AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1996
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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><CAPTION>
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
</TABLE>
(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 MAY 29, 1996
PRELIMINARY PROSPECTUS
, 1996
N86305MA.G01,380,540,H
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
<PAGE>
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 and Holdings 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 Holdings refer to the Company's or
Holdings' fiscal year, respectively. The first quarter for each of the Company
and Holdings 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 Holdings refer to the Company's or Holdings'
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 Holdings. 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 "Holdings" are to Fort Mill A Inc. for periods prior to the
Acquisition (as defined) and to Clark-Schwebel Holdings, Inc. for periods
following the Acquisition, and references to the "Company" are to
Clark-Schwebel, Inc. for periods prior to the Acquisition and to Clark-S
Acquisition Corporation which, through a series of mergers, will be 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 and EBITDA (as defined herein) grew at compounded annual
growth rates of 13.4% and 38.0%, respectively. During the same period, the
Company's EBITDA margin increased from 8.2% to 14.7% 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 and EBITDA were $231.3 million and $34.1 million,
respectively, representing increases of 22.1% and 40.2%, 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, high velocity fragments. During
1995, high performance fabrics represented 22.6% of the Company's net sales.
2
<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. 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 14.7%, due in part
to the Company's ability to control fixed overhead costs and increase
operating leverage.
3
<PAGE>
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.
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) 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).
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 fully diluted Holdings Common Stock,
and through its ownership of Holdings Common Stock, the Management Investors own
18% of the fully diluted Holdings Common Stock. The transactions contemplated by
the Acquisition, the Merger, the Offering, the Equity Contribution and the
initial borrowings under the Credit Agreement are referred to herein
collectively as the "Transactions."
4
<PAGE>
THE INITIAL OFFERING
<TABLE>
<CAPTION>
<S> <C>
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
<TABLE>
<S> <C>
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>
5
<PAGE>
<TABLE>
<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>
6
<PAGE>
<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>
7
<PAGE>
<TABLE>
<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. 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.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
CERTAIN COVENANTS.............. The Indenture contains certain covenants which, among
other things, limits the ability of the Company and its
Restricted Subsidiaries to: (i) incur additional
indebtedness and issue preferred stock; (ii) repay certain
other indebtedness; (iii) pay dividends or make certain
other distributions; (iv) repurchase equity interests; (v)
consummate certain asset sales; (vi) enter into certain
transactions with affiliates; (vii) enter into sale and
leaseback transactions; (viii) incur liens; (ix) merge or
consolidate with any other person; or (x) sell, assign,
transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company. In
addition, under certain circumstances, the Company will be
required to make an offer to repurchase the Notes at a
price equal to the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, to the
date of repurchase, with the proceeds of certain Asset
Sales (as defined herein). See "Description of New
Notes--Certain Covenants." In addition, the Company's
interests in certain joint ventures are not subject to the
covenants of the Indenture or the Credit Agreement. See
"Business--Joint Ventures."
</TABLE>
RISK FACTORS
See "Risk Factors" for a discussion of certain material factors that should
be considered in connection with the Exchange Offer.
9
<PAGE>
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 Holdings. Holdings' sole asset is all of the
capital stock of 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 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.
<TABLE>
<CAPTION>
FISCAL YEAR FIRST QUARTER
----------------------------- -------------
1993 1994 1995 1995 1996
------ ------ ----------- ----- -----
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................................... $163.7 $189.4 $ 231.3 $49.2 $60.2
Gross profit........................................ 24.5 28.7 39.3 7.1 12.3
Selling, general and administrative expenses........ 15.5 14.4 17.8 4.1 3.9
Operating income (before non-recurring asset
write-off)............................................ 9.0 14.3 21.6 3.0 8.4
Non-recurring asset write-off (1)................... -- 1.8 -- -- --
Operating income.................................... 9.0 12.5 21.6 3.0 8.4
Income (loss) from equity investees, net............ (3.4) 1.2 2.6 0.4 0.9
Income from continuing operations................... 1.6 8.3 15.3 2.1 5.9
OTHER DATA:
EBITDA (2).......................................... $ 19.0 $ 24.3 $ 34.1 $ 5.8 $11.5
Depreciation and amortization....................... 10.0 10.0 11.1 2.8 3.0
Capital expenditures................................ 8.8 11.5 8.4 2.0 1.1
Gross profit as a percentage of net sales........... 15.0% 15.1% 17.0% 14.5% 20.5%
EBITDA as a percentage of net sales................. 11.6% 12.8% 14.7% 11.9% 19.0%
PRO FORMA DATA:
EBITDA (3).......................................... $ 34.1 $11.5
Cash interest expense (4)........................... 15.3 3.8
Income from continuing operations................... 5.6 3.3
Ratio of EBITDA to cash interest expense............ 2.2x 3.0x
Ratio of net debt to EBITDA (5)..................... 4.7x 3.5x
</TABLE>
<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>
(Footnotes on the following page)
10
<PAGE>
(Footnotes from the preceding page)
- ------------
(1) During 1994, the Company recorded a $1.8 million charge against operating
income related to the write-off of certain retired manufacturing equipment.
(2) EBITDA 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 retained by Springs Industries. EBITDA does 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.
(3) Pro forma EBITDA excludes overhead expenses allocated to Holdings by Springs
Industries and includes Holdings' estimate of stand-alone expenses.
(4) 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.
(5) 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.
11
<PAGE>
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). Clark-Schwebel Holdings, Inc. guarantees 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.
N86305mn.g01,2230,1920,H
18
<PAGE>
SOURCES AND USES OF FUNDS
Concurrently with the Offering, the Company assumed the obligations under
the Credit Agreement and Vestar/CS Holding and the Management Investors made the
Equity Contribution. Proceeds from the Offering, the Equity Contribution and the
initial borrowings under the Credit Agreement were used to fund the purchase
price of the Acquisition and to pay fees and expenses.
Credit Agreement. On the day following the Closing, the Company assumed the
obligations under 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,
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 undrawn amount of $20.0 million under the
Revolving Credit Facility will be available for working capital and general
corporate purposes.
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. 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
fully diluted Holdings Common Stock and, through its ownership of Holdings
Common Stock, the Management Investors own 18% of the fully diluted Holdings
Common Stock. The Holdings Participating Preferred Stock is perpetual and
dividends accrue at a rate of 12.5% per annum of the aggregate initial
liquidation value, and accumulate and compound on a quarterly basis, with
certain exceptions, until its redemption or cancellation. See "Description of
Holdings Participating Preferred Stock."
The estimated sources and uses of funds in connection with the Transactions
are set forth below (in millions):
SOURCES OF FUNDS:
Credit Agreement:
Term Loan....................................................... $ 15.0
Revolving Credit Facility....................................... 35.0
Notes............................................................. 110.0
Holdings Participating Preferred Stock(1)......................... 36.0
Holdings Common Stock............................................. 9.0
------
Total sources............................................... $205.0
------
------
USES OF FUNDS:
Purchase price.................................................... $192.9
Loans to Management Investors..................................... 0.8
Estimated fees and expenses....................................... 11.3
------
Total uses.................................................. $205.0
------
------
--------------------------
(1) The $36.0 million value attributed to the Holdings
Participating Preferred Stock represents an aggregate initial
liquidation value of $35.0 million and an estimated value
of $1.0 million for the participating common equity interest.
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
Total stockholders' equity (1)....................... 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 Holdings
as of the dates and for the periods presented. Holdings' sole asset is 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 Holdings. The selected historical
data for the first quarter 1995 and first quarter 1996 are unaudited, but
include all 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 (1) 1992 (1) 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
-------- -------- ------ ------ ------ ------ ------
Operating income (before non-
recurring asset write-off)............. 10.1 3.6 9.0 14.3 21.6 3.0 8.4
Non-recurring asset write-off (2).... -- -- -- 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 (1)................................ (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.............. (0.1) (0.2) 0.7 3.0 0.1 -- --
-------- -------- ------ ------ ------ ------ ------
Net income (loss).................... $ 2.5 $ (4.0) $ 2.3 $ 11.3 $ 15.4 $ 2.1 $ 5.9
-------- -------- ------ ------ ------ ------ ------
-------- -------- ------ ------ ------ ------ ------
OTHER DATA:
EBITDA (3)........................... $ 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% 12.8% 14.7% 11.9% 19.0%
Ratio of earnings to fixed charges
(4).................................... 9.5x 4.3x 15.0x 23.2x 45.7x 26.1x 53.5x
</TABLE>
(Footnotes on the following page)
21
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR FIRST QUARTER
---------------------------------------------- -------------
1991 (1) 1992 (1) 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) 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.
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
----------------
<S> <C> <C>
1991 1992
------ ------
<CAPTION>
<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>
(2) During 1994, the Company recorded a $1.8 million charge against operating
income related to the write-off of certain retired manufacturing equipment.
(3) EBITDA 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 does 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.
(4) 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.
22
<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 14.7%.
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 today. In addition, in
1991, due to increased demand related to the Gulf War, the Company's net sales
23
<PAGE>
of high performance fabrics for military applications represented a
significantly larger percentage of net sales than they currently do.
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
The following table sets forth net sales of electronics fiber glass fabric,
composite materials fiber glass fabric and high performance fabrics, cost of
sales, gross profit, selling, general and administrative expense ("SG&A") and
operating income (before non-recurring asset write-off) as a percentage of total
net sales.
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. The company does not
anticipate such strength in the civilian and military ballistic markets for the
entire year.
Gross Profit. Gross profit for 1996 increased $5.2 million or 72.9% from
$7.1 million in 1995. The improvement resulted primarily from higher net sales
in 1996. Gross profit as a percentage of sales improved to 20.5% in 1996 from
14.5% in 1995.
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 increased
operating efficiencies and operating leverage.
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
24
<PAGE>
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 (before non-recurring asset write-off). Operating income
for 1995 increased by $7.3 million to $21.6 million from $14.3 million in 1994.
As a percentage of net sales, operating income for 1995 increased to 9.3% from
7.6% in 1994.
]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.
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 change in the method of allocating intercompany charges for
administrative services accounted for the 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 (before non-recurring asset write-off). Operating income
for 1994 increased $5.3 million to $14.3 million from $9.0 million in 1993. As a
percentage of sales, operating income increased to 7.6% in 1994 from 5.5% in
1993 due to increased operating efficiencies.
Non-recurring Asset Write-Off. During 1994, the Company took a $1.8 million
charge against operating earnings related to the write-off of certain retired
manufacturing equipment.
25
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements consist of debt service and
capital expenditures. 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. In 1993, 1994 and 1995, capital expenditures were $8.8 million, $11.5
million and $8.4 million, respectively. The Company estimates that capital
expenditures will be approximately $7.0 million in 1996. The Company's principal
source of cash to fund these capital requirements is net cash provided by
operating activities. In 1993, 1994 and 1995, the Company's net cash provided by
operations totaled $17.3 million, $16.2 million, and $18.0 million,
respectively.
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. 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. 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."
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.
26
<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 and EBITDA grew at compounded annual growth rates of 13.4%
and 38.0%, respectively. During the same period, the Company's EBITDA margin
increased from 8.2% to 14.7% 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 and EBITDA were $231.3 million and $34.1 million,
respectively, representing increases of 22.1% and 40.2%, 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.
27
<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.
28
<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. 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
14.7%, due in part to the Company's ability to control fixed overhead costs
and increase operating leverage.
29
<PAGE>
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.
N86305mv.g01,2920,2520,H
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.
30
<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.
31
<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>
32
<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.
33
<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.
35
<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, and presently
is, the subject of administrative proceedings, litigation or investigations
relating to environmental matters. Management does not believe that current
proceedings, litigation or investigations 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.
36
<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.
37
<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
38
<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
39
<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.
40
<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.
41
<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.
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 votes and receives dividends and
other distributions with Holdings Common Stock on a share for share basis. 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 converted or redeemed one share of Holdings Common Stock plus
its per share Liquidation Value and accrued and unpaid dividends. Holdings
Participating Preferred Stock is redeemable by Holdings at any time.
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 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
43
<PAGE>
owned by Holdings and certain future domestic subsidiaries of Holdings (direct
or indirect), whether now owned or hereafter acquired (other than CS-Interglas,
Asahi-Schwebel and CS Tech-Fab).
Interest. At the Company's option, the interest rates per annum applicable
to the loans under the Credit Agreement will be based upon (i) the Base Rate (as
defined in the Credit Agreement) plus 0.75% or (ii) the London Interbank Offered
Rate for one, two, three, six or, if available, nine or twelve months, plus
2.0%; provided, however, beginning on the date six months after the Closing
Date, the interest rates are subject to reduction if certain requirements of
financial performance are met.
Maturity. Outstanding loans under the Revolving Credit Facility must be
repaid in April 2002. The Term Loan will amortize quarterly over six years with
amortization payments totaling $0.5 million in the remainder of 1996, $1.5
million in 1997, $2.0 million in 1998, $2.5 million in 1999, $3.0 million in
2000, $3.5 million in 2001 and $2.0 million in 2002. Loans made pursuant to the
Revolving Credit Facility may be borrowed, repaid and reborrowed from time to
time until the sixth anniversary of the Closing Date, subject to the
satisfaction of certain conditions on the date of any such borrowing. In
addition, the Credit Agreement provides for mandatory repayments in the event of
certain asset sales, debt issuances and sales of equity.
Extension of Credit. The obligation of the Banks to make subsequent loans or
extend letters of credit after the Closing will be subject to the satisfaction
of certain customary conditions including the absence of a default or event of
default under the Credit Agreement.
Covenants. The Credit Agreement requires the Company to meet certain
financial tests, including minimum fixed charge coverage ratio, minimum interest
coverage ratio, maximum senior debt ratio and maximum amounts of capital
expenditures. The Credit Agreement also contains covenants which, among other
things, limits the incurrence of additional indebtedness, the nature of the
business of the Company and its subsidiaries, investments, leases of assets,
ownership of subsidiaries, dividends, transactions with affiliates, asset sales,
acquisitions, mergers and consolidations, prepayments of other indebtedness
(including the Notes), liens and encumbrances and other matters customarily
restricted in such agreements. Certain of the Company's joint venture interests
are not subject to the covenants under the Credit Agreement.
Events of Default. The Credit Agreement contains customary events of
default, including payment defaults, breach of representations and warranties,
covenant defaults, cross-default to certain other indebtedness, certain events
of bankruptcy and insolvency, ERISA violations, judgment defaults, failure of
any guaranty or security agreement supporting the Credit Agreement to be in full
force and effect and change of control of Holdings or the Company.
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DESCRIPTION OF NEW NOTES
GENERAL
The New Notes will be issued pursuant to an Indenture (the "Indenture")
between the Company and Fleet National Bank, as trustee (the "Trustee"). The
terms of the New Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939 (the "Trust
Indenture Act"). The New Notes are subject to all such terms, and Holders of New
Notes are referred to the Indenture and the Trust Indenture Act for a statement
thereof. The following summary of certain provisions of the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below. A copy
of the Indenture and Registration Rights Agreement is available as set forth
under "--Available Information." The definitions of certain terms used in the
following summary are set forth below under "--Certain Definitions."
The New Notes will be senior unsecured obligations of the Company and will
rank senior in right of payment to all subordinated Indebtedness of the Company
and pari passu in right of payment with all existing and future senior
Indebtedness, including Indebtedness pursuant to the Credit Agreement. The New
Notes will be effectively subordinated to all existing and future secured
Indebtedness of the Company, including Indebtedness pursuant to the Credit
Agreement, to the extent of the value of the assets securing such Indebtedness
and the New Notes will be structurally subordinated to Indebtedness of the
Company's Subsidiaries. At December 30, 1995, on a pro forma basis after giving
effect to the Transactions, the New Notes would have been effectively
subordinated to $50.0 million of secured Indebtedness under the Credit
Agreement.
Restrictions in the Indenture on the ability of the Company and its
Restricted Subsidiaries to incur additional Indebtedness, to make Asset Sales,
to enter into transactions with Affiliates and to enter into mergers,
consolidations or sales of all or substantially all of its assets, may make more
difficult or discourage a takeover of the Company or Holdings, whether favored
or opposed by the management of the Company and Holdings. While such
restrictions cover a wide variety of arrangements which have traditionally been
used to effect highly leveraged transactions, the Indenture may not afford
holders of New Notes protection in all circumstances from the adverse aspects of
a highly leveraged transaction, reorganization, restructuring, merger or similar
transaction.
As of the date of the Indenture, the Company has no Subsidiaries. Under
certain circumstances, the Company will be able to designate future Subsidiaries
as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to
many of the restrictive covenants set forth in the Indenture. In addition, the
Company's interests in the Joint Ventures have effectively been excluded from
the Indenture's covenants. See "Business--Joint Ventures."
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $110.0 million and
will mature on April 15, 2006. Interest on the Notes will accrue at the rate of
10 1/2% per annum and will be payable semi-annually in arrears on April 15 and
October 15, commencing on October 15, 1996, to Holders of record on the
immediately preceding April 1 and October 1. Interest on the Notes will accrue
from the most recent date to which interest has been paid or, if no interest has
been paid, from the date of original issuance. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months. Principal, premium,
if any, interest and Liquidated Damages on the Notes will be payable at the
office or agency of the Company maintained for such purpose within the City and
State of New York or, at the option of the Company, payment of interest and
Liquidated Damages may be made by check mailed to the Holders of the Notes at
their respective addresses set forth in the register of Holders of Notes;
provided that all payments with respect to Global Notes and Certificated
Securities the Holders of whom have given wire transfer instructions to the
Company will be required to be made by wire transfer
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of immediately available funds to the accounts specified by the Holders thereof.
Until otherwise designated by the Company, the Company's office or agency in New
York will be the office of the Trustee maintained for such purpose. The New
Notes will be issued in denominations of $1,000 and integral multiples thereof.
HOLDINGS GUARANTEE
Holdings, as primary obligor and not merely as surety, will irrevocably and
unconditionally guarantee on a senior unsecured basis the performance and
punctual payment when due, whether at stated maturity, by acceleration or
otherwise, of all 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:
YEAR PERCENTAGE
- ------------------------------------------------ -----------
2001...........................................] 105.25%
2002...........................................] 103.50%
2003...........................................] 101.75%
2004 and thereafter............................] 100.00%
Notwithstanding the foregoing, during the first 36 months after April 12,
1996, the Company may (but will not have the obligation to) redeem up to 35% of
the original aggregate principal amount of the Notes at a redemption price of
110% of the principal amount thereof, in each case plus accrued and unpaid
interest and Liquidated Damages thereon to the redemption date, with the net
proceeds of a Public Equity Offering; provided that at least 65% of the original
aggregate principal amount of the Notes remains outstanding immediately after
the occurrence of such redemption; and provided, further, that such redemption
will occur within 60 days of the date of the closing of such Public Equity
Offering.
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee will deem fair and appropriate; provided
that no Notes of $1,000 or less will be redeemed in part. Notices of redemption
will be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of Notes to be redeemed at its registered
address. If any Note is to be redeemed in part only, the notice of redemption
that relates to such Note will state the portion of the principal amount thereof
to be redeemed. A new Note in principal amount equal to the unredeemed portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. On and after the redemption date, interest ceases to accrue
on Notes or portions of them called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
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REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
The Indenture provides that upon the occurrence of a Change of Control, each
Holder of Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon to the date of purchase (the "Change of
Control Payment"). Within 30 days following any Change of Control, the Company
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Notes pursuant
to the procedures required by the Indenture and described in such notice. The
Company will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the Notes as
a result of a Change of Control.
The Change of Control Offer will remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Change of Control Offer
Period"). No later than five Business Days after the termination of the Offer
Period (the "Change of Control Purchase Date"), the Company will purchase all
Notes tendered in response to the Change of Control Offer. Payment for any Notes
so purchased will be made in the same manner as interest payments are made.
If the Change of Control Purchase Date is on or after an interest record
date and on or before the related interest payment date, any accrued and unpaid
interest will be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest will be
payable to Holders who tender Notes pursuant to the Change of Control Offer.
On the Change of Control Purchase Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the Holders of Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or other restructuring.
The Credit Agreement provides that certain change of control events with
respect to the Company would constitute a default thereunder permitting the
lending parties thereto to accelerate the Indebtedness thereunder. However, the
Company may not have sufficient resources to repay Indebtedness under the Credit
Agreement and to repurchase tendered Notes. Furthermore, any future credit
agreements or other agreements relating to senior Indebtedness to which the
Company becomes a party may contain similar restrictions and provisions. In the
event a Change of Control occurs at a time when the Company is prohibited from
purchasing Notes, the Company could seek the consent of its lenders to the
purchase of Notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Notes. The
Company's failure to purchase tendered Notes would constitute an Event of
Default under the Indenture which would, in turn, constitute a default under the
Credit Agreement.
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The definition of Change of Control includes a phrase relating to the sale,
lease or transfer of "all or substantially all" of the assets of the Company and
its Restricted Subsidiaries, taken as a whole. Although there is a developing
body of case law interpreting the phrase "substantially all," there is no
precisely established definition of the phrase under applicable law.
Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Notes as a result of a sale, lease or transfer of less than all
of the assets of the Company and its Restricted Subsidiaries taken as a whole to
another Person or group may be uncertain.
Asset Sales
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, engage in an Asset Sale in excess of $1 million
unless (i) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the fair
market value, and in the case of a lease of assets, a lease providing for rent
and other conditions which are no less favorable to the Company (or the
Restricted Subsidiary, as the case may be) in any material respect than the then
prevailing market conditions (evidenced in each case by a resolution of the
Board of Directors of such entity set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests sold or otherwise
disposed of, and (ii) at least 75% (100% in the case of lease payments) of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash or Cash Equivalents; provided that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet or in the notes thereto, excluding contingent liabilities
and trade payables), of the Company or any Restricted Subsidiary (other than
liabilities that are by their terms subordinated to the Notes, or any guarantee
thereof) that are assumed by the transferee of any such assets and (y) any notes
or other obligations received by the Company or any such Restricted Subsidiary
from such transferee that are promptly, but in no event more than 30 days after
receipt, converted by the Company or such Subsidiary into cash (to the extent of
the cash received), will be deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds (a) to permanently reduce long-term
Indebtedness of a Restricted Subsidiary, (b) to permanently reduce Indebtedness
(and, in the case of revolving Indebtedness, to permanently reduce the
commitments) under the Credit Agreement, or (c) to an investment in another
business, the making of a capital expenditure or the acquisition of other
tangible assets, in each case, in the same or a similar line of business as the
Company was engaged in on the date of the Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the preceding sentence of
this paragraph will be deemed to constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $5 million, the Company will be
required to make an offer to all Holders of Notes (an "Asset Sale Offer") to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon to the date of
purchase, in accordance with the procedures set forth in the Indenture. To the
extent that the aggregate amount of Notes tendered pursuant to an Asset Sale
Offer is less than the Excess Proceeds, the Company may use any remaining Excess
Proceeds for general corporate purposes. If the aggregate principal amount of
Notes surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
The Asset Sale Offer will remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Asset Sale Offer Period"). No later
than five Business Days after the termination of the Asset Sale Offer Period
(the "Asset Sale Purchase Date"), the Company will purchase the principal amount
of Notes required to be purchased pursuant to this covenant (the "Asset Sale
Offer Amount") or, if less than the Asset Sale Offer Amount has been tendered,
all Notes tendered in response to the Asset Sale Offer. Payment for any Notes so
purchased will be made in the same manner as interest payments are made.
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If the Asset Sale Purchase Date is on or after an interest record date and
on or before the related interest payment date, any accrued and unpaid interest
will be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest will be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
On or before the Asset Sale Purchase Date, the Company will, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Asset Sale Offer Amount of Notes or portions thereof tendered pursuant to the
Asset Sale Offer, or if less than the Asset Sale Offer Amount has been tendered,
all Notes tendered, and will deliver to the Trustee an Officers' Certificate
stating that such Notes or portions thereof were accepted for payment by the
Company in accordance with the terms of this covenant. The Company, the
Depositary or the Paying Agent, as the case may be, will promptly (but in any
case not later than five days after the Asset Sale Purchase Date) mail or
deliver to each tendering Holder an amount equal to the purchase price of the
Notes tendered by such Holder and accepted by the Company for purchase, and the
Company will promptly issue a new Note, and the Trustee, upon delivery of an
Officers' Certificate from the Company will authenticate and mail or deliver
such new Note to such Holder, in a principal amount equal to any unpurchased
portion of the Note surrendered. Any Note not so accepted will be promptly
mailed or delivered by the Company to the Holder thereof. The Company will
publicly announce the results of the Asset Sale Offer on the Asset Sale Purchase
Date.
CERTAIN COVENANTS
Restricted Payments
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company)
(other than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company or dividends or distributions payable to the
Company or any Wholly Owned Subsidiary of the Company); (ii) purchase, redeem or
otherwise acquire or retire for value any Equity Interests of the Company or any
direct or indirect parent of the Company or other Affiliate or Restricted
Subsidiary of the Company; (iii) make any principal payment on, or purchase,
redeem, defease or otherwise acquire or retire for value any Indebtedness that
is subordinated to the Notes, except in accordance with the scheduled mandatory
redemption or repayment provisions set forth in the original documentation
governing such Indebtedness (but not pursuant to any mandatory offer to
repurchase upon the occurrence of any event); or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i) through
(iv) above being collectively referred to as "Restricted Payments"), unless, at
the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default will have occurred and be continuing
or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described under "--Incurrence of Indebtedness and Issuance of Preferred
Stock"; and
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of the Indenture, is less than the sum of, without
duplication, (i) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing
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after the date of the Indenture to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), plus (ii) to the
extent not included in the amount described in clause (i) above, 100% of the
aggregate net cash proceeds received after the date of the Indenture by the
Company from the issue or sale of, or from additional capital contributions
in respect of, Equity Interests of the Company or of debt securities of the
Company or any Subsidiary Guarantor that have been converted into, or
cancelled in exchange for, Equity Interests of the Company (other than
Equity Interests (or convertible debt securities) sold to a Restricted
Subsidiary or an Unrestricted Subsidiary of the Company and other than
Disqualified Stock or debt securities that have been converted into
Disqualified Stock), plus (iii) 100% of any cash dividends received by the
Company or a Wholly Owned Subsidiary that is a Subsidiary Guarantor after
the date of the Indenture from an Unrestricted Subsidiary of the Company,
plus (iv) 100% of the cash proceeds realized upon the sale of any
Unrestricted Subsidiary (less the amount of any reserve established for
purchase price adjustments and less the maximum amount of any
indemnification or similar contingent obligation for the benefit of the
purchaser, any of its Affiliates or any other third party in such sale, in
each case as adjusted for any permanent reduction in any such amount on or
after the date of such sale, other than by virtue of a payment made to such
person) following the date of the Indenture, plus (v) to the extent that any
Restricted Investment that was made after the date of the Indenture is sold
to an unaffiliated purchaser for cash or otherwise liquidated or repaid for
cash, the cash proceeds realized with respect to such Restricted Investment
(less the cost of disposition, if any).
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the making of any Restricted Investment in exchange for, or out
of the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of the Company) of, or from substantially concurrent additional
capital contributions in respect of, Equity Interests of the Company (other than
Disqualified Stock); (iii) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of the Company or any direct or indirect
parent of the Company in exchange for, or out of the proceeds of, the
substantially concurrent sale (other than to a Subsidiary of the Company) of, or
from substantially concurrent additional capital contributions in respect of,
other Equity Interests of the Company (other than any Disqualified Stock); (iv)
the defeasance, redemption or repurchase of subordinated Indebtedness with the
net cash proceeds from (X) an incurrence of Permitted Refinancing Indebtedness
or (Y) the substantially concurrent sale (other than to a Subsidiary of the
Company) of, or from substantially concurrent additional capital contributions
in respect of, Equity Interests of the Company (other than Disqualified Stock);
(v) the distribution of the Joint Ventures or interests in the Joint Ventures or
any proceeds from the sale of, or distributions from, any of the Joint Ventures;
(vi) the declaration or payment of any dividend to Holdings for, or the direct
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company or any Restricted Subsidiary of the Company or
any direct or indirect parent of the Company held by any member of the Company's
(or any of its Restricted Subsidiaries') management pursuant to any management
agreement, stock option agreement or plan or stockholders agreement; provided
that (x) the aggregate price paid for all such repurchased, redeemed, acquired
or retired Equity Interests will not exceed $1.0 million in any fiscal year
(plus any amount available for such payments hereunder since the date of the
Indenture which have not been used for such purpose) or $5.0 million in the
aggregate (in each case, net of the cash proceeds received by the Company from
subsequent reissuances of such Equity Interests to new members of management);
(vii) loans to members of management of the Company or any Restricted Subsidiary
the proceeds of which are used for a concurrent purchase of Equity Interests of
Holdings and a capital contribution in an amount equal to such proceeds to the
Company; (viii) payments under the Management Advisory Agreement; (ix) payments
to Holdings in respect of accounting, legal or other administrative expenses
incurred by Holdings relating to the operations of the Company in the ordinary
course of business and in respect of fees and related expenses associated with
registration statements
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filed with the Commission and subsequent ongoing public reporting requirements
arising from the issuance of the Guarantee; provided that the aggregate amount
of such payments does not exceed $500,000 in any fiscal year; (x) so long as
Holdings files consolidated income tax returns which include the Company,
payments to Holdings in an amount equal to the amount of income tax that the
Company would have paid if it had filed consolidated tax returns on a
separate-company basis; (xi) payments to Holdings in an amount sufficient to pay
director's fees and the reasonable expenses of its directors in an aggregate
amount not to exceed $100,000 per year; and (xii) make any principal payment on,
or purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes out of Excess Proceeds available
for general corporate purposes after consummation of purchases of Notes pursuant
to an Asset Sale Offer; provided however that in the case of any transaction
described in clauses (i), (ii), (iii), (iv) and (vi) no Default or Event of
Default will have occurred and be continuing immediately after such transaction.
In determining the aggregate amount of Restricted Payments made after the date
of the Indenture, 100% of the amounts expended pursuant to the foregoing clauses
(ii), (iii), (iv)(Y), (vi) and (vii) shall be included in such calculation and
none of the amounts expended pursuant to the foregoing clauses (i), (iv)(X),
(v), (viii), (ix), (x), (xi) and (xii) shall be included in such calculation.
The Board of Directors may designate any Subsidiary to be an Unrestricted
Subsidiary (subject to clause (f) of the definition of "Permitted Investments")
if such designation would not cause a Default. For purposes of making such
determination, all outstanding Investments by the Company and its Restricted
Subsidiaries (except to the extent repaid in cash) in the Subsidiary so
designated will be deemed to be Restricted Payments at the time of such
designation and will reduce the amount available for Restricted Payments under
the first paragraph of this covenant. All such outstanding Investments will be
deemed to constitute Investments (i) in any Subsidiary that was not formerly a
Joint Venture, in an amount equal to the greatest of (x) the net book value of
such Investments at the time of such designation, (y) the fair market value of
such Investments at the time of such designation and (z) the original fair
market value of such Investments at the time they were made or (ii) in any
Subsidiary that was formerly a Joint Venture, in an amount equal to the amount
of such Investments made by the Company or a Restricted Subsidiary since the
date of the Indenture. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) will be the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) on the date of the Restricted
Payment of the asset(s) proposed to be transferred by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
Not later than the date of making any Restricted Payment, the Company will
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculation
required by this covenant were computed, which calculations may be based upon
the Company's latest available financial statements.
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Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries and Unrestricted Subsidiaries to, directly or
indirectly, create, incur, issue, assume, guaranty or otherwise become directly
or indirectly liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness (including Acquired Indebtedness) and that the Company
will not issue any Disqualified Stock and will not permit any of its Restricted
Subsidiaries and Unrestricted Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company and its Restricted Subsidiaries may
incur Indebtedness (including Acquired Indebtedness) or issue shares of
Disqualified Stock if: (i) the Fixed Charge Coverage Ratio for the Company's
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2.25 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional Indebtedness
had been incurred, or the Disqualified Stock had been issued, as the case may
be, at the beginning of such four-quarter period; and (ii) no Default or Event
of Default will have occurred and be continuing or would occur as a consequence
thereof; provided, that no Guarantee may be incurred pursuant to this paragraph
unless the guaranteed Indebtedness is incurred by the Company or a Restricted
Subsidiary pursuant to this paragraph.
The foregoing provisions will not apply to:
(i) the incurrence by the Company and its Restricted Subsidiaries of
Indebtedness and letters of credit pursuant to the Credit Agreement (with
letters of credit being deemed to have a principal amount equal to the
maximum potential liability of the Company or the relevant Restricted
Subsidiary thereunder), in a maximum principal amount outstanding at any one
time not to exceed an amount equal to the greater of (1) (a) $70 million
less (b) the aggregate amount of all Net Proceeds of Asset Sales applied
pursuant to clause (a) or (b) of the first sentence of the second paragraph
under the covenant entitled "Asset Sales" to permanently reduce Indebtedness
(and the commitments) thereunder or (2) the Borrowing Base;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iii) the incurrence by the Company of Indebtedness represented by the
Notes and by the Restricted Subsidiaries of Indebtedness represented by the
Subsidiary Guarantees;
(iv) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or Purchase Money Obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property used in the business of the Company
or such Restricted Subsidiary, in an aggregate principal amount not to
exceed $10 million at any time outstanding;
(v) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by the Indenture to be incurred;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Wholly Owned Subsidiaries or between or among any Wholly Owned Subsidiaries;
provided, however, that (i) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a Person other
than a Wholly Owned Subsidiary and (ii) any sale or other transfer of any
such Indebtedness to a Person that is not either the Company or a Wholly
Owned Subsidiary will be deemed, in each case, to constitute an incurrence
of such Indebtedness by the Company or such Subsidiary, as the case may be;
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(vii) the incurrence by the Company or any of its Restricted
Subsidiaries that are Subsidiary Guarantors of Hedging Obligations that are
incurred for the purpose of fixing or hedging interest rate risk with
respect to any floating rate Indebtedness that is permitted by the Indenture
to be incurred;
(viii) the incurrence by the Company, its Restricted Subsidiaries that
are Subsidiary Guarantors and its foreign subsidiaries that are Restricted
Subsidiaries of Indebtedness (in addition to Indebtedness permitted by any
other clause of this paragraph) in an aggregate principal amount at any time
outstanding not to exceed $15 million; provided that such Indebtedness
incurred by foreign subsidiaries that are Restricted Subsidiaries shall not
exceed an aggregate principal amount at any time outstanding of $5 million;
(ix) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event will be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company; and
(x) Indebtedness incurred by the Company or any of its Restricted
Subsidiaries that is a Subsidiary Guarantor arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from guarantees or letters of credit, surety bonds or
performance bonds securing the performance of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in connection with the
disposition of any business, assets or Restricted Subsidiary of the Company
(other than guarantees or similar credit support by the Company or any of
its Restricted Subsidiaries of Indebtedness incurred by any Person acquiring
all or any portion of such business, assets or Restricted Subsidiary for the
purpose of financing such acquisition), in a principal amount not to exceed
25% of the gross proceeds (with proceeds other than cash or Cash Equivalents
being valued at the fair market value thereof as determined by the Board of
Directors of the Company in good faith) actually received by the Company or
any of its Restricted Subsidiaries in connection with such disposition.
Notwithstanding any other provision of this covenant, a Guarantee of
Indebtedness permitted by the terms of the Indenture at the time such
Indebtedness was incurred will not constitute a separate incurrence of
Indebtedness.
Sale and Leaseback Transactions
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company or any Subsidiary Guarantor may enter into a sale and
leaseback transaction if (i) the Company or such Subsidiary Guarantor could have
(a) incurred Indebtedness in an amount equal to the Attributable Debt relating
to such sale and leaseback transaction pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant "--Incurrence of
Additional Indebtedness and Issuance of Preferred Stock" and (b) incurred a Lien
to secure such Indebtedness pursuant to the covenant "Liens," (ii) the net cash
proceeds of such sale and leaseback transaction are at least equal to the fair
market value (as determined in good faith by the Board of Directors and set
forth in an Officers' Certificate delivered to the Trustee) of the property that
is the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and the proceeds
of such transaction are applied in compliance with, the covenant "Asset Sales."
Liens
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on any asset now
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owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i) (a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, (b) the Credit Agreement
as in effect as of the date of the Indenture, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings are no more restrictive with respect to such dividend and other
payment restrictions than those contained in the Credit Agreement as in effect
on the date of the Indenture, (c) the Indenture and the Notes, (d) applicable
law, (e) any instrument governing Acquired Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Acquired
Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that the Consolidated
EBITDA of such Person is not taken into account in determining whether such
acquisition was permitted by the terms of the Indenture, (f) by reason of
customary non-assignment provisions in leases and licenses entered into in the
ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (h) agreements relating to the financing of the
acquisition of real or tangible personal property acquired after the date of the
Indenture, provided, that such encumbrance or restriction relates only to the
property which is acquired and in the case of any encumbrance or restriction
that constitutes a Lien, such Lien constitutes a Purchase Money Lien or (i) any
restriction or encumbrance contained in contracts for sale of assets permitted
by the Indenture in respect of the assets being sold pursuant to such contract.
Transactions with Affiliates
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, sell, lease, transfer or otherwise dispose of
any of its properties or assets to, or purchase any property or assets from, or
enter into or make any contract, agreement, understanding, loan, advance or
guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an
"Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that
are no less favorable to the Company or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by the Company
or such Restricted Subsidiary with an unrelated Person and (ii) the Company
delivers to the Trustee (a) with respect to any Affiliate Transaction entered
into after the date of the Indenture involving aggregate consideration in excess
of $1.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors and (b) with
respect to any Affiliate Transaction involving aggregate consideration in excess
of $5.0 million, an opinion as to the fairness to the Company or such Restricted
Subsidiary of such Affiliate Transaction from a financial point of view issued
by an investment banking firm of national standing; provided that the following
will not be deemed to be
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Affiliate Transactions: (u) reasonable compensation paid to, and indemnity
provided on behalf of, officers and directors of Holdings, the Company or any
Restricted Subsidiary as determined in good faith by the Company's Board of
Directors or senior management; (v) the provision of administrative or
management services by the Company or any of its officers to Holdings or any of
its Restricted Subsidiaries in the ordinary course of business consistent with
past practice, (w) any employment agreement entered into by the Company or any
of its Restricted Subsidiaries in the ordinary course of business and consistent
with the past practice of the Company or such Restricted Subsidiary, (x)
transactions between or among the Company and/or its Wholly Owned Subsidiaries,
(y)(i) fees paid and reimbursement of out-of-pocket expenses pursuant to the
Management Advisory Agreement and (ii) the payment of an acquisition advisory
fee to Vestar or its Affiliates in respect of the Acquisition in an amount not
to exceed $1.5 million and (z) transactions permitted by the covenant described
in "-- Restricted Payments."
Line of Business
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any line of business which is not the same, similar, ancillary,
complementary or related to the businesses in which the Company is engaged on
the date of the Indenture.
