes may not enforce the
Indenture or the Senior Notes except as provided in the Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Senior Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Senior 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 Senior Notes then outstanding by notice to the Trustee
may on behalf of the Holders of all of the Senior 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 Senior 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.
12. Trustee Dealings with Company. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
13. No Recourse Against Others. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Senior Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder by accepting a Senior Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Senior Notes.
14. Authentication. This Senior Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
15. Abbreviations. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
16. Additional Rights of Holders of Transfer Restricted Senior
Notes. In addition to the rights provided to Holders of Senior Notes under the
Indenture, Holders of Transferred Restricted Senior Notes shall have all the
rights set forth in the Registration Rights Agreement dated as of the date of
the Indenture, between the Company and the parties named on the signature pages
thereof (the "Registration Rights Agreement").
17. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Senior Notes and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Senior Notes
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Clark-Schwebel, Inc.
2200 South Murray Avenue
Anderson, SC 29622
Attention: William D. Bennison
Telephone No.: (803) 225-7028
Telecopier No.: (803) 260-3377
- --------
1. This paragraph should be included only if the Senior Note is issued
in global form. Bracketed language to be included only for issuance
of Series B Senior Notes.
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ASSIGNMENT FORM
For value received, I or we assign and transfer this Senior Note to
- --------------------------------------------------------------
- --------------------------------------------------------------
(Print or type name, address and zip code of assignee)
- --------------------------------------------------------------
(Insert Social Security or other identifying number of assignee)
and irrevocably appoint ________________________ agent to transfer this Senior
Note on the books of the Company. The agent may substitute another to act for
him.
In connection with any transfer of this Senior Note occurring prior
to April 15, 1999, the undersigned confirms that it has not utilized any general
solicitation or general advertising in connection with the transfer and that:
[Check One]
[ ] (a) this Senior Note is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities
Act of 1933) in compliance with the exemption from registration
under the Securities Act of 1933 provided by Rule 144A thereunder.
or
[ ] (b) this Senior Note is being transferred other than in accordance
with (a) above and documents and, if required by the Trustee or the
Company, legal opinions are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.14 of the Indenture shall have been satisfied.
Date: __________________________
Your Signature: ______________________
(Sign exactly as your name appears on the
face of this Senior Note)
Signature Guarantee
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TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Senior Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933 and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: _______________________ _____________________________
NOTICE: To be executed by
an executive officer
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Option of Holder to Elect Purchase
If you want to elect to have this Senior Note purchased by the
Company pursuant to Section 4.7 or 4.8 of the Indenture, check the box below:
Section 4.7 Section 4.8
If you want to elect to have only part of the Senior Note purchased
by the Company pursuant to Section 4.7 or Section 4.8 of the Indenture, state
the amount you elect to have purchased: $__________________
Date:____________________ Your Signature:
(Sign exactly as your name appears on the Note)
Tax Identification No.:
Signature Guarantee.
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<PAGE>
Exhibit B
FORM OF LETTER TO BE DELIVERED BY ACCREDITED INSTITUTIONS
We are delivering this letter in connection with an offering of 10
1/2% of Senior Notes due 2006 (the "Senior Notes") of Clark-Schwebel, Inc. (the
"Company"), all as described in the Offering Memorandum (the "Offering
Memorandum") relating to such offering.
We hereby confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended
(the "Securities Act"), or an entity in which all of the equity owners are
accredited investors within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act (an "Institutional Accredited Investor");
(ii) any purchase of Senior Notes by us will be for our own account
or for the account of one or more other Institutional Accredited
Investors;
(iii) in the event that we purchase any Senior Notes, we will
acquire Senior Notes having a minimum purchase price of at least $100,000
for our own account and for each separate account for which we are acting;
(iv) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of
purchasing Senior Notes;
(v) we are not acquiring Senior Notes with a view to any
distribution thereof in a transaction that would violate the Securities
Act or the securities laws of any State of the United States or any other
applicable jurisdiction; provided that the disposition of our property and
the property of any accounts for which we are acting as fiduciary shall
remain at all times within our control; and
(vi) we have received a copy of the Offering Memorandum and
acknowledge that we have had access to such financial and other
information, and have been afforded the opportunity to ask such questions
of representatives of the Company and Clark-Schwebel Holdings, Inc. and
receive answers thereto, as we deem necessary in connection with our
decision to purchase Senior Notes.