Additional Subsidiary Guarantees
The Indenture provides that all Restricted Subsidiaries of the Company
substantially all of whose assets are located in the United States or that
conduct substantially all of their business in the United States will be
Subsidiary Guarantors. In addition, the Indenture will provide that the Company
will not, and will not permit any of the Subsidiary Guarantors to, make any
Investment in any Subsidiary that is not a Subsidiary Guarantor unless either
(i) such Investment is permitted by the covenant described under "--Restricted
Payments," or (ii) such Restricted Subsidiary executes a Subsidiary Guarantee
and delivers an opinion of counsel in accordance with the provisions of the
Indenture.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, Holdings or
the Company will furnish to the Holders of Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, at any time after
the Company files a registration statement with respect to the Exchange Offer,
the Company will file a copy of all such information and reports with the
Commission for public availability (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. In addition, the Company has agreed and the
Subsidiary Guarantors, if any, will agree that, for so long as any Notes remain
outstanding, they will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Company shall not, in a single transaction
or series of related transactions, consolidate or merge with or into (whether or
not the Company is the surviving corporation), or directly and/or indirectly
through its Restricted Subsidiaries sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets
determined on a
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consolidated basis for the Company and its Restricted Subsidiaries taken as a
whole in one or more related transactions, to another corporation, Person or
entity unless (i) the Company is the surviving corporation or the entity or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, assignment, transfer, lease, conveyance or
other disposition will have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the District of
Columbia; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company) or the entity or Person to
which such sale, assignment, transfer, lease, conveyance or other disposition
will have been made assumes all the obligations of the Company, under the Notes
and the Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no Default
or Event of Default exists; (iv) the Company or the entity or Person formed by
or surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
will have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant described
above under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock"; and (v) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel addressed to the Trustee with respect to the foregoing
matters; provided, however, that the requirement set forth in clause (iv) above
shall not apply to a merger between the Company and any Wholly Owned Subsidiary
and between Wholly Owned Subsidiaries.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes; (ii) default in payment when due
of the principal of or premium, if any, on the Notes; (iii) failure by the
Company to comply with the provisions described under the captions "--Change of
Control," "--Asset Sales," "--Restricted Payments," "--Incurrence of
Indebtedness and Issuance of Preferred Stock," "--Sale and Leaseback
Transactions" or "--Merger, Consolidation or Sale of Assets"; (iv) failure by
the Company for 60 days after notice to comply with any of its other agreements
in the Indenture or the Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries or Holdings (or the payment of which is guaranteed by
the Company or any of its Restricted Subsidiaries or Holdings) whether such
Indebtedness or Guarantee now exists, or is created after the date of the
Indenture, which default (a) is caused by a failure to pay principal of or
premium, if any, or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5 million or more; (vi) failure by the Company or
any of its Restricted Subsidiaries or Holdings to pay final judgments
aggregating in excess of $5 million, which judgments are not paid, discharged or
stayed for a period of 60 days; (vii) except as permitted by the Indenture, any
Subsidiary Guarantee will be held in any judicial proceeding to be unenforceable
or invalid or will cease for any reason to be in full force and effect or any
Subsidiary Guarantor, or any Person acting on behalf of any Subsidiary
Guarantor, will deny or disaffirm its obligations under its Subsidiary
Guarantee; (viii) the Guarantee will be held in any judicial proceeding to be
unenforceable or invalid or will cease for any reason to be in full force and
effect or Holdings, or any Person acting on behalf of Holdings, will deny or
disaffirm its obligations under the Guarantee and (ix) certain events of
bankruptcy or insolvency with respect to Holdings, the
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Company or any of its Significant Subsidiaries or group of Restricted
Subsidiaries that, together, would constitute a Significant Subsidiary.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency with respect to Holdings, the Company, any Significant Subsidiary or
any group of Subsidiaries that, taken together, would constitute a Significant
Subsidiary, all outstanding Notes will become due and payable without further
action or notice. Holders of the Notes may not enforce the Indenture or the
Notes except as provided in the Indenture. Subject to certain limitations,
Holders of a majority in principal amount of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, premium and Liquidated Damages, if any, on the
Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, will have any liability for any obligations of the Company under the
Notes, the Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder of Notes by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations will not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including nonpayment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S.
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dollars, non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest and Liquidated Damages on the outstanding Notes on the stated maturity
or on the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date; (ii) in the case of Legal Defeasance, the Company will have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or (B) since
the date of the Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon such
opinion of counsel will confirm that, the Holders of the outstanding Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company will have delivered to the Trustee an opinion of counsel
in the United States reasonably acceptable to the Trustee confirming that the
Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred; (iv) no Default or Event of Default will have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit) or insofar
as Events of Default from bankruptcy or insolvency events are concerned, at any
time in the period ending on the 91st day after the date of deposit; (v) such
Legal Defeasance or Covenant Defeasance will not result in a breach or violation
of, or constitute a default under any material agreement or instrument (other
than the Indenture) to which the Company or any of its Subsidiaries is a party
or by which the Company or any of its Subsidiaries is bound; (vi) the Company
must have delivered to the Trustee an opinion of counsel to the effect that on
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally; (vii) the Company must deliver to the
Trustee an Officers' Certificate stating that the deposit was not made by the
Company with the intent of preferring the Holders of Notes over the other
creditors of the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others; and (viii) the Company must
deliver to the Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for
Notes), and any existing default or compliance with any provision of the
Indenture or the Notes
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may be waived with the consent of the Holders of a majority in principal amount
of the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders") or (viii) make any change in
the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not adversely affect the
legal rights under the Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default will
occur (which will not be cured), the Trustee will be required, in the exercise
of its power, to use the degree of care of a prudent man in the conduct of his
own affairs. Subject to such provisions, the Trustee will be under no obligation
to exercise any of its rights or powers under the Indenture at the request of
any Holder of Notes, unless such Holder will have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to Clark-Schwebel, Inc.
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BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes to be resold as set
forth herein will initially be issued in the form of one Global Note (the
"Global Note"). The Global Note will be deposited on the date of the closing of
the sale of the Notes offered hereby (the "Closing Date") with, or on behalf of,
The Depository Trust Company (the "Depositary") and registered in the name of
Cede & Co., as nominee of the Depositary (such nominee being referred to herein
as the "Global Note Holder").
Notes that were issued as described below under "--Certificated Securities"
will be issued in the form of registered definitive certificates (the
"Certificated Securities"). Such Certificated Securities may, unless the Global
Note has previously been exchanged for Certificated Securities, be exchanged for
an interest in the Global Note representing the principal amount of Senior Notes
being transferred.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants designated by the Initial Purchasers with portions of
the principal amount of the Global Note and (ii) ownership of the Notes
evidenced by the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer Notes evidenced by the Global
Note will be limited to such extent. For certain other restrictions on the
transferability of the Notes, see "Notice to Investors."
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose names Notes, including the Global
Note, are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has or will have any
responsibility or liability for the payment of such amounts to beneficial owners
of Notes. The Company believes, however, that it is currently the policy of the
Depositary to immediately credit the accounts of the relevant Participants with
such payments, in amounts proportionate to their respective
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holdings of beneficial interests in the relevant security as shown on the
records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
Certificated Securities
Institutional "accredited investors" (within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) will receive Notes only in
certificated form. In addition, if (i) the Company notifies the Trustee in
writing that the Depositary is no longer willing or able to act as a depositary
and the Company is unable to locate a qualified successor within 90 days or (ii)
the Company, at its option, notifies the Trustee in writing that it elects to
cause the issuance of Notes in certificated form, then, upon surrender by the
Global Note Holder of its Global Note, Notes in certificated form will be issued
to each person that the Global Note Holder and the Depositary identify as being
the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Depositary in identifying the beneficial owners of Notes and the Company and the
Trustee may conclusively rely on, and will be protected in relying on,
instructions from the Depositary for all purposes.
Same-Day Settlement and Payment
The Indenture requires that payments in respect of the Notes represented by
the Global Certificate (including principal, premium, if any, interest and
Liquidated Damages, if any) be made by wire transfer of immediately available
funds to the accounts specified by the Global Certificate Holder. With respect
to Certificated Securities, the Company will make all payments of principal,
premium, if any, interest and Liquidated Damages, if any, by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each such Holder's
registered address. Secondary trading in long-term notes and debentures of
corporate issuers is generally settled in clearing-house or next-day funds. In
contrast, the Notes represented by the Global Certificate are expected to be
eligible to trade in the Depositary's Same-Day Funds Settlement System, and any
permitted secondary market trading activity in such Notes will, therefore, be
required by the Depositary to be settled in immediately available funds. The
Company expects that secondary trading in the Certificated Exchange Notes
Securities will also be settled in immediately available funds.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Indebtedness" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary or is designated a Restricted
Subsidiary of such specified Person, including, without limitation, Indebtedness
incurred in connection with, or in contemplation of, such other Person merging
with or into or becoming a Subsidiary or Restricted Subsidiary of such specified
Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired
by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly
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or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting securities,
by agreement or otherwise; provided that beneficial ownership of 10% or more of
the voting securities of a Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets (including, without limitation, by way of a sale and leaseback,
including any disposition by means of a merger, consolidation or similar
transaction and including the issuance, sale or other transfer of any of the
capital stock of any Restricted Subsidiary of such person) other than to the
Company or to any of its Wholly Owned Subsidiaries that is a Subsidiary
Guarantor (including the receipt of proceeds of insurance paid on account of the
loss of or damage to any asset and awards of compensation for any asset taken by
condemnation, eminent domain or similar proceeding, and including the receipt of
proceeds of business interruption insurance); and (ii) the issuance of Equity
Interests in any Restricted Subsidiaries or the sale of any Equity Interests in
any Restricted Subsidiaries, in each case, in one or a series of related
transactions, provided, that notwithstanding the foregoing, the term "Asset
Sale" shall not include: (a) the sale, lease, conveyance, disposition or other
transfer of all or substantially all of the assets of the Company, as permitted
pursuant to the covenant described under "Merger, Consolidation or Sale of
Assets," (b) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business consistent with past practice,
(c) a transfer of assets by the Company to a Wholly Owned Subsidiary that is a
Subsidiary Guarantor or by a Wholly Owned Subsidiary to the Company or to
another Wholly Owned Subsidiary that is a Subsidiary Guarantor or by a Wholly
Owned Subsidiary that is not a Subsidiary Guarantor to another Wholly Owned
Subsidiary that is not a Subsidiary Guarantor, (d) an issuance of Equity
Interests by a Wholly Owned Subsidiary to the Company or to another Wholly Owned
Subsidiary that is a Subsidiary Guarantor, or by a Wholly Owned Subsidiary that
is not a Subsidiary Guarantor to another Wholly Owned Subsidiary that is not a
Subsidiary Guarantor, (e) the surrender or waiver of contract rights or the
settlement, release or surrender of contract, tort or other claims of any kind,
(f) the grant in the ordinary course of business of any non-exclusive license of
patents, trademarks, registrations therefor and other similar intellectual
property, (g) the sale, lease, conveyance or other disposition of the Joint
Ventures, the assets of the Joint Ventures or any interest therein, (h)
Permitted Investments or (i) any cash dividend, distribution, Investment or
payment made pursuant to the first or second paragraph of the "Restricted
Payments" covenant.
"Attributable Debt" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of interest
implicit in such transaction, determined in accordance with GAAP) of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such sale and leaseback transaction (including any period
for which such lease has been extended or may, at the option of the lessor, be
extended).
"Board of Directors" means the Board of Directors of the Company, or any
authorized committee of the Board of Directors.
"Borrowing Base" means, as of any date, an amount equal to the sum of (i)
85% of the face amount of all Eligible Accounts Receivable owned by the Company
and its Restricted Subsidiaries as of such date, and (ii) 65% of the book value
(calculated on first in, first out basis) of all Eligible Inventory owned by the
Company and its Restricted Subsidiaries as of such date, all calculated on a
consolidated basis and in accordance with GAAP, calculated as of the end of the
most recently completed fiscal quarter.
"Business Day" means any day other than a Legal Holiday.
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"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities not more than twelve
months from the date of acquisition, (b) U.S. dollar denominated (or foreign
currency fully hedged) time deposits, certificates of deposit, Eurodollar time
deposits or Eurodollar certificates of deposit of (i) any domestic commercial
bank of recognized standing having capital and surplus in excess of $100.0
million or (ii) any bank whose short-term commercial paper rating from S&P is at
least A-1 or the equivalent thereof or from Moody's is at least P-1 or the
equivalent thereof (any such bank being an "Approved Lender"), in each case with
maturities of not more than twelve months from the date of acquisition, (c)
commercial paper and variable or fixed rate notes issued by any Approved Lender
(or by the parent company thereof) or any variable rate notes issued by, or
guaranteed by, any domestic corporation rated A-2 (or the equivalent thereof) or
better by S&P or P-2 (or the equivalent thereof) or better by Moody's and
maturing within twelve months of the date of acquisition, (d) repurchase
agreements with a bank or trust company or recognized securities dealer having
capital and surplus in excess of $100.0 million for direct obligations issued by
or fully guaranteed by the United States of America in which the Company shall
have a perfected first priority security interest (subject to no other Liens)
and having, on the date of purchase thereof, a fair market value of at least
100% of the amount of repurchase obligations, and (e) interests in money market
mutual funds which invest solely in assets or securities of the type described
in subparagraphs (a), (b), (c) or (d) hereof.
"Change of Control" means such time as (i) prior to the initial public
offering by the Company or any direct or indirect parent of the Company of its
common stock (other than a public offering pursuant to a registration statement
on Form S-8), Vestar and its Affiliates (collectively, the "Initial Investors")
cease to have, directly or indirectly, in the aggregate at least 51% of the
voting power of the voting stock of the Company or Holdings ceases to own,
directly or indirectly, 100% of the voting power of the voting stock of the
Company (other than by reason of a merger of Holdings and the Company) or (ii)
after the initial public offering by the Company or any direct or indirect
parent of the Company of its common stock (other than a public offering pursuant
to a registration statement on Form S-8), (A) any Schedule 13D, Form 13F or
Schedule 13G under the Exchange Act, or any amendment to such Schedule or Form,
is received by the Company or Holdings which indicates that, or the Company or
Holdings otherwise becomes aware that, a "person" or "group" (within the meaning
of Sections 13(d) and 14(d) (2) of the Exchange Act) has become, directly or
indirectly, the "beneficial owner," by way of merger, consolidation or
otherwise, of 35% or more of the voting power of the voting stock of the Company
or Holdings on a fully-diluted basis after giving effect to the conversion and
exercise of all outstanding warrants, options and other securities of the
Company or Holdings, as the case may be (whether or not such securities are then
currently convertible or exercisable) and (B) such person or group has become,
directly or indirectly, the beneficial owner of a greater percentage of the
voting capital stock of the Company, calculated on such fully-diluted basis,
than beneficially owned by the Initial Investors, or (iii) the sale, lease or
transfer of all or substantially all of the assets of the Company to any person
or group (other than a Subsidiary Guarantor or the Initial Investors), or (iv)
during any period of two consecutive calendar years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by the Board of Directors of
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the Company or whose nomination for election by the shareholders of the Company,
as the case may be, was approved by a vote of a majority of the directors then
still in office who either were directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease for
any reason to constitute a majority of the directors of the Company, as the case
may be, then in office. Notwithstanding anything to the contrary in the
foregoing, the mergers (as described in "The Transactions" herein) shall not be
deemed to constitute a "Change of Control".
"Consolidated EBITDA" means, with respect to the Company and its Restricted
Subsidiaries for any period, the sum of, without duplication, (i) the
Consolidated Net Income for such period, plus (ii) to the extent deducted from
Consolidated Net Income for such period, (x) the Fixed Charges for such period,
plus (y) non-cash dividends on the Company's preferred stock, plus (iii)
provision for taxes based on income or profits for such period (to the extent
such income or profits were included in computing Consolidated Net Income for
such period), plus (iv) consolidated depreciation, amortization and other
non-cash charges of the Company and its Restricted Subsidiaries required to be
reflected as expenses on the books and records of the Company, minus (v) cash
payments with respect to any non-recurring, non-cash charges previously added
back pursuant to clause (iv), and (vi) excluding the impact of foreign currency
translations. Notwithstanding the foregoing, the provision for taxes based on
the income or profits of, and the depreciation and amortization and other
non-cash charges of, a Restricted Subsidiary of a Person shall be added to
Consolidated Net Income to compute Consolidated EBITDA only to the extent that
the Net Income of such Restricted Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to the Company by
such Restricted Subsidiary without prior approval (that has not been obtained),
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to that
Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Subsidiary
thereof that is a Subsidiary Guarantor, (ii) the Net Income of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (which has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the date
of such acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded, (v) the Net Income of, or any dividends
or other distributions from, any Unrestricted Subsidiary, to the extent
otherwise included, shall be excluded, whether or not distributed to the Company
or one of its Restricted Subsidiaries, (vi) income or loss attributable to
discontinued operations shall be excluded; (vii) any increase in cost of sales
or other write-offs resulting from the purchase accounting treatment of the
Acquisition or other acquisitions shall be excluded; and (viii) all other
extraordinary, unusual or nonrecurring gains or losses shall be excluded.
"Consolidated Net Worth" of a Person at any date means the amount by which
the assets of such Person and its consolidated Restricted Subsidiaries (less any
revaluation or other write-up subsequent to the date of the Indenture in any
such assets (other than write-ups resulting from foreign currency translations
and write-ups of tangible assets of a going concern business made within twelve
months after the acquisition of such business)) exceed the sum of (a) the total
liabilities of such Person and its consolidated Restricted Subsidiaries, plus
(b) any Disqualified Stock of such Person or any consolidated
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Restricted Subsidiaries of such Person issued to any Person other than such
Person or a wholly-owned Restricted Subsidiary of such Person, in each case
determined in accordance with GAAP.
"Credit Agreement" means, collectively, (i) that certain Credit Agreement,
as in effect on the date of the Indenture, by and among the Company, the lenders
that may be from time to time parties thereto and Chemical Bank, as
administrative agent, as the foregoing may from time to time be amended,
renewed, supplemented or otherwise modified at the option of the parties
thereto, including increases in the principal amount thereof; and (ii) after
Chemical Bank, as administrative agent, has acknowledged in writing that the
Credit Agreement has been terminated and all then outstanding Indebtedness
thereunder or with respect thereto have been repaid in full in cash and
discharged, any successors to or replacements of (as designated by the Board of
Directors of the Company in its sole judgment, and evidenced by a resolution)
such Credit Agreement, as such successors or replacements may from time to time
be amended, renewed, supplemented, modified or replaced, including increases in
the principal amount thereof.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Depositary" means, with respect to the Notes issuable or issued in whole or
in part in global form, the Person specified in the Indenture as the Depositary
with respect to the Notes, until a successor shall have been appointed and
become such Depositary pursuant to the applicable provision of the Indenture,
and, thereafter, "Depositary" shall mean or include such successor.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
on which the Senior Notes mature.
"Eligible Accounts Receivable" means at a particular date, all accounts
receivable owned by the Company and Restricted Subsidiaries (i) which are not 90
or more days past due; (ii) which are not owed by an obligor which has taken any
of the actions or suffered any of the events of the kind described in clause
(ix) under "Events of Default"; (iii) which are not subject to any asserted
dispute, off-set, counterclaim or defense on the part of the account debtor or
to any asserted claim on the part of the account debtor denying liability under
such account in whole or in part and (iv) which are not owed by an obligor in
respect of which 50% or more of the accounts receivable are 90 or more days past
due or uncollectible.
"Eligible Inventory" means at the time of any determination thereof, all
inventory (less reserves for obsolescence) of the Company and Restricted
Subsidiaries as to which the following requirements have been fulfilled: (a) the
Company or a Restricted Subsidiary has lawful and absolute title to such
Inventory; and (b) none of such inventory is obsolete, unsalable, damaged or
otherwise unfit for sale or further processing.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that may be made by the Company pursuant to
the Registration Rights Agreement to exchange New Notes for Old Notes.
"Existing Indebtedness" means the Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the Credit Agreement) in
existence on the date of the Indenture, until such amounts are repaid.
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"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of original issue discount, non-cash interest
payments, the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), and (ii) the consolidated interest expense of such
Person and its Restricted Subsidiaries that was capitalized during such period,
and (iii) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such Person or one of its Restricted Subsidiaries (whether or
not such Guarantee or Lien is called upon), and (iv) the product of (a) all cash
dividend payments (and non-cash dividend payments in the case of a Person that
is a Restricted Subsidiary) on any series of preferred stock of such Person
payable to a party other than the Company or a Wholly Owned Subsidiary, times
(b) a fraction, the numerator of which is one and the denominator of which is
one minus the then current combined federal, state and local statutory tax rate
of such Person, expressed as a decimal, on a consolidated basis and in
accordance with GAAP, but excluding from the calculation of fixed charges
amortization of financing costs (except to the extent referred to in the
parenthetical in clause (i) of this definition).
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated EBITDA of such Person and its Restricted
Subsidiaries for such period to the Fixed Charges of such Person and its
Restricted Subsidiaries for such period. In the event that the Company or any of
its Restricted Subsidiaries incurs, assumes, Guarantees or repays any
Indebtedness (other than the incurrence or repayment of revolving credit
borrowings used for working capital, except to the extent that a repayment is
accompanied by a permanent reduction in revolving credit commitments) or issues
preferred stock subsequent to the commencement of the four-quarter reference
period for which the Fixed Charge Coverage Ratio is being calculated but prior
to the date on which the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. For purposes of making the
computation referred to above, (i) acquisitions that have been made by the
Company or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and shall give pro forma effect to the
Consolidated EBITDA and Indebtedness of the Person which is the subject of any
such acquisition, and (ii) the Consolidated EBITDA attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
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"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates.
"Holder" means a Person in whose name a Note is registered on the
Registrar's books.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, as well as all indebtedness of others
secured by a Lien on any asset of such Person (whether or not such indebtedness
is assumed by such Person), the maximum fixed repurchase price of Disqualified
Stock issued by such Person in each case, if held by any Person other than the
Company or a Wholly Owned Subsidiary of the Company, and, to the extent not
otherwise included, the Guarantee by such Person of any indebtedness of any
other Person.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances (other than advances to customers in the ordinary course of business
that are recorded as accounts receivable on the books of such person) or capital
contributions (excluding commission, travel, relocation and similar advances to
officers and employees made in the ordinary course of business), purchases or
other acquisitions for consideration of Indebtedness, Equity Interests or other
securities and all other items that are or would be classified as investments on
a balance sheet prepared in accordance with GAAP; provided that an acquisition
of assets, Equity Interests or other securities by the Company for consideration
consisting of common equity securities of the Company or of any direct or
indirect parent of the Company shall not be deemed to be an Investment.
"Joint Venture" means each of Clark-Schwebel Corporation, Clark-Schwebel
Tech-Fab Company, CS-Interglas AG and Asahi-Schwebel Co., Ltd. and any other
Person whose sole asset is directly or indirectly a Joint Venture (unless such
Joint Venture or Person is a Restricted Subsidiary by virtue of an Investment
pursuant to clause (f) of the definition of "Permitted Investment").
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, in the city of the Corporate Trust Office
of the Trustee, or at a place of payment are authorized by law, regulation or
executive order to remain closed. If a payment date is a Legal Holiday, payment
may be made on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
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"Liquidated Damages" means all liquidated damages then owing pursuant to the
Registration Rights Agreement.
"Management Advisory Agreement" means the agreement dated as of April 17,
1996, among Vestar, the Company and Holdings as in effect on the date of the
Indenture, with only such amendments, alterations, modifications or waivers
thereto which are not materially adverse to the interests of the Company or the
holders of Notes.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP, and before reduction for
non-cash preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries, (ii) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss) and (iii) fees and expenses related to the
Acquisition in an amount not to exceed $11.5 million.
"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP and net of any Purchase
Money Obligations relating to the assets comprising such Asset Sale.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender; and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they will not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Note Custodian" means the Trustee, as custodian with respect to the Global
Senior Notes, or any successor entity thereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the Offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice President of such Person.
"Permitted Investments" means (a) any Investments in the Company or in a
Wholly Owned Subsidiary of the Company that is a Subsidiary Guarantor (or in
CS-Interglas AG to the extent it is a Wholly Owned Subsidiary of the Company)
and that is engaged in the same or a similar line of business as the Company and
its Restricted Subsidiaries were engaged in on the date of the Indenture and
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reasonable extensions or expansions thereof; (b) any Investments in Cash
Equivalents; (c) Investments by the Company or any Restricted Subsidiary of the
Company in a Person if as a result of such Investment (i) such Person becomes a
Wholly Owned Subsidiary of the Company that is engaged in the same or a similar
line of business as the Company and its Restricted Subsidiaries were engaged in
on the date of the Indenture and reasonable extensions or expansions thereof or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Wholly Owned Subsidiary of the Company that is a Subsidiary
Guarantor and that is engaged in the same or a similar line of business as the
Company and its Restricted Subsidiaries were engaged in on the date of the
Indenture and reasonable extensions or expansions thereof; (d) Investments made
as a result of the receipt of non-cash consideration from an Asset Sale that was
made pursuant to and in compliance with the covenant described under "--Asset
Sales"; (e) Investments by the Company or any Restricted Subsidiary in cash in
an amount not to exceed $5 million in the aggregate; (f) Investments by the
Company or any Restricted Subsidiary in cash in an amount not to exceed $15
million in the aggregate to enable the Company or any Restricted Subsidiaries to
purchase or otherwise acquire equity interests in the Joint Ventures; provided
that upon the consummation of any such Investment pursuant to this clause (f)
the Joint Venture in which the Investment is made becomes a Restricted
Subsidiary; (g) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the Company or any
Subsidiary or in satisfaction of judgments; (h) the conversion or exchange of
debt of CS-Interglas AG for common securities of CS-Interglas AG; and (i) the
contribution of shares of stock or other equity securities of an Unrestricted
Subsidiary to another Subsidiary.
"Permitted Liens" means (i) Liens securing (a) Indebtedness permitted by
clause (i) or clause (viii) under the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock" and (b) related Hedging
Obligations; (ii) Liens in favor of the Company or any Subsidiary Guarantor;
(iii) Liens on property of a Person existing at the time such Person is merged
into or consolidated with the Company or any Restricted Subsidiary of the
Company; provided that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company; (iv) Liens on
property of a Person existing at the time such Person becomes a Restricted
Subsidiary of the Company; (v) Liens on property existing at the time of
acquisition thereof by the Company or any Restricted Subsidiary of the Company,
provided that such Liens were in existence prior to the contemplation of such
acquisition; (vi) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vii) Liens existing on the date of
the Indenture; (viii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, provided
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (ix) carriers',
warehousemen's, mechanics', materialmen's, repairmen's, or other similar Liens
arising in the ordinary course of business which are not overdue for a period of
more than 60 days or which are being contested in good faith by appropriate
proceedings diligently conducted; (x) Liens of landlords or of mortgagees of
landlords arising by operation of law, provided that the rental payments secured
thereby are not yet due and payable; (xi) Liens incurred in the ordinary course
of business of the Company or any Restricted Subsidiary of the Company with
respect to obligations that do not exceed $2.5 million at any one time
outstanding and that (a) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Restricted Subsidiary; (xii)
nonconsensual Liens incurred in the ordinary course of business of any foreign
subsidiary that is a Restricted Subsidiary that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances of credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by such
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Restricted Subsidiary; (xiii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (xiv) easements, rights-of-way,
restrictions, minor defects or irregularities in title and other similar charges
or encumbrances not interfering in any material respect with the business of the
Company or any of its Restricted Subsidiaries; (xv) Purchase Money Liens
(including extensions and renewals thereof); (xvi) judgment and attachment Liens
not giving rise to an Event of Default; (xvii) Liens arising out of consignment
or similar arrangements for the sale of goods; (xviii) any interest or title of
a lessor in property subject to any capital lease obligation or operating lease;
and (xix) Liens arising from filing Uniform Commercial Code financing statements
regarding leases.
"Permitted Refinancing Debt" means any Indebtedness of the Company or any of
its Restricted Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Restricted Subsidiaries; provided
that: (i) the principal amount of such Permitted Refinancing Indebtedness does
not exceed the principal amount of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness
has a final maturity date at least as late as the final maturity date of, and
has a Weighted Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; (iii) if the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded is subordinated in
right of payment to the Senior Notes, such Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date of, and is
subordinated in right of payment to, the Senior Notes on terms at least as
favorable to the Holders of Senior Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company, or other business entity or government or agency or political
subdivision thereof (including any subdivision or ongoing business of any such
entity or substantially all of the assets of any such entity, subdivision or
business).
"Public Equity Offering" means an underwritten public offering pursuant to a
registration statement filed with the SEC in accordance with the Securities Act
of (i) Equity Interests other than Disqualified Stock of the Company or (ii) of
Equity Interests other than Disqualified Stock of the Company's parent or
indirect parent corporation to the extent that the cash proceeds therefrom are
contributed to the equity capital of the Company or are used to purchase Equity
Interests (other than Disqualified Stock) of the Company.
"Purchase Money Lien" means a Lien granted on an asset or property to secure
a Purchase Money Obligation permitted to be incurred under the Indenture and
incurred solely to finance the purchase, or the cost of construction or
improvement, of such asset or property; provided however, that such Lien
encumbers only such asset or property and is granted within 180 days of such
acquisition.
"Purchase Money Obligations" of any Person means any obligations of such
Person to any seller or any other Person incurred or assumed to finance the
purchase, or the cost of construction or improvement, of real or personal
property to be used in the business of such person or any of its Restricted
Subsidiaries in an amount that is not more than 100% of the cost, or fair market
value, as appropriate, of such property, and incurred within 180 days after the
date of such acquisition (excluding accounts payable to trade creditors incurred
in the ordinary course of business).
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date of the Indenture, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
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"Representative" means the indenture trustee or other trustee, client or
representative for any Senior Indebtedness.
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Exchange Act, as such Regulation is in effect on the date
hereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof).
"Subsidiary Guarantors" means any Restricted Subsidiary that executes a
Subsidiary Guarantee in accordance with the provisions of the Indenture, and
their respective successors and assigns.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sec.Sec.
77aaa-77bbbb) as in effect on the date on which the Indenture is qualified under
the TIA.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution;
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or understanding
are no less favorable to the Company or such Restricted Subsidiary than those
that might be obtained at the time from Persons who are not Affiliates of the
Company; (c) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Company or any of
its Restricted Subsidiaries. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by the covenant described under the caption
"--Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail
to meet the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture
and any Indebtedness of such Subsidiary shall be deemed to be incurred by a
Restricted
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Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock," the
Company shall be in default of such covenant). The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under the covenant described
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock," and (ii) no Default or Event of Default would be in existence following
such designation. Notwithstanding anything to the contrary in the foregoing, to
the extent a Joint Venture becomes a Subsidiary, it shall initially be an
Unrestricted Subsidiary except to the extent that it becomes a Subsidiary in
connection with an Investment pursuant to clause (f) of the definition of
"Permitted Investment."
"Vestar" means Vestar Equity Partners, L.P.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" of any Person means a Restricted Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) (or in the case of CS-Interglas
AG 90% of the outstanding Capital Stock or other ownership interests) shall at
the time be owned by such Person or by one or more Wholly Owned Subsidiaries of
such Person. Unrestricted Subsidiaries shall not be included in the definition
of Wholly Owned Subsidiary for any purposes of the Indenture.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on April 17, 1996 to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Old Notes to qualified institutional buyers in reliance
on Rule 144A under the Securities Act. As a condition to the Purchase Agreement,
the Company and Holdings entered into the Registration Rights Agreement with the
Initial Purchasers (the "Registration Rights Agreement") pursuant to which the
Company and Holdings agreed, for the benefit of the holders of the Old Notes to,
among other things, (i) file the Exchange Offer Registration Statement with the
Commission on or prior to 45 days after the Closing Date and (ii) use their best
efforts to have the Exchange Offer Registration Statement declared effective by
the Commission on or prior to 120 days after the Closing Date. The Company will
keep the Exchange Offer open for not less than 20 business days (or longer if
required by applicable law) after the date on which notice of the Exchange Offer
is mailed to the holders of the Old Notes. For each Old Note surrendered to the
Company pursuant to the Exchange Offer, the holder of such Old Note will receive
a New Note having a principal amount equal to that of the surrendered Old Note.
Interest on each New Note will accrue from the date of its original issue.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the New Notes would in general be
freely tradeable after the Exchange Offer without further registration under the
Securities Act. However, any purchaser of Old Notes who is an "affiliate" of the
Company or who intends to participate in the Exchange Offer for the purpose of
distributing the New Notes (i) will not be able to rely on the interpretation of
the staff of the Commission, (ii) will not be able to tender its Old Notes in
the Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the Old Notes, unless such sale or transfer is made pursuant to an
exemption from such requirements.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent to
the Company in the Letter of Transmittal that (i) the New Notes are to be
acquired by the holder or the person receiving such New Notes, whether or not
such person is the holder, in the ordinary course of business, (ii) the holder
or any such other person (other than a broker-dealer referred to in the next
sentence) is not engaging and does not intend to engage, in the distribution of
the New Notes, (iii) the holder or any such other person has no arrangement or
understanding with any person to participate in the distribution of the New
Notes, (iv) neither the holder nor any such other person is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities Act, and (v) the
holder or any such other person acknowledges that if such holder or other person
participates in the Exchange Offer for the purpose of distributing the New Notes
it must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale of the New Notes and cannot rely on
those no-action letters. As indicated above, each Participating Broker-Dealer
that receives a New Note for its own account in exchange for Old Notes must
acknowledge that it (i) acquired the Old Notes for its own account as a result
of market-making activities or other trading activities, (ii) has not entered
into any arrangement or understanding with the Company or any "affiliate" of the
Company (within the meaning of Rule 405 under the Securities Act) to distribute
the New Notes to be received in the Exchange Offer and (iii) will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such New Notes. For a description of the procedures for such resales
by Participating Broker-Dealers, see "Plan of Distribution."
In the event that changes in the law or the applicable interpretations of
the staff of the Commission do not permit the Company to effect such an Exchange
Offer, or if for any other reason the Exchange Offer is not consummated or if
any holder of the Old Notes (other than an "affiliate" of the Company or an
Initial Purchaser) is not eligible to participate in the Exchange Offer, the
Company will (a) file the Shelf Registration Statement covering resales of the
Old Notes, (b) use its reasonable best efforts to
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cause the Shelf Registration Statement to be declared effective under the
Securities Act and (c) use its reasonable best efforts to keep effective the
Shelf Registration Statement until the earlier of three years after its
effective date and such time as all of the applicable Old Notes have been sold
thereunder. The Company will, in the event of the filing of the Shelf
Registration Statement, provide to each applicable holder of the Old Notes
copies of the prospectus which is a part of the Shelf Registration Statement,
notify each such holder when the Shelf Registration Statement has become
effective and take certain other actions as are required to permit unrestricted
resales of the Old Notes. A holder of Old Notes that sells such Old Notes
pursuant to the Shelf Registration Statement permit generally will be required
to be named as a selling securityholder in the related prospectus and to deliver
a prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement which are
applicable to such a holder (including certain indemnification obligations). In
addition, each holder of the Old Notes will be required to deliver information
to be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Old Notes included
in the Shelf Registration Statement and to benefit from the provisions set forth
in the following paragraph.
The Registration Rights Agreement provides that (i) Holdings and the Company
will file an Exchange Offer Registration Statement with the Commission on or
prior to 45 days after the Closing Date, (ii) Holdings and the Company will use
their best efforts to have the Exchange Offer Registration Statement declared
effective by the Commission on or prior to 120 days after the Closing Date,
(iii) unless the Exchange Offer would not be permitted by applicable law or
Commission policy, Holdings and the Company will commence the Exchange Offer and
use their best efforts to issue on or prior to 150 days after the Closing Date
(the "Exchange Offer Effectiveness Date"), New Notes (and the related Holdings
guarantee) in exchange for all Old Notes tendered prior thereto in the Exchange
Offer and (iv) if obligated to file the Shelf Registration Statement, Holdings
and the Company will cause to be filed the Shelf Registration Statement with the
Commission on or prior to 45 days after such filing obligation arises and to
cause the Shelf Registration to be declared effective by the Commission on or
prior to 120 days after such obligation arises. If (a) Holdings and the Company
fail to file any of the Registration Statements required by the Registration
Rights Agreement on or before the date specified for such filing, (b) any of
such Registration Statements is not declared effective by the Commission on or
prior to the date specified for such effectiveness (the "Effectiveness Target
Date"), or (c) Holdings and the Company fail to Consummate the Exchange Offer
within 30 business days of the Effectiveness Target Date with respect to the
Exchange Offer Registration Statement, or (d) the Shelf Registration Statement
or the Exchange Offer Registration Statement is declared effective but
thereafter ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the period specified in the Registration
Rights Agreement (each such event referred to in clauses (a) through (d) above a
"Registration Default"), then the Company will pay Liquidated Damages to each
Holder of Old Notes, with respect to the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to $.05
per week per $1,000 principal amount of Old Notes held by such Holder. The
amount of the Liquidated Damages will increase by an additional $.05 per week
per $1,000 principal amount of Old Notes with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of Liquidated Damages of $.30 per week per $1,000 principal amount of Old Notes.
All accrued Liquidated Damages will be paid by the Company on each Damages
Payment Date to the Global Note Holder by wire transfer of immediately available
funds or by federal funds check and to Holders of Certificated Securities by
wire transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults, the accrual of Liquidated Damages will cease.
Holders of Old Notes will be required to make certain representations to the
Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will
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be required to deliver information to be used in connection with the Shelf
Registration Statement and to provide comments on the Shelf Registration
Statement within the time periods set forth in the Registration Rights Agreement
in order to have their Old Notes included in the Shelf Registration Statement
and benefit from the provisions regarding Liquidated Damages set forth above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which is filed as an exhibit to the Exchange Offer Registration Statement of
which this Prospectus is a part.
Following the consummation of the Exchange Offer, holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old Notes
will continue to be subject to certain restrictions on transfer. Accordingly,
the liquidity of the market for such Old Notes could be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Old Notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue $1,000 principal amount of New Notes
in exchange for each $1,000 principal amount of outstanding Old Notes accepted
in the Exchange Offer. Holders may tender some or all of their Old Notes
pursuant to the Exchange Offer. However, Old Notes may be tendered only in
integral multiples of $1,000.
The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that (i) the New Notes bear a Series B designation and a
different CUSIP Number from the Old Notes, (ii) the New Notes have been
registered under the Securities Act and hence will not bear legends restricting
the transfer thereof and (iii) the holders of the New Notes will not be entitled
to certain rights under the Registration Rights Agreement, including the
provisions providing for an increase in the interest rate on the Old Notes in
certain circumstances relating to the timing of the Exchange Offer, all of which
rights will terminate when the Exchange Offer is terminated. The New Notes will
evidence the same debt as the Old Notes and will be entitled to the benefits of
the Indenture.
As of the date of this Prospectus, $110,000,000 aggregate principal amount
of Old Notes were outstanding. This Prospectus and the Letter of Transmittal
will be mailed initially to the holders of record of the Old Notes as of the
close of business on , 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 or 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 holders
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 the
stated redemption price at maturity of such New Note was originally issued, 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 accrued (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
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to include market discount in income currently, once made, applies to all market
discount obligations 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 but equal to or less than
the sum of all amounts payable on such New Notes after the purchase date will be
considered to have purchased such New Notes with "amortizable bond premium."
Under the amortizable bond premium rules, the amount of 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 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 91 I (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
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Security number, (b) furnishes an incorrect TIN, (c) is notified by the Internal
Revenue Service that it 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 on 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 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 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.
85
<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.
86
<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
NONRECURRING ASSET 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
Nonrecurring asset write-off................................ 1,836
Deferred tax provision...................................... (384) 577 176
Loss (income) from equity investments, net.................. 3,397 (1,176) (2,553)
Income from discontinued operations, net.................... (695) (426) (111)
Gain on sale of discontinued operation, net................. (2,573)
Changes in assets and liabilities:
Accounts receivable....................................... (3,394) (831) (8,244)
Inventories............................................... 925 (1,825) (2,931)
Prepaid expenses and other................................ (178) (2,055) 1,465
Accounts payable.......................................... 3,132 833 3,181
Accrued expenses.......................................... (247) 261 367
Other..................................................... 2,548 200 124
------ ------- -------
Net cash provided by operating activities............... 17,330 16,165 18,011
------ ------- -------
INVESTING ACTIVITIES:
Purchases of equipment........................................ (8,810) (11,543) (8,429)
Proceeds from sale of discontinued operation.................. 19,130
Proceeds from sale of assets.................................. 114 18 42
------ ------- -------
Net cash provided by (used in) investing activities..... (8,696) 7,605 (8,387)
------ ------- -------
FINANCING ACTIVITIES:
Investment by Springs......................................... (8,704) (23,774) (8,982)
Principal payments under capital lease obligations............ (43) (87)
------ ------- -------
Net cash used in financing activities................... (8,704) (23,817) (9,069)
------ ------- -------
NET CHANGE IN CASH.............................................. (70) (47) 555
CASH, BEGINNING OF YEAR......................................... 146 76 29
------ ------- -------
CASH, END OF YEAR............................................... $ 76 $ 29 $ 584
------ ------- -------
------ ------- -------
CASH PAID FOR INTEREST.......................................... $ 401 $ 401 $ 401
------ ------- -------
------ ------- -------
</TABLE>
See notes to financial statements.
F-5
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS
FISCAL YEARS ENDED JANUARY 1, 1994, DECEMBER 31, 1994 AND DECEMBER 30, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION
Fort Mill A Inc., a wholly-owned subsidiary of Springs Industries, Inc.
("Springs"), is a holding company whose sole asset is 100% of the outstanding
stock of Clark-Schwebel, Inc. The accompanying financial statements include the
assets, liabilities and results of operations of Fort Mill A Inc. and Clark-
Schwebel, Inc. on a consolidated basis, and also include certain liabilities and
expenses that historically were accounted for only at the Springs--parent
company level. The consolidated entity is referred to herein as the "Company".