We understand that the Senior Notes are being offered in a
transaction not involving any public offering within the meaning of the
Securities Act and that the Senior Notes have not been registered under the
Securities Act, and we agree, on our own behalf and on behalf of each account
for which we acquire any notes, that such Senior Notes may be offered, resold,
pledged or otherwise transferred only (i) to a person whom we reasonably believe
to be a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in a transaction meeting the requirements of Rule 144A, in a
transaction meeting the requirements of Rule 144 under the Securities Act,
outside the United States in a transaction meeting the requirements of Rule 904
under the Securities Act (and based upon an opinion of counsel if the Company so
requests), (ii) to the Company or (iii) pursuant to an effective registration
statement, and, in each case, in accordance with any applicable securities laws
of any State of the United States or any other applicable jurisdiction. We
understand that the registrar and transfer agent will not be required to accept
for registration of transfer any Senior Notes, except upon presentation of
evidence satisfactory to the Company that the foregoing restrictions on transfer
have been complied with. We further understand that the Senior Notes purchased
by us will be in the form of definitive physical certificates and that such
certificates will bear a legend reflecting the substance of this paragraph.
We acknowledge that you, the Company, Clark-Schwebel Holdings, Inc.
and others will rely upon our confirmations, acknowledgements and agreements set
forth herein, and we agree to notify you promptly in writing if any of our
representations or warranties herein ceases to be accurate and complete.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
- -------------------------------------
(Name of Purchaser)
By:__________________________________
Name:
Address:
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<PAGE>
Exhibit C
HOLDINGS GUARANTEE
Clark-Schwebel Holdings, Inc., a Delaware corporation ("Holdings"),
which term includes any successors or assigns under the Indenture (the
"Indenture") hereby irrevocably and unconditionally guarantees (i) the due and
punctual payment of the principal of, premium, if any, and interest and
Liquidated Damages on the 10 1/2% Senior Notes due 2006 (the "Senior Notes") of
Clark-S Acquisition Corporation, a Delaware corporation and CS Finance
Corporation, a Delaware corporation (together, the "Company"), whether at stated
maturity, by acceleration or otherwise, the due and punctual payment of interest
on the overdue principal, and premium if any, and (to the extent permitted by
law) interest on any interest, if any, on the Senior Notes, and the due and
punctual performance of all other obligations of the Company, to the Holders or
the Trustee all in accordance with the terms set forth in Article 10 of the
Indenture, (ii) in case of any extension of time of payment or renewal of any
Senior Notes or any such other obligations, that the same will be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise, and (iii) the
payment of any and all costs and expenses (including reasonable attorneys' fees)
incurred by the Trustee or any Holder in enforcing any rights under this
Guarantee.
The obligations of Holdings to the Holders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
10 of the Indenture and reference is hereby made to such Indenture for the
precise terms of this Guarantee.
No stockholder, officer, director or incorporator, as such, past,
present or future of Holdings shall have any liability under this Guarantee by
reason of his or its status as such stockholder, officer, director or
incorporator.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon Holdings and its successors and assigns until
full and final payment of all of the Company's obligations under the Senior
Notes and Indenture and shall inure to the benefit of the successors and assigns
of the Trustee and the Holders, and, in the event of any transfer or assignment
of rights by any Holder or the Trustee, the rights and privileges herein
conferred upon that party shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions hereof. This is
a Guarantee of payment and not of collectibility.
This Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Senior Note upon which this
Guarantee is noted shall have been executed by the Trustee under the Indenture
by the manual signature of one of its authorized officers.
THE TERMS OF ARTICLE 10 OF THE INDENTURE ARE
INCORPORATED HEREIN BY REFERENCE.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
Dated as of _________________ CLARK-SCHWEBEL HOLDINGS, INC.
By: ______________________________
Name:
Title:
ATTEST: _____________________
C-1
<PAGE>
Exhibit D
SUBSIDIARY GUARANTEE
The Subsidiary Guarantors listed below (hereinafter referred to as
the "Subsidiary Guarantors," which term includes any successors or assigns under
the Indenture (the "Indenture") and any additional Subsidiary Guarantors),
hereby irrevocably and unconditionally guarantee (i) the due and punctual
payment of the principal of, premium, if any, and interest and Liquidated
Damages on the 10 1/2% Senior Notes due 2006 (the "Senior Notes") of Clark-S
Acquisition Corporation, a Delaware corporation and CS Finance Corporation, a
Delaware corporation (together, the "Company"), whether at stated maturity, by
acceleration or otherwise, the due and punctual payment of interest on the
overdue principal, and premium if any, and (to the extent permitted by law)
interest on any interest, if any, on the Senior Notes, and the due and punctual
performance of all other obligations of the Company, to the Holders or the
Trustee all in accordance with the terms set forth in Article 11 of the
Indenture, (ii) in case of any extension of time of payment or renewal of any
Senior Notes or any such other obligations, that the same will be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration or otherwise, and (iii) the
payment of any and all costs and expenses (including reasonable attorneys' fees)
incurred by the Trustee or any Holder in enforcing any rights under this
Subsidiary Guarantee.