The Company consists primarily of the operations, assets and liabilities of
manufacturing facilities located in Anderson, SC, Statesville, NC, Cleveland,
GA, and Washington, GA, which produce woven fiber glass and aramid fabrics. The
Company's products are used in electronic circuit boards, coated and laminated
composites, aircraft construction and protective apparel such as anti-ballistic
vests and helmets.
The financial statements have been prepared generally as if the Company had
operated as a stand-alone entity for all periods presented. The financial
information included herein is not necessarily indicative of the financial
position and results of operations of the Company in the future. In addition,
these financial statements do not reflect any effects of the proposed change in
ownership transactions described in Note 2. The Company has not had significant
borrowings, and there was no allocation of Springs' consolidated borrowings or
related interest expense.
The Company's financial statements include intercompany charges allocated by
Springs for certain administrative services totaling $3,545, $2,452 and $3,041
for fiscal 1993, 1994 and 1995, respectively. Management considers the
allocation methods to be reasonable for the operations of the Company as a
subsidiary of Springs. As a stand-alone ongoing entity, the Company will not
incur such intercompany charges from Springs. Throughout the period covered by
these financial statements, the Company participated in Springs' centralized
cash management system and its cash funding requirements were met by Springs.
Intercompany balances with Springs have been included in "Investment by
Springs."
2. PROPOSED CHANGE IN OWNERSHIP TRANSACTIONS
On February 24, 1996, the Company and Springs signed an agreement with
certain affiliates of Vestar Equity Partners, L.P. which would result in a
change in the controlling ownership of the Company and a substantial payment of
cash to Springs.
Pursuant to an Agreement and Plan of Merger ("Agreement"), Vestar/CS Holding
Company L.L.C. ("Holding", a Delaware limited liability company), may elect to
purchase all of the outstanding stock of Fort Mill A Inc. for approximately
$192,500 (the "Cash Election").
If the Cash Election is not made, a subsidiary of Holding would merge with
the Company and a recapitalization of the Company would occur in which Springs
would receive (i) approximately $155,000 in cash ("the Cash Distribution"), (ii)
common stock equivalent to 20% ownership on a fully diluted basis, and (iii)
14.223% Series A Preferred Stock, par value $.01 per share, having an aggregate
liquidation value of approximately $30,000 ("Series A Preferred Stock"). On the
closing date, Holding and certain members of the Company's management would own
(i) 80% of the fully diluted common stock and (ii) 14.223% Series B
Participating Preferred Stock, par value $.01 per share, having an aggregate
liquidation value of approximately $25,000 ("Series B Preferred Stock").
F-6
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. PROPOSED CHANGE IN OWNERSHIP TRANSACTIONS--(CONTINUED)
The purchase price under the Cash Election and the amount of the Cash
Distribution in the recapitalization are both subject to adjustment based on the
level of working capital, as defined, as of the closing date. Both the Cash
Election and the recapitalization are subject to certain conditions and
approvals required by the Agreement.
As of December 30, 1995, the authorized capital stock of the Company
consisted of 1,000 shares of common stock, 100 of which were outstanding and
owned by Springs. If the Cash Election is not made, the authorized capital stock
of the merged company will include shares of Series A Preferred Stock; shares of
Series B Preferred Stock; and shares of Common Stock. In certain circumstances,
dividends on the Series A and B Preferred Stock may be non-cash. The merged
company, under certain circumstances, may be required to redeem a portion or all
of the Series A and B Preferred Stock. Under other circumstances involving a
public offering of Common Stock, the merged company may require holders of
Series A and B Preferred Stock to convert their shares to Common Stock. A
Securityholders Agreement also contains certain transfer restrictions,
registration rights and other matters applicable to the Series A and B Preferred
Stock and Common Stock, including voting rights and board representation.
Under both the Cash Election and the recapitalization, Springs has agreed to
(i) assume responsibility for repayment of the Industrial Revenue Bonds
described in Note 6, (ii) pay certain accrued employee benefits (which totaled
approximately $487 as of December 30, 1995), (iii) provide indemnification for
certain environmental, tax and other matters (including the environmental matter
described in Note 12 for which the Company had an accrual of $175 as of December
30, 1995) and (iv) to retain the accounts receivable from one customer (which
totaled $2,782 as of December 30, 1995) and related $1,400 reserve described in
Note 3. At the closing date, all payable and receivable accounts between the
Company and Springs will be cancelled. Funds for the Cash Distribution or the
Cash Election are to come from a new bank credit facility, a proposed debt
offering by the Company and an equity contribution by Holding. At closing, the
Company is expected to incur significant transaction costs, including the
payment of a fee to an affiliate of Vestar Equity Partners, L.P.
Additional agreements include Transition Agreements for specified periods in
which Springs would be compensated for certain services provided to the Company,
and a Management Agreement that will specify services to be provided to the
Company by Holding or its affiliates.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of the significant accounting policies used in the
preparation of the financial statements of the Company.
FISCAL YEAR--The Company's operations are based on a fifty-two or
fifty-three week fiscal year ending on the Saturday closest to December 31. The
fiscal years ended January 1, 1994, December 31, 1994 and December 30, 1995 are
referred to herein as 1993, 1994 and 1995, respectively. The 1993, 1994 and 1995
fiscal years each consist of 52 weeks.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. These estimates
F-7
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
include the allowance for doubtful accounts receivable and the liabilities for
certain long-term benefit plans such as described in Note 8. Actual results
could differ from such estimates.
REVENUE RECOGNITION--Revenue from product sales is recognized at the time
ownership of the goods transfers to the customer and the earnings process is
complete. This generally occurs when goods are shipped.
ACCOUNTS RECEIVABLE--The Company establishes an allowance for doubtful
accounts based upon factors including the credit risk of specific customers,
historical trends and other information. The Company performs ongoing credit
evaluations of its customers' financial condition and generally requires no
collateral. The reserve for doubtful accounts was $641 at December 31, 1994 and
$2,133 at December 30, 1995. The reserve at December 30, 1995 included $1,400
applicable to $2,782 of accounts receivable from one customer (see Note 2). The
provision for uncollectible amounts was $344, $240 and $1,842 for fiscal 1993,
1994 and 1995, respectively. Write-offs in such years were $3,212, $29 and $349,
respectively.
INVENTORIES--Inventories are valued at the lower of cost or market. Cost is
determined using the last-in, first-out (LIFO) method for substantially all
inventories.
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment is recorded at
cost and depreciation is computed on a straight-line basis over the estimated
useful lives of the related assets. Estimated useful lives are as follows:
Land improvements........................................... 10 to 20 years
Buildings and improvements.................................. 20 to 40 years
Machinery and equipment..................................... 3 to 11 years
EQUITY INVESTMENTS--The Company owns equity interests in CS-Interglas AG
(headquartered in Germany), Asahi-Schwebel Co., Ltd. (located in Japan) and
Clark Schwebel Tech-Fab Company (located in Anderson, SC), which are accounted
for using the equity method of accounting.
FOREIGN CURRENCY--The foreign equity investments are translated at year-end
exchange rates. Equity income and losses are translated at the average rate
during the year. Cumulative translation adjustments are reflected as a separate
component of stockholder's equity. The effect of exchange rate changes on the
Convertible Notes (See Note 10) resulted in foreign currency transaction gains
(losses) of ($677), $1,405 and $1,016, in 1993, 1994 and 1995, respectively.
Because of the long-term nature of the Convertible Notes, such gains and losses
are also included in the cumulative translation adjustment.
POSTRETIREMENT BENEFITS--Postretirement benefits are accounted for pursuant
to Statement of Financial Accounting Standards ("SFAS") No. 106, Employers
Accounting for Postretirement Benefits Other Than Pensions. SFAS No. 106
requires that the projected future cost of providing postretirement benefits,
such as health care and life insurance, be recognized as an expense as employees
render service rather than when claims are incurred.
CERTAIN COMPENSATION PLANS--Certain key employees of the Company have been
granted stock options and certain types of deferred compensation related to
Springs' common stock under Springs' executive plans. Compensation expense
allocated from Springs for these grants was approximately $69, $125 and $145 for
1993, 1994 and 1995, respectively.
F-8
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
INCOME TAXES--Income taxes are accounted for pursuant to SFAS 109,
Accounting for Income Taxes. Under SFAS No. 109, deferred income tax assets and
liabilities represent the future income tax effect of temporary differences
between the book and tax bases of assets and liabilities assuming they will be
realized and settled at the amounts reported in the financial statements. The
provision for income taxes included in the accompanying financial statements is
computed in a manner consistent with SFAS No. 109, as if the Company filed
separate income tax returns.
The operating results of the Company are included in the consolidated
federal income tax return of Springs.
PER SHARE AMOUNTS--Historical per share amounts have been omitted because
the Company was a wholly-owned subsidiary of Springs for all periods presented.
4. INVENTORIES
Inventories consisted of the following:
1994 1995
------- -------
Finished goods.......................................... $10,903 $10,145
In process.............................................. 12,946 12,828
Raw materials and supplies.............................. 5,730 9,868
------- -------
Total at standard cost (which approximates average
cost)................................................. 29,579 32,841
Less LIFO reserve....................................... (3,719) (4,050)
------- -------
Inventories, net........................................ $25,860 $28,791
------- -------
------- -------
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
1994 1995
-------- --------
Land................................................... $ 1,306 $ 1,306
Buildings and improvements............................. 22,415 22,479
Machinery and equipment................................ 61,729 69,438
Construction in progress............................... 5,237 3,568
-------- --------
Total.................................................. 90,687 96,791
Less accumulated depreciation.......................... (37,287) (43,777)
-------- --------
Property, plant and equipment, net..................... $ 53,400 $ 53,014
-------- --------
-------- --------
The nonrecurring asset write-off in 1994 resulted from the retirement of
certain production equipment.
F-9
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
6. LONG-TERM DEBT
Long-term debt consisted of the following:
<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
-------- -------- --------
-------- -------- --------
</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. 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.
The following table sets forth the status of the Company's obligation under
SFAS No. 106 at December 30, 1995:
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)
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
------
------
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>
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>
F-11
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. INCOME TAXES--(CONTINUED)
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 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. Conversion would
result in the Company holding additional common shares which would represent
approximately 17% 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
F-12
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. EQUITY INVESTMENTS--(CONTINUED)
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.
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>
11. MAJOR CUSTOMERS, CERTAIN CONCENTRATIONS, AND FAIR VALUE OF
FINANCIAL INSTRUMENTS
Sales to two customers aggregated 37%, 40% and 42% of net sales during
fiscal 1993, 1994 and 1995, respectively. 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.
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--(CONTINUED)
The Company currently buys substantially all of its fiberglass yarn, an
important component of its products, from two suppliers and substantially all of
its aramid yarn from one supplier. There are a limited number of manufacturers
of fiberglass yarn and aramid yarn.
The Company's financial instruments include cash, accounts receivable,
Convertible Notes, accounts payable and long-term debt. Management estimates
that the carrying value of such instruments approximates fair value.
12. COMMITMENTS AND CONTINGENCIES
The Company leases certain machinery and equipment under noncancelable
operating leases. Rent expense attributed to such leases was $583 in 1993, $432
in 1994, and $384 in 1995.
Future minimum payments under the non-cancelable operating leases as of
December 30, 1995 were as follows:
1996................................................................ $337
1997................................................................ 304
1998................................................................ 64
1999................................................................ 4
----
$709
----
----
The Company is involved in administrative proceedings governed by
environmental laws and regulations, including proceedings under the
Comprehensive Environmental Response, Compensation and Liability Act. The
potential costs related to environmental matters are uncertain due to such
factors as: the unknown magnitude of possible pollution and cleanup costs; the
complexity and evolving nature of governmental laws and regulations and their
interpretations; the timing, varying costs and effectiveness of alternative
cleanup technologies; the determination of the liability in proportion to the
respective liabilities of other potential responsible parties; and the extent,
if any, to which such costs are recoverable from insurance or other parties. The
Company has accrued $175 as of December 30, 1995, which represents management's
best estimate of the probable liability concerning all known environmental
matters. This accrual has not been reduced by any potential insurance recovery.
There was no material provision for environmental matters in 1993, 1994 or 1995.
In the opinion of management, the ultimate disposition of these matters will not
materially affect the Company's financial position or results of operations (see
Note 2).
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.
F-14
<PAGE>
FORT MILL A INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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)
3. LONG-TERM DEBT
As of March 30, 1996 long-term debt consisted of:
Industrial Revenue Bonds payable in 2010, interest at 6.85% (See
Note 2)......................................................... $5,850
Capitalized lease obligation payable in equal monthly installments
of $7, through August 1997...................................... 114
------
Total....................................................... 5,964
Less current maturities........................................... (79)
------
Long-term debt.................................................... $5,885
------
------
Principal repayments required in fiscal 1996 total $57.
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.
Charlotte, North Carolina,
May 17, 1996
F-21
<PAGE>
DRAFT
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 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. A portion of the
contribution from the management investors was financed by loans from the
Company.
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.
F-23
<PAGE>
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>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements (the "Unaudited Pro
Forma Financial Statements") 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 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.
P-1
<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
---------- ----------- ---------
---------- ----------- ---------
Other data:
Cash interest expense................................... $ 0.4 $ 14.9 $ 15.3
EBITDA (7).............................................. 34.1 -- 34.1
</TABLE>
See notes to unaudited pro forma income statement.
P-2
<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.
(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 and the
elimination of Springs Industries' management fees as follows:
Stand-alone costs................................................... $ 1.8
Springs Industries' management fees................................. (3.0)
Amortization of goodwill over forty years, net of effect of reversal
of historical goodwill amortization............................... 0.7
-----
Total adjustment.............................................. ($0.5)
-----
-----
(3) The pro forma adjustment to interest expense under the new capital
structure is as follows:
10 1/2% Notes....................................................... $11.6
Term Loan and Revolving Credit Facility at 7 1/2%................... 3.8
Amortization of financing costs over a weighted average life of nine
years............................................................... 0.9
Less: historical interest expense................................... (0.4)
-----
Total adjustment.............................................. $15.9
-----
-----
(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.
(6) The pro forma adjustment reflects the accumulated dividend on the
liquidation value ($35.0) of Holdings Participating Preferred Stock at a per
annum rate of 12 1/2% compounded quarterly.
(7) EBITDA is defined as operating income plus depreciation, amortization,
non-recurring asset write-offs ($0 in 1995), and the provision for uncollectable
account related to trade accounts receivable retained by Springs Industries
($1.4 in 1995).
P-3
<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
----- ----- ---------
----- ----- ---------
Other data:
Cash interest expense..................................... $ 0.1 $ 3.7 $ 3.8
EBITDA (7)................................................ 11.5 -- 11.5
</TABLE>
See notes to unaudited pro forma income statement.
P-4
<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.
(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 and the
elimination of Springs Industries' management fees as follows:
Stand-alone costs................................................... $ 0.4
Springs Industries' management fees................................. (0.6)
Amortization of goodwill over forty years, net of effect of reversal
of historical goodwill amortization............................... 0.2
-----
Total adjustment.............................................. --
-----
-----
(3) The pro forma adjustment to interest expense under the new capital
structure is as follows:
10 1/2% Notes....................................................... $ 2.9
Term Loan and Revolving Credit Facility at 7 1/2%................... 0.9
Amortization of financing costs over a weighted average life of nine
years............................................................... 0.3
Less: historical interest expense................................... (0.1)
-----
Total adjustment.............................................. $ 4.0
-----
-----
(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.
(6) The pro forma adjustment reflects the accumulated dividend on the
liquidation value ($35.0) of Holdings Participating Preferred Stock at a per
annum rate of 12 1/2% compounded quarterly.
(7) EBITDA is defined as operating income plus depreciation and
amortization.
P-5
<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......................................... -- 35.0(5) 35.0
Common equity........................................... 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.
P-6
<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:
Purchase price.................................................... $192.9
Nonfinancing portion of fees and expenses......................... 3.2
------
Total purchase price........................................ 196.1
Less net assets acquired, including the effect of the net assets
retained by Springs Industries.................................. (143.4)
------
Excess of purchase price over net assets acquired............... $ 52.7
------
------
Management's preliminary allocation of such excess is as follows:
Inventories..................................................... $ 7.4
Property, plant and equipment................................... 15.0
Other assets.................................................... (5.0)
Goodwill........................................................ 45.8
Accrued liabilities............................................. (2.6)
Deferred income taxes: current portion.......................... (1.9)
long term portion............................................... (6.0)
------
$ 52.7
------
------
(2) The pro forma adjustment to other assets reflects certain other assets
retained by Springs Industries and the deferred financing costs incurred in
connection with the Transactions as follows:
Certain retained assets........................................... $(0.4)
Deferred financing costs.......................................... 8.1
-----
Total adjustment.............................................. $ 7.7
-----
-----
P-7
<PAGE>
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET--(CONTINUED)
AS OF MARCH 30, 1996
(DOLLARS IN MILLIONS)
(3) The pro forma adjustments to current liabilities of $0.3 and long-term
liabilities of $0.6 reflect environmental matters, accrued interest, accrued
long-term disability obligation and executive compensation retained by Springs
Industries.
(4) The pro forma adjustment to long-term debt reflects the following:
Industrial revenue bond obligations retained by Springs
Industries........................................................ $ (5.9)
Credit Agreement.................................................. 50.0
Notes............................................................. 110.0
------
Total adjustment............................................ $154.1
------
------
Additional payments due in the next twelve months for the long-term debt are
$0.8. Any payments under the Credit Agreement pursuant to the excess cash flow
calculation have been excluded from current maturities of long-term debt.
(5) The pro forma adjustment to total equity relates to the Acquisition as
follows:
Equity Contribution, net of loans to
Management Investors............................................ $ 44.2
Elimination of historical equity.................................. (137.0)
-------
Total adjustment............................................ $ (92.8)
-------
-------
Holdings Participating Preferred Stock's value of $36.0 has been assigned
based on its Liquidation Value, plus the estimated value of its participating
common equity interests. Management believes that this preliminary assignment of
value will not vary significantly from the ultimate valuation.
P-8
<PAGE>
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE [LOGO]
CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER
MADE BY THIS PROSPECTUS, AND, IF
GIVEN OR MADE BY THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE CLARK-SCHWEBEL, INC.
COMPANY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY
ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES OR ANY
OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER
OR SOLICITATION IS UNLAWFUL.
-------------------
TABLE OF CONTENTS
PAGE
Available Information................ i
Prospectus Summary................... 1
Risk Factors......................... 12
The Transactions..................... 18
Use of Proceeds...................... 20
Capitalization....................... 20 ----------------
Selected Historical Financial Data... 21 PROSPECTUS
Management's Discussion and ----------------
Analysis of Financial Condition and
Results of Operations.............. 23
The Business......................... 27
Management........................... 37
Security Ownership................... 41
Certain Relationships and Related
Transactions......................... 42
Description of Holdings Participating
Preferred Stock...................... 43
Description of Credit Agreement...... 43
Description of New Notes............. 45
The Exchange Offer................... 74 OFFER TO EXCHANGE ITS 10 1/2%
Certain Federal Income Tax
Considerations....................... 82 SERIES B SENIOR NOTES DUE
Plan of Distribution................. 85
Legal Matters........................ 86 2006 FOR ANY AND ALL OF ITS
Experts.............................. 86
Index to Financial Statements........ F-1 OUTSTANDING 10 1/2% SERIES A
Unaudited Pro Forma Financial
Statements......................... P-1 SENIOR NOTES DUE 2006
-------------------
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 May 29, 1996.
CLARK-SCHWEBEL HOLDINGS, INC.
By: /s/ WILLIAM D. BENNISON
..................................
Name: William D. Bennison
Title: President
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Donald R. Burnette
for the undersigned in any and all capacities, with the power of substitution,
to sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
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 May 29, 1996
.......................................
William D. Bennison
/s/ DONALD R. BURNETTE Vice President and Chief Financial May 29, 1996
....................................... Officer
Donald R. Burnette
/s/ JACK P. SCHWEBEL Chairman of the Board May 29, 1996
.......................................
Jack P. Schwebel
/s/ RICHARD C. WOLFE Executive Vice President and Director May 29, 1996
.......................................
Richard C. Wolfe
/s/ NORMAN W. ALPERT Director May 29, 1996
.......................................
Norman W. Alpert
/s/ JOHN D. HOWARD Director May 29, 1996
.......................................
John D. Howard
/s/ SANDER M. LEVY Director May 29, 1996
.......................................
Sander M. Levy
/s/ ARTHUR J. NAGLE Director May 29, 1996
.......................................
Arthur J. Nagle
/s/ DANIEL S. O'CONNELL Director May 29, 1996
.......................................
Daniel S. O'Connell
</TABLE>
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 May 29, 1996.
CLARK-SCHWEBEL, INC.
By: /s/ WILLIAM D. BENNISON
..................................
Name: William D. Bennison
Title: President
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Donald R. Burnette
for the undersigned in any and all capacities, with the power of substitution,
to sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
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 May 29, 1996
.......................................
William D. Bennison
/s/ DONALD R. BURNETTE Vice President and Chief Financial May 29, 1996
....................................... Officer
Donald R. Burnette
/s/ JACK P. SCHWEBEL Chairman of the Board May 29, 1996
.......................................
Jack P. Schwebel
/s/ RICHARD C. WOLFE Executive Vice President and Director May 29, 1996
.......................................
Richard C. Wolfe
/s/ NORMAN W. ALPERT Director May 29, 1996
.......................................
Norman W. Alpert
/s/ JOHN D. HOWARD Director May 29, 1996
.......................................
John D. Howard
/s/ SANDER M. LEVY Director May 29, 1996
.......................................
Sander M. Levy
/s/ ARTHUR J. NAGLE Director May 29, 1996
.......................................
Arthur J. Nagle
/s/ DANIEL S. O'CONNELL Director May 29, 1996
.......................................
Daniel S. O'Connell
</TABLE>
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.
3.1 Certificate of Incorporation of Clark-Schwebel Holdings, Inc.
3.2 By-laws of Clark-Schwebel Holdings, Inc.
3.3 Amended and Restated 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 including the Form of Subsidiary
Guarantees.
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.
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.
10.7 Transitional Services Agreement between Clark-Schwebel Holdings, Inc.
and Springs Industries, Inc.+
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
- -------
<C> <S>
10.8 Management Agreement, dated as of April 17, 1996, between Clark-Schwebel Holdings,
Inc. and Springs Industries, Inc.
10.9 Intellectual Property Security Agreement, dated as of April 17, 1996, among
Clark-Schwebel Holdings, Inc.
12.1 Statement Regarding Computation of Ratios of Earnings to Fixed Charges.+
21.1 Subsidiaries of the Registrant.+
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 (included in signature page).
25.1 Statement of Eligibility of Trustee on Form T-1.+
27.1 Financial Data Schedule.+
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Tender Instructions.
</TABLE>
- ------------
+ 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
- --------
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>
Kirkland & Ellis - DRAFT
May 28, 1996 (11:16a)
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;
-2-
<PAGE>
(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
-3-
<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
-4-
<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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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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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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(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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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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"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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"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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"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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"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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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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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.
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[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
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<PAGE>
than Purchaser or CS Finance; (c) 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 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.
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Exhibit 3.2
BYLAWS
OF
CLARK-SCHWEBEL HOLDINGS, INC.
(a Delaware corporation)
ARTICLE I - OFFICES
Section 1. Registered Office. The registered office of the corporation
in the State of Delaware shall be at 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the corporation's registered agent
at such address shall be The Corporation Trust Company. The registered office or
registered agent of the corporation may be changed from time to time by action
of the board of directors on the filing of a certificate or certificates as
required by law.
Section 2. Other Offices. The corporation may also have offices at
such other places, both within and without the State of Delaware, as the board
of directors may from time to time determine or the business of the corporation
may require.
ARTICLE II - MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year within 120 days after the close of the
immediately preceding fiscal year of the corporation or at such other time as
the board of directors shall decide. At such meeting, the stockholders shall
elect the directors of the corporation and conduct such other business as may
come before the meeting. The time and place of the annual meeting shall be
determined by the board of directors. Special meetings of the stockholders for
any other purpose may be held at such time and place, within or without the
State of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof. Special meetings of the stockholders may be
called by thepresident for any purpose and shall be called by the secretary if
directed by the board of directors.
Section 2. Notice. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice of every annual or special
meeting of the stockholders, stating the place, date, time, and, in the case of
special meetings, the purpose or purposes, of such meeting, shall be given to
each stockholder entitled to vote at such meeting not less than l0 nor more than
60 days before the date of the meeting. All such notices shall be delivered,
either personally or by mail, by or at the direction of the board of directors,
the president or the secretary, and if mailed, such notice shall be deemed to be
delivered when deposited in the United States mail with postage prepaid and
addressed to the stockholder at his or her address as it appears on the records
of the corporation.
Section 3. Stockholders List. The officer having charge of the stock
ledger of the corporation shall make, at least l0 days before every meeting of
the stockholders, a complete list arranged in alphabetical order of the
stockholders entitled to vote at such meeting, specifying the address of and the
number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during
<PAGE>
ordinary business hours, for a period of at least l0 days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 4. Quorum. The holders of a majority of the outstanding shares
of capital stock entitled to vote thereat, whether present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders, except as otherwise provided by statute or by the certificate of
incorporation. If a quorum is not present, the holders of the shares present in
person or represented by proxy at the meeting and entitled to vote thereat shall
have the power, by the affirmative vote of the holders of a majority of such
shares, to adjourn the meeting to another time or place. Unless the adjournment
is for more than thirty days or unless a new record date is set for the
adjourned meeting, no notice of the adjourned meeting need be given to any
stockholder, provided that the time and place of the adjourned meeting were
announced at the meeting at which the adjournment was taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting.
Section 5. Vote Required. When a quorum is present or represented by
proxy at any meeting, the vote of the holders of a majority of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the subject matter shall be the act of the stockholders, unless the question is
one upon which by express provisions of an applicable statute or of the
certificate of incorporation a different vote is required, in which case such
express provision shall govern and control the decision of such question.
Section 6. Voting Rights. Except as otherwise provided by the Delaware
General Corporation Law or by the certificate of incorporation of the
corporation or any amendments thereto and subject to Section 3 of Article VI
hereof, each stockholder shall at every meeting of the stockholders be entitled
to one vote in person or by proxy for each share of capital stock held by such
stockholder.
Section 7. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period.
Section 8. Action by Written Consent. Any action required to be taken
at any annual or special meeting of stockholders of the corporation, or any
action which may be taken at any annual or special meeting of such stockholders,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted, and shall be
delivered to the corporation by delivery to its registered office in the State
of Delaware or the corporation's principal place of business or an officer or
agent of the corporation having custody of the books in which proceedings of
meetings are recorded. All consents delivered in accordance with this section
shall be deemed to be recorded when so delivered. No written consent shall be
effective to take the corporate action referred to therein unless, within
2
<PAGE>
sixty days of the earliest date consent delivered to the corporation as required
by this section, written consents signed by the holders of a sufficient number
of shares to take such corporate action are recorded. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
Any action taken pursuant to such written consent of the stockholders shall have
the same force and effect as if taken by the stockholders at a meeting thereof.
ARTICLE III - DIRECTORS
Section 1. Number, Election and Term of Office. The initial board of
directors shall consist of one person. Thereafter, the number of directors shall
be established from time to time by resolution of the board of directors,
provided, however, that no vote to decrease the number of the directors of the
corporation shall shorten the term of any incumbent director.
The directors shall be elected at the annual meeting of stockholders,
except as provided in Section 3 of this Article III, and each director elected
shall hold office until the next annual meeting of stockholders and until a
successor is duly elected and qualified or until his or her death, resignation
or removal as hereinafter provided.
Section 2. Removal and Resignation. Any director or the entire board
of directors may be removed at any time, with or without cause, by the holders
of a majority of the shares of stock of the corporation then entitled to vote at
an election of directors, except as otherwise provided by statute. Any director
may resign at any time upon written notice to the corporation.
Section 3. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office though less than a quorum, and
each director so chosen shall hold office until the next annual meeting of
stockholders and until a successor is duly elected and qualified or until his or
her earlier death, resignation or removal as hereinafter provided.
Section 4. Annual Meetings. The annual meeting of each newly elected
board of directors shall be held without other notice than this bylaw
immediately after, and at the same place as, the annual meeting of stockholders.
Section 5. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at the
request of the president on at least 24 hours notice to each director, either
personally, by telephone, by mail, or by telegraph; in like manner and on like
notice the secretary must call a special meeting on the written request of a
majority of directors.
Section 6. Quorum. A majority of the total number of directors shall
constitute a quorum for the transaction of business. The vote of a majority of
directors present at a meeting at which a quorum is present shall be the act of
the board of directors. If a quorum shall not be present at any meeting of the
board of directors, the directors present thereat may adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present.
3
<PAGE>
Section 7. Committees. The board of directors may, by resolution
passed by a majority of the whole board, designate one or more committees. Each
committee shall consist of one or more of the directors of the corporation,
which, to the extent provided in such resolution and not otherwise limited by
statute, shall have and may exercise the powers of the board of directors in the
management and affairs of the corporation including without limitation the power
to declare a dividend and to authorize the issuance of stock. The board of
directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. Such committee or committees shall have such name or names as may
be determined from time to time by resolution adopted by the board of directors.
Each committee shall keep regular minutes of its meetings and report the same to
the directors when required.
Section 8. Committee Rules. Each committee of the board of directors
may fix its own rules of procedure and shall hold its meetings as provided by
such rules, except as may otherwise be provided by the resolution of the board
of directors designating such committee, but in all cases the presence of at
least a majority of the members of such committee shall be necessary to
constitute a quorum. In the event that a member and that member's alternate, if
alternates are designated by the board of directors as provided in Section 7 of
this Article III, of such committee is/are absent or disqualified, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in place of any
such absent or disqualified member.
Section 9. Communications Equipment. Members of the board of directors
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 10. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the board of directors, or of any
committee thereof, may be taken without a meeting if all members of the board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board of directors or
committee.
ARTICLE IV - OFFICERS
Section 1. Number. The officers of the corporation shall be elected by
the board of directors and shall consist of a president, one or more
vice-presidents, a secretary, a treasurer, and such other officers and assistant
officers as may be deemed necessary or desirable by the board of directors. Any
number of offices may be held by the same person. In its discretion, the board
of directors may choose not to fill any office for any period as it may deem
advisable, except the offices of president and secretary.
Section 2. Election and Term of Office. The officers of the
corporation shall be elected annually by the board of directors at the meeting
of the board of directors held after each annual meeting of stockholders. If the
election of officers shall not be held at such meeting, such
4
<PAGE>
election shall be held as soon thereafter as conveniently may be. Vacancies may
be filled or new offices created and filled at any meeting of the board of
directors. Each officer shall hold office until the next annual meeting of the
board of directors and until a successor is duly elected and qualified or until
his or her earlier death, resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
directors may be removed by the board of directors whenever in its judgment the
best interest of the corporation would be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term by the board of directors
then in office.
Section 5. Compensation. Compensation of all officers shall be fixed
by the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of the fact that he or she is also a director of the
corporation.
Section 6. The President. The president shall be the chief executive
officer of the corporation; shall preside at all meetings of the stockholders
and board of directors at which he or she is present; subject to the powers of
the board of directors, shall have general charge of the business, affairs and
property of the corporation, and control over its officers, agents and
employees; and shall see that all orders and resolutions of the board of
directors are carried into effect. The president shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the corporation, except
where required or permitted by law to be otherwise signed and executed and
except where the signing and execution thereof shall be expressly delegated by
the board of directors to some other officer or agent of the corporation. The
president shall have such other powers and perform such other duties as may be
prescribed by the board of directors or as may be provided in these bylaws.
Section 7. Vice Presidents. The vice-president, or if there shall be
more than one, the vice-presidents in the order determined by the board of
directors, shall, in the absence or disability of the president, perform the
duties and exercise the powers of the president and shall perform such other
duties and have such other powers as the board of directors may, from time to
time, determine or these bylaws may prescribe.
Section 8. The Secretary and Assistant Secretaries. The secretary
shall attend all meetings of the board of directors and all meetings of the
stockholders and record all the proceedings of the meetings of the corporation
and the board of directors in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. The secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the board of directors; perform such other duties as may be
prescribed by the board of directors, or president, under whose supervision he
or she shall be; shall have custody of the corporate seal of the corporation and
the secretary, or an assistant secretary, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by his or
her signature or by the signature of such assistant secretary. The board of
directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by his or her signature. The
assistant secretary, or if there be more than one, the assistant secretaries in
the order determined by the
5
<PAGE>
board of directors, shall, in the absence or disability of the secretary,
perform the duties and exercise the powers of the secretary and shall perform
such other duties and have such other powers as the board of directors may from
time to time prescribe.
Section 9. The Treasurer and Assistant Treasurer. The treasurer shall
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the corporation as may be ordered by the board of directors,
taking proper vouchers for such disbursements; and shall render to the president
and the board of directors, at its regular meeting or when the board of
directors so requires, an account of the corporation. If required by the board
of directors, the treasurer shall give the corporation a bond (which shall be
rendered every six years) in such sums and with such surety or sureties as shall
be satisfactory to the board of directors for the faithful performance of the
duties of the office of treasurer and for the restoration to the corporation, in
case of death, resignation, retirement, or removal from office, of all books,
papers, vouchers, money, and other property of whatever kind in the possession
or under the control of the treasurer belonging to the corporation. The
assistant treasurer, or if there shall be more than one, the assistant
treasurers in the order determined by the board of directors, shall in the
absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
Section 10. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these bylaws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
ARTICLE V - INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. Each person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he or she is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust or other
enterprise shall be indemnified and held harmless by the corporation to the
fullest extent which it is empowered to do so by the Delaware General
Corporation Law against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
6
<PAGE>
Section 2. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees) actually and reasonably incurred by him or
her in connection with the defense or settlement of such action or suit if he or
she acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Section 3. To the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Sections 1 and 2 of this Article V
or in defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith.
Section 4. Any indemnification under Sections 1 and 2 of this Article
V (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in Sections 1 and 2
of this Article V. Such determination shall be made (1) by the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
Section 5. Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director, officer, employee, or agent to create an
obligation to repay such amount if it shall ultimately be determined that he or
she is not entitled to be indemnified by the corporation as authorized in this
Article V.
Section 6. The indemnification and advancement of expenses provided by
or granted pursuant to the other sections of this Article V shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any other bylaw, agreement, vote
of stockholders, of disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office.
Section 7. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him or her and incurred by him or her in any such capacity, or arising out of
his or her status as such,
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whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of this Article V.
Section 8. For purposes of this Article V, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees and
agents so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise shall stand
in the same position under the provisions of this Article V with respect to the
resulting or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
Section 9. For purposes of this Article V, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article V.
Section 10. The indemnification and advancement of expenses provided
by, or granted pursuant to this Article V shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE VI - CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by
the president or a vice-president, and the secretary or an assistant secretary
of the corporation, certifying the number of shares owned by him or her in the
corporation. Where a certificate is signed (l) by a transfer agent or an
assistant transfer agent other than the corporation or its employee or (2) by a
registrar, other than the corporation or its employee, the signature of any such
president, vice-president, secretary, or assistant secretary may be facsimile.
In case any officer or officers have signed a certificate or certificates, or
whose facsimile signature or signatures have been used on certificate or
certificates, shall cease to be such officer or officers of the corporation
whether because of death, resignation or otherwise before such certificate or
certificates have been delivered by the corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures have been used on such certificate or certificates had not ceased
to be such officer or officers of the corporation. All certificates for shares
shall be consecutively numbered or otherwise identified. The name of the person
to whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the corporation. All
certificates surrendered to the
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corporation for transfer shall be cancelled, and no new certificate shall be
issued in replacement until the former certificate for a like number of shares
shall have been surrendered or cancelled, except as otherwise provided in
Section 2 with respect to lost, stolen or destroyed certificates.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 3. Fixing a Record Date. The board of directors may fix in
advance a record date for the determination of stockholders entitled to notice
of, and to vote at, any meeting of stockholders and any adjournment thereof;
stockholders entitled to consent to corporate action in writing without a
meeting; stockholders entitled to receive payment of any dividend or other
distribution or allotment of rights or entitled to exercise any rights in
respect to any change, conversion or exchange of stock; or, for the purpose of
any other lawful action, which record date may not precede the date on which the
resolution fixing such record date is adopted by the board of directors. The
record date for the determination of stockholders entitled to notice of, and to
vote at, a meeting of stockholders shall not be more than sixty (60) days nor
less than ten (10) days before the date of such meeting. The record date for the
determination of stockholders entitled to consent to corporate action in writing
without a meeting shall not be more than ten (10) days after the date upon which
the resolution fixing the record date is adopted by the board of directors. The
record date for the determination of stockholders with respect to any other
action shall not be more than sixty (60) days before the date of such action. If
no record date is fixed: the record date for determining stockholders entitled
to notice of, and to vote at, a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held; the record date for determining stockholders entitled
to consent to corporate action in writing without a meeting when no prior action
by the board of directors is required by the Delaware General Corporation Law,
shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the corporation by delivery
to its registered office in the State of Delaware, its principal place of
business, or an officer or agent of the corporation having custody of the book
in which proceedings of meetings of stockholders are recorded; and, the record
date for determining stockholders with respect to any other action shall be the
close of business on the day on which the board of directors adopts the
resolution relating thereto.
ARTICLE VII - GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for
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dividends such sum or sums as the directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies,
equalize dividends, repair or maintain any property of the corporation, or for
any other purpose, and the directors may modify or abolish any such reserve in
the manner in which it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other
orders for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer
or officers, or any agent or agents, of the corporation to enter into any
contract or to execute and deliver any instrument in the name of and on behalf
of the corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors may provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Delaware."
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
Section 7. Voting Securities Owned by Corporation. Voting securities
in any other corporation held by the corporation shall be voted by the president
or the vice president, unless the board of directors specifically confers
authority to vote with respect thereto, upon some other person or officer. Any
person authorized to vote securities shall have the power to appoint proxies,
with general power of substitution.
Section 8. Inspection of Books and Records. Any stockholder of record,
in person or by attorney or other agent, shall, upon written demand upon oath
stating the purpose thereof, have the right during the usual hours of business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such
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other writing which authorizes the attorney or other agent to so act on behalf
of the stockholder. The demand under oath shall be directed to the corporation
at its registered office in the State of Delaware or at its principal place of
business.
Section 9. Section Headings. Section headings in these bylaws are
for convenience of reference only and shall not be given any substantive effect
in limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision
of these bylaws is or becomes inconsistent with any provision of the certificate
of incorporation, the Delaware General Corporation Law or any other applicable
law, the provision of these bylaws shall not be given any effect to the extent
of such inconsistency but shall otherwise be given full force and effect.
ARTICLE VIII - AMENDMENTS
These bylaws may be amended, altered or repealed and new bylaws
adopted at any meeting of the board of directors by a majority vote. The fact
that the power to adopt, amend, alter or repeal the bylaws has been conferred
upon the board of directors shall not divest the stockholders of the same
powers.
Exhibit 3.3
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
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(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.
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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.
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(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.
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"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.
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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
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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
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<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.
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Exhibit A
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 3.4.
BYLAWS
OF
CLARK-SCHWEBEL, INC.
(a Delaware corporation)
ARTICLE I - OFFICES
Section 1. Registered Office. The registered office of the corporation
in the State of Delaware shall be at 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the corporation's registered agent
at such address shall be The Corporation Trust Company. The registered office or
registered agent of the corporation may be changed from time to time by action
of the board of directors on the filing of a certificate or certificates as
required by law.
Section 2. Other Offices. The corporation may also have offices at
such other places, both within and without the State of Delaware, as the board
of directors may from time to time determine or the business of the corporation
may require.
ARTICLE II - MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year within 120 days after the close of the
immediately preceding fiscal year of the corporation or at such other time as
the board of directors shall decide. At such meeting, the stockholders shall
elect the directors of the corporation and conduct such other business as may
come before the meeting. The time and place of the annual meeting shall be
determined by the board of directors. Special meetings of the stockholders for
any other purpose may be held at such time and place, within or without the
State of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof. Special meetings of the stockholders may be
called by the chairman or the president for any purpose and shall be called by
the secretary if directed by the board of directors.
Section 2. Notice. Whenever stockholders are required or permitted to
take action at a meeting, written or printed notice of every annual or special
meeting of the stockholders, stating the place, date, time, and, in the case of
special meetings, the purpose or purposes, of such meeting, shall be given to
each stockholder entitled to vote at such meeting not less than l0 nor more than
60 days before the date of the meeting. All such notices shall be delivered,
either personally or by mail, by or at the direction of the board of directors,
the chairman, the president or the secretary, and if mailed, such notice shall
be deemed to be delivered when deposited in the United States mail with postage
prepaid and addressed to the stockholder at his or her address as it appears on
the records of the corporation.
Section 3. Stockholders List. The officer having charge of the stock
ledger of the corporation shall make, at least l0 days before every meeting of
the stockholders, a complete list arranged in alphabetical order of the
stockholders entitled to vote at such meeting, specifying the address of and the
number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during
<PAGE>
ordinary business hours, for a period of at least l0 days prior
to the meeting, either at a place within the city where the meeting is to be
held, which place shall be specified in the notice of the meeting or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 4. Quorum. The holders of a majority of the outstanding shares
of capital stock entitled to vote thereat, whether present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders, except as otherwise provided by statute or by the certificate of
incorporation. If a quorum is not present, the holders of the shares present in
person or represented by proxy at the meeting and entitled to vote thereat shall
have the power, by the affirmative vote of the holders of a majority of such
shares, to adjourn the meeting to another time or place. Unless the adjournment
is for more than thirty days or unless a new record date is set for the
adjourned meeting, no notice of the adjourned meeting need be given to any
stockholder, provided that the time and place of the adjourned meeting were
announced at the meeting at which the adjournment was taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting.
Section 5. Vote Required. When a quorum is present or represented by
proxy at any meeting, the vote of the holders of a majority of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the subject matter shall be the act of the stockholders, unless the question is
one upon which by express provisions of an applicable statute or of the
certificate of incorporation a different vote is required, in which case such
express provision shall govern and control the decision of such question.
Section 6. Voting Rights. Except as otherwise provided by the Delaware
General Corporation Law or by the certificate of incorporation of the
corporation or any amendments thereto and subject to Section 3 of Article VI
hereof, each stockholder shall at every meeting of the stockholders be entitled
to one vote in person or by proxy for each share of capital stock held by such
stockholder.
Section 7. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period.
Section 8. Action by Written Consent. Any action required to be taken
at any annual or special meeting of stockholders of the corporation, or any
action which may be taken at any annual or special meeting of such stockholders,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted, and shall be
delivered to the corporation by delivery to its registered office in the State
of Delaware or the corporation's principal place of business or an officer or
agent of the corporation having custody of the books in which proceedings of
meetings are recorded. All consents delivered in accordance with this section
shall be deemed to be recorded when so delivered. No written consent shall be
effective to take the corporate action referred to therein unless, within
2
<PAGE>
sixty days of the earliest date consent delivered to the corporation as required
by this section, written consents signed by the holders of a sufficient number
of shares to take such corporate action are recorded. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
Any action taken pursuant to such written consent of the stockholders shall have
the same force and effect as if taken by the stockholders at a meeting thereof.
ARTICLE III - DIRECTORS
Section 1. Number, Election and Term of Office. The board of directors
shall not be less than one (1) nor more than eleven (11) in number. The initial
board of directors shall consist of one person. Thereafter, the number of
directors shall be established from time to time by resolution of the board of
directors, provided, however, that no vote to decrease the number of the
directors of the corporation shall shorten the term of any incumbent director.
The directors shall be elected at the annual meeting of stockholders,
except as provided in Section 3 of this Article III, and each director elected
shall hold office until the next annual meeting of stockholders and until a
successor is duly elected and qualified or until his or her death, resignation
or removal as hereinafter provided.
Section 2. Removal and Resignation. Any director or the entire board
of directors may be removed at any time, with or without cause, by the holders
of a majority of the shares of stock of the corporation then entitled to vote at
an election of directors, except as otherwise provided by statute. Any director
may resign at any time upon written notice to the corporation.
Section 3. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office though less than a quorum, and
each director so chosen shall hold office until the next annual meeting of
stockholders and until a successor is duly elected and qualified or until his or
her earlier death, resignation or removal as hereinafter provided.
Section 4. Annual Meetings. The annual meeting of each newly elected
board of directors shall be held without other notice than this bylaw
immediately after, and at the same place as, the annual meeting of stockholders.
Section 5. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution of
the board. Special meetings of the board of directors may be called by or at the
request of the chairman or the president on at least 24 hours notice to each
director, either personally, by telephone, by mail, or by telegraph; in like
manner and on like notice the secretary must call a special meeting on the
written request of a majority of directors.
Section 6. Quorum. A majority of the total number of directors shall
constitute a quorum for the transaction of business. The vote of a majority of
directors present at a meeting at which a quorum is present shall be the act of
the board of directors. If a quorum shall not be present
3
<PAGE>
at any meeting of the board of directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 7. Committees. The board of directors may, by resolution
passed by a majority of the whole board, designate one or more committees. Each
committee shall consist of one or more of the directors of the corporation,
which, to the extent provided in such resolution and not otherwise limited by
statute, shall have and may exercise the powers of the board of directors in the
management and affairs of the corporation including without limitation the power
to declare a dividend and to authorize the issuance of stock. The board of
directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. Such committee or committees shall have such name or names as may
be determined from time to time by resolution adopted by the board of directors.
Each committee shall keep regular minutes of its meetings and report the same to
the directors when required.
Section 8. Committee Rules. Each committee of the board of directors
may fix its own rules of procedure and shall hold its meetings as provided by
such rules, except as may otherwise be provided by the resolution of the board
of directors designating such committee, but in all cases the presence of at
least a majority of the members of such committee shall be necessary to
constitute a quorum. In the event that a member and that member's alternate, if
alternates are designated by the board of directors as provided in Section 7 of
this Article III, of such committee is/are absent or disqualified, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the board of directors to act at the meeting in place of any
such absent or disqualified member.
Section 9. Communications Equipment. Members of the board of directors
or any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 10. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the board of directors, or of any
committee thereof, may be taken without a meeting if all members of the board or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the board of directors or
committee.
ARTICLE IV - OFFICERS
Section 1. Number. The officers of the corporation shall be elected by
the board of directors and shall consist of a chairman of the board, a
president, one or more vice-presidents, a secretary, a treasurer, and such other
officers and assistant officers as may be deemed necessary or desirable by the
board of directors. Any number of offices may be held by the same person. In its
discretion, the board of directors may choose not to fill any office for any
period as it may deem advisable, except the offices of president and secretary.
4
<PAGE>
Section 2. Election and Term of Office. The officers of the
corporation shall be elected annually by the board of directors at the meeting
of the board of directors held after each annual meeting of stockholders. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as conveniently may be. Vacancies may be filled or new
offices created and filled at any meeting of the board of directors. Each
officer shall hold office until the next annual meeting of the board of
directors and until a successor is duly elected and qualified or until his or
her earlier death, resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of
directors may be removed by the board of directors whenever in its judgment the
best interest of the corporation would be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term by the board of directors
then in office.
Section 5. Compensation. Compensation of all officers shall be fixed
by the board of directors, and no officer shall be prevented from receiving such
compensation by virtue of the fact that he or she is also a director of the
corporation.
Section 6. Chairman of the Board. The chairman of the board shall be
the chief executive officer of the corporation, and shall have the powers and
perform the duties incident to that position. Subject to the powers of the board
of directors, he or she shall be in the general and active charge of the entire
business and affairs of the corporation, and shall be its chief policy making
officer. He or she shall preside at all meetings of the board of directors and
stockholders and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or provided in these bylaws.
Whenever the president is unable to serve, by reason of sickness, absence or
otherwise, the chairman of the board shall perform all the duties and
responsibilities and exercise all the powers of the president.
Section 7. The President. The president shall, subject to the powers
of the board of directors, and the chairman of the board, shall have general
charge of the business, affairs and property of the corporation, and control
over its officers, agents and employees; and shall see that all orders and
resolutions of the board of directors are carried into effect. The president
shall execute bonds, mortgages and other contracts requiring a seal, under the
seal of the corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be expressly delegated by the board of directors to some other officer or
agent of the corporation. The president shall have such other powers and perform
such other duties as may be prescribed by the chairman of the board or the board
of directors or as may be provided in these bylaws.
Section 8. Vice Presidents. The vice-president, or if there shall be
more than one, the vice-presidents in the order determined by the board of
directors, shall, in the absence or disability of the president, perform the
duties and exercise the powers of the president and shall perform such other
duties and have such other powers as the board of directors may, from time to
time, determine or these bylaws may prescribe.
5
<PAGE>
Section 9. The Secretary and Assistant Secretaries. The secretary
shall attend all meetings of the board of directors and all meetings of the
stockholders and record all the proceedings of the meetings of the corporation
and the board of directors in a book to be kept for that purpose and shall
perform like duties for the standing committees when required. The secretary
shall give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the board of directors; perform such other duties as may be
prescribed by the board of directors, the chairman or president, under whose
supervision he or she shall be; shall have custody of the corporate seal of the
corporation and the secretary, or an assistant secretary, shall have authority
to affix the same to any instrument requiring it and when so affixed, it may be
attested by his or her signature or by the signature of such assistant
secretary. The board of directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
or her signature. The assistant secretary, or if there be more than one, the
assistant secretaries in the order determined by the board of directors, shall,
in the absence or disability of the secretary, perform the duties and exercise
the powers of the secretary and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
Section 10. The Treasurer and Assistant Treasurer. The treasurer shall
have the custody of the corporate funds and securities; shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name and
to the credit of the corporation as may be ordered by the board of directors,
taking proper vouchers for such disbursements; and shall render to the chairman
or the president and the board of directors, at its regular meeting or when the
board of directors so requires, an account of the corporation. If required by
the board of directors, the treasurer shall give the corporation a bond (which
shall be rendered every six years) in such sums and with such surety or sureties
as shall be satisfactory to the board of directors for the faithful performance
of the duties of the office of treasurer and for the restoration to the
corporation, in case of death, resignation, retirement, or removal from office,
of all books, papers, vouchers, money, and other property of whatever kind in
the possession or under the control of the treasurer belonging to the
corporation. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors, shall in
the absence or disability of the treasurer, perform the duties and exercise the
powers of the treasurer and shall perform such other duties and have such other
powers as the board of directors may from time to time prescribe.
Section 11. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these bylaws, shall have such authority and perform such duties
as may from time to time be prescribed by resolution of the board of directors.
ARTICLE V - INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. Each person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he or she is
or was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust or other
enterprise shall be indemnified and held harmless by the corporation to the
fullest extent which it is empowered to do so by the Delaware
6
<PAGE>
General Corporation Law against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him or
her in connection with such action, suit or proceeding if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
Section 2. The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorney's fees) actually and reasonably incurred by him or
her in connection with the defense or settlement of such action or suit if he or
she acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Section 3. To the extent that a director, officer, employee or agent
of a corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Sections 1 and 2 of this Article V
or in defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith.
Section 4. Any indemnification under Sections 1 and 2 of this Article
V (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
or she has met the applicable standard of conduct set forth in Sections 1 and 2
of this Article V. Such determination shall be made (1) by the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
Section 5. Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director, officer, employee, or agent to create an
obligation to repay such amount if it shall ultimately be determined that he or
she is not entitled to be indemnified by the corporation as authorized in this
Article V.
7
<PAGE>
Section 6. The indemnification and advancement of expenses provided by
or granted pursuant to the other sections of this Article V shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any other bylaw, agreement, vote
of stockholders, of disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office.
Section 7. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him or her and incurred by him or her in any such capacity, or arising out of
his or her status as such, whether or not the corporation would have the power
to indemnify him or her against such liability under the provisions of this
Article V.
Section 8. For purposes of this Article V, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees and
agents so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise shall stand
in the same position under the provisions of this Article V with respect to the
resulting or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued.
Section 9. For purposes of this Article V, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article V.
Section 10. The indemnification and advancement of expenses provided
by, or granted pursuant to this Article V shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE VI - CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by
the chairman or the president or a vice-president, and the secretary or an
assistant secretary of the corporation, certifying the number of shares owned by
him or her in the corporation. Where a certificate is signed (l) by a transfer
agent or an assistant transfer agent other than the corporation or its employee
or (2) by a registrar,
8
<PAGE>
other than the corporation or its employee, the signature of any such chairman,
president, vice-president, secretary, or assistant secretary may be facsimile.
In case any officer or officers have signed a certificate or certificates, or
whose facsimile signature or signatures have been used on certificate or
certificates, shall cease to be such officer or officers of the corporation
whether because of death, resignation or otherwise before such certificate or
certificates have been delivered by the corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures have been used on such certificate or certificates had not ceased
to be such officer or officers of the corporation. All certificates for shares
shall be consecutively numbered or otherwise identified. The name of the person
to whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the books of the corporation. All
certificates surrendered to the corporation for transfer shall be cancelled, and
no new certificate shall be issued in replacement until the former certificate
for a like number of shares shall have been surrendered or cancelled, except as
otherwise provided in Section 2 with respect to lost, stolen or destroyed
certificates.
Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a bond
in such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost, stolen or destroyed.
Section 3. Fixing a Record Date. The board of directors may fix in
advance a record date for the determination of stockholders entitled to notice
of, and to vote at, any meeting of stockholders and any adjournment thereof;
stockholders entitled to consent to corporate action in writing without a
meeting; stockholders entitled to receive payment of any dividend or other
distribution or allotment of rights or entitled to exercise any rights in
respect to any change, conversion or exchange of stock; or, for the purpose of
any other lawful action, which record date may not precede the date on which the
resolution fixing such record date is adopted by the board of directors. The
record date for the determination of stockholders entitled to notice of, and to
vote at, a meeting of stockholders shall not be more than sixty (60) days nor
less than ten (10) days before the date of such meeting. The record date for the
determination of stockholders entitled to consent to corporate action in writing
without a meeting shall not be more than ten (10) days after the date upon which
the resolution fixing the record date is adopted by the board of directors. The
record date for the determination of stockholders with respect to any other
action shall not be more than sixty (60) days before the date of such action. If
no record date is fixed: the record date for determining stockholders entitled
to notice of, and to vote at, a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held; the record date for determining stockholders entitled
to consent to corporate action in writing without a meeting when no prior action
by the board of directors is required by the Delaware General Corporation Law,
shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the corporation by delivery
to its registered office in
9
<PAGE>
the State of Delaware, its principal place of business, or an officer or agent
of the corporation having custody of the book in which proceedings of meetings
of stockholders are recorded; and, the record date for determining stockholders
with respect to any other action shall be the close of business on the day on
which the board of directors adopts the resolution relating thereto.
ARTICLE VII - GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, equalize dividends, repair or
maintain any property of the corporation, or for any other purpose, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other
orders for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or officers, agent or agents of the corporation, and in such
manner, as shall be determined by resolution of the board of directors or a duly
authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any officer
or officers, or any agent or agents, of the corporation to enter into any
contract or to execute and deliver any instrument in the name of and on behalf
of the corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall
be fixed by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors may provide a
corporate seal which shall be in the form of a circle and shall have inscribed
thereon the name of the corporation and the words "Corporate Seal, Delaware."
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
10
<PAGE>
Section 7. Voting Securities Owned by Corporation. Voting securities
in any other corporation held by the corporation shall be voted by the chairman,
the president or the vice president, unless the board of directors specifically
confers authority to vote with respect thereto, upon some other person or
officer. Any person authorized to vote securities shall have the power to
appoint proxies, with general power of substitution.
Section 8. Inspection of Books and Records. Any stockholder of record,
in person or by attorney or other agent, shall, upon written demand upon oath
stating the purpose thereof, have the right during the usual hours of business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
The demand under oath shall be directed to the corporation at its registered
office in the State of Delaware or at its principal place of business.
Section 9. Section Headings. Section headings in these bylaws are
for convenience of reference only and shall not be given any substantive effect
in limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision
of these bylaws is or becomes inconsistent with any provision of the certificate
of incorporation, the Delaware General Corporation Law or any other applicable
law, the provision of these bylaws shall not be given any effect to the extent
of such inconsistency but shall otherwise be given full force and effect.
ARTICLE VIII - AMENDMENTS
These bylaws may be amended, altered or repealed and new bylaws
adopted at any meeting of the board of directors by a majority vote. The fact
that the power to adopt, amend, alter or repeal the bylaws has been conferred
upon the board of directors shall not divest the stockholders of the same
powers.
11
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
<PAGE>
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.
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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.
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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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"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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22
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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(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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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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(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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29
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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(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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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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43
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
<PAGE>
50
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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53
(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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54
(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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55
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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56
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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57
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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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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62
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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65
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.
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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.
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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
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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.
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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
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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)
A-3
<PAGE>
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.
A-4
<PAGE>
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
A-5
<PAGE>
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
A-6
<PAGE>
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.
A-7
<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:
B-1
<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 4.4
CLARK-S ACQUISITION CORPORATION (to be merged into
Clark-Schwebel, Inc.)
CS FINANCE CORPORATION (to be merged into
Clark-Schwebel, Inc.)
$110,000,000
10 1/2% Senior Notes due 2006
PURCHASE AGREEMENT
April 12, 1996
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
CS FIRST BOSTON CORPORATION
LAZARD FRERES & CO. LLC
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
140 Broadway
New York, New York 10005
Ladies & Gentlemen:
Each of Clark-S Acquisition Corporation, a Delaw re corporation ("Clark-S
Acquisition"), CS Finance Corporation of Delaware, a Delaware corporation ("CS
Finance", and together with Clark-S Acquisition, the "Company") and
Clark-Schwebel Holdings, Inc., a Delaware corporation ("Holdings") (but for
Holdings, only with respect to Sections 5 and 6 herein) agrees with you as
follows:
1. The Notes. The Company proposes to issue and sell to Donaldson, Lufkin
& Jenrette Securities Corporation, Bear, Stearns & Co. Inc., CS First Boston
Corporation and Lazard Freres & Co. LLC (each, a "Purchaser," and collectively,
the "Purchasers"), in the respective amounts set forth on Schedule I hereto, an
aggregate of $110,000,000 principal amount of 10 1/2% Senior Notes due 2006 (the
"Series A Notes"). The Series A Notes are to be issued pursuant to an indenture
(the "Indenture") to be dated as of April 17, 1996 between Clark-S Acquisition,
CS Finance, Holdings and Fleet National Bank, as trustee (the "Trustee").
Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Indenture.
<PAGE>
Pursuant to an Agreement and Plan of Merger dated as of February 24, 1996,
by and among Vestar/CS Holding Company, L.L.C., a Delaware limited liability
company ("Vestar"), Clark-S Acquisition, Springs Industries, Inc., a South
Carolina corporation ("Springs Industries") and Fort Mill A Inc., a Delaware
corporation ("Fort Mill") (the "Acquisition Agreement"), Clark-S Acquisition
will purchase all of the issued and outstanding stock of Fort Mill from Springs
Industries (the "Acquisition"). Concurrently with the consummation of the
Acquisition, Clark-S Acquisition will merge into Fort Mill, with Fort Mill as
the surviving corporation, and CS Finance will merge into Clark-Schwebel, Inc.,
with Clark-Schwebel, Inc. as the surviving corporation. On the day following the
Acquisition, Fort Mill will merge into Clark-Schwebel, Inc., with
Clark-Schwebel, Inc. as the surviving corporation. The Series A Notes and the
Series B Notes (as defined herein) will be guaranteed (the "Notes Guarantee") by
Holdings. All agreements, representations and warranties of the Company set
forth in this Agreement are made as of the date of this Agreement but after
giving pro forma effect to the Acquisition and related mergers described above
(the "Mergers").
The proceeds to the Company from the sale to you of the Series A Notes,
together with the proceeds of an equity investment from Vestar and the initial
borrowings under the Credit Agreement (the "Credit Agreement"), to be dated the
Closing Date (as defined herein), among the Company, the lenders party thereto
and Chemical Bank, as agent (which Credit Agreement will be guaranteed (the
"Bank Guarantee", and together with the Notes Guarantee, the "Guarantees") by
Holdings), will be used to fund the consideration to be paid in connection with
the Acquisition.
The Series A Notes will be offered and sold to you pursuant to an
exemption from the registration requirements under the Securities Act of 1933,
as amended (the "Act"). The Company has prepared a preliminary offering
memorandum, dated March 25, 1996 (the "Preliminary Offering Memorandum"), and a
final offering memorandum, dated April 12, 1996 (the "Offering Memorandum"),
relating to the Company and the Series A Notes.
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Act, the Series A Notes
(and all securities issued in exchange therefor or in substitution thereof)
shall bear the following legend:
"THE SECURITY (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 (THE "SECURITIES ACT"), AND THE SECURITY
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 SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A)
SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
2
<PAGE>
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, IN
A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144, OR 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), (b) TO
THE COMPANY, (c) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR (d) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT,
AND (2) IN EACH CASE, IN ACCORDANCE WITH ANY 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 FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
You have advised the Company that you will make offers (the "Exempt
Resales") of the Series A Notes purchased hereunder on the terms set forth in
the Offering Memorandum, as amended or supplemented, solely to persons whom you
reasonably believe to be "qualified institutional buyers," as defined in Rule
144A under the Act ("QIBs"), and to a limited number of institutional
"accredited investors" referred to in Rule 501(a)(1), (2), (3) or (7) under the
Act (each, an "Accredited Investor"). The QIBs and the Accredited Investors are
referred to herein as the "Eligible Purchasers." You will offer the Series A
Notes to such QIBs and Accredited Investors initially at a price equal to 100%
of the principal amount thereof. Such price may be changed at any time without
notice.
Holders (including subsequent transferees) of the Series A Notes will have
the registration rights set forth in the registration rights agreement relating
thereto (the "Registration Rights Agreement"), to be dated the Closing Date, in
substantially the form of Exhibit A hereto, for so long as such Series A Notes
constitute "Transfer Restricted Securities" (as defined in the Registration
Rights Agreement). Pursuant to the Registration Rights Agreement, Holdings and
the Company will agree to file with the Securities and Exchange Commission (the
"Commission"), under the circumstances set forth therein, (i) a registration
statement under the Act (the "Exchange Offer Registration Statement") relating
to the 10 1/2% Series B Senior Notes due 2006 (the "Series B Notes", and
together with the Series A Notes, the "Notes") (and the related guarantee by
Holdings of the Company's obligations under the Series B Notes) to be offered in
exchange for the Series A Notes (the "Exchange Offer"), and (ii) a shelf
registration statement pursuant to Rule 415 under the Act (the "Shelf
Registration Statement") relating to the resale by certain holders of the Series
A Notes, and to use their best efforts to cause such Registration Statements to
be declared effective. This Purchase Agreement (this "Agreement"), the Notes,
the Indenture, the Registration Rights Agreement, the Acquisition Agreement and
3
<PAGE>
the Credit Agreement are hereinafter sometimes referred to collectively as the
"Operative Documents."
2. Agreements to Sell and Purchase. On the basis of the representations
and warranties contained in this Agreement, and subject to its terms and
conditions, the Company agrees to issue and sell to each of you, and each of
you, severally but not jointly, agrees to purchase from the Company,
$110,000,000 aggregate principal amount of Series A Notes in the respective
principal amount set forth opposite your name on Schedule I hereto. The purchase
price for the Series A Notes shall be 97% of their principal amount.
3. Delivery and Payment. Delivery to the Purchasers of and payment for the
Series A Notes shall be made at 9:00 a.m., New York City time, on April 17, 1996
(the "Closing Date") at the offices of Kirkland & Ellis, 153 East 53rd Street,
Citicorp Center -- 29th Floor, New York, New York 10022, or such other time or
place as you and the Company shall designate.
One or more of the Series A Notes in definitive form, registered in the
name of Cede & Co., as nominee of The Depository Trust Company ("DTC"), or such
other names as the Purchasers may request upon at least two business days'
notice to the Company prior to the Closing Date, having an aggregate principal
amount designated by you (each, a "Global Note"), and one or more Series A Notes
in definitive form, registered in such names and denominations as you may so
request (each, a "Certificated Note"), shall be delivered by the Company to you
(or as you direct), against payment by you of the purchase price by wire
transfer of immediately available funds to the order of the Company. The Global
Note(s) and the Certificated Note(s), if any, in definitive form shall be made
available to you for inspection no later than 9:30 a.m.
on the business day immediately preceding the Closing Date.
4. Agreements of the Company. The Company agrees with each of you as
follows:
(a) Before completion of the distribution of the Series A Notes by you, to
advise you promptly and, if requested by you, confirm such advice in writing,
(i) of the issuance by any state securities commission of any stop order
suspending the qualification or exemption from qualification of any of the
Series A Notes for offering or sale in any jurisdiction, or the initiation of
any proceeding for such purpose by any state securities commission or other
regulatory authority, and (ii) before the earlier to occur of the Exchange
Offer and the effective date of the Shelf Registration Statement, to advise
you promptly, and if requested by you, confirm such advice in writing, of (A)
the happening of any event that makes any statement of a material fact made
in the Offering Memorandum untrue or that requires the making of any
additions to or changes in the Offering Memorandum in order to make the
statements therein, in the light of the circumstances under which they are
made, not misleading and (B) the issuance of any quarterly or annual
financial statements by the Company (copies of which shall be delivered to
you within one business day after issuance). The Company shall use its best
efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption of any of the Series A Notes under any state
securities or Blue Sky laws, and if at any time any state securities
commission or other regulatory authority shall issue an order suspending the
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qualification or exemption of any of the Series A Notes under any state
securities or Blue Sky laws, the Company shall use their best efforts to
obtain the withdrawal or lifting of such order at the earliest possible time.
(b) To furnish you, without charge, as many copies of the Preliminary
Offering Memorandum and the Offering Memorandum, and any amendments or
supplements thereto, as you may reasonably request. The Company consents to
the use of the Preliminary Offering Memorandum and the Offering Memorandum,
and any amendments and supplements thereto, by you in connection with Exempt
Resales.
(c) Not to amend or supplement the Preliminary Offering Memorandum or the
Offering Memorandum prior to the Closing Date unless you shall previously
have been advised thereof and shall not have objected thereto in writing
within five business days after being furnished a copy thereof. The Company
shall promptly prepare, upon your request, any amendment or supplement to the
Preliminary Offering Memorandum or the Offering Memorandum that may be
necessary or advisable in connection with Exempt Resales.
(d) If, after the date hereof and prior to consummation of any Exempt
Resales, any event shall occur as a result of which, in the judgment of the
Company or in the reasonable opinion of your counsel, it becomes necessary to
amend or supplement the Offering Memorandum in order to make the statements
therein, in the light of the circumstances when the Offering Memorandum is
delivered to an Eligible Purchaser which is a prospective purchaser, not
misleading, or if it is necessary to amend or supplement the Offering
Memorandum to comply with applicable law, promptly to prepare an appropriate
amendment or supplement to the Offering Memorandum so that the statements
therein as so amended or supplemented will not, in the light of the
circumstances when the Offering Memorandum is so delivered, be misleading, or
so the Offering Memorandum will comply with applicable law.
(e) To cooperate with you and your counsel in connection with the
qualification of the Notes under the state securities or Blue Sky laws of
such jurisdictions in the United States as you may request and to continue
such qualification in effect so long as required for the Exempt Resales;
provided, however that the Company shall not be required in connection
therewith to register or qualify as a foreign corporation where it is not now
so qualified or to take any action that would subject it to the service of
process in suits or taxation, other than as to matters and transactions
relating to the Exempt Resales, in any jurisdiction where it is not now so
subject. The Company will continue such qualification in effect so long as
required by law for distribution of the Series A Notes.
(f) Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, to pay all costs, expenses, fees
and taxes incident to and in connection with: (i) the preparation, printing,
processing, distribution and delivery of the Preliminary Offering Memorandum
and the Offering Memorandum (including, without limitation, financial
statements and exhibits) and all amendments and supplements thereto (but not,
however, legal fees and expenses of your counsel incurred in connection with
any of the foregoing), (ii) the preparation (including, without limitation,
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word processing and duplication costs) printing, processing, distribution and
delivery of this Agreement and the other Operative Documents (but not,
however, legal fees and expenses of your counsel incurred in connection with
any of the foregoing), and all preliminary and final Blue Sky memoranda and
all other agreements, memoranda, correspondence and other documents prepared
and delivered in connection herewith and with the Exempt Resales, (iii) the
issuance and delivery by the Company of the Notes, (iv) the qualification of
the Notes for offer and sale under the securities or Blue Sky laws of the
several states (including, without limitation, the reasonable fees and
disbursements of your counsel relating to such registration or
qualification), (v) furnishing such copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and all amendments and supplements
thereto, as may be reasonably requested for use in connection with Exempt
Resales, (vi) the preparation of certificates for the Notes (including,
without limitation, printing and engraving thereof), (vii) the fees,
disbursements and expenses of the Company's counsel and accountants, (viii)
the fees and expenses of the Trustee and its counsel under the Indenture,
(ix) all expenses and listing fees in connection with the application for
quotation of the Series A Notes in the National Association of Securities
Dealers, Inc. ("NASD") Automated Quotation System - PORTAL ("PORTAL"), (x)
all fees and expenses (including fees and expenses of counsel) of the Company
in connection with approval of the Notes by DTC for "book-entry" transfer,
(xi) any fees charged by rating agencies for rating the Notes, (xii) all
"road show" and other marketing expenses related to the preparation of
slides, videotapes and printed marketing materials, and travel, hotel, food
and entertainment expenses of affiliates of the Company and (xiii) the
performance by the Company of its other obligations under this Agreement and
the other Operative Documents.
(g) To use the proceeds from the sale of the Series A Notes in the manner
described in the Offering Memorandum under the caption "Use of Proceeds."
(h) Not to voluntarily claim, and to resist actively any attempts to
claim, the benefit of any usury laws against the holders of any Notes.
(i) To do and perform all things required to be done and performed under
this Agreement by them prior to or after the Closing Date and to satisfy all
conditions precedent on their part to the delivery of the Series A Notes that
are within its control.
(j) Not to sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Series A Notes in a manner that would require
the registration under the Act of the sale to you or Eligible Purchasers of
the Series A Notes.
(k) For so long as any of the Notes remain outstanding and during any
period in which the Company is not subject to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), to make
available to any QIB or beneficial owner of the Notes in connection with any
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sale thereof and any prospective purchaser of such Notes from such QIB or
beneficial owner, the information required by Rule 144A(d)(4) under the Act.
(l) To cause the Exchange Offer to be made in the appropriate form to
permit registration of the Series B Notes to be offered in exchange for the
Series A Notes and to comply with all applicable federal and state securities
laws in connection with the Exchange Offer.
(m) To use their best efforts to effect the inclusion of the Series A
Notes in PORTAL.
(n) During a period of five years following the date of this Agreement, to
deliver to each of you promptly upon their becoming available, copies of all
current, regular and periodic reports filed by the Company with the
Commission or any securities exchange or with any governmental authority
succeeding to any of the Commission's functions and such other publicly
available information concerning the Company as the Purchasers shall
reasonably request.
(o) Not to, and to use its reasonable best efforts to cause its affiliates
not to, offer, sell, contract to sell or grant any option to purchase or
otherwise transfer or dispose of any preferred stock or debt security issued
by the Company (other than the Series B Notes issuable in the Exchange
Offer), or any security convertible into or exchangeable or exercisable for
any such preferred stock or debt security, for a period of 90 days after the
Closing Date, without your prior written consent.
(p) Prior to or concurrently with the Closing, to enter into the
Registration Rights Agreement in substantially the form attached hereto as
Exhibit A in order to permit registration of the Series B Notes to be offered
in exchange for the Series A Notes as contemplated thereby.
(q) To comply with all of its agreements set forth in the Registration
Rights Agreement, and all agreements set forth in the representation letter
of the Company to DTC relating to the approval of the Notes by DTC for
"book-entry" transfer.
Notwithstanding any provision of this Agreement to the contrary, the
Company's obligations under paragraph (a) of this Section 4 shall terminate on
the dates set forth therein and under paragraphs (b) through (d) of this Section
4 shall terminate on the earliest to occur of (i) the second anniversary of the
Closing Date, (ii) the consummation of the Exchange Offer, (iii) the effective
date of the Shelf Registration Statement and (iv) the completion of the
distribution of Series A Notes by you and your affiliates pursuant to Exempt
Resales; provided, however, that, notwithstanding the foregoing, the Company
shall not be required to comply with paragraph (d) of this Section 4 for a
period of up to 30 days in each year following the Closing Date if, and only for
so long as (A) either (1)(y) the Company shall be engaged in a material
acquisition or disposition and (x)(I) the failure by the Company to disclose
such transaction in the Offering Memorandum, or any amendment or supplement
thereto, as then amended or supplemented, would cause such Offering Memorandum,
amendment or supplement thereto, to contain an untrue statement of a material
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fact or omit to state a material fact necessary in order to make the statements
therein not misleading, in the light of the circumstances under which they were
made, (II) information regarding the existence of such acquisition or
disposition has not then been publicly disclosed by or on behalf of the Company
and (III) a majority of the Board of Directors determines in the exercise of its
good faith judgment that disclosure of such acquisition or disposition would not
be in the best interest of the Company and its subsidiaries or would have a
material adverse effect on the consummation of such acquisition or disposition
or (2) a majority of the Board of Directors determines in the exercise of its
good faith judgment that compliance with the disclosure obligations set forth in
paragraph (d) of this Section 4 would otherwise have a material adverse effect
on the Company and its subsidiaries, taken as a whole, and (B) the Company
notifies you within two business days after the Board of Directors makes the
relevant determination set forth in clause (A).
5. Representations and Warranties. (a) Each of the Company and Holdings
represents and warrants, jointly and severally, to each of you that:
(i) The Offering Memorandum does not, and any supplement or
amendment to it will not, contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and warranties
contained in this paragraph (i) shall not apply to statements in or
omissions from the Offering Memorandum (or any supplement or amendment
thereto) made in reliance upon and in conformity with information relating
to you furnished to the Company in writing by you expressly for use
therein. No stop order preventing the use of the Preliminary Offering
Memorandum or the Offering Memorandum, or any amendment or supplement
thereto, or any order asserting that any of the transactions contemplated
by this Agreement are subject to the registration requirements of the Act,
has been issued.
(ii) When the Series A Notes are issued and delivered pursuant to
this Agreement, none of the Series A Notes will be of the same class
(within the meaning of Rule 144A under the Act) as securities of the
Company that are listed on a national securities exchange registered under
Section 6 of the Exchange Act or that are quoted in a United States
automated inter-dealer quotation system.
(iii) Each of Clark-Schwebel, Inc., Clark-S Acquisition, CS Finance
and Holdings and its subsidiaries has been duly organized and is validly
existing in good standing under the laws of its respective jurisdiction of
organization. Each of Clark-Schwebel, Inc., Clark-S Acquisition, CS
Finance and Holdings and its subsidiaries has all requisite corporate or
partnership power, as applicable, and authority to carry on its business
as it is currently being conducted and as described in the Offering
Memorandum and to own, lease and operate its properties. Each of
Clark-Schwebel, Inc., Clark-S Acquisition, CS Finance and Holdings and its
subsidiaries is duly qualified and in good standing as a foreign entity
authorized to do business in each jurisdiction in which the nature of its
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<PAGE>
business or its ownership or leasing of property requires such
qualification, except where failure to have such qualification would have
a Material Adverse Effect.
(iv) The entities listed on Schedule II hereto are the only
subsidiaries, direct or indirect, of the Company. The Company owns,
directly or indirectly through other subsidiaries, the percentage listed
in Schedule II hereto of the outstanding capital stock or other securities
evidencing equity ownership of such subsidiaries, free and clear of any
security interest, claim, lien, limitation on voting rights or encumbrance
(except for those arising under the Credit Agreement or pursuant to state
and federal securities laws); and all of such securities have been duly
authorized, validly issued, are fully paid and nonassessable and were not
issued in violation of any preemptive or similar rights. There are no
outstanding subscriptions, rights, warrants, calls, commitments of sale or
options to acquire, or instruments convertible into or exchangeable for,
any such shares of capital stock or other equity interest of such
subsidiaries. Except as set forth on Schedule III hereto, neither the
Company nor any of its subsidiaries has any investments in the securities
of other persons and there are no outstanding subscriptions, rights,
warrants, calls, commitments of sale or options to acquire, or instruments
convertible into or exchangeable for, any such securities of such person.
(v) Each of Clark-S Acquisition, CS Finance and Holdings has all
requisite corporate power and authority to execute, deliver and perform
its obligations under the Operative Documents to which they are parties
and to consummate the transactions contemplated hereby and thereby,
including, without limitation, with respect to each of Clark-S Acquisition
and CS Finance, the corporate power and authority to issue, sell and
deliver the Notes as provided herein and therein. Upon the Mergers,
Clark-Schwebel, Inc. will assume the obligations of Clark-S Acquisition
and CS Finance under the Operative Documents to which they are parties and
will have all requisite corporate power and authority to perform its
obligations thereunder.
(vi) Holdings has all the requisite corporate power and authority to
execute, deliver and perform its obligations under the Agreement, the
Indenture, the Registration Rights Agreement, the Acquisition Agreement,
the Guarantees and the Credit Agreement and to consummate the transactions
contemplated hereby and thereby.
(vii) This Agreement has been duly and validly authorized, executed and
delivered by each of Clark-S Acquisition, CS Finance and Holdings and
(assuming the due execution and delivery thereof by you) is the legally
valid and binding agreement of each of Clark-S Acquisition, CS Finance and
Holdings, enforceable against each of Clark-S Acquisition, CS Finance and
Holdings in accordance with its terms (except as such enforceability may
be limited by any exceptions to enforceability of the type set forth in
the legal opinions delivered to you pursuant to Section 7(g) hereof). Upon
the Mergers, Clark-Schwebel, Inc. will assume the obligations of Clark-S
Acquisition and CS Finance under the Agreement and the Agreement will be
the legally valid and binding agreement of Clark-Schwebel, Inc.,
enforceable against Clark-Schwebel, Inc. in accordance with its terms
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<PAGE>
(except as such enforceability may be limited by any exceptions to
enforceability of the type set forth in the legal opinions delivered to
you pursuant to Section 7(g) hereof).
(viii)Each of the Guarantees has been duly and validly authorized,
executed and delivered by Holdings and is the legally valid and binding
agreement of Holdings, enforceable against Holdings in accordance with its
terms (except as such enforceability may be limited by any exceptions to
enforceability of the type set forth in the legal opinions delivered to
you pursuant to Section 7(g) hereof).
(ix) The Indenture has been duly and validly authorized by each of
Clark-S Acquisition, CS Finance and Holdings and, when duly executed and
delivered by each of Clark-S Acquisition, CS Finance and Holdings
(assuming the due execution and delivery thereof by the Trustee), will be
the legally valid and binding obligation of Clark-S Acquisition, CS
Finance and Holdings, enforceable against each of Clark-S Acquisition, CS
Finance and Holdings in accordance with its terms (except as such
enforceability may be limited by any exceptions to enforceability of the
type set forth in the legal opinions delivered to you pursuant to Section
7(g) hereof). The Indenture, when executed and delivered, will conform to
the description thereof in the Offering Memorandum. Upon the Mergers,
Clark-Schwebel, Inc. will assume the obligations of Clark-S Acquisition
and CS Finance under the Indenture and the Indenture will be the legally
valid and binding agreement of Clark-Schwebel, Inc., enforceable against
Clark-Schwebel, Inc. in accordance with its terms (except as such
enforceability may be limited by any exceptions to enforceability of the
type set forth in the legal opinions delivered to you pursuant to Section
7(g) hereof).
(x) The shares of issued and outstanding common stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable and were not issued in violation of or subject to any
preemptive or similar rights. All of the outstanding capital stock of the
Company is owned by Holdings.
(xi) The Registration Rights Agreement has been duly and validly
authorized by each of Clark-S Acquisition, CS Finance and Holdings and,
when duly executed and delivered by each of Clark-S Acquisition, CS
Finance and Holdings (assuming the due execution and delivery thereof by
you), will be the legally valid and binding obligation of each of Clark-S
Acquisition, CS Finance and Holdings, enforceable against each of Clark-S
Acquisition, CS Finance and Holdings in accordance with its terms (except
as such enforceability may be limited by any exceptions to enforceability
of the type set forth in the legal opinions delivered to you pursuant to
Section 7(g) hereof). The Registration Rights Agreement, when executed and
delivered, will conform to the description thereof in the Offering
Memorandum. Upon the Mergers, Clark-Schwebel, Inc. will assume the
obligations of Clark-S Acquisition and CS Finance under the Registration
Rights Agreement and the Registration Rights Agreement will be the legally
valid and binding obligation of Clark-Schwebel, Inc., enforceable against
Clark-Schwebel, Inc. in accordance with its terms (except as such
enforceability may be limited by any exceptions to enforceability of the
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type set forth in the legal opinions delivered to you pursuant to Section
7(g) hereof).