The obligations of each Subsidiary Guarantor to the Holders and to
the Trustee pursuant to this Subsidiary Guarantee and the Indenture are
expressly set forth in Article 11 of the Indenture and reference is hereby made
to such Indenture for the precise terms of this Guarantee.
No stockholder, officer, director or incorporator, as such, past,
present or future of each Subsidiary Guarantor shall have any liability under
this Subsidiary Guarantee by reason of his or its status as such stockholder,
officer, director or incorporator.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon each Subsidiary Guarantor and its successors
and assigns until full and final payment of all of the Company's obligations
under the Senior Notes and Indenture and shall inure to the benefit of the
successors and assigns of the Trustee and the Holders, and, in the event of any
transfer or assignment of rights by any Holder or the Trustee, the rights and
privileges herein conferred upon that party shall automatically extend to and be
vested in such transferee or assignee, all subject to the terms and conditions
hereof. This is a Guarantee of payment and not of collectibility.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Senior Note upon which
this Subsidiary Guarantee is noted shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized officers.
The Obligations of each Subsidiary Guarantor under its Subsidiary
Guarantee shall be limited to the extent necessary to insure that it does not
constitute a fraudulent conveyance under applicable law.
THE TERMS OF ARTICLE 11 OF THE INDENTURE ARE
INCORPORATED HEREIN BY REFERENCE.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
Dated as of _________________
[Subsidiary Guarantor]
By: __________________________
Name:
Title:
ATTEST:_____________________
D-1
Exhibit 4.2
CLARK-SCHWEBEL, INC.
(as successor by merger to each of
Clark-S Acquisition Corporation and
CS Finance Corporation of Delaware)
TO
FLEET NATIONAL BANK
FIRST SUPPLEMENTAL
INDENTURE
Dated as of April 18, 1996
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of April 18, 1996 among
Clark-Schwebel, Inc., a Delaware corporation (the "Company"), Clark-Schwebel
Holdings, Inc., a Delaware corporation ("Holdings") and Fleet National Bank, a
national association organized and existing under the laws of the United States,
as trustee (the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, Clark-S Acquisition Corporation ("Clark-S Acquisition"), CS
Finance Corporation of Delaware ("CS Finance") and Holdings have heretofore
executed and delivered to the Trustee a certain indenture, dated as of April 17,
1996 (the "Indenture"), pursuant to which a series of 10 1/2% Senior Notes due
2006 has been issued. All terms used in this First Supplemental Indenture
which are defined in the Indenture shall have the meanings assigned to them in
the Indenture;
WHEREAS, CS Finance has merged with and into the Company, with the
Company as the surviving corporation;
WHEREAS, Clark-S Acquisition has merged with and into Fort Mill A
Inc., a Delaware corporation ("Fort Mill"), with Fort Mill as the surviving
corporation;
WHEREAS, Fort Mill has merged with and into the Company, with the
Company as the surviving entity;
WHEREAS, Section 5.1 of the Indenture provides that upon the merger of
Clark-S Acquisition or CS Finance with and into another entity the surviving
entity shall assume the obligations of Clark-S Acquisition or CS Finance, as the
case may be, under the Indenture and the Senior Notes pursuant to an indenture
supplemental to the Indenture in form satisfactory to the Trustee;
WHEREAS, the Company pursuant to the foregoing authority, proposes in
and by this First Supplemental Indenture to amend the Indenture in certain
respects with respect to the Senior Notes and has requested that Holdings and
the Trustee join in the execution of this First Supplemental Indenture; and
WHEREAS, all things necessary to make this First Supplemental
Indenture a valid agreement of the Company, Holdings and the Trustee and a valid
amendment of and supplement to the Indenture have been done.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE
WITNESSETH:
For and in consideration of the premises and the purchase of the Senior
Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Senior Notes with respect
to the Senior Notes as follows:
<PAGE>
ARTICLE ONE
ASSUMPTION
SECTION 1.1 The Company hereby assumes all of the obligations of
each of Clark-S Acquisition and CS Finance under the Senior Notes and this
Indenture and references in the Senior Notes and the Indenture to the "Company"
shall hereby be references to Clark-Schwebel, Inc.
ARTICLE TWO
MISCELLANEOUS
SECTION 2.1 Incorporation of Indenture. All the provisions of this
First Supplemental Indenture shall be deemed to be incorporated in, and made a
part of, the Indenture; and the Indenture, as supplemented and amended by this
First Supplemental Indenture, shall be read, taken and construed as one and the
same instrument.
SECTION 2.2 Application of First Supplemental Indenture. The
provisions and benefit of this First Supplemental Indenture shall be effective
with respect to the Senior Notes.
SECTION 2.3 Counterparts. This First Supplemental Indenture may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.
SECTION 2.4 Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof which is
required to be included in this First Supplemental Indenture by any of the
provisions of the Trust Indenture Act, such required provision shall control.