(xii) The Series A Notes have been duly and validly authorized for
issuance and sale to you by Clark-S Acquisition and CS Finance pursuant to
this Agreement and, when issued and authenticated in accordance with the
terms of the Indenture and delivered against payment therefor in
accordance with the terms hereof, will be the legally valid and binding
obligations of Clark-S Acquisition and CS Finance, enforceable against
Clark-S Acquisition and CS Finance in accordance with their terms (except
as such enforceability may be limited by any exceptions to enforceability
of the type set forth in the legal opinions delivered to you pursuant to
Section 7(g) hereof) and entitled to the benefits of the Indenture. The
Series A Notes, when issued, authenticated and delivered, will conform to
the description thereof in the Offering Memorandum. Upon the Mergers,
Clark-Schwebel, Inc. will assume the obligations of Clark-S Acquisition
and CS Finance under the Series A Notes and the Series A Notes will be the
legally valid and binding obligation of Clark-Schwebel, Inc., enforceable
against Clark-Schwebel, Inc. in accordance with its terms (except as such
enforceability may be limited by any exceptions to enforceability of the
type set forth in the legal opinions delivered to you pursuant to Section
7(g) hereof).
(xiii)The Series B Notes have been duly and validly authorized for
issuance by the Company, and when issued and authenticated in accordance
with the terms of the Indenture and the Registration Rights Agreement,
will be the legally valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms (except as
such enforceability may be limited by any exceptions to enforceability of
the type set forth in the legal opinions delivered to you pursuant to
Section 7(g) hereof) and entitled to the benefits of the Indenture. The
Series B Notes, when issued authenticated and delivered, will conform to
the description thereof in the Offering Memorandum.
(xiv) None of Clark-Schwebel, Inc., Clark-S Acquisition, CS Finance or
Holdings or any of their subsidiaries is (A) in violation of its
respective charter or bylaws or other organizational documents, (B) in
default in the performance of any bond, debenture, note, indenture,
mortgage, deed of trust or other agreement or instrument to which it is a
party or by which it is bound or to which any of its properties is
subject, or (C) is in violation of any law, statute, rule, regulation,
judgment or court decree applicable to Clark-Schwebel, Inc., Clark-S
Acquisition, CS Finance or Holdings, any of their subsidiaries or their
assets or properties that in the case of clauses (A), (B) and (C) above,
(x) would reasonably be expected, individually or in the aggregate, to
result in a material adverse effect on the assets, properties, business,
results of operations, condition (financial or otherwise) or business
prospects of Clark-Schwebel, Inc., Clark-S Acquisition, CS Finance or
Holdings and their subsidiaries, taken, as a whole, (y) would materially
interfere with or adversely affect the issuance of the Notes or (z) in any
manner draw into question the validity of this Agreement or any other
Operative Document or the Guarantees (any of the events set forth in
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clauses (x), (y) or (z), a "Material Adverse Effect"). There exists no
condition that, with notice, the passage of time or otherwise, would
constitute a default under any such document or instrument.
(xv) The execution, delivery and performance by each of Clark-S
Acquisition, CS Finance and Holdings of this Agreement and the other
Operative Documents to which it is a party, the issuance and sale of the
Notes, the execution, delivery and performance of the Guarantees, the
consummation of the transactions contemplated hereby and thereby, the
consummation of the Mergers, the assumption by Clark-Schwebel, Inc. of the
obligations of Clark-S Acquisition and CS Finance under the Operative
Documents to which they are parties and the performance by Clark-Schwebel,
Inc. of its obligations under the Operative Documents, will not violate,
conflict with or constitute a breach of any of the terms or provisions of,
or a default under (or an event that with notice or the lapse of time, or
both, would constitute a default), or require consent under, or (other
than pursuant to or in connection with the Credit Agreement) result in the
imposition of a lien or encumbrance on any properties of Clark-Schwebel,
Inc., Clark-S Acquisition, CS Finance or Holdings or any of their
subsidiaries, or an acceleration of indebtedness pursuant to, (i) the
charter or bylaws of Clark-Schwebel, Inc., Clark-S Acquisition, CS Finance
or Holdings or any of their subsidiaries, (ii) any bond, debenture, note,
indenture, mortgage, deed of trust or other agreement or instrument to
which Clark-Schwebel, Inc., Clark-S Acquisition, CS Finance or Holdings or
any of their subsidiaries is a party or by which any of them or their
property is or may be bound, (iii) any statute, rule or regulation
applicable to Clark-Schwebel, Inc., Clark-S Acquisition, CS Finance or
Holdings, any of their subsidiaries or any of their assets or properties,
or (iv) any judgment, order or decree of any court or governmental agency
or authority having jurisdiction over Clark-Schwebel, Inc., Clark-S
Acquisition, CS Finance or Holdings, any of their subsidiaries or their
assets or properties, except insofar as any of (ii), (iii) or (iv) above
would not reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect. No consent, approval, authorization
or order of, or filing, registration, qualification, license or permit of
or with, any court or governmental agency, body or administrative agency
is required for the execution, delivery and performance of this Agreement
and the other Operative Documents, the issuance and sale of the Notes, the
execution, delivery and performance of the Guarantees, the consummation of
the transactions contemplated hereby and thereby, the consummation of the
Mergers, the assumption by Clark-Schwebel, Inc. of the obligations of
Clark-S Acquisition and CS Finance under the Operative Documents to which
they are parties and the performance by Clark-Schwebel, Inc. of its
obligations under the Operative Documents, except such as have been
obtained and made (or, in the case of the Registration Rights Agreement,
will be obtained and made) under the Act, the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act") and state securities or Blue Sky
laws and regulations or such as may be required by the NASD, except
insofar as the failure to obtain such consent, appraisal, authorization or
order of, or filing, registration, qualification, license or permit would
not reasonably be expected, individually or in the aggregate, to result in
a Material Adverse Effect.
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(xvi) No consents or waivers from any other person are required for the
execution, delivery and performance of this Agreement and the other
Operative Documents, the issuance and sale of the Notes, the execution,
delivery and performance of the Guarantees and the consummation of the
transactions contemplated hereby and thereby, other than such consents and
waivers as have been obtained (or, in the case of the Registration Rights
Agreement, will be obtained), except where the failure to have obtained
any of the foregoing would not reasonably be expected to have a Material
Adverse Effect.
(xvii)There is (i) no action, suit or proceeding before or by any
court, arbitrator or governmental agency, body or official, domestic or
foreign, now pending or, to the best knowledge of the Company and its
subsidiaries, threatened or contemplated to which the
Company or any of its subsidiaries or any benefit plan maintained thereby
is or may be a party or to which the business or property of the Company
or any of its subsidiaries is or may be subject, (ii) no statute, rule,
regulation or order that has been enacted, adopted or issued by any
governmental agency or that has been proposed by any governmental body,
(iii) no injunction, restraining order or order of any nature by a federal
or state court or foreign court of competent jurisdiction to which the
Company or any of its subsidiaries is or may be subject or to which the
business, assets or property of the Company or its subsidiaries are or may
be subject issued that would, in the case of clauses (i), (ii) and (iii)
above, reasonably be expected to, individually or in the aggregate, result
in a Material Adverse Effect.
(xviii) There is (i) no significant unfair labor practice complaint
pending against the Company or any of its subsidiaries nor, to the best
knowledge of the Company and its subsidiaries, threatened against any of
them, before the National Labor Relations Board, any state or local labor
relations board or any foreign labor relations board, and no significant
grievance or significant arbitration proceeding arising out of or under
any collective bargaining agreement is so pending against the Company or
any or its subsidiaries or, to the best knowledge of the Company and its
subsidiaries, threatened against any of them, (ii) no significant strike,
labor dispute, slowdown or stoppage pending against the Company or any of
its subsidiaries nor, to the best knowledge of the Company and its
subsidiaries, threatened against the Company or any of its subsidiaries
and (iii) to the best knowledge of the Company and its subsidiaries, no
union representation question exists with respect to the employees of the
Company and its subsidiaries and, to the best knowledge of the Company and
its subsidiaries, no union organizing activities are taking place, except
insofar as any of the foregoing would not reasonably be expected, either
individually or in the aggregate, to have a Material Adverse Effect.
Neither the Company nor any of its subsidiaries has violated any federal,
state or local law or foreign law relating to discrimination in hiring,
promotion or pay of employees, nor any applicable wage or hour laws, nor
any provision of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the rules and regulations thereunder, or analogous
foreign laws and regulations, which would reasonably be expected, either
individually or in the aggregate, to have a Material Adverse Effect.
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(xix) In connection with the Acquisition, the Company has conducted
reviews of the effect of Environmental Laws (as defined herein) and the
disposal of hazardous or toxic substances, wastes, pollutants and
contaminants on the business, operations and properties of the Company and
its subsidiaries, in the course of which it identifies and evaluates
associated costs and liabilities (including, without limitation, all
capital and operating expenditures required for clean-up, closure of
properties and compliance with Environmental Laws, all permits, licenses
and approvals, all related constraints on operating activities and all
potential liabilities to third parties). On the basis of such reviews, the
Company has reasonably concluded that such associated costs and
liabilities would not reasonably be expected, either individually or in
the aggregate, to have a Material Adverse Effect. Neither the Company nor
any of its subsidiaries has violated any environmental, safety or similar
law or regulation applicable to it or its business or property relating to
the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), lacks any permit, license or other approval required of them under
applicable Environmental Laws or is violating any term or condition of
such permit, license or approval which would reasonably be expected,
either individually or in the aggregate, to have a Material Adverse
Effect.
(xx) Each of the Company and its subsidiaries has (i) good and
marketable title to all of the properties and assets described in the
Offering Memorandum as owned by it, free and clear of all liens, charges,
encumbrances and restrictions, except such as are described in the
Offering Memorandum or for liens for taxes not yet due and payable or as
would not reasonably be expected, either individually or in the aggregate,
to have a Material Adverse Effect, (ii) peaceful and undisturbed
possession under all leases to which it is party as lessee, except where
the failure to have such possession would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, (iii)
all licenses, certificates, permits, authorizations, approvals, franchises
and other rights from, and has made all declarations and filings with, all
federal, state and local authorities, all self-regulatory authorities and
all courts and other tribunals (each an "Authorization") necessary to
engage in the business currently conducted by it in the manner described
in the Offering Memorandum, except where failure to hold such
Authorizations would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect and (iv) no reason to believe
that any governmental body or agency is considering limiting, suspending
or revoking any such Authorization. All such Authorizations are valid and
in full force and effect and the Company and its subsidiaries are in
compliance in all material respects with the terms and conditions of all
such Authorizations and with the rules and regulations of the regulatory
authorities having jurisdiction with respect thereto, except insofar as
the failure to have any of the foregoing would not reasonably be expected
either individually or in the aggregate, to have a Material Adverse
Effect. All leases to which the Company or any of its subsidiaries is a
party are valid and binding and to the knowledge of the Company no
material defaults by the landlord are existing under any such lease.
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(xxi) Each of the Company and its subsidiaries owns or possesses or has
the right to use all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks and trade names (collectively, the
"Intellectual Property") presently employed by it in connection with the
businesses now operated by them as described in the Offering Memorandum,
except insofar as failure to have any of the foregoing would not
reasonably be expected to have a Material Adverse Effect, and neither the
Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to
any of the foregoing which would have a Material Adverse Effect. The use
of the Intellectual Property in connection with the business and
operations of the Company and its subsidiaries does not infringe on the
rights of any person, except infringements which would not reasonably be
expected, either individually or in the aggregate, to have a Material
Adverse Effect.
(xxii)All tax returns required to be filed by the Company or any of
its subsidiaries, in all jurisdictions, have been so filed. All taxes,
including withholding taxes, penalties and interest, assessments, fees and
other charges due or claimed to be due from such entities or that are due
and payable have been paid, other than those being contested in good faith
and for which adequate reserves have been provided or those currently
payable without penalty or interest. Neither the Company nor any of its
subsidiaries knows of any material proposed additional tax assessments
against it or any of its subsidiaries or the assets or property of the
Company or any of its subsidiaries.
(xxiii) Neither the Company nor any of its subsidiaries is (i) an
"investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended (the
"Investment Company Act"), or analogous foreign laws and regulations, or
(ii) a "holding company" or a "subsidiary company" or an "affiliate" of a
holding company within the meaning of the Public Utility Holding Company
Act of 1935, as amended, or analogous foreign laws and regulations.
(xxiv)There are no holders of securities of the Company or any of
its subsidiaries who, by reason of the execution by the Company of this
Agreement or any other Operative Document to which it is a party or the
consummation of the transactions contemplated hereby and thereby, have the
right to request or demand that the Company register under the Act or
analogous foreign laws and regulations securities held by them.
(xxv) Each certificate signed by any officer of Clark-S Acquisition,
CS Finance, Holdings and Fort Mill and delivered to the Purchasers or
counsel for the Purchasers shall be deemed to be a representation and
warranty by Clark-S Acquisition, CS Finance, Holdings and Fort Mill to
each Purchaser as to the matters covered thereby.
(xxvi)The Company and each of its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance
that: (i) transactions are executed in accordance with management's
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general or specific authorizations; (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability
for assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect thereto.
(xxvii)The Company and each of its subsidiaries maintains insurance
covering their properties, operations, personnel and businesses. Such
insurance insures against such losses and risks as are adequate in
accordance with customary industry practice to protect the Company and its
subsidiaries and their businesses. Neither the Company nor any of its
subsidiaries has received notice from any insurer or agent of such insurer
that substantial capital improvements or other expenditures will have to
be made in order to continue such insurance. All such insurance is
outstanding and duly in force on the date hereof and will be outstanding
and duly in force on the Closing Date and after giving effect to the
Acquisition.
(xxviii)Neither Clark-S Acquisition nor CS Finance has (i) taken,
directly or indirectly, any action designed to, or that might reasonably
be expected to, cause or result in stabilization or manipulation of the
price of any security of Clark-S Acquisition, CS Finance or
Clark-Schwebel, Inc. to facilitate the sale or resale of the Notes or (ii)
since the date of the Preliminary Offering Memorandum (A) sold, bid for,
purchased or paid any person any compensation for soliciting purchases of,
the Notes or (B) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of Clark-S
Acquisition, CS Finance or Clark-Schwebel, Inc.
(xxix)No registration under the Act of the Series A Notes is
required for the sale of the Series A Notes to the Purchasers as
contemplated hereby or for the Exempt Resales assuming (i) that the
purchasers who buy the Series A Senior Notes in the Exempt Resales are
either QIBs or Accredited Investors and (ii) the accuracy of the
Purchasers' representations in Section 5(b) hereof. No form of general
solicitation or general advertising was used by the Company or any of its
representatives in connection with the offer and sale of any of the Series
A Notes or in connection with Exempt Resales, including, but not limited
to, articles, notices or other communications published in any newspaper,
magazine, or similar medium or broadcast over television or radio, or any
seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. No securities of the same class as
the Series A Notes have been issued and sold by the Company within the
six-month period immediately prior to the date hereof.
(xxx) The execution and delivery of this Agreement, the other
Operative Documents and the sale of the Series A Notes to be purchased by
the Eligible Purchasers will not involve any prohibited transaction within
the meaning of Section 406 of ERISA or Section 4975 of the Internal
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Revenue Code of 1986. The representation made by the Company in the
preceding sentence is made in reliance upon and subject to the accuracy
of, and compliance with, the representations and covenants made or deemed
made by the Eligible Purchasers as set forth in the Offering Memorandum
under the Section entitled "Notice to Investors."
(xxxi)Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, and each amendment or supplement thereto, as
of its date, contains all the information specified in, and meets the
requirements of, Rule 144A(d)(4) under the Act.
(xxxii)Subsequent to the respective dates as of which information is
given in the Offering Memorandum and up to the Closing Date, except as set
forth in the Offering Memorandum, neither the Company nor any of its
subsidiaries has incurred any liabilities or obligations, direct or
contingent, which are material to the Company and its subsidiaries taken
as a whole, nor entered into any transaction not in the ordinary course of
business, there has not been, singly or in the aggregate, any material
adverse change, or any development which may reasonably be expected to
involve a material adverse change, in the assets, properties, business,
results of operations, condition (financial or otherwise), affairs or
prospects of the Company and its subsidiaries, taken as a whole (a
"Material Adverse Change") and there have not been dividends or
distributions (other than to the Company) of any kind declared, paid or
made by Company or any of its subsidiaries on any class of its capital
stock.
(xxxiii)None of Clark-S Acquisition, CS Finance or any agent thereof
acting on behalf of Clark-S Acquisition or CS Finance has taken, and none
of them will take, any action that would reasonably expect to cause this
Agreement or the issuance or sale of the Notes to violate Regulation G (12
C.F.R. Part 207), Regulation T (12 C.F.R. Part 220), Regulation U (12
C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System or analogous foreign laws and
regulations.
(xxxiv)The accountants who have certified or shall certify the
financial statements and supporting schedules included or to be included
as part of the Offering Memorandum are independent accountants. The
consolidated historical statements fairly present the consolidated
financial condition and results of operations of the Company and its
subsidiaries at the respective dates and for the respective periods
indicated, in accordance with generally accepted accounting principles
consistently applied throughout such periods, except as stated therein.
The pro forma financial statements including in the Offering Memorandum
have been prepared on a basis consistent with such historical statements,
except for the pro forma adjustments specified therein, and give effect to
assumptions made on a reasonable basis and present fairly the historical
and proposed transactions contemplated by this Agreement and the other
Operative Documents and the Guarantees. Other financial and statistical
information and data included in the Offering Memorandum, historical and
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pro forma, are accurately presented and prepared on a basis consistent
with such financial statements and the books and records of the Company
and its subsidiaries.
(xxxv)The Company does not intend to, nor does it believe that it
will, incur debts beyond its ability to pay such debts as they mature.
Upon the issuance of the Series A Notes, the present fair saleable value
of the assets of the Company will exceed the amount that will be required
to be paid on or in respect of the existing debts and other liabilities
(including contingent liabilities) of such person as they become absolute
and matured. The assets of the Company, upon the issuance of the Series A
Notes, will not constitute unreasonably small capital to carry out its
business as now conducted, including the capital needs of the Company,
taking into account the projected capital requirements and capital
availability of the Company.
(xxxvi)There are no contracts, agreements or understandings between
Clark-Schwebel, Inc., Clark-S Acquisition, CS Finance or Holdings or any
of their subsidiaries and any person that would give rise to a valid claim
against Clark-Schwebel, Inc., Clark-S Acquisition, CS Finance or Holdings,
its subsidiaries or any Purchaser for a brokerage commission, finder's fee
or like payment in connection with the issuance, purchase and sale of the
Notes.
(xxxvii)Prior to the Exchange Offer or the effectiveness of the Shelf
Registration Statement, the Indenture is not required to be qualified
under the Trust Indenture Act.
(xxxviii)The Company has delivered to the Purchasers true and correct
copies of the Acquisition Agreement and the Credit Agreement, and all
amendments, alterations, modifications, or waivers thereto or in the
exhibits or schedules thereto through the date hereof.
The Company acknowledges that the Purchasers and, for purposes of the
opinions to be delivered to the Purchasers pursuant to Section 7 hereof, counsel
to the Company and counsel to the Purchasers will rely upon the accuracy and
truth of the foregoing representations and hereby consent to such reliance.
(b) Each Purchaser represents and warrants to the Company and to the other
Purchasers and, agrees that:
(i) Such Purchaser is a QIB, with such knowledge and experience in
financial and business matters as are necessary in order to evaluate the
merits and risks of an investment in the Notes.
(ii) Such Purchaser (A) is not acquiring the Series A Notes with a
view to any distribution thereof that would violate the Act or the
securities laws of any state of the United States or any other applicable
jurisdiction and (B) will be reoffering and reselling the Series A Notes
only to QIBs in reliance on the exemption from the registration
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<PAGE>
requirements of the Act provided by Rule 144A and to Accredited Investors
that execute and deliver a letter containing representations and
agreements in the form attached as Annex A to the Preliminary Offering
Memorandum in a private placement exempt from the registration
requirements of the Act.
(iii) No form of general solicitation or general advertising has
been or will be used by such Purchaser or any of its representatives in
connection with the offer and sale of any of the Series A Notes,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have been
invited by any general solicitation or general advertising.
(iv) Such Purchaser agrees that, in connection with the Exempt Resales,
it will solicit offers to buy the Series A Notes only from, and will offer
to sell the Series A Notes only to, QIBs and Accredited Investors. Such
Purchaser further agrees (A) that it will offer to sell the Series A Notes
only to, and will solicit offers to buy the Series A Notes only from (1)
QIBs who in purchasing such Series A Notes will be deemed to have
represented and agreed that they are purchasing the Series A Notes for
their own accounts or accounts with respect to which they exercise sole
investment discretion and that they or such accounts are QIBs and (2)
Accredited Investors who make the representations contained in, and
execute and return to the Purchaser, a certificate in the form of Annex A
attached to the Offering Memorandum and (B) that, in the case of such QIBs
and Accredited Investors, acknowledges and agrees that such Series A Notes
will not have been registered under the Act and may be resold, pledged or
otherwise transferred only (x)(I) to a person who the seller reasonably
believes is a QIB in a transaction meeting the requirements of Rule 144A,
(II) in a transaction meeting the requirements of Rule 144, (III) to a
foreign person in a transaction meeting the requirements of Rule 904 under
the Act or (IV) in accordance with another exemption from the registration
requirements of the Act (and based upon an opinion of counsel if the
Company so requests), (y) to the Company, or (z) pursuant to an effective
registration statement under the Act and, in each case, in accordance with
any applicable securities laws of any state of the United States or any
other applicable jurisdiction and (C) that the holder will, and each
subsequent holder is required to, notify any purchaser from it of the
security evidenced thereby of the resale restrictions set forth in (B)
above.
(v) Prior to the Closing Date, such Purchaser will have provided
each Eligible Purchaser with a copy of the Offering Memorandum.
(vi) Such Purchaser also understands that the Company and, for
purposes of the opinions to be delivered to you pursuant to Section 7
hereof, counsel to the Company and counsel to the Purchasers will rely
upon the accuracy and truth of the foregoing representations and hereby
consents to such reliance.
6. Indemnification.
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(a) The Company and Holdings, jointly and severally, agrees to indemnify
and hold harmless each of the Purchasers and each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
any of the Purchasers (any of such persons hereinafter referred to as a
"controlling person"), and the respective officers, directors, partners,
employees, representatives and agents of any of the Purchasers or any
controlling person (each such entity or person an "Indemnified Person") to the
fullest extent lawful, from and against any and all losses, claims, damages,
assessments, judgments, actions and other liabilities (collectively,
"Liabilities"), and will reimburse each Indemnified Person for all fees and
expenses (including without limitation, the reasonable fees and expenses of
counsel to any Indemnified Person) (collectively, "Expenses") as they are
incurred in investigating, preparing, pursuing or defending any claim or action,
or any investigation or proceeding by any governmental agency or body, whether
or not in connection with pending or threatened litigation and whether or not
any Indemnified Person is a party (collectively, "Actions"), directly or
indirectly caused by, related to, based upon, arising out of or in connection
with any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Offering Memorandum or the Offering Memorandum (or
any amendment or supplement thereto), or by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, except insofar as such Liabilities or Expenses are caused
by an untrue statement or omission or alleged untrue statement or omission (i)
that is made in reliance upon and in conformity with information relating to
such Purchaser furnished in writing to the Company and Holdings by such
Purchaser expressly for use therein or (ii) that is made in any Preliminary
Offering Memorandum if a copy of the Offering Memorandum (as then amended or
supplemented) was not sent or given by or on behalf of such Purchaser to the
person asserting any such loss, claim, damage, liability or expense, if required
by law so to have been delivered, at or prior to the written confirmation of the
sale of the Series A Notes and the Offering Memorandum (as then amended or
supplemented) would have corrected each untrue statement or omission. The
Company and Holdings will also reimburse each Indemnified Person for all
Expenses as incurred in connection with enforcing such Indemnified Person's
rights under this Agreement. The Company and Holdings shall notify each
Purchaser promptly of the institution, threat or assertion of any Action in
connection with the matters addressed by this Agreement which involves the
Company, Holdings or an Indemnified Person.
(b) Upon receipt by an Indemnified Person of notice of an Action against
such Indemnified Person with respect to which indemnity may be sought under
Section 6(a), such Indemnified Person shall promptly notify the Company and
Holdings in writing, provided that the failure to so notify the Company and
Holdings shall not relieve the Company or Holdings from any liability which the
Company or Holdings may have on account of this indemnity or otherwise, except
to the extent the Company and Holdings shall have been materially prejudiced by
such failure. The Company and Holdings shall, if requested by such Indemnified
Person, assume the defense of any such Action including the employment of
counsel reasonably satisfactory to such Indemnified Person. Any Indemnified
Person shall have the right to employ separate counsel in any such action and
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person, unless: (i) the Company and
Holdings have failed promptly to assume the defense and employ counsel
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<PAGE>
reasonably satisfactory to such indemnified party, (ii) the indemnifying party
has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party or (iii) the named parties to any such Action
(including any impleaded parties) include such Indemnified Person and the
Company or Holdings, and such Indemnified Person shall have been advised by
counsel that there may be one or more legal defenses available to it which are
different from or in addition to those available to the Company or Holdings,
provided that the Company and Holdings shall not in such event be responsible
hereunder for the fees and expenses of more than one firm of separate counsel in
connection with any Action in the same jurisdiction, in addition to any local
counsel. Neither the Company nor Holdings shall be liable for any settlement of
any Action effected without written consent of the Company and Holdings (which
shall not be unreasonably withheld) and the Company and Holdings agree to
indemnify and hold harmless any Indemnified Person from and against any
Liability or Expense by reason of any settlement of any Action effected with the
written consent of the Company. Notwithstanding the immediately preceding
sentence, if at any time an Indemnified Person shall have requested the Company
or Holdings to reimburse the Indemnified Person for fees and expenses of counsel
as contemplated by the third sentence of this paragraph, each of the Company and
Holdings agrees that it shall be liable for any settlement of any proceeding
effected without its written consent if (i) such settlement is entered into more
than sixty (60) business days after receipt by the Company and Holdings of the
aforesaid request and (ii) the Company and Holdings shall not have reimbursed
the Indemnified Person in accordance with such request prior to the date of such
settlement. In addition, the Company and Holdings will not, without the prior
written consent of each Indemnified Person, settle any pending or threatened
Action in respect of which indemnification or contribution may be sought
hereunder (whether or not any Indemnified Person is a party thereto), unless
such settlement includes an unconditional release of each Indemnified Person
from all Liabilities on claims that are the subject matter of such proceedings.
(c) Each of the Purchasers agrees, severally and not jointly, to
indemnify and hold harmless each of the Company and Holdings, and its directors,
officers and any person controlling (within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act) the Company and Holdings, and the officers,
directors, partners, employees, representatives and agents of each such person,
to the same extent as the foregoing indemnity from the Company and Holdings to
each of the Indemnified Persons, but only with respect to Liabilities and
Expenses incurred in investigating, preparing, pursuing or defending Actions
caused by, arising out of or based on or in connection with information relating
to such Purchaser furnished in writing by or on behalf of such Purchaser to the
Company and Holdings expressly for use in the Preliminary Offering Memorandum,
the Offering Memorandum or any amendment or supplement thereto. In case any
Action shall be brought against the Company, Holdings or their directors or
officers or any such controlling person in respect of which indemnity may be
sought against a Purchaser, such Purchaser shall have the rights and duties
given the Company and Holdings, and the Company, Holdings or their directors or
officers or such controlling person shall have the rights and duties given to
each Purchaser by the preceding paragraph. In no event shall the liability of
any Purchaser hereunder be greater, in the aggregate, than the amount by which
the total discounts and commissions received by such Purchaser with respect to
the Series A Notes exceeds the amount of any damages which such Purchaser has
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<PAGE>
otherwise been required to pay by reason of a claim or action based on such
information.
The statements in the Preliminary Offering Memorandum and the Offering
Memorandum set forth in the first paragraph, the third paragraph and the second
sentence of the fifth paragraph under the section entitled "Plan of
Distribution" constitute the only information heretofore furnished to the
Company and Holdings in writing by any Purchaser expressly for use in the
Preliminary Offering Memorandum or the Offering Memorandum, or any amendment or
supplement thereto.
(d) If the indemnification provided for in this Section 6 is unavailable
to an indemnified party under Section 6(a), (b) and (c) hereof (other than by
reason of exceptions provided in those Sections) in respect of any Liabilities
or Expenses referred to therein, then each indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Liabilities and Expenses
(i) in such proportion as is appropriate to reflect the relative benefits
received by the indemnifying party on the one hand and the indemnified party on
the other hand from the offering of the Series A Notes or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the indemnifying party and
the indemnified party, as well as any other relevant equitable considerations.
The relative benefits received by the Company and Holdings on the one hand and
the Purchasers on the other hand, shall be in the same proportion as the total
proceeds from the sale of the Series A Notes (net of discounts and commissions
but before deducting expenses) received by the Company and Holdings on the one
hand and the total discounts and commissions received by the Purchasers on the
other hand, bear to the total price of the Series A Notes, in each case, as set
forth in the table on the covering page of the Offering Memorandum. The relative
fault of the indemnifying party on the one hand and of the indemnified party on
the other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, Holdings and the Purchasers agree that it would not be
just and equitable if contribution pursuant to this Section 6(d) were determined
by pro rata allocation (even if the Purchasers were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
Liabilities or Expenses referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any legal or
other fees or expenses reasonably incurred by such indemnified party in
connection with investigating or defending any Action. Notwithstanding the
provisions of this Section 6, none of the Purchasers (nor their related
Indemnified Persons) shall be required to contribute, in the aggregate, any
amount in excess of the amount by which the total discounts and commissions
received by such Purchaser with respect to the Series A Notes, exceeds the
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amount of any damages which such Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Purchasers'
obligations to contribute pursuant to this Section 6(d) are several in
proportion to the respective number of Series A Notes purchased by each of the
Purchasers hereunder and not joint.
(e) Each of the Company and Holdings hereby designates CT Corporation
System as its authorized agent upon whom process may be served in any action,
suit or proceeding that may be instituted in any state or federal court in the
State of New York by any of the Purchasers or any person controlling any of them
asserting a claim for indemnification or contribution under or pursuant to this
Section 6, and the Company and Holdings will accept the jurisdiction of such
court in such action, and waive, to the fullest extent permitted by applicable
law, any defense based upon lack of personal jurisdiction or venue. A copy of
any such process shall be sent or given to the Company and Holdings at the
address for notices specified in Section 11 hereof.
7. Conditions of Purchasers' Obligations. The several obligations of the
Purchasers under this Agreement are subject to the satisfaction of each of the
following conditions:
(a) All of the representations and warranties of the Company contained in
this Agreement shall be true and correct on the date hereof and on the
Closing Date with the same force and effect as if made on and as of the date
hereof and the Closing Date, respectively. The Company shall have performed
or complied with all of the agreements herein contained and required to be
performed or complied with by them at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies distributed
to the Purchasers not later than 10:00 a.m., New York City time, on the date
of this Agreement or at such later date and time as to which you may agree.
(c) No stop order suspending the qualification or exemption from
qualificatinon of any of the Series A Notes in any jurisdiction referredin
Section 4(e) shall have been issued and no proceeding for that purpose shall
have been commenced or shall be pending or threatened.
(d) No action shall have been taken and no statute, rule, regulation or
order shall have been enacted, adopted or issued by any governmental agency
which would, as of the Closing Date, prevent the issuance or sale of any of
the Series A Notes or the consummation of the Acquisition; no action, suit or
proceeding shall be pending against or affecting or, to the knowledge of the
Company, threatened against, the Company or any of their respective
subsidiaries before any court or arbitrator or any governmental body, agency
or official that, if adversely determined, would have a Material Adverse
Effect; and no stop order preventing the use of the Offering Memorandum, or
any amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act shall have been issued.
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(e) Since the dates as of which information is given in the Offering
Memorandum, (i) there shall not have been any material change, or any
development that is reasonably likely to result in a material change, in the
capital stock, or material increase in the short-term debt or the long-term
debt, of the Company or any of its subsidiaries from that set forth in the
Offering Memorandum and (ii) no dividend or distribution (other than to the
Company) of any kind shall have been declared, paid or made by the Company or
any if its subsidiaries on any class of its capital stock. Since the date
hereof and since the dates as of which information is given in the Offering
Memorandum, there shall not have been any Material Adverse Change.
(f) You shall have received certificates, dated the Closing Date, signed
by (i) the President or any Vice President and (ii) a principal financial or
accounting officer of the Company, as of the Closing Date, confirming the
matters set forth in paragraphs (a), (c) (d) and (e) of this Section 7.
(g) You shall have received on the Closing Date an opinion (satisfactory
to you and your counsel), dated the Closing Date, of Kirkland & Ellis,
counsel for the Company, to the effect that:
(1) Each of Clark-S Acquisition, CS Finance and Clark-Schwebel
Holdings, Inc. has been duly incorporated and is validly existing in good
standing under the laws of its respective jurisdiction of organization.
Each of Clark-S Acquisition, CS Finance and Holdings has the requisite
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Offering Memorandum, and each
of Clark-S Acquisition, CS Finance and Holdings is duly qualified as a
foreign entity and in good standing in each jurisdiction set forth on a
schedule to such opinion.
(2) (i) All of the issued and outstanding shares of capital stock of
each of Clark-S Acquisition, CS Finance and Holdings have been duly and
validly authorized and issued; (ii) the capital stock of each of
Clark-Schwebel, Inc. and Holdings will be owned of record after the
Mergers as described in the Offering Memorandum under the caption
"Security Ownership"; (iii) to the knowledge of such counsel, all such
shares of capital stock of each of Clark-Schwebel, Inc. and Holdings and
its subsidiaries described in the foregoing subsection (ii) are owned free
and clear of any Lien, except for Liens arising under the Credit Agreement
as described in the Offering Memorandum, and were not issued in violation
of any preemptive or similar rights known to such counsel; (iv) to the
knowledge of such counsel, except for the ownership interests described in
the subsection (ii) of this paragraph, each of Clark-Schwebel, Inc. and
Holdings has no other direct or indirect subsidiaries other than
Clark-Schwebel Tech-Fab Company; (v) to the knowledge of such counsel,
there are no outstanding subscriptions, rights, warrants, options, calls,
convertible securities, commitments of sale or Liens (other than Liens
arising under the Credit Agreement and the Securityholders Agreement dated
the Closing Date among Holdings and the other parties thereto) related to
or entitling any person to purchase or otherwise to acquire any shares of
the capital stock of, or other ownership interest in, each of
Clark-Schwebel, Inc. and Holdings, or any subsidiary; and (vi) each of
Clark-Schwebel, Inc. and Holdings will have after the Mergers the
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authorized and outstanding capitalization as set forth in the Offering
Memorandum under the caption "Security Ownership."
(3) Each of Clark-S Acquisition and CS Finance has the requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and the other Operative Documents to
which it is a party, including the corporate power and authority to issue,
sell and deliver the Notes as contemplated by this Agreement. Upon the
Mergers, Clark-Schwebel, Inc. will assume the obligations of Clark-S
Acquisition and CS Finance under the Operative Documents and will have all
corporate power and authority to perform its obligations thereunder.
Holdings has the requisite corporate power and authority to execute,
deliver and perform its obligations under the Guarantees, this Agreement,
the Indenture, the Registration Rights Agreement, the Acquisition
Agreement and the Credit Agreement.
(4) Each of this Agreement, the Notes, the Indenture, the Registration
Rights Agreement, and the Credit Agreement has been duly authorized,
executed and delivered by the Clark-S Acquisition and CS Finance and the
Acquisition Agreement has been duly authorized, executed and delivered by
Clark-S Acquisition. Each of the Guarantees, this
Agreement, the Indenture, the Registration Rights Agreement, the
Acquisition Agreement and the Credit Agreement has been duly authorized,
executed and delivered by Holdings.
(5) When issued and authenticated in accordance with the terms of the
Indenture and delivered to and paid for by you in accordance with the
terms of this Agreement, the Series A Notes will constitute valid and
legally binding obligations of each of Clark-S Acquisition and CS Finance,
enforceable against each of Clark-S Acquisition and CS Finance in
accordance with their terms and entitled to the benefits of the Indenture.
Upon the Mergers, Clark-Schwebel, Inc. will assume the obligations of
Clark-S Acquisition and CS Finance under the Series A Notes and the Series
A Notes will constitute valid and legally binding obligations of
Clark-Schwebel, Inc., enforceable against Clark-Schwebel, Inc. in
accordance with their terms and entitled to the benefits of the Indenture.
(6) When issued and authenticated in accordance with the terms of the
Indenture, the Registration Rights Agreement and the Exchange Offer, the
Series B Notes will constitute valid and legally binding obligations of
Clark-Schwebel, Inc., enforceable against Clark-Schwebel, Inc. in
accordance with their terms and entitled to the benefits of the Indenture.
(7) The Indenture, assuming due authorization, execution and delivery
thereof by the Trustee, constitutes a valid and legally binding obligation
of each of Clark-S Acquisition, CS Finance and Holdings, enforceable
against each of Clark-S Acquisition, CS Finance and Holdings in accordance
with its terms. Upon the Mergers, Clark-Schwebel, Inc. will assume the
obligations of Clark-S Acquisition and CS Finance under the Indenture, and
the Indenture will constitute a valid and legally binding obligation of
Clark-Schwebel, Inc. in accordance with its terms. The Guarantees
constitute a valid and legally binding obligation of Holdings, enforceable
against Holdings in accordance with its terms.
25
<PAGE>
(8) The Registration Rights Agreement has been duly authorized,
executed and delivered by each of Clark-S Acquisition, CS Finance and
Holdings and constitutes a valid and legally binding agreement of each of
Clark-S Acquisition, CS Finance and Holdings, enforceable against each of
Clark-S Acquisition, CS Finance and Holdings in accordance with its terms.
(9) The Notes, the Indenture, the Registration Rights Agreement, the
Acquisition Agreement, the Participating Preferred Stock of Holdings, par
value $.01 per share, and the Credit Agreement conform in all material
respects to the descriptions thereof contained in the Offering Memorandum.
(10) When the Notes are issued and delivered pursuant to the Agreement,
the Notes will not be of the same class (within the meaning of Rule 144A
under the Act) as securities of Clark-Schwebel, Inc., Clark-S Acquisition
or CS Finance Corporation that are listed on any national securities
exchange registered under Section 6 of the Exchange Act or that are quoted
in a United States automated inter-dealer quotation system.
(11) No registration under the Act of the Notes is required for the
sale of the Notes to you as contemplated hereby or for the Exempt Resales,
and prior to the consummation of the Exchange Offer or the effectiveness
of the Shelf Registration Statement, the Indenture is not required to be
qualified under the Trust Indenture Act, assuming (i) that Eligible
Purchasers acquire the Notes in the Exempt Resales; (ii) the accuracy of
the Purchasers' representations regarding the absence of general
solicitation in connection with the Exempt Resales contained herein and
(iii) the accuracy of the representations made by each Accredited Investor
who purchases Notes pursuant to an Exempt Resale as set forth in the
letters of representation executed by such Accredited Investor in the form
of Annex A to the Offering Memorandum.
(12) Each of the Preliminary Offering Memorandum and the Offering
Memorandum, as of its date, and each amendment or supplement thereto, as
of its date (except for the financial statements and the notes thereto and
schedules and other financial and accounting data included therein, as to
which no opinion need be expressed), complied in all material respects
with the information requirements of Rule 144A(d)(4) of the Act.
(13) None of Clark-Schwebel, Inc., Clark-S Acquisition, CS Finance or
Holdings, or any of their subsidiaries, is an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or a
"holding company" or a "subsidiary company" or an "affiliate" of a holding
company within the meaning of the Public Utility Holding Company Act of
1935, as amended.
(14) The execution, delivery and performance by each of Holdings,
Clark-S Acquisition and CS Finance of this Agreement and the other
Operative Documents to which it is a party, the execution, delivery and
performance of the Guarantees, the issuance and sale of the Notes and the
consummation of the transactions contemplated hereby and thereby, the
26
<PAGE>
consummation of the Mergers, the assumption by Clark-Schwebel, Inc. of the
obligations of Clark-S Acquisition and CS Finance under the Operative
Documents to which they are a party and the performance by Clark-Schwebel,
Inc. of its obligations under the Operative Documents will not violate,
conflict with or constitute a breach of any of the terms or provisions of,
or a default under (or an event that with notice or the lapse of time, or
both, would constitute a default) or require consent under, or result in
the imposition of a Lien on any properties of Clark-Schwebel, Inc.,
Clark-S Acquisition, CS Finance or Holdings (except as contemplated by the
Credit Agreement), or an acceleration of indebtedness pursuant to, (i) the
charter or bylaws of Clark-Schwebel, Inc., Clark-S Acquisition, CS Finance
and Holdings, (ii) any material bond, debenture, note, indenture,
mortgage, deed of trust or other agreement or instrument identified as
such to such counsel to which Clark-S Acquisition, CS Finance and Holdings
is a party or by which any of them or their property is bound, or the
agreements listed on Schedule IV hereto to which Clark-Schwebel, Inc. is a
party, (iii) any statute which, in such counsel's experience, is normally
applicable to general business corporations that are not engaged in
regulated business activities and to transactions of the type contemplated
by the sale of the Notes, or to such counsel's knowledge, rule or
regulation applicable to Clark-Schwebel, Inc., Clark-S Acquisition, CS
Finance and Holdings or (iv) any judgment, order or decree identified to
such counsel of any United States federal or state court or governmental
agency or authority having jurisdiction over Clark-Schwebel, Inc., Clark-S
Acquisition, CS Finance and Holdings. To such counsel's knowledge, no
consent, approval, authorization or order of, or filing, registration,
qualification, license or permit of or with, any United States federal or
state court or governmental agency, body or administrative agency is
required for the execution, delivery and performance of this Agreement and
the other Operative Documents, the execution, delivery and performance of
the Guarantees, the issuance and sale of the Notes and the consummation of
the transactions contemplated hereby and thereby, the assumption by
Clark-Schwebel, Inc. of the obligations of Clark-S Acquisition and CS
Finance under the Operative Documents to which they are a party and the
performance by Clark-Schwebel, Inc. of its obligations under the Operative
Documents, except such as may be required under state securities or Blue
Sky laws and regulations (as to which such counsel may express no
opinion), the Act and the Trust Indenture Act or such as may be required
by the NASD.
(15) To the knowledge of such counsel, no injunction, restraining order
or order of any nature by a United States federal, New York or Delaware
state court of competent jurisdiction has been issued that prevents or
suspends the use of the Offering Memorandum.
(16) To the knowledge of such counsel, there are no holders of
securities of Clark-S Acquisition, CS Finance and Holdings who, by reason
of the execution by Clark-S Acquisition, CS Finance and Holdings of this
Agreement or any other Operative Document to which it is a party, or the
consummation of the transactions contemplated hereby and thereby, have the
right to request or demand that Clark-S Acquisition, CS Finance and
Holdings register under the Act securities held by them.
27
<PAGE>
(17) The authorized, issued and outstanding capital stock of Clark-S
Acquisition, CS Finance and Holdings has been duly and validly authorized
and issued, is fully paid and nonassessable and was not issued in
violation of or subject to preemptive or similar rights.
(18) The statements made in the Offering Memorandum under the caption
"Notice to Investors," insofar as such statements purport to constitute
statements of law or legal conclusions, are accurate in all material
respects.
(19) Prior to the first to occur of the consummation of the Exchange
Offer or the effectiveness of the Shelf Registration Statement, the
Exchange Debenture Indenture is not required to be qualified under the
Trust Indenture Act.
In addition, Counsel for the Company shall additionally state that such
counsel has participated in conferences with officers and other representatives
of the Company, representatives of the independent certified public accountants
for the Company, representatives and counsel to the Purchasers in connection
with the preparation of the Offering Memorandum and any amendment thereof or
supplement thereto and has considered the matters required to be stated therein
and the statements contained therein, although such counsel has not
independently verified the accuracy, completeness or fairness of such statements
and does not assume any responsibility for the accuracy, completeness or
fairness of the statement contained in the Offering Memorandum and any amendment
thereof or supplement thereto (except as set forth in (9) above); and such
counsel advises you that, on the basis of the foregoing, no facts came to such
counsel's attention that caused such counsel to believe that the Offering
Memorandum (as amended or supplemented, if applicable), as of the date thereof
or on the Closing Date, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading (it being understood that Counsel for
the Company need express no belief or opinion with respect to the financial
statements, notes and schedules thereto and other financial data included
therein).
In rendering such opinion, Counsel for the Company shall opine as to the
laws of the States of Delaware, New York and the federal laws of the United
States. Counsel for the Company will be permitted to except from its opinions
with respect to enforceability: (A) the effect of bankruptcy, insolvency,
reorganization, moratorium and other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors; (B) the effect of
general equitable principles, whether such enforceability is considered in a
proceeding in equity or at law, and the discretion of the court before which any
proceeding therefor may be brought; and (C) the unenforceability of any
provision requiring the payment of attorney's fees, except to the extent that a
court determines such fees to be reasonable.
(h) Counsel for the Company shall have delivered to you copies of all
opinions issued by them in connection with the Credit Agreement and the
Acquisition Agreement and the transactions contemplated thereby, along with
executed letters addressed to you entitling you to rely upon such opinions as
if originally addressed to you.
28
<PAGE>
(i) Clark-S Acquisition and Holdings shall have delivered to you copies of
all opinions issued to them in connection with the Acquisition Agreement and
the transactions contemplated thereby, along with executed letters addressed
to you entitling you to rely upon such opinions as if originally addressed to
you.
(j) You shall have received an opinion, dated the Closing Date, of Simpson
Thacher & Bartlett, your counsel, in form and substance reasonably
satisfactory to you, covering such matters as are customarily covered in such
opinions.
(k) At the time this Agreement is executed and delivered by the Company
and on the Closing Date, you shall have received letters, substantially in
the form previously approved by you, from Deloitte & Touche LLP and Arthur
Andersen LLP, independent public accountants, with respect to the financial
statements and certain financial information contained in the Offering
Memorandum.
(l) Simpson Thacher & Bartlett shall have been furnished with such
documents and opinions, in addition to those set forth above, as they may
reasonably require for the purpose of enabling them to review or pass upon
the matters referred to in this Section 7 and in order to evidence the
accuracy, completeness or satisfaction in all material respects of any of the
representations, warranties or conditions herein contained.
(m) Prior to the Closing Date, the Company shall have furnished to you
such further information, certificates and documents as you may reasonably
request.
(n) Clark-S Acquisition, CS Finance, Holdings and the Trustee shall have
entered into the Indenture and you shall have received counterparts,
conformed as executed, thereof.
(o) Clark-S Acquisition, CS Finance and Holdings shall have entered into
the Registration Rights Agreement and you shall have received counterparts,
conformed as executed, thereof.
(p) At or prior to the Closing Date, the Acquisition shall have been
consummated on terms that conform in all material respects to the Acquisition
Agreement (in the form delivered to the Initial Purchasers prior to the date
hereof) and the description thereof in the Offering Memorandum and you shall
have received true and correct copies of all documents pertaining thereto and
evidence satisfactory to you of the consummate on thereof.
(q) At or prior to the Closing Date, the closing under the Credit
Agreement shall have been consummated on terms that conform in all material
respects to the Credit Agreement (in the form delivered to the Initial
Purchasers prior to the date hereof) and the description thereof in the
Offering Memorandum and you shall have received evidence satisfactory to you
of the consummation thereof.
29
<PAGE>
(r) Prior to the Closing Date, the Company shall have furnished to you the
consent to the Acquisition and the Mergers of the lessor under the lease of
the Santa Fe Springs, California premises.
(s) Prior to the Closing Date, the Company shall have furnished to you the
waiver of the non-competition agreement of Jack P. Schwebel contained in the
agreement dated as of October 7, 1985 by and among Clark-Schwebel Fiber Glass
Corporation, M. Lowenstein Corporation and Springs Industries, Inc.
(t) Prior to the Closing Date, the Company and its subsidiaries shall have
furnished to you such further information, certificates and documents as you
may reasonable request, including any such information, certificates and
documents required in connection with the legal opinions to be furnished by
your counsel as set forth above.
All opinions, certificates, letters and other documents required by this
Section 7 to be delivered by the Company will be in compliance with the
provisions hereof only if they are reasonably satisfactory in form and substance
to you. The Company will furnish the Purchasers with such conformed copies of
such opinions, certificates, letters and other documents as they shall
reasonably request.
8. Conditions to the Company's Obligations. All of the representations and
warranties of the Purchasers contained in this Agreement shall be true and
correct as of the Closing Date with the same force and effect as if made on and
as of the Closing Date.
9. Defaults. If, on the Closing Date, any of the Purchasers shall fail or
refuse to purchase Series A Notes that it has agreed to purchase hereunder on
such date, and the aggregate principal amount of such Series A Notes that such
defaulting Purchaser agreed but failed or refused to purchase does not exceed
10% of the total principal amount of such Series A Notes that all of the
Purchasers are obligated to purchase on such Closing Date, the non-defaulting
Purchasers shall be obligated to purchase the amount of such Series A Notes that
such defaulting Purchaser agreed but failed or refused to purchase. If, on the
Closing Date, any of the Purchasers shall fail or refuse to purchase Series A
Notes in an aggregate principal amount that exceeds 10% of such total principal
amount and arrangements satisfactory to the other Purchasers and the Company for
the purchase of such Series A Notes are not made within 48 hours after such
default, this Agreement shall terminate without liability on the part of the
non-defaulting Purchasers or the Company, except as otherwise provided in
Section 10. In any such case that does not result in termination of this
Agreement, the Purchasers or the Company may postpone the Closing Date for not
longer than seven (7) days, in order that the required changes, if any, in the
Offering Memorandum or any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve a defaulting Purchaser from
liability in respect of any default by any such Purchaser under this Agreement.
10. Effective Date of Agreement and Termination. This Agreement shall
become effective upon the execution hereof.
30
<PAGE>
This Agreement may be terminated at any time on or prior to the Closing
Date by you by notice to the Company if any of the following has occurred: (i)
subsequent to the date information is provided in the Offering Memorandum, any
Material Adverse Change which, in your judgment, materially impairs the
investment quality of any of the Notes, (ii) any outbreak or escalation of
hostilities or other national or international calamity or crisis or material
adverse change in the financial markets of the United States or elsewhere, or
any other substantial national or international calamity or emergency if the
effect of such outbreak, escalation, calamity, crisis, material adverse change
or emergency would, in your judgment, make it impracticable or inadvisable to
market any of the Series A Notes or to enforce contracts for the sale of any of
the Series A Notes, (iii) any suspension or limitation of trading generally in
securities on the New York Stock Exchange or in the Nasdaq National Market
System or any setting of minimum prices for trading on such exchange or markets,
(iv) any declaration of a general banking moratorium by either federal or New
York authorities, (v) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs that in your
judgment has a material adverse effect on the financial markets in the United
States, and would, in your judgment, make it impracticable or inadvisable to
market any of the Series A Notes or to enforce contracts for the sale of any of
the Series A Notes or (vi) the enactment, publication, decree, or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which, in your judgment, would have a
Material Adverse Effect.
The indemnities and contribution provisions and the other agreements,
representations and warranties of the Company, Holdings, their respective
officers and directors and of the Purchasers set forth in or made pursuant to
this Agreement shall remain operative and in full force and effect, and will
survive delivery of and payment for the Series A Notes, regardless of (i) any
investigation, or statement as to the results thereof, made by or on behalf of
either of the Purchaser or by or on behalf of the Company and Holdings, the
officers or directors of the Company and Holdings or the controlling person of
the Company and Holdings, (ii) acceptance of the Series A Notes and payment for
them hereunder and (iii) termination of this Agreement.
If this Agreement shall be terminated by the Purchasers pursuant to clause
(i) of the second paragraph of this Section 10 or because of the failure or
refusal on the part of the Company or Holdings to comply with the terms or to
fulfill any of the conditions of this Agreement, the Company agrees to reimburse
you for all out-of-pocket expenses (including the fees and disbursements of
counsel) incurred by you. Notwithstanding any termination of this Agreement, the
Company shall be liable for all expenses which it has agreed to pay pursuant to
Section 4(f) hereof. If the transactions contemplated hereby are consummated,
each of the parties shall pay its own expenses, including the costs and expenses
of its counsel, except as otherwise provided in Section 4(f) hereof.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, Holdings, the
Purchasers, any Indemnified Person referred to herein and their respective
successors and assigns, all as and to the extent provided in this Agreement, and
no other person shall acquire or have any right under or by virtue of this
31
<PAGE>
Agreement. The terms "successors and assigns" shall not include a purchaser of
any of the Series A Notes from any of the Purchasers merely because of such
purchase.
11. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company, Clark-Schwebel,
Inc., 2200 South Murray Avenue, Anderson, South Carolina 29622, Attention:
William D. Bennison, with a copy to Vestar Equity Partners, L.P., 245 Park
Avenue, 40th Floor, New York, New York 10167, Attention: Norman W. Alpert and
Sander M. Levy and to Kirkland & Ellis, 153 East 53rd Street, Citicorp Center,
29th Floor, New York, New York 10022, Attention: Lance Balk, Esq., (b) if to
Holdings, c/o Clark-Schwebel Holdings, Inc., c/o Vestar Equity Partners, L.P.,
245 Park Avenue, 40th Floor, New York, New York 10167, Attention: Norman W.
Alpert and Sander M. Levy, and (c) if to the Purchasers, c/o Donaldson, Lufkin &
Jenrette Securities Corporation, 140 Broadway, New York, New York 10005,
Attention: Tom McGonagle, with a copy to Simpson Thacher & Bartlett, Attention:
Gary I. Horowitz, Esq., or in any case to such other address as the person to be
notified may have requested in writing.
This Agreement shall be governed and construed in accordance with the
internal laws of the State of New York as applied to contracts made and
performed entirely within the State of New York, without regard to the conflicts
of laws and principles thereof. This Agreement may be signed in various
counterparts which together shall constitute one and the same instrument.
32
<PAGE>
Please confirm that the foregoing correctly sets forth the Agreement among
the Company and the Purchasers.
Very truly yours,
CLARK-S ACQUISITION CORPORATION
By:
----------------------------
Name:
Title:
CS FINANCE CORPORATION OF
DELAWARE
By:
----------------------------
Name:
Title:
CLARK-SCHWEBEL HOLDINGS, INC.
By:
----------------------------
Name:
Title:
Accepted and agreed to as of
the date first above written:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
CS FIRST BOSTON
LAZARD FRERES & CO. LLC
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: __________________________
Name:
Title:
33
<PAGE>
SCHEDULE I
Principal Amount
Donaldson, Lufkin & Jenrette
Securities Corporation....................................... $55,000,000
Bear, Stearns & Co. Inc........................................ 18,333,333.33
CS First Boston Corporation.................................... 18,333,333.33
Lazard Freres & Co. LLC........................................ 18,333,333.33
-------------
Total....................................................... $110,000,000
=============
34
<PAGE>
SCHEDULE II
Clark-Schwebel Corporation, a New York corporation, is a
wholly-owned subsidiary of Clark-Schwebel, Inc.
35
<PAGE>
SCHEDULE III
(1) The Company has a 50% interest in Clark-Schwebel Tech-Fab Company;
(2) The Company has a 39% interest in Asahi-Schwebel Co., Ltd.; and
(3) The Company, through a DM20 million convertible subordinated note and a 25%
common stock ownership position, effectively has a 42% fully diluted equity
interest in CS-Interglas AG.
36
<PAGE>
SCHEDULE IV
(1) The Lease of premises in Santa Fe Springs, CA dated June 29, 1989 among BFC
Holding Company and Springs Industries, Inc.
(2) Credit Agreement dated as of the Closing Date among Clark-S Acquisition
Corporation, Clark-Schwebel Holdings, Inc., Chemical Bank and the other
lenders thereto.
(3) Indenture dated as of the Closing Date among Clark-S Acquisition
Corporation, CS Finance Corporation of Delaware, Clark-Schwebel Holdings,
Inc. and the Subsidiary Guarantors thereto.
(4) Agreement and Plan of Merger dated as of February 24, 1996 among Springs
Industries, Inc., Fort Mill A Inc., Vestar/CS Holdings Company, L.L.C., and
Clark-S Acquisition Corporation.
(5) Partnership Agreement dated December 18, 1984 between Vabobel B.V.
("Tech-Fab") and Clark-Schwebel Corporation.
(6) Exclusive Distributorship Agreement dated December 19, 1984 by and between
Fils D'Auguste Chomarat et Compagnie and Clark-Schwebel Fiber Glass
Corporation.
(7) Exchange of Shares and Contribution Agreement dated January 7/8, 1993
between Interglas Aktiengesellschaft ("Interglas") and Clark-Schwebel Fiber
Glass Corporation and the Deschler Group.
(8) Joint Venture Agreement dated September 18, 1970 by and among
Clark-Schwebel Fiber Glass Corporation, Asahi Chemical Industry Co., Ltd.
and Fukui Seiren Co., Ltd.
(9) Exclusive Distributor Agreement dated 1970 by and among Clark-Schwebel
Fiber Glass Corporation, Asahi-Schwebel Co., Ltd., Asahi Chemical Industry
Co., Ltd. and Fukui Seiren Co., Ltd.
(10) Joint Venture Agreement dated December 18, 1984 by and between
Clark-Schwebel Corporation and Vabobel B.V. ("Tech-Fab").
37
================================================================================
A/B EXCHANGE
REGISTRATION RIGHTS AGREEMENT
Dated as of April 17, 1996
by and among
Clark-S Acquisition Corporation
and
CS Finance Corporation of Delaware
and
Clark-Schwebel Holdings, Inc.
and
Donaldson, Lufkin & Jenrette Securities Corporation,
Bear, Stearns & Co. Inc.,
CS First Boston Corporation
and
Lazard Freres & Co. LLC
(collectively, the "Purchasers")
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of April 17, 1996 by and among Clark-S Acquisition Corporation, a
Delaware corporation ("Clark-S Acquisition"), CS Finance Corporation of
Delaware, a Delaware corporation ("CS Finance") and Clark-Schwebel Holdings,
Inc., a Delaware corporation ("Holdings"), and Donaldson, Lufkin & Jenrette
Securities Corporation, Bear Stearns & Co. Inc., CS First Boston Corporation and
Lazard Freres & Co. LLC (each a "Purchaser" and, collectively, the
"Purchasers"), each of whom has agreed to purchase the Company's 10-1/2% Series
A Senior Notes due 2006 (the "Series A Senior Notes") pursuant to the Purchase
Agreement (as defined below). Reference herein to the "Company" are to
Clark-Schwebel, Inc. as successor by merger to Clark-S Acquisition and CS
Finance.
This Agreement is made pursuant to the Purchase Agreement, dated April 12,
1996 (the "Purchase Agreement"), by and among Clark-S Acquisition, CS Finance,
Holdings and the Purchasers. In order to induce the Purchasers to purchase the
Series A Senior Notes, the Company has agreed to provide the registration rights
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Purchasers set forth in Section 4(p) of the
Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933, as amended.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: A Registered Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Senior Notes (and the related Holdings Guarantee) to be
issued in the Exchange Offer, (ii) the maintenance of such Registration
Statement as continuously effective and the keeping open of the Exchange Offer
for a period not less than the minimum period required pursuant to Section 3(b)
hereof and (iii) the delivery, by Holdings and the Company to the Registrar
under the Indenture, of Series B Senior Notes (and the related Holdings
Guarantee) in the same aggregate principal amount as the aggregate principal
amount of Series A Senior Notes tendered by the Holders thereof pursuant to the
Exchange Offer.
Damages Payment Date: With respect to the Series A Senior Notes, each
Interest Payment Date.
<PAGE>
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by Holdings and the Company under the Act
of the Series B Senior Notes (and the related Holdings Guarantee) pursuant to a
Registration Statement pursuant to which the Company and Holdings offer the
Holders of all outstanding Transfer Restricted Securities the opportunity to
exchange all such outstanding Transfer Restricted Securities held by such
Holders for Series B Senior Notes (and the related Holdings Guarantee) in an
aggregate principal amount equal to the aggregate principal amount of Transfer
Restricted Securities tendered by such Holders in response to such exchange
offer.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Purchasers propose to sell
the Series A Senior Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act, and to certain institutional
"accredited investors," as such term is defined in Rule 501(a)(1), (2), (3) and
(7) of Regulation D under the Act ("Accredited Institutions").
Holders: As defined in Section 2(b) hereof.
Holdings Guarantee: The guarantee by Holdings of the obligations of the
Company under the Series B Senior Notes, substantially in the form attached as
Exhibit C to the Indenture.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of April 17, 1996, among Clark-S
Acquisition, CS Finance, Holdings and Fleet National Bank, as trustee (the
"Trustee"), pursuant to which the Senior Notes are to be issued, as such
Indenture is amended or supplemented from time to time in accordance with the
terms thereof.
Interest Payment Date: As defined in the Indenture and the Senior Notes.
NASD: National Association of Securities Dealers, Inc.
Person: An individual, partnership, corporation, trust or unincorporated
organization, or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Purchaser: As defined in the preamble hereto.
2
<PAGE>
Record Holder: With respect to any Damages Payment Date relating to Senior
Notes, each Person who is a Holder of Senior Notes on the record date with
respect to the Interest Payment Date on which such Damages Payment Date shall
occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company and
Holdings relating to (a) an offering of Series B Senior Notes (and related
Holdings Guarantee) pursuant to an Exchange Offer or (b) the registration for
resale of Transfer Restricted Securities pursuant to the Shelf Registration
Statement, which is filed pursuant to the provisions of this Agreement, in each
case, including the Prospectus included therein, all amendments and supplements
thereto (including post-effective amendments) and all exhibits and material
incorporated by reference therein.
Senior Notes: The Series A Senior Notes and the Series B Senior Notes.
Series B Senior Notes: The Company's 10-1/2% Series B Senior Notes due
2006 to be issued pursuant to the Indenture in the Exchange Offer.
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Senior Note, until the earliest to
occur of (a) the date on which such Senior Note is exchanged in the Exchange
Offer by a Person other than a Broker-Dealer for a Series B Senior Note and is
entitled to be resold to the public by the Holder thereof without complying with
the prospectus delivery requirements of the Act, (b) following the exchange by a
Broker-Dealer in the Exchange Offer of a Senior Note for a Series B Senior Note,
the date on which such Series B Senior Note is sold to a purchaser who receives
from such Broker-Dealer on or prior to the date of such sale a copy of the
prospectus contained in the Exchange Offer Registration Statement, (c) the date
on which such Senior Note effectively has been registered under the Act and
disposed of in accordance with the Shelf Registration Statement or (iv) the date
on which such Senior Note is distributed to the public pursuant to Rule 144
under the Act.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
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SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to be a
holder of Transfer Restricted Securities (each, a "Holder") whenever such Person
owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under applicable
law or Commission policy (after the procedures set forth in Section 6(a) below
have been complied with), Holdings and the Company shall (i) cause to be filed
under the Act with the Commission as soon as practicable after the Closing Date,
but in no event later than 45 days after the Closing Date, an Exchange Offer
Registration Statement relating to the Series B Senior Notes (and the related
Holdings Guarantee) and the Exchange Offer, (ii) use their best efforts to cause
such Exchange Offer Registration Statement to become effective at the earliest
possible time, but in no event later than 120 days after the Closing Date, (iii)
in connection with the foregoing, file (A) all pre-effective amendments to such
Exchange Offer Registration Statement as may be necessary in order to cause such
Exchange Offer Registration Statement to become effective, (B) if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) all filings in connection with the
registration and qualification of the Series B Senior Notes (and the related
Holdings Guarantee) as are necessary under the Blue Sky laws of such
jurisdictions in order to permit Consummation of the Exchange Offer, and (iv)
upon the effectiveness of such Registration Statement, use their best efforts to
issue on or prior to 150 days after the Closing Date (the "Exchange Offer
Effectiveness Date") Series B Senior Notes (and the related Holdings Guarantee)
in exchange for all Series A Senior Notes tendered prior thereto in the Exchange
Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the Series B Senior Notes (and the related Holdings Guarantee)
to be offered in exchange for the Transfer Restricted Securities and to permit
resales of Senior Notes held by Broker-Dealers as contemplated by Section 3(c)
below.
(b) Holdings and the Company shall cause the Exchange Offer Registration
Statement to be effective continuously and shall keep the Exchange Offer open
for a period of not less than the minimum period required under applicable
federal and state securities laws to Consummate the Exchange Offer; provided,
however, that in no event shall such period be less than 20 business days.
Holdings and the Company shall cause the Exchange Offer to comply with all
applicable federal and state securities laws. No securities other than the
Series B Senior Notes (and the related Holdings Guarantee) shall be included in
the Exchange Offer Registration Statement. Holdings and the Company shall use
their best efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 30 business days thereafter.
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(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Series A Senior Notes that are
Transfer Restricted Securities and that were acquired for its own account as a
result of market-making activities or other trading activities (other than
Transfer Restricted Securities acquired directly from the Company), may exchange
such Series A Senior Notes pursuant to the Exchange Offer; however, such
Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Act
and, consequently, must deliver a prospectus meeting the requirements of the Act
in connection with any resales of the Series B Senior Notes received by such
Broker-Dealer in the Exchange Offer, which prospectus delivery requirement may
be satisfied by the delivery by such Broker-Dealer of the Prospectus contained
in the Exchange Offer Registration Statement. Such "Plan of Distribution"
section shall also contain all other information with respect to such resales by
Broker-Dealers that the Commission may require in order to permit such resales
pursuant thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of Senior Notes held by any such
Broker-Dealer except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.
The Company shall use its reasonable best efforts to keep the Exchange
Offer Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) below to the extent necessary to
ensure that it is available for resales of Senior Notes acquired by
Broker-Dealers for their own accounts as a result of market-making activities or
other trading activities, and to ensure that such Exchange Offer Registration
Statement conforms with the requirements of this Agreement, the Act and the
policies, rules and regulations of the Commission as announced from time to
time, for a period equal to the shorter of (A) two hundred and ten (210)
consecutive days after the date the Exchange Offer is Consummated (subject to
the provisions of Section 6(c)(i) below) and (B) the date on which all Transfer
Restricted Securities acquired in the Exchange Offer by Restricted
Broker-Dealers have been sold to the public by such Restricted Broker-Dealers.
In order to facilitate such resales, at any time during such 210-day period
the Company shall provide to Broker-Dealers, promptly upon request, and in no
event more than five business days after any such request, sufficient copies of
the latest version of such Prospectus.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) Holdings and the Company are not required
to file an Exchange Offer Registration Statement with respect to the Series B
Senior Notes (and the related Holdings Guarantee) because the Exchange Offer is
not permitted by applicable law (after the procedures set forth in Section 6(a)
below have been complied with) or Commission policy or (ii) if any Holder of
Transfer Restricted Securities shall notify Holdings and the Company within 10
business days following Consummation of the Exchange Offer that (A) such Holder
was prohibited by law or Commission policy from participating in the Exchange
Offer, (B) such Holder may not resell the Series B Senior Notes acquired by it
in the Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Offer Registration Statement is not
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appropriate or available for such resales by such Holder, or (C) such Holder is
a Broker-Dealer and holds Series A Senior Notes acquired directly from the
Company or one of its affiliates, then Holdings and the Company shall
(x) cause to be filed on or prior to (1) in the case of a Registration
Statement filed pursuant to clause (i) above, the earlier to occur of 45
days after the date on which Holdings and the Company determine that they
are not required to file the Exchange Offer Registration Statement or 75
days after the Closing Date and (2) in the case of a Registration Statement
filed pursuant to clause (ii) above, 45 days after the date on which
Holdings and the Company receive the notice specified in clause (ii) above,
a shelf registration statement pursuant to Rule 415 under the Act (which
may be an amendment to the Exchange Offer Registration Statement (in either
event, the "Shelf Registration Statement")), relating to all Transfer
Restricted Securities the Holders of which shall have provided the
information required pursuant to Section 4(b) hereof, and shall
(y) use its reasonable best efforts to cause such Shelf Registration
Statement to become effective on or prior to (1) in the case of a
Registration Statement filed pursuant to clause (i) above, 120 days after
the date on which Holdings and the Company become obligated to file such
Shelf Registration Statement and (2) in the case of a Registration
Statement filed pursuant to clause (ii) above, 120 days after the date on
which Holdings and the Company receive the notice specified in clause (ii)
above. If, after Holdings and the Company have filed an Exchange Offer
Registration Statement which satisfies the requirements of Section 3(a)
above, Holdings and the Company are required to file and make effective a
Shelf Registration Statement solely because the Exchange Offer shall not be
permitted under applicable federal law, then the filing of the Exchange
Offer Registration Statement shall be deemed to satisfy the requirements of
clause (x) above. Such an event shall have no effect on the requirements of
clause (y) above, or on the Effectiveness Target Date as defined in Section
5 below.
Each of Holdings and the Company shall use its reasonable best efforts to
keep such Shelf Registration Statement continuously effective, supplemented and
amended as required by the provisions of Sections 6(b) and (c) hereof for a
period of three years from the effective date thereof (as extended pursuant to
Section 6(c)(i) or such shorter period that will terminate when all Senior Notes
are no longer Transfer Restricted Securities or all Senior Notes covered by such
Shelf Registration Statement have been sold pursuant thereto, and to ensure that
such Shelf Registration Statement conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of three years from the effective date
thereof (as extended pursuant to Section 6(c)(i)) or such shorter period that
will terminate when all Senior Notes are no longer Transfer Restricted
Securities or all Senior Notes covered by such Shelf Registration Statement have
been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
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Holdings and the Company in writing, within [20] business days after receipt of
a request therefor, such information as Holdings and the Company reasonably may
request for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to Liquidated Damages pursuant to
Section 5 hereof unless and until such Holder shall have used its best efforts
to provide all such reasonably requested information. Each Holder as to which
any Shelf Registration Statement is being effected agrees to furnish promptly to
Holdings and the Company all information required to be disclosed in order to
make the information previously furnished to Holdings and the Company by such
Holder not materially misleading.
(c) Restrictions on Sale of Certain Securities by Others. Holdings and the
Company agree not to, and to use their reasonable best efforts to cause its
affiliates not to, offer, sell, contract to sell or grant any option to purchase
or otherwise transfer or dispose of any debt security issued by Holdings or the
Company or any security convertible into or exchangeable or exercisable for any
such debt security, including a sale pursuant to Rule 144 under the Act, during
the 30-day period beginning on the closing date of each Underwritten Offering
made pursuant to the Shelf Registration Statement (except as part of such
Underwritten Registration).
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement are
not filed with the Commission on or prior to the date specified for such filing
in Section 3 or 4 of this Agreement, (ii) any of such Registration Statements
have not been declared effective by the Commission on or prior to the date
specified for such effectiveness in Section 3 or 4 of this Agreement (the
"Effectiveness Target Date"), (iii) the Exchange Offer has not been Consummated
within 150 days after the Closing Date or (iv) subject to the provisions of
Section 6(c)(i) below, any Registration Statement required by this Agreement is
filed and declared effective but shall thereafter cease to be effective or fail
to be usable for its intended purpose without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself immediately declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), Holdings and the Company
hereby, jointly and severally, agree to pay liquidated damages to each Holder of
Transfer Restricted Securities, during 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 the Transfer Restricted Securities
held by such Holder for so long as the Registration Default continues. The
amount of liquidated damages payable to each Holder shall increase by an
additional $.05 per week per $1,000 principal amount of Transfer Restricted
Securities held by such Holder for each subsequent 90-day period, up to a
maximum amount of liquidated damages of $.30 per week per $1,000 principal
amount of Transfer Restricted Securities held by such Holder. All accrued
liquidated damages shall be paid by Holdings and the Company on each Damages
Payment Date (i) to the Global Note Holder by wire transfer of immediately
available funds and (ii) 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, as provided in the Indenture.
Following the cure of all Registration Defaults relating to any particular
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Transfer Restricted Securities, the accrual of liquidated damages with respect
to such Transfer Restricted Securities will cease.
All obligations of Holdings and the Company set forth in the preceding
paragraph that are outstanding with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security shall
survive until such time as all such obligations with respect to such Security
shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, Holdings and the Company shall comply with all of the provisions of
Section 6(c) below, shall use its reasonable best efforts to effect such
exchange to permit the sale of Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If in the reasonable opinion of counsel to Holdings and the
Company there is a question as to whether the Exchange Offer is permitted by
applicable law, Holdings and the Company hereby agree to seek a no-action
letter or other favorable decision from the Commission allowing Holdings and
the Company to Consummate an Exchange Offer for such Series A Senior Notes.
Holdings and the Company hereby agree to pursue the issuance of such a
decision to the Commission staff level, but shall not be required to take
commercially unreasonable action to effect a change of Commission policy.
Holdings and the Company hereby agree, however, (A) to participate in
telephonic conferences with the Commission, (B) to deliver to the Commission
staff an analysis prepared by counsel to Holdings and the Company setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) to pursue diligently a
resolution (which need not be favorable) by the Commission staff of such
submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer Restricted
Securities shall furnish, upon the request of Holdings and the Company, prior
to the Consummation thereof, a written representation to Holdings and the
Company (which may be contained in the letter of transmittal contemplated by
the Exchange Offer Registration Statement) to the effect that such Holder (A)
is not an affiliate of Holdings or the Company, (B) is not engaged in, and
does not intend to engage in, and has no arrangement or understanding with
any person to participate in, a distribution of the Series B Senior Notes to
be issued in the Exchange Offer and (C) is acquiring the Series B Senior
Notes in its ordinary course of business. In addition, all such Holders of
Transfer Restricted Securities otherwise shall cooperate in Holdings' and the
Company's preparations for the Exchange Offer. Each Holder hereby
acknowledges and agrees (X) that any Broker-Dealer and any such Holder using
the Exchange Offer to participate in a distribution of the securities to be
acquired in the Exchange Offer (1) could not under Commission policy as in
effect on the date of this Agreement rely on the position of the Commission
enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon
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Capital Holdings Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and similar
no-action letters (including any no-action letter obtained pursuant to clause
(i) above), and (2) must comply with the registration and prospectus delivery
requirements of the Act in connection with a secondary resale transaction and
(Y) that such a secondary resale transaction should be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K if
the resales are of Series B Senior Notes obtained by such Holder in exchange
for Series A Senior Notes acquired by such Holder directly from the Company.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, Holdings and the Company shall provide a supplemental letter to
the Commission (A) stating that Holdings and the Company are registering the
Exchange Offer in reliance on the position of the Commission enunciated in
Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley
and Co., Inc. (available June 5, 1991) and, if applicable, any no-action
letter obtained pursuant to clause (i) above and (B) including a
representation that Holdings and the Company have not entered into any
arrangement or understanding with any Person to distribute the Series B
Senior Notes (and the related Holdings Guarantee) to be received in the
Exchange Offer and that, to the best of Holdings' and the Company's
information and belief, each Holder participating in the Exchange Offer is
acquiring the Series B Senior Notes (and the related Holdings Guarantee) in
its ordinary course of business and has no arrangement or understanding with
any Person to participate in the distribution of the Series B Senior Notes
(and the related Holdings Guarantee) received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, Holdings and the Company shall comply with all of the
provisions of Section 6(c) below and shall use their best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being sold
in accordance with the intended method or methods of distribution thereof, and
pursuant thereto Holdings and the Company as expeditiously as possible will
prepare and file with the Commission a Registration Statement relating to the
registration on any appropriate form under the Act, which form shall be
available for the sale of the Transfer Restricted Securities in accordance with
the intended method or methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement and
any Prospectus required by this Agreement in order to permit the sale or resale
of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit resales of
Senior Notes by Broker-Dealers), Holdings and the Company shall:
(i) use their reasonable best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this Agreement, as
applicable. Upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain a
material misstatement or omission or (B) not to be effective and usable for
resale of Transfer Restricted Securities during the period required by this
Agreement, Holdings and the Company promptly shall file an appropriate
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amendment to such Registration Statement, in the case of clause (A),
correcting any such misstatement or omission, and, in the case of either
clause (A) or (B), use its best efforts to cause such amendment to be
declared effective and such Registration Statement and the related
Prospectus to become usable for their intended purpose(s) as soon as
practicable thereafter. Notwithstanding the foregoing, Holdings and the
Company may suspend the effectiveness of (1) the Registration Statement
relating to the Exchange Offer for up to 10 days during the 210-day period
referred to in Section 3(c) and (2) the Shelf Registration Statement for up
to 30 days in each year during which such Shelf Registration Statement is
required to be effective and usable hereunder (measured from the date of
effectiveness of such Shelf Registration Statement to successive
anniversaries thereof) if (A) either (y)(I) Holdings and the Company shall
be engaged in a material acquisition or disposition and (II)(aa) such
acquisition or disposition is required to be disclosed in the Registration
Statement, the related Prospectus or any amendment or supplemental thereto,
or the failure by Holdings and the Company to disclose such transaction in
the Registration Statement or related Prospectus, or any amendment or
supplemental thereto, as then amended or supplemented, would cause such
Registration Statement, Prospectus or amendment or supplement thereto, to
contain an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statement therein not misleading, in
the light of the circumstances under with they were made, (bb) information
regarding the existence of such acquisition or disposition has not then
been publicly disclosed by or on behalf of Holdings and the Company and
(cc) a majority of the Board of Directors of Holdings or the Company
determines in the exercise of its good faith judgment that disclosure of
such acquisition or disposition would not be in the best interest of
Holdings or the Company and its subsidiaries or would have a material
adverse effect on the consummation of such acquisition or disposition or
(z) a majority of the Board of Directors of Holdings or the Company
determines in the exercise of its good faith judgment that compliance with
the disclosure obligations set forth in this Section 6(c)(i) would
otherwise have a material adverse effect on Holdings or the Company and its
subsidiaries, taken as a whole, and (B) Holdings and the Company notify the
Holders within two business days after such Board of Directors makes the
relevant determination set forth in clause (A); provided, however, that in
each such case the applicable period specified in Section 3 and 4 hereof
during which the applicable Registration Statement is required to be kept
effective and usable shall be extended by the number of days during which
such effectiveness was suspended pursuant to the foregoing.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary
to keep the Registration Statement effective for the applicable period set
forth in Section 3 or 4 hereof, as applicable, or such shorter period as
will terminate when all Transfer Restricted Securities covered by such
Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
the applicable provisions of Rules 424 and 430A under the Act in a timely
manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement during
the applicable period in accordance with the intended method or methods of
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distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders and, if
requested by such Persons, confirm such advice in writing, (A) when the
Prospectus or any Prospectus supplement or post-effective amendment has
been filed, and, with respect to any Registration Statement or any
post-effective amendment thereto, when the same has become effective, (B)
of any request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or for additional
information relating thereto, (C) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement under
the Act or of the suspension by any state securities commission of the
qualification of the Transfer Restricted Securities for offering or sale in
any jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, (D) of the existence of any fact or the happening of
any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement thereto
or any document incorporated by reference therein untrue, or that requires
the making of any additions to or changes in the Registration Statement or
the Prospectus in order to make the statements therein not misleading. If
at any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, Holdings and
the Company shall use their best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time;
(iv) furnish to each Purchaser, each of the selling Holders and each
of the underwriter(s), if any, before filing with the Commission, copies of
any Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or Prospectus
(including all documents incorporated by reference after the initial filing
of such Registration Statement), which documents will be subject to the
review of such Holders and underwriter(s), if any, for a period of at least
five business days, and the Company will not file any such Registration
Statement or Prospectus or any amendment or supplement to any such
Registration Statement or Prospectus (including all such documents
incorporated by reference) to which a selling Holder of Transfer Restricted
Securities covered by such Registration Statement or the underwriter(s), if
any, shall object within five business days after the receipt thereof. A
selling Holder or underwriter, if any, shall be deemed to have objected
reasonably to such filing if such Registration Statement, amendment,
Prospectus or supplement, as applicable, as proposed to be filed, contains
a material misstatement or omission or fails to comply with the applicable
requirements of the Act;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriter(s), if any, make Holdings' and the Company's representatives
available for discussion of such document and other customary due diligence
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matters, and include such information in such document prior to the filing
thereof as such selling Holders or underwriter(s), if any, reasonably may
request;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition pursuant to
such Registration Statement, and any attorney or accountant retained by such
selling Holders or any of the underwriter(s), all financial and other
records, pertinent corporate documents and properties of Holdings and the
Company and cause Holdings' and the Company's officers, directors and
employees to supply all information reasonably requested by any such Holder,
underwriter, attorney or accountant in connection with such Registration
Statement subsequent to the filing thereof and prior to its effectiveness;
(vii) if requested by any selling Holders or the underwriter(s), if
any, promptly incorporate in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders and underwriter(s), if any, reasonably
may request to have included therein, including, without limitation,
information relating to the "Plan of Distribution" of the Transfer
Restricted Securities, information with respect to the principal amount of
Transfer Restricted Securities being sold to any such underwriter(s), the
purchase price being paid therefor and any other terms of the Transfer
Restricted Securities to be sold in such offering; and make all
required filings of such Prospectus supplement or post-effective amendment as
soon as practicable after Holdings and the Company are notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies, if
so requested by the Holders of a majority in aggregate principal amount of
Senior Notes covered thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the underwriter(s),
if any, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including all
documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) deliver to each selling Holder and each of the underwriter(s),
if any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such
Persons reasonably may request; Holdings and the Company hereby consent to
the use of the Prospectus and any amendment or supplement thereto by each of
the selling Holders and each of the underwriter(s), if any, in connection
with the offering and the sale of the Transfer Restricted Securities covered
by the Prospectus or any amendment or supplement thereto;
(xi) enter into such agreements (including an underwriting
agreement), and make such representations and warranties, and take all such
other actions in connection therewith in order to expedite or facilitate the
disposition of the Transfer Restricted Securities pursuant to any
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Registration Statement contemplated by this Agreement, all to such extent as
may be requested by any Purchaser or by any Holder of Transfer Restricted
Securities or underwriter in connection with any sale or resale pursuant to
any Registration Statement contemplated by this Agreement; and whether or not
an underwriting agreement is entered into and whether or not the registration
is an Underwritten Registration, each of Holdings and the Company shall:
(A) furnish to each Purchaser, each selling Holder and each
underwriter, if any, in such substance and scope as they may request and
as are customarily made by issuers to underwriters in primary underwritten
offerings, upon the date of the Consummation of the Exchange Offer and, if
applicable, upon the effectiveness of the Shelf Registration Statement:
(1) a certificate, dated the date of Consummation of the Exchange
Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, signed by (x) the President or any Vice
President and (y) a principal financial or accounting officer of each
of Holdings and the Company, confirming, as of the date thereof, the
matters set forth in paragraphs (a), (b), (c) and (d) and (e) of
Section 7 of the Purchase Agreement and such other matters as such
parties may reasonably request;
(2) an opinion, dated the date of Consummation of the Exchange
Offer or the date of effectiveness of the Shelf Registration Statement,
as the case may be, of counsel for Holdings and the Company covering
the matters set forth in paragraph (g) of Section 7 of the Purchase
Agreement and such other matters as the Holders and/or managing
underwriter(s) reasonably may request, and in any event including a
statement to the effect that such counsel has participated in
conferences with officers and other representatives of Holdings and the
Company, representatives of the independent public accountants for
Holdings and the Company, the Purchasers' representatives and the
Purchasers' counsel in connection with the preparation of such
Registration Statement and the related Prospectus and have considered
the matters required to be stated therein and the statements contained
therein, although such counsel has not independently verified the
accuracy, completeness or fairness of such statements; and that on the
basis of the foregoing (relying upon facts provided to such counsel by
officers and other representatives of Holdings and the Company and
without independent check or verification), that no facts came to such
counsel's attention that caused such counsel to believe that the
applicable Registration Statement, at the time such Registration
Statement or any post-effective amendment thereto became effective,
and, in the case of the Exchange Offer Registration Statement, as of
the date of Consummation, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus contained in such Registration Statement as of its date and,
in the case of the opinion dated the date of Consummation of the
Exchange Offer, as of the date of Consummation, contained an untrue
statement of a material fact or omitted to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Without
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<PAGE>
limiting the foregoing, such counsel may state further that such
counsel assumes no responsibility for, and has not independently
verified, the accuracy, completeness or fairness of the financial
statements, notes and schedules and other financial data included in
any Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness of the
Shelf Registration Statement, as the case may be, from Holdings' and
the Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort letters to
underwriters in connection with primary underwritten offerings, and
affirming the matters set forth in the comfort letters delivered
pursuant to Section 7(j) of the Purchase Agreement, without exception;
(B) set forth in full or incorporate by reference in the underwriting
agreement, if any, the indemnification provisions and procedures of
Section 8 hereof with respect to all parties to be indemnified pursuant to
said Section; and
(C) deliver such other documents and certificates as reasonably may be
requested by such parties to evidence compliance with clause (A) above and
with any customary conditions contained in the underwriting agreement or
other agreement entered into by Holdings and the Company pursuant to this
clause (xi), if any.