SECTION 2.5 Successors and Assigns. All agreements in this First
Supplemental Indenture by the Company shall bind its successors and assigns,
whether so expressed or not.
SECTION 2.6 Separability Clause. In case any provision in this
First Supplemental Indenture shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 2.7 Benefits of First Supplemental Indenture. Nothing in
this First Supplemental Indenture, express or implied, shall give to any person,
other than the parties hereto and their successors hereunder and the Holders,
any benefit or any legal or equitable right, remedy or claim under this First
Supplemental Indenture.
<PAGE>
SECTION 2.8 Regarding the Trustee. The Trustee shall not be
responsible for the correctness of the recitals herein, and makes no
representation as to the validity or the sufficiency of this First Supplemental
Indenture. The Trustee shall, in connection with this First Supplemental
Indenture, be entitled to all of the benefits of all of the rights, privileges,
immunities and indemnities of the Trustee provided for in the Indenture.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
CLARK-SCHWEBEL, INC.
By:__________________________
Name:
Title:
FLEET NATIONAL BANK, as Trustee
By:__________________________
Name:
Title:
CLARK-SCHWEBEL HOLDINGS, INC.
By:__________________________
Name:
Title:
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On the day of , 1996, before
me personally
came , to me known, who, being by me duly sworn, did depose and
say that s/he resides at ; that s/he is of CLARK-SCHWEBEL,
INC., one of the corporations described in and which executed the above
instrument; that s/he knows the corporate seal of such corporation; that the
seal affixed to said instrument is such corporate seal; that it was so affixed
pursuant to authority of the Board of Directors of such corporation; and that
s/he signed her/his name thereto pursuant to like authority.
(NOTARIAL
SEAL)
<PAGE>
STATE OF )
) ss.:
COUNTY OF )
On the day of , 1996, before me personally came
, to me known, who, being by me duly sworn, did depose and
say that s/he resides at ; that s/he is of FLEET NATIONAL
BANK, one of the corporations described in and which executed the above
instrument; that s/he knows the corporate seal of such corporation; that the
seal affixed to said instrument is such corporate seal; that it was so affixed
pursuant to authority of the Board of Directors of such corporation; and that
s/he signed her/his name thereto pursuant to like authority.
(NOTARIAL
SEAL)
EXHIBIT 12.1
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE><CAPTION>
FISCAL YEAR FIRST FIRST
------------------------------------------------- QUARTER QUARTER
1991 1992 1993 1994 1995 1995 1996
------- ------ ------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Operating income less interest
expense....................... $ 9,487 $3,238 $8,620 $12,037 $21,189 $2,894 $8,316
Equity income (loss).......... 856 (297) 13 529 3,393 440 311
------- ------ ------ ------- ------- ------ ------
Income before income taxes and
extraordinary items........... 10,343 2,941 8,633 12,566 24,582 3,334 8,627
Fixed charges:
Interest expense.............. 634 473 401 401 401 101 128
Amortization of bond issue
costs......................... 7 14 21 21 21 5 5
Interest expense on rental
expense....................... 576 401 194 144 128 27 31
------- ------ ------ ------- ------- ------ ------
Total fixed charges....... 1,217 888 616 566 550 133 164
------- ------ ------ ------- ------- ------ ------
------- ------ ------ ------- ------- ------ ------
Income before income taxes,
extraordinary items and
fixed charges............... 11,560 3,829 9,249 13,132 25,132 3,467 8,791
------- ------ ------ ------- ------- ------ ------
------- ------ ------ ------- ------- ------ ------
Ratio of earnings to fixed
charges....................... 9.5 4.3 15.0 23.2 45.7 26.1 53.5
------- ------ ------ ------- ------- ------ ------
------- ------ ------ ------- ------- ------ ------
</TABLE>
Exhibit 21.1
Subsidiaries of Clark-Schwebel Holdings, Inc.
Clark-Schwebel, Inc., a Delaware corporation
Subsidiaries of Clark-Schwebel, Inc.
Clark-Schwebel Corporation, a New York corporation
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
(and to all references to our Firm) included in or made a part of Registration
Statement No. 333-4723.
\s\ Arthur Andersen LLP
Charlotte, North Carolina,
July 18, 1996
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No.1 to Registration Statement
No. 333-4723 of Clark-Schwebel Holdings, Inc. on Form S-4 of our report dated
February 9, 1996 (February 24, 1996 as to Note 2), appearing in the Prospectus,
which is part of this Registration Statement.
We also consent to the reference to us under the headings "Summary Historical
and Pro Forma Financial Data," "Selected Historical Financial Data" and
"Experts" in such Prospectus.
\s\ Deloitte & Touche LLP
Charlotte, North Carolina
July 18, 1996