The provisions of this clause (a) shall be applicable at each closing
under such underwriting or similar agreement, as and to the extent required
thereunder and, if at any time the representations and warranties of Holdings
and the Company contemplated in clause (A)(1) above cease to be true and
correct, Holdings and the Company promptly shall so advise the Purchasers and
the underwriter(s), if any, and each selling Holder and, if requested by such
Persons, shall confirm such advice in writing;
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders, the underwriter(s), if any, and their
respective counsel in connection with the registration and qualification of
the Transfer Restricted Securities under the securities or Blue Sky laws of
such jurisdictions as the selling Holders or underwriter(s) may request and
do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the Shelf Registration Statement; provided, however, that neither
Holdings nor the Company shall be required to register or qualify as a
foreign corporation where it is not now so qualified or to take any action
that would subject it to the service of process in suits or to taxation,
other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject;
(xiii) upon the request of any Holder of Series A Senior Notes covered
by the Shelf Registration Statement, shall issue Series B Senior Notes,
having an aggregate principal amount equal to the aggregate principal amount
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<PAGE>
of Series A Senior Notes surrendered to the Company by such Holder in
exchange therefor or being sold by such Holder, such Series B Senior Notes to
be registered in the name of such Holder or in the name of the purchaser(s)
of such Senior Notes, as the case may be; in return, the Series A Senior
Notes held by such Holder shall be surrendered to the Company for
cancellation;
(xiv) cooperate with the selling Holders and the underwriter(s), if
any, to facilitate the timely preparation and delivery of certificates
representing Transfer Restricted Securities to be sold and not bearing any
restrictive legends, and enable such Transfer Restricted Securities to be in
such denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior to any
sale of Transfer Restricted Securities made by such underwriter(s);
(xv) use its best efforts to cause the Transfer Restricted
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary in order to enable the seller or sellers thereof or the
underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (viii)
above;
(xvi) if any fact or event contemplated by clause (c)(iii)(D) above
shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of Transfer Restricted
Securities, the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein not misleading; provided, however, Holdings and the Company shall not
be required to comply with this clause (xvi) if, and only for so long as (A)
either (l)(y) Holdings and the Company shall be engaged in a material
acquisition or disposition and (z)(I) such acquisition or disposition is
required to be disclosed in the Registration Statement, the related
Prospectus or any amendment or supplement thereto, or the failure by Holdings
and the Company to disclose such transaction in the Registration Statement or
related Prospectus, or any amendment or supplement thereto, as then amended
or supplemented, would cause such Registration Statement, Prospectus or
amendment or supplement thereto, to contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein no misleading, in the light of the circumstances under
with they were made, (II) information regarding the existence of such
acquisition or disposition has not been publicly disclosed by or on behalf of
Holdings and the Company and (III) a majority of the Board of Directors of
Holdings or the Company determines in the exercise of its good faith judgment
that disclosure of such acquisition or disposition would not be in the best
interests of Holdings and the Company and its subsidiaries or would have a
material adverse effect on the consummation of such acquisition or
disposition or (2) a majority of the Board of Directors of Holdings or the
Company determines in the exercise of its good faith judgment that compliance
with the disclosure obligations set forth in this clause (xvi) would
otherwise have a material adverse effect on Holdings and the Company and its
subsidiaries, taken as whole, and (B) the Company notifies the Holders within
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<PAGE>
two business days after the Board of Directors makes the relevant
determination set forth in clause (A); provided, however, that in each such
case the period specified in Section 3 and 4 hereof during which the
applicable Registration Statement is required to be kept effective and usable
shall be extended by the number of days during which such effectiveness was
suspended pursuant to the foregoing;
(xvii) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of the Registration Statement, and provide
the Trustee under the Indenture with printed certificates for the Transfer
Restricted Securities which are in a form eligible for deposit with the
Depositary Trust Company;
(xviii) cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is
required to be retained in accordance with the rules and regulations of the
NASD, and use its reasonable best efforts to cause such Registration
Statement to become effective and approved by such governmental agencies or
authorities as may be necessary to enable the Holders selling Transfer
Restricted Securities to consummate the disposition of such Transfer
Restricted Securities;
(xix) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) for the twelve-month period (A) commencing at the end of any fiscal
quarter in which Transfer Restricted Securities are sold to underwriters in a
firm or best efforts Underwritten Offering or (B) if not sold to underwriters
in such an offering, beginning with the first month of Holdings' and the
Company's first fiscal quarter commencing after the effective date of the
Registration Statement;
(xx) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by this
Agreement, and, in connection therewith, cooperate with the Trustee and the
Holders of Senior Notes to effect such changes to the Indenture as may be
required for such Indenture to be so qualified in accordance with the terms
of the TIA; and execute and use its best efforts to cause the Trustee to
execute, all documents that may be required to effect such changes and all
other forms and documents required to be filed with the Commission to enable
such Indenture to be so qualified in a timely manner;
(xxi) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by Holdings and the Company are then listed if
requested by the Holders of a majority of the outstanding shares or aggregate
principal amount of Series A Senior Notes, or the underwriters, if any; and
(xxii) provide promptly to each Holder upon request each document
filed with the Commission pursuant to the requirements of Section 13 and
Section 15 of the Exchange Act.
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Each Holder agrees by acquisition of a Transfer Restricted Security that,
upon receipt of any notice from Holdings and the Company of the existence of any
fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will
forthwith discontinue disposition of Transfer Restricted Securities pursuant to
the applicable Registration Statement until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi)
hereof, or until it is advised in writing (the "Advice") by Holdings and the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by reference in
the Prospectus. If so directed by Holdings and the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of such notice. In the event Holdings and the Company shall give any
such notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 6(c)(iii)(D) hereof to and including
the date when each selling Holder covered by such Registration Statement shall
have received the copies of the supplemented or amended Prospectus contemplated
by Section 6(c)(xvi) hereof or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to Holdings' and the Company's performance of or
compliance with this Agreement will be borne by Holdings and the Company,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses (including
filings made by any Purchaser or Holder with the NASD (and, if applicable, the
fees and expenses of any "qualified independent underwriter" and its counsel
that may be required by the rules and regulations of the NASD)); (ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the Series B Senior Notes to be issued in the Exchange Offer and printing of
Prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company and, subject to Section 7(b) below, the
Holders of Transfer Restricted Securities; (v) all application and filing fees
in connection with listing Senior Notes on a national securities exchange or
automated quotation system pursuant to the requirements hereof; and (vi) all
fees and disbursements of independent certified public accountants of Holdings
and the Company (including the expenses of any special audit and comfort letters
required by or incident to such performance).
Each of Holdings and the Company will, in any event, bear its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by Holdings or the Company.
[(b) Who bears ST&B expenses in connection with registration?]
SECTION 8. INDEMNIFICATION
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(a) Holdings and the Company, jointly and severally, agree to indemnify
and hold harmless (i) each Holder and (ii) each person, if any, who controls
(within the meaning of Section 15 of the Act or Section 20 of the Exchange Act)
any Holder (any of the persons referred to in this clause (ii) being hereinafter
referred to as a "controlling person") and (iii) the respective officers,
directors, partners, employees, representatives and agents of each Holder and
each controlling person (any person referred to in clause (i), (ii) or (iii) may
hereinafter be referred to as an "Indemnified Holder") to the fullest extent
lawful, from and against any and all losses, claims, damages, judgments, actions
and other liabilities (collectively, "Liabilities"), and will reimburse each
Indemnified Holder for all fees and expenses (including, without limitation, the
reasonable fees and expenses of counsel to any Indemnified Holder)
(collectively, "Expenses") as they are incurred in investigating, preparing,
pursuing or defending any claim or action, or any proceeding or investigation by
any governmental agency or body, whether or not in connection with pending or
threatened litigation and whether or not any Indemnified Holder is a party
(collectively, "Actions"), directly or indirectly caused by, related to, based
upon, arising out of or in connection with any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement,
preliminary Prospectus or Prospectus (including any amendments thereof and
supplements thereto), or by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except insofar as such Liabilities or Expenses are caused by an
untrue statement or omission or alleged untrue statement or omission (i) that is
made in reliance upon and in conformity with information relating to an
Indemnified Holder furnished in writing to Holdings or the Company by such
Indemnified Holder expressly for use therein or (ii) that is made in any
preliminary Prospectus if a copy of the final Prospectus (as then amended or
supplemented) was not sent or given by or on behalf of the Holder to the person
asserting any such loss, claim, damage, liability or expense, if required by law
so to have been delivered, at or prior to the written confirmation of the sale
of the Senior Notes and the final prospectus (as then amended or supplemented)
would have corrected such untrue statement or omission. Holdings and the
Company, jointly and severally, also agree to reimburse each Indemnified Holder
for all Expenses as incurred in connection with enforcing such Indemnified
Holder's rights under this Agreement (including, without limitation, its rights
under this Section 8). Holdings or the Company shall notify each Indemnified
Holder promptly of the institution, threat or assertion of any Action in
connection with the matters addressed by this Agreement which involves Holdings
or the Company or an Indemnified Holder.
Upon receipt by an Indemnified Holder of notice of an Action against such
Indemnified Holder with respect to which indemnity may be sought under this
Section 8, such Indemnified Holder shall promptly notify Holdings and the
Company in writing; provided that the failure to so notify the Company shall not
relieve Holdings and the Company from any liability which the Company may have
on account of this indemnity or otherwise, except to the extent Holdings and the
Company shall have been materially prejudiced by such failure. Holdings and the
Company shall, if requested by such Indemnified Holder, assume the defense of
any such Action, including the employment of counsel reasonably satisfactory to
such Indemnified Holder. Any Indemnified Holder shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
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Indemnified Holder, unless: (i) Holdings and the Company have failed promptly to
assume the defense and employ counsel reasonably satisfactory to such
Indemnified Holder, (ii) the indemnifying party has authorized the employment of
counsel for such Indemnified Holder at the expense of the indemnifying party or
(iii) the named parties to any such Action (including any impleaded parties)
include such Indemnified Holder and Holdings and the Company, and such
Indemnified Holder shall have been advised by counsel that there may be one or
more legal defenses available to it which are different from or in addition to
those available to Holdings and the Company; provided that Holdings and the
Company shall not in such event be responsible hereunder for the fees and
expenses of more than one firm of separate counsel in connection with any Action
in the same jurisdiction, in addition to any local counsel. Holdings and the
Company shall not be liable for any settlement of any Action effected without
its written consent (which shall not be unreasonably withheld) and Holdings and
the Company agree to indemnify and hold harmless any Indemnified Holder from and
against any Liability or Expense by reason of any settlement of any Action
effected with the written consent of Holdings and the Company. Notwithstanding
the immediately preceding sentence, if at any time an Indemnified Holder shall
have requested Holdings and the Company to reimburse the Indemnified Holder for
fees and expenses of counsel as contemplated by the third sentence of this
paragraph, each of Holdings and the Company agree that it shall be liable for
any settlement of any proceeding effected without its written consent if (i)
such settlement is entered into more than sixty (60) business days after receipt
by Holdings and the Company of the aforesaid request and (ii) Holdings and the
Company shall not have reimbursed the Indemnified Holder in accordance with such
request prior to the date of such settlement. In addition, Holdings and the
Company will not, without the prior written consent of each Indemnified Holder,
settle any pending or threatened Action in respect of which indemnification or
contribution may be sought hereunder (whether or not any Indemnified Holder is a
party thereto), unless such settlement includes an unconditional release of such
Indemnified Holder from all Liabilities on claims that are the subject matter of
such proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally and
not jointly, to indemnify and hold harmless Holdings and the Company, and its
directors, officers, and any person controlling (within the meaning of Section
15 of the Act or Section 20 of the Exchange Act) Holdings and the Company, and
the respective officers, directors, partners, employees, representatives and
agents of each such person, to the same extent as the foregoing indemnity from
Holdings and the Company to each of the Indemnified Holders, but only with
respect to Liabilities and Expenses incurred in investigating, preparing,
pursuing or defending Actions caused by or arising out of, based on or in
connection with information relating to such Holder furnished in writing by or
on behalf of such Holder expressly for use in any Registration Statement or
Prospectus or any amendment or supplement thereto. In case any Action shall be
brought against Holdings and the Company or their directors or officers or any
such controlling person in respect of which indemnity may be sought against a
Holder of Transfer Restricted Securities, such Holder shall have the rights and
duties given Holdings and the Company and Holdings and the Company or its
directors or officers or such controlling person shall have the rights and
duties given to each Holder by the preceding paragraph. In no event shall the
liability of any selling Holder hereunder be greater than the amount by which
the total proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation exceeds the sum of (A)
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the amount paid by such Holder for such Registrable Securities plus (B) the
amount of any damages which such Holder has otherwise been required to pay by
reason of a claim or action based on such information.
(c) If the indemnification provided for in this Section 8 is unavailable
to an indemnified party under Section 8(a) or Section 8(b) hereof (other than by
reason of exceptions provided in those Sections) in respect of any Liabilities
or Expenses referred to therein, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such Liabilities or Expenses
(i) in such proportion as is appropriate to reflect the relative benefits
received by the Company on the one hand and the Holders on the other hand from
their sale of Transfer Restricted Securities or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of Holdings and the Company and of the
Indemnified Holder, as well as any other relevant equitable considerations. The
relative benefits received by Holdings and the Company and any Indemnified
Holder shall be deemed to be in the same proportion as (x) the total proceeds
from the offering of Units to the Purchasers (net of discounts but before
deducting expenses) received by Holdings and the Company and (y) the total
proceeds received by such Indemnified Holder upon its sale of Transfer
Restricted Services which otherwise would give rise to the indemnification
obligation, respectively. The relative fault of Holdings and the Company on the
one hand and of the Indemnified Holder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by Holdings and the Company or by the
Indemnified Holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Holdings and the Company and each Holder of Transfer Restricted Securities
agree that it would not be just and equitable if contribution pursuant to this
Section 8(c) were determined by pro rata allocation (even if the Holders were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an indemnified
party as a result of the Liabilities and Expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 8(a), any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any Action. Notwithstanding any other provision of
this Section 8, none of the Holders (and its related Indemnified Holders) shall
be required to contribute, in the aggregate, an amount in excess of the amount
by which the total proceeds received by such Holder with respect to the sale of
its Series A Senior Notes giving rise to such Liabilities or Expenses exceeds
the sum of (A) the amount paid by such Holder for such Series A Senior Notes
plus (B) the amount of any damages which such Holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The Holders'
obligations to contribute pursuant to this Section 8(c) are several in
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proportion to the principal amount of Series A Senior Notes held by each of the
Holders hereunder and not joint.
SECTION 9. RULE 144A
Holdings and the Company hereby agree with each Holder, for so long as any
Transfer Restricted Securities remain outstanding, to make available to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Act in order to effect resales of such Transfer
Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided that such investment bankers and managers must be
reasonably satisfactory to Holdings and the Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. Each Holder, in addition to being entitled to exercise all
rights provided herein, in the Indenture, the Purchase Agreement or granted by
law, including recovery of liquidated or other damages, will be entitled to
specific performance of its rights under this Agreement. Holdings and the
Company agree that a breach of any of the provisions of this Agreement will
cause irreparable injury to the Holders, that the Holders have no adequate
remedy by law in respect of such breach and, as a consequence, that each and
every provision contained in this Agreement shall be specifically enforceable
against Holdings and the Company, and Holdings and the Company hereby waive and
agree not to assert as a defense to the request or granting of specific
performance of any such provision that any breach of any such provision does not
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or would not cause irreparable harm or is or would be compensable by an award of
money damages in respect of such breach.
(b) No Inconsistent Agreements. Holdings and the Company will not enter,
on or after the date of this Agreement, into any agreement with respect to its
securities that would be inconsistent with the rights granted to the Holders in
this Agreement or otherwise would conflict with the provisions hereof. Holdings
and the Company previously have not entered into any agreement granting any
registration rights with respect to its securities to any Person. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent in any way with the rights granted to the holders of Holdings' and
the Company's securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Senior Notes. Holdings and the Company will
not take any action, or permit any change to occur, with respect to the Senior
Notes that would materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless Holdings and the Company have
obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities. Notwithstanding the
foregoing, the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered may give a waiver or
consent to departure from the provisions hereof, which waiver or consent relates
exclusively to the rights of Holders whose securities are being tendered
pursuant to the Exchange Offer and does not directly or indirectly affect the
rights of other Holders whose securities are not being tendered pursuant to such
Exchange Offer.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, then at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
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(ii) if to Holdings or the Company, then:
Clark-Schwebel, Inc.
P.O. Box 2627
2200 South Murray Avenue
Andersen, SC 29622
Telecopier No.: 803-260-3377
Attention: William D. Bennison
With a copy to:
Kirkland & Ellis
153 East 53rd Street
Citicorp Center - 29th Floor
New York, NY 10022
Telecopier No.: (212) 446-4900
Attention: Lance Balk
All such notices and communications shall be deemed to have been duly
given as follows: (A) at the time delivered by hand, if personally delivered;
(B) five business days after being deposited in the mail, postage prepaid, if
mailed; (C) when answered back, if telexed; (D) when receipt acknowledged, if
telecopied; and (E) on the next business day, if timely delivered to an air
courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
delivered concurrently to the Trustee, at the address specified in the
Indenture, by the Person giving the same.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders of Transfer Restricted Securities; provided, however, that this
Agreement shall not inure to the benefit of or be binding upon a successor or
assign of a Holder unless and to the extent such successor or assign acquired
Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the other Operative
Documents (as defined in the Purchase Agreement) is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted by the Company with respect to
the Transfer Restricted Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
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IN WITNESS WHEREOF, the parties have executed this Agreement 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:
Accepted and agreed to as of
the date first above written:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
CS FIRST BOSTON
LAZARD FRERES & CO. LLC
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: __________________________
Name:
Title:
25
Exhibit 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 HERETO
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TABLE OF CONTENTS
Page
ARTICLE I
REPRESENTATIONS AND WARRANTIESOF THE PARTIES
1 1.1 Representations and Warranties of the Company
1 1.2 Representations and Warranties of the
Securityholders...........................2
ARTICLE II
VOTING AGREEMENTS . . . . ...... . . . . . . . . 2
2.1 Election of Directors . . . . . . . . . . . 2
2.2 Other Voting Matters. . . . . . . . . . . . 3
2.3 Voting Trust Agreement. . . . . . . . . . . 3
2.4 Redemption and/or Conversion of Preferred
Stock....................................3
ARTICLE III
TRANSFERS OF SECURITIES. . . ....... . . . . . . 4
3.1 Restrictions on Transfer of Employee
Securities and Equityholder
Securities . . . . . . . . . . . . . . 4
3.2 Restrictions on Transfers of Holdings
Securities.............................4
(a) Tag-Along Rights . . . . . . . . . . . 4
(b) Excluded Transfers . . . . . . . . . . 6
(c) Excluded Securities. . . . . . . . . . 6
(d) Survival of Provisions . . . . . . . . 6
3.3 Securities Act Compliance . . . . . . . . . 6
3.4 Certain Transferees Bound by Agreement. . . 6
3.5 Transfers in Violation of Agreement . . . . 7
ARTICLE IV
TAKE-ALONG RIGHTS;SALE OF THE COMPANY ...... . . 7
4.1 Take-Along Rights . . . . . . . . . . . . . 7
(a) Sale of the Company . . . . . . . . . . . . 7
(b) Take-Along Conditions . . . . . . . . . . . 8
(c) Purchaser Representative. . . . . . . . . . 8
(d) Expenses. . . . . . . . . . . . . . . . . . 8
4.2 Sale of the Company . . . . . . . . . . . . 9
4.3 Survival of Provisions. . . . . . . . . . . 9
ARTICLE V
REGISTRATION RIGHTS. . . . . . . . . . . . . . . 9
5.1 Demand Registrations. . . . . . . . . . . . 9
(a) Requests for Registration. . . . . . . 9
(b) Preservation of Demand Registration. .10
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(c) Priority on Demand Registration. . . .10
(d) Restrictions on Demand Registrations .10
(e) Stock Splits . . . . . . . . . . . . .11
5.2 Incidental Registration . . . . . . . . . .11
(a) Requests for Incidental Registration .11
(b) Priority on Incidental Registration. .12
5.3 Holdback Agreements . . . . . . . . . . . .12
5.4 Registration Procedures . . . . . . . . . .13
5.5 Registration Expenses . . . . . . . . . . .16
5.6 Indemnification; Contribution . . . . . . .16
(a) Indemnification by the Company . . . .16
(b) Indemnification by Holders . . . . . .17
(c) Conduct of Indemnification Proceedings18
(d) Contribution . . . . . . . . . . . . .19
5.7 Rules 144 and 144A. . . . . . . . . . . . .19
5.8 Underwritten Registrations. . . . . . . . .20
5.9 No Inconsistent Agreements. . . . . . . . .20
ARTICLE VI
AMENDMENT AND TERMINATION . . . . . . . . . . . 20
6.1 Amendment and Waiver. . . . . . . . . . . .20
6.2 Termination of Certain Provisions . . . . .20
6.3 Termination of Agreement. . . . . . . . . .20
6.4 Termination as to a Party . . . . . . . . .21
ARTICLE VII
MISCELLANEOUS. . . . . . . . . . . . . . . . . .21
7.1 Certain Defined Terms . . . . . . . . . . .21
7.2 Legends . . . . . . . . . . . . . . . . . .28
(a) Securityholders Agreement. . . . . . .28
(b) Restricted Securities. . . . . . . . .28
(c) Removal of Legends . . . . . . . . . .28
7.3 Severability. . . . . . . . . . . . . . . .29
7.4 Entire Agreement. . . . . . . . . . . . . .29
7.5 Successors and Assigns. . . . . . . . . . .29
7.6 Counterparts. . . . . . . . . . . . . . . .29
7.7 Remedies. . . . . . . . . . . . . . . . . .29
7.8 Notices . . . . . . . . . . . . . . . . . .29
7.9 Governing Law . . . . . . . . . . . . . . .30
7.10 Descriptive Headings. . . . . . . . . . . .30
7.11 Voting Trust Certificates . . . . . . . . .30
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SECURITYHOLDERS AGREEMENT
This Securityholders Agreement (this "Agreement") is entered into
as of April 17, 1996 by and among (i) Clark-Schwebel Holdings, Inc., a
Delaware corporation (the "Company"), (ii) Vestar/CS Holding Company,
L.L.C., a Delaware limited liability company ("Holdings"), on behalf of
itself and as voting trustee (in such capacity, the "Voting Trustee") under
that certain Voting Trust Agreement dated as of April 17, 1996 among the
Voting Trustee, the Equityholders and the Employees (the "Voting Trust
Agreement"), (iii) the initial parties to this Agreement who are identified
as Equityholders on the signature pages hereto (each, an "Equityholder"
and, collectively, the "Equityholders"), (iv) the initial parties to this
Agreement who are identified as Employees on the signature pages hereto
(each, an "Employee," and collectively, the "Employees") and (v) each other
holder of Securities who hereafter executes a separate agreement to be
bound by the terms hereof. Holdings, the Equityholders, the Employees and
each other Person that is or may become a party to this Agreement as
contemplated hereby are sometimes referred to herein collectively as the
"Securityholders" and individually as a "Securityholder." Certain
capitalized terms used herein are defined in Section 7.1.
The parties hereto agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
OF THE PARTIES
1.1 Representations and Warranties of the Company. The Company
hereby represents and warrants to the Securityholders that as of the date
of this Agreement:
(a) it is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, it has full
corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby, and the
execution, delivery and performance by it of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action;
(b) this Agreement has been duly and validly executed and
delivered by the Company and constitutes a legal and binding obligation of
the Company, enforceable against the Company in accordance with its terms;
and
(c) the execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions
contemplated hereby will not, with or without the giving of notice or lapse
of time, or both (i) violate any provision of law, statute, rule or
regulation to which the Company is subject, (ii) violate any order,
judgment or decree applicable to the Company, or (iii) conflict with, or
result in a breach or default under, any term or condition of the Company's
Certificate of Incorporation
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or Bylaws or any agreement or instrument to
which the Company is a party or by which it is bound.
1.2 Representations and Warranties of the Securityholders. Each
Securityholder (as to such Person only) represents and warrants to the
Company and the other Securityholders that, as of the time such
Securityholder becomes a party to this Agreement:
(a) this Agreement (or the separate joinder agreement executed by
such Securityholder) has been duly and validly executed and delivered by
such Securityholder, and this Agreement constitutes a legal and binding
obligation of such Securityholder, enforceable against such Securityholder
in accordance with its terms; and
(b) the execution, delivery and performance by such Securityholder
of this Agreement (or any joinder to this Agreement) and the consummation
by such Securityholder of the transactions contemplated hereby (and
thereby) will not, with or without the giving of notice or lapse of time,
or both (i) violate any provision of law, statute, rule or regulation to
which such Securityholder is subject, (ii) violate any order, judgment or
decree applicable to such Securityholder, or (iii) conflict with, or result
in a breach or default under, any term or condition of any agreement or
other instrument to which such Securityholder is a party or by which such
Securityholder is bound.
ARTICLE II
VOTING AGREEMENTS
2.1 Election of Directors. (a) Each Securityholder hereby agrees
that such Person will vote, or cause to be voted, all voting securities of
the Company over which such Person has the power to vote or direct the
voting, and will take all other necessary or desirable action within such
Person's control, and the Company will take all necessary and desirable
actions within its control, to cause the authorized number of directors for
each of the respective boards of directors of the Company and its
Subsidiaries to be established at eleven directors, and to elect or cause
to be elected to the respective boards of directors of the Company and each
of its Subsidiaries and cause to be continued in office the individuals
designated by the Vestar Holders; provided that two of the eleven directors
designated by the Vestar Holders shall be elected from management of the
Company.
(b) If at any time the Vestar Holders shall notify the other
parties to this Agreement of their desire to remove, with or without cause,
any individual from a Company or Subsidiary directorship, all such parties
so notified will vote, or cause to be voted, all voting securities of the
Company and its Subsidiaries over which they have the power to vote or
direct the voting, and shall take all such other actions promptly as shall
be necessary or desirable to cause the removal of such director.
(c) If at any time any individual ceases to serve on the board of
directors of the Company or any Subsidiary of the Company (whether due to
resignation, removal or otherwise), the Vestar Holders shall be entitled to
designate a successor director to fill the
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vacancy created thereby. Each Person that is a party hereto agrees to vote,
or cause to be voted, all voting securities of the Company and its
Subsidiaries over which such Person has the power to vote or direct the
voting, and shall take all such other actions as shall be necessary or
desirable to cause the designated successor to be elected to fill such
vacancy.
(d) Nothing in this Agreement shall be construed to impair any
rights that the stockholders of the Company or any Subsidiary of the
Company may have to remove any director for cause pursuant to Section
141(k) of the General Corporation Law of the State of Delaware (or any
successor provision). No such removal of an individual designated pursuant
to this Section 2.1 for cause shall affect the rights of the Vestar Holders
to designate a different individual pursuant to this Section 2.1 to fill
the directorship from which such individual was removed.
(e) Subject to Section 6.2, the provisions of this Section 2.1
shall remain in effect following the first Public Offering.
2.2 Other Voting Matters. Each Securityholder hereby agrees that
such Person will vote, or cause to be voted, all voting securities of the
Company and its Subsidiaries over which such Person has the power to vote
or direct the voting, either in person or by proxy, whether at a
stockholders meeting, or by written consent, in the manner in which the
Vestar Holders direct in connection with the approval of any amendment or
amendments to the Company's Certificate of Incorporation, the merger, share
exchange, combination or consolidation of the Company with any other Person
or Persons, the sale, lease or exchange of all or substantially all of the
property and assets of the Company and its Subsidiaries on a consolidated
basis, and the reorganization, recapitalization, liquidation, dissolution
or winding-up of the Company.
2.3 Voting Trust Agreement. In order to effectuate the provisions
of Sections 2.1 and 2.2, each Securityholder (excluding Holdings, in its
individual capacity, and the Vestar Holders) shall enter into or become a
party to the Voting Trust Agreement giving the Voting Trustee the authority
to vote such Person's voting securities of the Company in respect of the
matters set forth in Sections 2.1 and 2.2 for the term of this Agreement.
Each Securityholder hereby represents and warrants that such Person has
not, and each Securityholder agrees that such Person will not, grant any
proxy or other voting rights or enter into any voting agreement with
respect to, or subject to any voting trust, any of such Person's voting
securities of the Company, other than as required by this Article II and
the Pledge Agreements. To effectuate the provisions of this Article II, the
Company shall not, and shall cause its Subsidiaries not to, record any vote
or consent or other action contrary to the terms of this Article II.
2.4 Redemption and/or Conversion of Preferred Stock. Each
Securityholder hereby acknowledges and agrees that the Company may, and the
Vestar Holders may cause the Company to, (i) redeem any or all of the
Preferred Stock at any time and (ii) convert any or all of the Preferred
Stock upon and after the Company's first Public Offering, in each case in
accordance with the terms of the Company's Certificate of Incorporation.
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ARTICLE III
TRANSFERS OF SECURITIES
3.1 Restrictions on Transfer of Employee Securities and
Equityholder Securities. No holder of Employee Securities may Transfer any
Employee Securities except in an Exempt Employee Transfer; provided that no
holder of Employee Securities may Transfer more than the Applicable
Percentage (measured as of the date of such Transfer) of such Person's
Employee Securities in a Rule 144 Sale. No holder of Equityholder
Securities may Transfer any Equityholder Securities except in an Exempt
Equityholder Transfer.
3.2 Restrictions on Transfers of Holdings Securities.
(a) Tag-Along Rights. Prior to making any Transfer of Holdings
Securities (other than a Transfer described in Section 3.2(b)) any holder
of Holdings Securities proposing to make such a Transfer (for purposes of
this Section 3.2, a "Selling Holder") shall give at least thirty (30) days'
prior written notice to each other holder of Securities (for purposes of
this Section 3.2 each, an "Other Holder") and the Company, which notice
(for purposes of this Section 3.2, the "Sale Notice") shall identify the
type and amount of Holdings Securities to be sold (for purposes of this
Section 3.2, the "Offered Securities"), describe the terms and conditions
of such proposed Transfer, and identify each prospective transferee. Any of
the Other Holders may, within fifteen (15) days after the receipt of the
Sale Notice, give written notice (each, a "Tag-Along Notice") to the
Selling Holder that such Other Holder wishes to participate in such
proposed Transfer upon the terms and conditions set forth in the Sale
Notice, which Tag-Along Notice shall specify the Securities such Other
Holder desires to include in such proposed Transfer; provided, however,
that (1) each Other Holder shall be required, to the extent applicable, as
a condition to being permitted to sell Securities pursuant to this Section
3.2(a) in connection with a Transfer of Offered Securities, to elect to
sell Securities of the same type and class and in the same relative
proportions as the Securities which comprise the Offered Securities, taking
into account the provisions of Section 7.11; (2) only the Applicable
Percentage (measured as of the date of the Sale Notice) of any Other
Holder's Employee Securities shall be counted in determining such Person's
participation rights in a transfer pursuant to this Section 3.2(a); and (3)
to exercise such Person's tag-along rights hereunder, each Other Holder
must agree to make to the transferee the same representations, warranties,
covenants, indemnities and agreements as the Selling Holder agrees to make
in connection with the Transfer of the Offered Securities (except that in
the case of representations and warranties pertaining specifically to, or
covenants made specifically by, the Selling Holder, the Other Holders shall
make comparable representations and warranties pertaining specifically to
(and, as applicable, covenants by) such Persons), and must agree to bear
such Person's ratable share (which may be joint and several but shall be
based on the value of Securities that are Transferred) of all liabilities
to the transferees arising out of representations, warranties and covenants
(other than those representations, warranties and covenants that pertain
specifically to a given Securityholder, who shall bear all of the liability
related thereto), indemnities or other agreements made in connection with
the Transfer. Each Securityholder will bear (x) such Person's own costs of
any sale of Securities pursuant to this Section 3.2(a) and (y) such
Person's pro-rata share (based upon the relative amount of Securities sold)
of the reasonable costs of any sale of Securities pursuant to this Section
3.2(a) to the extent
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such costs are incurred for the benefit of all Securityholders and are not
otherwise paid by the acquiring party.
If none of the Other Holders gives the Selling Holder a timely
Tag-Along Notice with respect to the Transfer proposed in the Sale Notice,
then (notwithstanding the first sentence of this Section 3.2(a)) the
Selling Holder may Transfer such Offered Securities on the terms and
conditions set forth in the Sale Notice to or among any of the transferees
identified (or Affiliates of transferees identified) in the Sale Notice at
any time within ninety (90) days after expiration of the fifteen-day period
for giving Tag-Along Notices with respect to such Transfer. Any such
Offered Securities not Transferred by the Selling Holder during such
ninety-day period will again be subject to the provisions of this Section
3.2(a) upon a subsequent Transfer. If one or more Other Holders give the
Selling Holder a timely Tag-Along Notice, then the Selling Holder shall use
all reasonable efforts to obtain the agreement of the prospective
transferee(s) to the participation of the Other Holders in any contemplated
Transfer, on the same terms and conditions as are applicable to the Offered
Securities, and no Selling Holder shall transfer any of such Person's
shares to any prospective transferee if such prospective transferee(s)
declines to allow the participation of the Other Holders. If the
prospective transferee(s) is unwilling or unable to acquire all of the
Offered Securities and all of the Securities to be Transferred by the Other
Holders specified in a timely Tag-Along Notice upon such terms, then the
Selling Holder may elect either to cancel such proposed Transfer or to
allocate the maximum number of each class of Securities that the
prospective transferees are willing to purchase (the "Allocable Shares")
among the Selling Holder and the Other Holders giving timely Tag-Along
Notices as follows (it being understood that the prospective transferees
shall be required to purchase Securities of the same class on the same
terms and conditions taking into account the provisions of clause (1) of
the first paragraph of this Section 3.2(a), whether or not they are
represented by voting trust certificates, and to consummate such Transfer
on those terms and conditions):
(i) each participating Securityholder (including the Selling
Holder) shall be entitled to sell a number of shares of Securities
(not to exceed, for any Other Holder, the number of shares of such
Securities identified in such Other Holder's Tag-Along Notice)
equal to the product of (A) the number of Allocable Shares of such
class of Securities and (B) a fraction, the numerator of which is
such Securityholder's Ownership Percentage of such class of
Securities and the denominator of which is the aggregate Ownership
Percentage for all participating Securityholders of such class of
Securities; and
(ii) if after allocating the Allocable Shares of any class of
Securities to such Securityholders in accordance with clause (i)
above, there are any Allocable Shares of such class that remain
unallocated, then they shall be allocated (in one or more
successive allocations on the basis of the allocation method
specified in clause (i) above) among the Selling Holder and each
such Other Holder that has elected in its Tag-Along Notice to sell
a greater number of shares of such class of Securities than
previously has been allocated to such Person pursuant to clause
(i) and this clause (ii) (all of whom (but no others) shall, for
purposes of clause (i) above, be deemed to be the participating
Securityholders) until all such Allocable Shares have been
allocated in accordance with this clause (ii).
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(b) Excluded Transfers. The rights and restrictions contained in
Section 3.2(a) shall not apply with respect to any of the following
Transfers of Securities:
(i) any Transfer of Holdings Securities in a Public Sale;
(ii) any Transfer of Holdings Securities to and among the
Members of Holdings and the partners, stockholders, and employees
of such Members (subject to compliance with Sections 3.3 and 3.4);
(iii) any Transfer of Holdings Securities in accordance with
Section 4.1;
(iv) any Transfer of Holdings Securities incidental to the
exercise, conversion or exchange of such securities in accordance
with their terms, any combination of shares (including any reverse
stock split) or any recapitalization, reorganization or
reclassification of, or any merger or consolidation involving, the
Company;
(v) any Transfer of Holdings Securities to members of the
management of the Company or its Subsidiaries; and
(vi) any Transfer constituting an Exempt Individual Transfer.
(c) Excluded Securities. No Securities that have been transferred
by the Selling Holder or an Other Holder in a Transfer pursuant to the
provisions of Section 3.2(a) ("Excluded Securities") shall be subject again
to the restrictions set forth in Section 3.2(a), nor shall any
Securityholder holding Excluded Securities be entitled to exercise any
rights as an Other Holder under Section 3.2(a) with respect to such
Excluded Securities, and no Excluded Securities held by a Selling Holder or
any Other Holder shall be counted in determining the respective
participation rights of such Holders in a Transfer subject to Section
3.2(a).
(d) Survival of Provisions. The provisions of this Section 3.2
shall remain in effect following the first Public Offering.
3.3 Securities Act Compliance. No Securities may be transferred by
a Securityholder (other than pursuant to an effective registration
statement under the Securities Act) unless such Securityholder first
delivers to the Company an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to the Company, to the effect that such
Transfer is not required to be registered under the Securities Act.
3.4 Certain Transferees Bound by Agreement. Subject to compliance
with the other provisions of this Article III, any Securityholder may
Transfer any Securities held by such Securityholder in accordance with
applicable law; provided, however, that if the Transfer is not made
pursuant to a Public Sale or a Sale of the Company, then the transferor of
such Security shall first deliver to the Company a written agreement of the
proposed transferee (excluding a transferee that is a Limited Partner) to
become a Securityholder and
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to be bound by the terms of this Agreement, including, without limitation,
the requirements of Section 2.3 (unless such proposed transferee is already
a Securityholder). All Employee Securities will continue to be Employee
Securities in the hands of any transferee (other than the Company, Holdings
or any transferee in a Public Sale); provided that Employee Securities
Transferred pursuant to an exercise of tag-along rights as an Other Holder
under Section 3.2(a) shall not be subject to the provisions of Section 3.1
in the hands of the transferee or any subsequent transferee. All
Equityholder Securities will continue to be Equityholder Securities in the
hands of any transferee (other than the Company, Holdings or any transferee
in a Public Sale); provided that Equityholder Securities Transferred
pursuant to an exercise of tag-along rights as an Other Holder under
Section 3.2(a) shall not be subject to the provisions of Section 3.1 in the
hands of the transferee or any subsequent transferee. All Holdings
Securities will continue to be Holdings Securities in the hands of any
transferee (other than the Company, the Employees or a transferee in a
Public Sale). All New Securityholder Securities will continue to be New
Securityholder Securities in the hands of a transferee (other than the
Company, Holdings, the Employees, the Equityholders or any transferee in a
public sale; provided that New Securityholder Securities Transferred
pursuant to an exercise of tag-along rights as an Other Holder under
Section 3.2(a) shall not be subject to the provisions of Section 3.1 in the
hands of the transferee or any subsequent transferee.
3.5 Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any Securities in violation of any provision of this Agreement
shall be void, and the Company shall not record such Transfer on its books
or treat any purported transferee of such Securities as the owner of such
Securities for any purpose.
ARTICLE IV
TAKE-ALONG RIGHTS;
SALE OF THE COMPANY
4.1 Take-Along Rights.
(a) Sale of the Company. If the Vestar Holders elect to
consummate, or to cause the Company to consummate, a transaction
constituting a Sale of the Company, the Vestar Holders may notify the
Company and the other Securityholders in writing of the election of the
Vestar Holders to exercise its rights under this Section 4.1. If the Vestar
Holders deliver such notice, the other Securityholders will consent to and
raise no objections to the proposed transaction, and the Securityholders
and the Company will take all other actions reasonably necessary or
desirable to cause the consummation of such Sale of the Company on the
terms proposed by the Vestar Holders. Without limiting the foregoing, (i)
if the proposed Sale of the Company is structured as a sale of assets or a
merger or consolidation, the Securityholders and the Company will vote or
cause to be voted all Securities that they hold or with respect to which
such Securityholder has the power to direct the voting and which are
entitled to vote on such transaction in favor of such transaction and will
waive any appraisal rights which they may have in connection therewith, and
(ii) if the proposed
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Sale of the Company is structured as or involves a sale or redemption of
Securities, the Securityholders will agree to sell their pro-rata share of
the Securities being sold in such Sale of the Company on the terms and
conditions approved by the Vestar Holders, and the Securityholders will
execute any merger or sale agreement approved by the Vestar Holders in
connection with such Sale of the Company.
(b) Take-Along Conditions. The obligations of the Securityholders
with respect to the Sale of the Company are subject to the satisfaction of
the following conditions, in all cases taking into account the provisions
of Section 7.11: (i) upon the consummation of the Sale of the Company, all
of the holders of a particular class or series of Securities shall receive
the same form and amount of consideration per share unit or amount of
Securities, or if any holders of a particular class or series of Securities
are given an option as to the form and amount of consideration to be
received, all holders of such class or series will be given the same
option, (ii) all holders of then currently exercisable rights to acquire a
particular class or series of Securities will be given an opportunity to
either (A) exercise such rights prior to the consummation of the Sale of
the Company and participate in such sale as holders of such Securities or
(B) upon the consummation of the Sale of the Company, receive in exchange
for such rights consideration equal to the amount determined by multiplying
(1) the same amount of consideration per share, unit or amount of
Securities received by the holders of such type and class of Securities in
connection with the Sale of the Company less the exercise price per share,
unit or amount of such rights to acquire such Securities by (2) the number
of shares, units or aggregate amount of Securities represented by such
rights, and (iii) the holders of Preferred Stock shall receive
consideration in respect of all of the issued and outstanding shares of
Preferred Stock in such Sale of the Company having a fair market value
equal to the aggregate Liquidation Value (plus all accrued but unpaid
dividends) of such Preferred Stock (after which each share of Preferred
Stock shall be treated as a share of Common Stock for purposes of
allocating any remaining consideration from such sale) before any
consideration is paid in respect of the Common Stock in such Sale of the
Company; provided however, that if less than all of the outstanding
Preferred Stock is acquired in such Sale of the Company or if all of the
outstanding Preferred Stock is acquired in such Sale of the Company but the
value of the consideration in such Sale of the Company is less than the
aggregate Liquidation Value of such Preferred Stock, then the consideration
in such Sale of the Company shall be allocated ratably among the holders of
Preferred Stock based on the number of shares of Preferred Stock held by
each such holder.
(c) Purchaser Representative. If the Company or Holdings enters
into any negotiation or transaction for which Rule 506 under the Securities
Act (or any similar rule then in effect) may be available with respect to
such negotiation or transaction (including a merger, consolidation or other
reorganization), each Securityholder that is not an "accredited investor"
(within the meaning of Rule 501(a) of the Securities Act) will, at the
request of the Company, appoint a purchaser representative (as such term is
defined in Rule 501 under the Securities Act) approved by the Company and
the Company will pay the fees of such purchaser representative. If any such
Securityholder declines to appoint the purchaser representative approved by
the Company such Securityholder will appoint another purchaser
representative, and such Securityholder will be responsible for the fees of
the purchaser representative so appointed.
(d) Expenses. Each Securityholder will bear such Person's pro-rata
share (based upon the relative amount of Securities sold) of the reasonable
costs of any sale of
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Securities pursuant to a Sale of the Company (but only if such Sale of the
Company is actually consummated) to the extent such costs are incurred for
the benefit of all Securityholders and are not otherwise paid by the
Company or the acquiring party. Costs incurred by or on behalf of a
Securityholder for such Person's sole benefit will not be considered costs
of the transaction hereunder. In the event that any transaction that the
Vestar Holders elect to consummate or cause to be consummated pursuant to
this Section 4.1 is not consummated for any reason, the Company will
reimburse Holdings and/or the Vestar Holders for all actual and reasonable
expenses paid or incurred by Holdings and/or the Vestar Holders in
connection therewith.
4.2 Sale of the Company. Notwithstanding any provision in this
Agreement to the contrary each party hereto acknowledges and agrees that,
in connection with a Sale of the Company, (a) the holders of Preferred
Stock shall be entitled to receive proceeds in such sale on such terms and
in the such amounts as if such sale were treated as a Liquidation of the
Company and (b) Vestar Capital Partners shall be entitled to be paid
customary and reasonable fees by the Company for any investment banking
services provided by it in connection with such sale.
4.3 Survival of Provisions. The provisions of this Section 4 shall
remain in effect following the first Public Offering.
ARTICLE V
REGISTRATION RIGHTS
5.1 Demand Registrations.
(a) Requests for Registration. Subject to the provisions of this
Article V, from and after the first anniversary of the closing of the
Company's first Public Offering the Vestar Holders shall have the right
(the "Holdings Demand Right") to request registration under the Securities
Act of all or any portion of the Registrable Securities held by Vestar
and/or Holdings (in each case, referred to herein as the "Requesting
Holders") by delivering a written notice to the principal business office
of the Company, which notice identifies the Requesting Holders and
specifies the number of Registrable Securities to be included in such
registration (the "Registration Request"). Subject to the restrictions set
forth in paragraph 5.1(d), the Company will give prompt written notice of
such Registration Request (the "Registration Notice") to all other holders
of Registrable Securities and will thereupon use its best efforts to effect
the registration (a "Demand Registration") under the Securities Act on any
form available to the Company of:
(i) the Registrable Securities requested to be registered by
the Requesting Holders;
(ii) all other Registrable Securities which the Company has
received a written request to register within 30 days after the
Registration Notice is given and any securities of the Company
proposed to be included in such registration by the Company for
its own account; and
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(iii) any Common Stock of the Company proposed to be included
in such registration by the holders of registration rights granted
other than pursuant to this Agreement ("Other Registration
Rights").
(b) Preservation of Demand Registration. A registration
undertaken by the Company at the request of the Requesting
Holders will not count as a Demand Registration:
(i) if, pursuant to the Holdings Demand Right, the Requesting
Holders fail to register and sell at least 75% of the Registrable
Securities requested to be included in such registration by them,
unless such failure results from any act of, or failure to act by,
any of the Requesting Holders; or
(ii) if the Requesting Holders withdraw a Registration
Request (A) upon the determination of the Board of Directors of
the Company to postpone the filing or effectiveness of a
Registration Statement pursuant to paragraph 5.1(d) or (B) within
ten days of receiving notice from the Company of its intent to
exercise its Priority Right in connection with such registration.
(c) Priority on Demand Registration. If the sole or managing
underwriter of a Demand Registration advises the Company in writing that in
its opinion the number of Registrable Securities and other securities
requested to be included exceeds the number of Registrable Securities and
other securities which can be sold in such offering without adversely
affecting the distribution of the securities being offered, the price that
will be paid in such offering or the marketability thereof, the Company
will include in such registration the greatest number of (i) Registrable
Securities proposed to be registered by the holders thereof, (ii)
securities having Other Registration Rights that are pari passu with the
demand rights granted in respect of Registrable Securities hereunder
proposed to be registered by the holders thereof, and (iii) securities
proposed to be registered by the Company for its own account which in the
opinion of such underwriters can be sold in such offering without adversely
affecting the distribution of the securities being offered, the price that
will be paid in such offering or the marketability thereof, ratably among
the holders of Registrable Securities and such Other Registration Rights,
and the Company, based (A) as between the Company and such holders
requesting registration, on the respective amounts of securities requested
to be registered, and (B) as among the holders requesting registration, on
the respective amounts of Registrable Securities and securities subject to
such Other Registration Rights, as the case may be, held by each such
holder; provided, however, that the Company shall have the right (the
"Priority Right") to receive priority over all holders of Registrable
Securities in any Demand Registration to be effected under this Section 5.1
with respect to securities that the Company proposes to include in such
registration for its own account by giving written notice of its election
to exercise such Priority Right to the holders of Registrable Securities
requesting registration thereof; and provided further that for purposes of
clause (B) of this Section 5.1(c), Preferred Stock shall be deemed to be
Registrable Securities.
(d) Restrictions on Demand Registrations. Except as otherwise
provided in this Section 5.1(d), the Company shall be obligated to effect
four Demand Registrations
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pursuant to a Holdings Demand Right. Any Demand Registration requested must
be for a firmly underwritten public offering to be managed by an
underwriter or underwriters of recognized national standing selected by the
Requesting Holders and reasonably acceptable to the Company. The Company
shall not be obligated to effect any Demand Registration within a period of
one year after the effective date of any previous Demand Registration. The
Company shall not be obligated to effect any Demand Registration if it
reasonably believes that the aggregate sales price of all securities
proposed to be included in such Demand Registration will not equal or
exceed $5 million if such registration is effected on Form S-3 (or any
successor form) or $10 million if such registration is effected on any
other form. During any twelve month period, the Company may postpone once,
for up to a period of 180 days, the filing or the effectiveness of a
Registration Statement for a Demand Registration if the Board of Directors
of the Company in good faith determines that such Demand Registration might
reasonably be expected to have a materially adverse effect on any proposal
or plan by the Company or any of its Subsidiaries to engage in any
acquisition of assets (other than in the ordinary course of business) or
any merger, consolidation, tender offer or other material transactions;
provided that in such event, the Requesting Holders will be entitled to
withdraw such request and, if such request is withdrawn, such Demand
Registration will not count as a Demand Registration.
(e) Stock Splits. In connection with any Demand Registration
pursuant to this Section 5.1, each party to this Agreement will vote, or
cause to be voted, all securities of the Company over which it has the
power to vote or direct the voting to effect any stock split which, in the
opinion of the sole or managing underwriter, is necessary to facilitate the
effectiveness of such Demand Registration.
5.2 Incidental Registration.
(a) Requests for Incidental Registration. At any time the Company
proposes to register any shares of Common Stock under the Securities Act
(other than pursuant to Section 5.1 or in connection with a business
acquisition or combination or an employee benefit plan), whether in
connection with a primary or secondary offering, the Company will give
written notice to each holder of Registrable Securities at least thirty
(30) days prior to the initial filing of such Registration Statement with
the SEC of its intent to file such registration statement and of such
holder's rights under this Section 5.2. Upon the written request of any
holder of Registrable Securities made within twenty (20) days after any
such notice is given (which request shall specify the Registrable
Securities intended to be disposed of by such holder), the Company will use
its best efforts to effect the registration (an "Incidental Registration")
under the Securities Act of all Registrable Securities which the Company,
as the case may be, has been so requested to register by the holders
thereof; provided, however, that if, at any time after giving written
notice of its intention to register any securities and prior to the
effective date of the Registration Statement filed in connection with such
Incidental Registration (each an "Incidental Registration Statement"), the
Company shall determine for any reason not to register or to delay
registration of such securities, the Company may, at its election, give
written notice of such determination to each holder of Registrable
Securities and, thereupon, (a) in the case of a determination not to
register, the Company shall be relieved of its obligation to register any
Registrable Securities under this Section 5.2 in connection with such
registration (but not from its
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obligation to pay the expenses incurred in connection therewith), and (b)
in the case of a determination to delay registration, the Company shall be
permitted to delay registering any Registrable Securities under this
Section 5.2 during the period that the registration of such other
securities is delayed.
(b) Priority on Incidental Registration. If the sole or managing
underwriter of a registration advises the Company in writing that in its
opinion the number of Registrable Securities and other securities requested
to be included exceeds the number of Registrable Securities and other
securities which can be sold in such offering without adversely affecting
the distribution of the securities being offered, the price that will be
paid in such offering or the marketability thereof, the Company will
include in such registration the Registrable Securities and other
securities of the Company in the following order of priority:
(i) first, the greatest number of securities of the Company
proposed to be included in such registration by the Company for
its own account and by holders of Other Registration Rights that
have priority over the incidental registration rights granted to
holders of Registrable Securities under this Agreement, which in
the opinion of such underwriters can be so sold; and
(ii) second, after all securities that the Company proposes
to register for its own account or for the accounts of holders of
Other Registration Rights that have priority over the incidental
registration rights under this Agreement have been included, the
greatest amount of Registrable Securities and securities having
Other Registration Rights that are pari passu with Registrable
Securities, in each case requested to be registered by the holders
thereof which in the opinion of such underwriters can be sold in
such offering without adversely affecting the distribution of the
securities being offered, the price that will be paid in such
offering or the marketability thereof, ratably among the holders
of Registrable Securities and securities subject to such Other
Registration Rights based on the respective amounts of Registrable
Securities (it being agreed that in determining such amounts,
Registrable Securities shall include Preferred Stock) and
securities subject to such Other Registration Rights held by each
such holder.
5.3 Holdback Agreements. (a) Each holder of Registrable Securities
agrees that if requested in connection with an underwritten offering made
pursuant to a Registration Statement for which such Securityholder has
registration rights pursuant to this Article V by the managing underwriter
or underwriters of such underwritten offering, such holder will not effect
any Public Sale or distribution of any of the securities being registered
or any securities convertible or exchangeable or exercisable for such
securities (except as part of such underwritten offering), during the
period beginning 10 days prior to, and ending 180 days after, the closing
date of each underwritten offering made pursuant to such Registration
Statement (or for such shorter period as to which the managing underwriter
or underwriters may agree.
(b) The Company agrees (i) not to effect any public sale or
distribution of its equity securities, or any securities convertible into
or exchangeable or exercisable for
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such securities, during the seven days prior to and during the 180-day
period beginning on the effective date of any underwritten Demand
Registration (or for such shorter period as to which the managing
underwriter or underwriters may agree), except as part of such Demand
Registration or in connection with any employee benefit or similar plan,
any dividend reinvestment plan, or a business acquisition or combination
and (ii) to use all reasonable efforts to cause each holder of at least 5%
(on a fully-diluted basis) of its equity securities, or any securities
convertible into or exchangeable or exercisable for such securities, which
are or may be purchased from the Company at any time after the date of this
Agreement (other than in a registered offering) to agree not to effect any
sale or distribution of any such securities during such period (except as
part of such underwritten offering, if otherwise permitted).
5.4 Registration Procedures. In connection with the registration
of any Registrable Securities, the Company shall effect such registrations
to permit the sale of such Registrable Securities in accordance with the
intended method or methods of disposition thereof, and pursuant thereto the
Company shall as expeditiously as possible:
(a) Prepare and file with the SEC a Registration Statement or
Registration Statements on a form available for the sale of the Registrable
Securities by the holders thereof in accordance with the intended method of
distribution thereof, and use its best efforts to cause each such
Registration Statement to become effective.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement continuously effective for a
period ending on the earlier of (i) 90 days from the effective date and
(ii) such time as all of such securities have been disposed of in
accordance with the intended method of disposition thereof; cause the
related prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 (or any
similar provisions then in force) under the Securities Act; and comply with
the provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to it with respect
to the disposition of all securities covered by such Registration Statement
as so amended or in such prospectus as so supplemented.
(c) Notify the selling holders of Registrable Securities promptly
(but in any event within two business days), and confirm such notice in
writing, (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and, with respect to a
Registration Statement or any post-effective amendment, when the same has
become effective, (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any preliminary prospectus, (iii) if at
any time when a prospectus is required by the Securities Act to be
delivered in connection with sales of Registrable Securities the Company
becomes aware that the representations and warranties of the Company
contained in any agreement (including any underwriting agreement)
contemplated by Section 5.4(h) below cease to be true and correct in all
material respects, (iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable
Securities for offer or sale
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in any jurisdiction, (v) if the Company becomes aware of the happening of
any event that makes any statement made in such Registration Statement or
related prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires the making of any changes in such Registration Statement,
prospectus or documents so that, in the case of such Registration
Statement, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, and that in the case of the
prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(d) Use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, and, if any such order is issued,
to obtain the withdrawal of any such order at the earliest possible moment.
(e) Deliver to each selling holder of Registrable Securities and
the underwriters, if any, without charge, as many copies of the prospectus
or prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request; and, the Company
hereby consents to the use of such prospectus and each amendment or
supplement thereto by each of the selling holders of Registrable Securities
and the underwriters or agents, if any, in connection with the offering and
sale of the Registrable Securities covered by such prospectus and any
amendment or supplement thereto.
(f) Prior to any public offering of Registrable Securities, to use
its best efforts to register or qualify, and cooperate with the selling
holders of Registrable Securities, the underwriters, if any, the sales
agents and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of
such Registrable Securities for offer and sale under the securities or
"blue sky" laws of such jurisdictions within the United States as any
selling holder or the managing underwriters reasonably request in writing;
provided, however, that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it is not then so
qualified or (ii) take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject.
(g) Upon the occurrence of any event contemplated by Section
5.4(c)(v) above, as promptly as practicable prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to
the related prospectus or any document incorporated or deemed to be
incorporated therein by reference, or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable
Securities being sold thereunder, such prospectus will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
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(h) Enter into an underwriting agreement in form, scope and
substance as is customary in underwritten offerings and take all such other
actions as are reasonably requested by the managing or sole underwriter in
order to expedite or facilitate the registration or the disposition of such
Registrable Securities, and in such connection, (i) make such
representations and warranties to the underwriters, with respect to the
business of the Company and its subsidiaries, and the Registration
Statement, prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings, and confirm the same if and when requested; (ii) obtain opinions
of counsel to the Company and updates thereof (which counsel and opinions
(in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters), addressed to the underwriters covering the matters
customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by underwriters; (iii)
obtain "cold comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary, any other
independent certified public accountants of any Subsidiary of the Company
or of any business acquired by the Company for which financial statements
and financial data are, or are required to be, included in the Registration
Statement), addressed to each of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings; and (iv)
if an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable to the holders
of Registrable Securities than those set forth in Section 5.6 hereof (or
such other provisions and procedures acceptable to holders of a majority of
the Registrable Securities covered by such Registration Statement and the
managing underwriters or agents) with respect to all parties to be
indemnified pursuant to said Section. The above shall be done at each
closing under such underwriting agreement, or as and to the extent required
thereunder.
(i) Comply with all applicable rules and regulations of the SEC
and make generally available to its Securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities
are sold to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company
after the effectiveness of a Registration Statement, which statements shall
cover said 12-month periods.
(j) (i) Use its best efforts to cause all such Registrable
Securities covered by such registration statement to be listed on the
principal securities exchange on which Common Stock is then listed (if
any), if the listing of such Registrable Securities is then permitted under
the rules of such exchange, or (ii) if no Common Stock is then so listed,
use its best efforts to, either (as the Company may elect) (x) cause all
such Registrable Securities to be listed on a national securities exchange
or (y) secure designation of all such Registrable Securities as a NASDAQ
"national market system security" within the meaning of Rule 11Aa2-1 or,
failing that, to secure NASDAQ authorization for such shares and, without
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limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such shares with the
National Association of Securities Dealers, Inc.
("NASD").
The Company may require each holder of Registrable Securities as to which
any registration is being effected to furnish to the Company such
information regarding such holder and the distribution of such Registrable
Securities as the Company may, from time to time, reasonably request in
writing; provided that such information shall be used only in connection
with such registration. The Company may exclude from such registration the
Registrable Securities of any holder who unreasonably fails to furnish such
information promptly after receiving such request. Each holder agrees that,
upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 5.4(c)(ii), 5.4(c)(iv) or 5.4(c)(v), such
holder will forthwith discontinue disposition of such Registrable
Securities covered by such Registration Statement or prospectus until such
holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 5.4, or until it is advised in writing by the
Company that the use of the applicable prospectus may be resumed, and has
received copies of any amendments or supplements thereto.
5.5 Registration Expenses. Subject to Section 5.1(b)(i), all fees
and expenses incident to the performance of or compliance with this
Agreement by the Company shall be borne by the Company, whether or not any
Registration Statement is filed or becomes effective, including, without
limitation, (i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the
NASD in connection with an underwritten offering and (B) fees and expenses
of compliance with state securities or "blue sky" laws), (ii) reasonable
messenger, telephone and delivery expenses, (iii) fees and disbursements of
counsel for the Company, (iv) fees and disbursements of all independent
certified public accountants referred to in Section 5.4(h), (v)
underwriters' fees and expenses (excluding discounts, commissions, or fees
of underwriters, selling brokers, dealer managers or similar securities
industry professionals relating to the distribution of the Registrable
Securities), (vi) Securities Act liability insurance, if the Company so
desires such insurance, (vii) internal expenses of the Company, (viii) the
expense of any annual audit, (ix) the fees and expenses incurred in
connection with the listing of the securities to be registered on any
securities exchange, and (x) the fees and expenses of any Person, including
special experts, retained by the Company. In connection with any Demand
Registration or Incidental Registration hereunder, the Company shall
reimburse the holders of the Registrable Securities being registered in
such registration for the reasonable fees and disbursements of not more
than one counsel (together with appropriate local counsel) chosen by the
Requesting Holders, if pursuant to a Demand Registration, or the Company,
in all other cases, and other reasonable out-of-pocket expenses of the
holders of Registrable Securities incurred in connection with the
registration of the Registrable Securities.
5.6 Indemnification; Contribution.
(a) Indemnification by the Company. The Company shall, without
limitation as to time, indemnify and hold harmless, to the full extent
permitted by law, each holder of Registrable Securities, the officers,
directors, agents and employees of each of them, each Person who controls
each such holder (within the meaning of Section 15 of the
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Securities Act or Section 20 of the Exchange Act), the officers, directors,
agents and employees of each such controlling person and any financial or
investment adviser (each, an "Indemnified Party"), to the fullest extent
lawful, from and against any and all losses, claims, damages, liabilities,
actions or proceedings (whether commenced or threatened) reasonable costs
(including, without limitation, reasonable costs of preparation and
reasonable attorneys' fees) and reasonable expenses (including reasonable
expenses of investigation) (collectively, "Losses"), as incurred, arising
out of or based upon (i) any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, prospectus or form
of prospectus or in any amendment or supplements thereto or in any
preliminary prospectus, or arising out of or based upon any omission or
alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except to the
extent that the same arise out of or are based upon information furnished
in writing to the Company by such Indemnified Party or the related holder
of Registrable Securities expressly for use therein or (ii) any violation
by the Company of any federal, state or common law rule or regulation
applicable to the Company and relating to action required of or inaction by
the Company in connection with any such registration; provided, however,
that the Company shall not be liable to any Person who participates as an
underwriter in the offering or sale of Registrable Securities or any other
Person, if any, who controls such underwriters within the meaning of the
Securities Act to the extent that any such Losses arise out of or are based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in any preliminary prospectus if (i) such Person failed to
send or deliver a copy of the prospectus with or prior to the delivery of
written confirmation of the sale by such Person to the Person asserting the
claim from which such Losses arise, (ii) the prospectus would have
corrected such untrue statement or alleged untrue statement or such
omission or alleged omission, and (iii) the Company has complied with its
obligations under Section 5.4(c). Each indemnity and reimbursement of costs
and expenses shall remain in full force and effect regardless of any
investigation made by or on behalf of such indemnified party.
(b) Indemnification by Holders. In connection with any
Registration Statement in which a holder of Registrable Securities is
participating, such holder, or an authorized officer of such holder, shall
furnish to the Company in writing such information as the Company
reasonably requests for use in connection with any Registration Statement
or prospectus and agrees, severally and not jointly, to indemnify, to the
full extent permitted by law, the Company, its directors, officers, agents
and employees, each Person who controls the Company (within the meaning of
Section 15 of the Securities Act and Section 20 of the Exchange Act), and
the directors, officers, agents or employees of such controlling persons,
from and against all Losses arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement, prospectus, or form of prospectus, or arising out of or based
upon any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
to the extent, but only to the extent, that such untrue or alleged untrue
statement is contained in, or such omission or alleged omission is required
to be contained in, any information so furnished in writing by such holder
to the Company expressly for use in such Registration Statement or
prospectus and that such statement or omission was relied upon by the
Company in preparation of such Registration Statement, prospectus or form
of prospectus; provided, however, that such holder of Registrable
Securities shall not be liable in any such
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case to the extent that the holder has furnished in writing to the Company
within a reasonable period of time prior to the filing of any such
Registration Statement or prospectus or amendment or supplement thereto
information expressly for use in such Registration Statement or prospectus
or any amendment or supplement thereto which corrected or made not
misleading, information previously furnished to the Company, and the
Company failed to include such information therein. In no event shall the
liability of any selling holder of Registrable Securities hereunder be
greater in amount than the dollar amount of the proceeds (net of payment of
all expenses) received by such holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation. Such indemnity
shall remain in full force and effect regardless of any investigation made
by or on behalf of such indemnified party.
(c) Conduct of Indemnification Proceedings. If any Person shall be
entitled to indemnity hereunder (an "indemnified party"), such indemnified
party shall give prompt notice to the party or parties from which such
indemnity is sought (the "indemnifying parties") of the commencement of any
action, suit, proceeding or investigation or written threat thereof (a
"Proceeding") with respect to which such indemnified party seeks
indemnification or contribution pursuant hereto; provided, however, that
the failure to so notify the indemnifying parties shall not relieve the
indemnifying parties from any obligation or liability except to the extent
that the indemnifying parties have been prejudiced by such failure. The
indemnifying parties shall have the right, exercisable by giving written
notice to an indemnified party promptly after the receipt of written notice
from such indemnified party of such Proceeding, to assume, at the
indemnifying parties' expense, the defense of any such Proceeding, with
counsel reasonably satisfactory to such indemnified party; provided,
however, that an indemnified party or parties (if more than one such
indemnified party is named in any Proceeding) shall have the right to
employ separate counsel in any such Proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such indemnified party or parties unless: (i) the indemnifying
parties agree to pay such fees and expenses; (ii) the indemnifying parties
fail promptly to assume the defense of such Proceeding or fail to employ
counsel reasonably satisfactory to such indemnified party or parties; or
(iii) the named parties to any such Proceeding (including any impleaded
parties) include both such indemnified party or parties and the
indemnifying parties or an affiliate of the indemnifying parties or such
indemnified parties, and there may be one or more defenses available to
such indemnified party or parties that are different from or additional to
those available to the indemnifying parties, in which case, if such
indemnified party or parties notifies the indemnifying parties in writing
that it elects to employ separate counsel at the expense of the
indemnifying parties, the indemnifying parties shall not have the right to
assume the defense thereof and such counsel shall be at the expense of the
indemnifying parties, it being understood, however, that, unless there
exists a conflict among indemnified parties, the indemnifying parties shall
not, in connection with any one such Proceeding or separate but
substantially similar or related Proceedings in the same jurisdiction,
arising out of the same general allegations or circumstances, be liable for
the fees and expenses of more than one separate firm of attorneys (together
with appropriate local counsel) at any time for such indemnified party or
parties. Whether or not such defense is assumed by the indemnifying
parties, such indemnifying parties or indemnified party or parties will not
be subject to any liability for any settlement made without its or their
consent (but such consent will not be unreasonably withheld). The
indemnifying parties shall not consent to entry of any judgment or enter
into any settlement which (i) provides for other than monetary damages
without the consent of the indemnified party or parties (which consent
shall not be unreasonably
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withheld or delayed) or (ii) does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party
or parties of a release, in form and substance satisfactory to the
indemnified party or parties, from all liability in respect of such
Proceeding for which such indemnified party would be entitled to
indemnification hereunder.
(d) Contribution. If the indemnification provided for in this
Section 5.6 is unavailable to an indemnified party or is insufficient to
hold such indemnified party harmless for any Losses in respect of which
this Section 5.6 would otherwise apply by its terms, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
have a joint and several obligation to contribute to the amount paid or
payable by such indemnified party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the
indemnifying party, on the one hand, and such indemnified party, on the
other hand, in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one
hand, and indemnified party, on the other hand, shall be determined by
reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact, has been taken by, or relates to
information supplied by, such indemnifying party or indemnified party, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent any such action, statement or omission.
The amount paid or payable by a party as a result of any Losses shall be
deemed to include any legal or other fees or expenses incurred by such
party in connection with any Proceeding, to the extent such party would
have been indemnified for such expenses if the indemnification provided for
in Section 5.6(a) or 5.6(b) was available to such party. The parties hereto
agree that it would not be just and equitable if contribution pursuant to
this Section 5.6(d) were determined by pro-rata allocation or by any other
method of allocation that does not take account of the equitable
considerations referred to in this Section 5.6(d). Notwithstanding the
provisions of this Section 5.6(d), an indemnifying party that is a selling
holder of Registrable Securities shall not be required to contribute any
amount in excess of the amount by which the net proceeds received by such
indemnifying party exceeds the amount of any damages that such indemnifying
party has otherwise been required to pay by reasons of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
5.7 Rules 144 and 144A. At all times after the Company effects its
first Public Offering, the Company shall file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder (or, if the Company is not required to
file such reports, it will, upon the request of any holder of Registrable
Securities, make publicly available other information so long as such
information is necessary to permit sales under Rule 144A), and will take
such further action as any holder of Registrable Securities may reasonably
request, all to the extent required
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from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 and Rule 144A. Upon the request of any
holder of Registrable Securities, the Company shall deliver to such holder
a written statement as to whether it has complied with such requirements.
5.8 Underwritten Registrations. No holder of Registrable
Securities may participate in any underwritten registration hereunder
unless such holder (a) agrees to sell such holder's Registrable Securities
on the basis provided in any underwriting arrangements approved by the
Persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of
such underwriting arrangements.
5.9 No Inconsistent Agreements. The Company has not and will not,
enter into any agreement with respect to the Company's securities that is
inconsistent with the rights granted to the holders of Registrable
Securities in this Article V or otherwise conflicts with the provisions
hereof.
ARTICLE VI
AMENDMENT AND TERMINATION
6.1 Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall
be effective against the Company or the Securityholders unless such
modification, amendment or waiver is approved in writing by each of the
Company, the holders of a majority of the Holdings Securities adversely
affected by such modification, amendment or waiver, the holders of a
majority of the Equityholder Securities adversely affected by such
modification, amendment or waiver and the holders of a majority of the
Employee Securities adversely affected by such modification, amendment or
waiver. The failure of any party to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such provisions and
shall not affect the right of such party thereafter to enforce each and
every provision of this Agreement in accordance with its terms.
6.2 Termination of Certain Provisions. The provisions of Article
II shall terminate upon the consummation of the Company's first Public
Offering if, and only to the extent, required by the managing underwriter
of such Public Offering; provided, however, that none of the limitations
set forth in Article II on the Vestar Holders' ability to cause the other
Securityholders to vote their Securities in the manner the Vestar Holders'
direct in connection with the transactions specified in Section 2.2 may be
terminated with respect to any of such rights granted to the Vestar Holders
in Section 2.2.
6.3 Termination of Agreement. This Agreement will terminate in
respect of all Securityholders (a) with the written consent of the Company,
the holders of a majority of the Holdings Securities and the holders of a
majority of the Equityholder Securities and the Employee Securities, (b)
upon the dissolution, liquidation or winding-up of the Company or (c) upon
the consummation of a Sale of the Company (except with respect to the
rights to
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Incidental Registration under Article V, which shall survive).
The termination of this Agreement will not affect any indemnification or
contribution obligations under Section 5.6, which shall survive such
termination.
6.4 Termination as to a Party. Any Person who ceases to hold any
Securities shall cease to be a Securityholder and shall have no further
rights or obligations under this Agreement (except with respect to any
indemnification and contribution obligations under Section 5.6, which shall
survive).
ARTICLE VII
MISCELLANEOUS
7.1 Certain Defined Terms. As used in this Agreement, the
following terms shall have the meanings set forth or as referenced below:
"Affiliate" of any particular Person means any other Person
Controlling, Controlled by or under common Control with such particular
Person or, in the case of a natural Person, any other member of such
Person's Family Group.
"Agreement" has the meaning set forth in the preface.
"Agreement of Merger" means the Agreement and Plan of Merger dated
as of February 24, 1996 among Fort Mill A Inc., a Delaware corporation,
Springs Industries, Inc., a South Carolina corporation, the Company and
Holdings.
"Allocable Shares" has the meaning set forth in Section 3.2(a).
"Applicable Percentage" has the meaning given to such term in the
Management Subscription Agreements.
"Book Value" has the meaning given to such term in the Management
Subscription Agreements.
"Closing Date" has the meaning given such term in the Agreement of
Merger.
"Common Stock" means, collectively, the Company's common stock,
par value $.01 per share, and any other class or series of authorized
capital stock of the Company which is not limited to a fixed sum or
percentage of par or stated value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of assets upon
any liquidation, dissolution or winding up of the Company.
"Common Stock Equivalents" means (without duplication with any
Common Stock or other Common Stock Equivalents) rights, warrants, options
(including the Options), convertible securities, or exchangeable securities
or indebtedness, or other rights, exercisable for or convertible or
exchangeable into, directly or indirectly, Common Stock or securities
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exercisable for or convertible or exchangeable into Common Stock, whether
at the time of issuance or upon the passage of time or the occurrence of
some future event.
"Company" has the meaning set forth in the preface.
"Control" (including, with correlative meaning, all conjugations
thereof) means with respect to any Person, the ability of another Person to
control or direct the actions or policies of such first Person, whether by
ownership of voting securities, by contract or otherwise.
"Cost" has the meaning given to such term in the Management
Subscription Agreements.
"Demand Registration" has the meaning given to such term in
Section 5.1(a).
"Employee" has the meaning set forth in the preface.
"Employee Securities" means (a) the Common Stock acquired by the
Employees on the date of this Agreement under the Management Subscription
Agreements, (b) Voting Trust Certificates acquired by the Employees
pursuant to the Voting Trust Agreement, (c) any Options and any Common
Stock issued upon exercise of the Options, (d) any Securities, Common Stock
or Preferred Stock hereafter acquired by any holder of Employee Securities,
and (e) any securities of the Company issued with respect to the securities
referred to in clauses (a), (b), (c), or (d) above by way of a
payment-in-kind, stock dividend or stock split or in connection with a
combination of shares, exchange, conversion, recapitalization, merger,
consolidation or other reorganization.
"Equityholder Securities" means (a) the Common Stock acquired by
the Equityholders on the date of this Agreement and the Equity Purchase
Agreement, (b) Voting Trust Certificates acquired by the Equityholders
pursuant to the Voting Trust Agreement, (c) any Securities, Common Stock or
Preferred Stock hereafter acquired by any holder of Equityholder
Securities, and (d) any securities of the Company issued with respect to
the securities referred to in clauses (a), (b) or (c) above by way of a
payment-in-kind, stock dividend or stock split or in connection with a
combination of shares, exchange, conversion, recapitalization, merger,
consolidation or other reorganization.
"Equity Purchase Agreement" means the Equity Purchase Agreement of
even date herewith by and among the Company, Holdings and each
Equityholder.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Excluded Securities" has the meaning set forth in Section 3.3(c).
"Exempt Employee Transfer" means a Transfer of Employee Securities
(a) pursuant to an exercise of tag-along rights as an Other Holder under
Section 3.2, (b) pursuant to a Sale of the Company under Section 4.1 or
other transaction approved under Section 2.2,
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(c) to the Company and/or Holdings pursuant to the call option under the
Management Subscription Agreement, (d) to the Company pursuant to an
exercise of the put option under the Management Subscription Agreement, (e)
pursuant to a Public Sale, (f) upon the death of the holder pursuant to the
applicable laws of descent and distribution, (g) to or among such
Employee's Family Group, (h) incidental to the exercise, conversion or
exchange of such securities in accordance with their terms, any combination
of shares (including any reverse stock split) or any recapitalization,
reorganization or reclassification of, or any merger or consolidation
involving, the Company, or (i) as required by the Voting Trust Agreement.
"Exempt Equityholder Transfer" means a Transfer of Equityholder
Securities (a) pursuant to an exercise of tag-along rights as an Other
Holder under Section 3.2, (b) pursuant to a Sale of the Company under
Section 4.1 or other transaction approved under Section 2.2, (c) pursuant
to a Public Sale, (d) upon the death of the holder pursuant to the
applicable laws of descent and distribution, (e) to or among such
Equityholder's Family Group, (f) incidental to the exercise, conversion or
exchange of such securities in accordance with their terms, any combination
of shares (including any reverse stock split) or any recapitalization,
reorganization or reclassification of, or any merger or consolidation
involving, the Company, or (g) as required by the Voting Trust Agreement.
"Exempt Individual Transfer" means a Transfer of Holdings
Securities held by a natural person (a) upon the death of the holder
pursuant to the applicable laws of descent and distribution, (b) to or
among such Person's Family Group, (c) to the Company incidental to the
exercise, conversion or exchange of such securities in accordance with
their terms, any combination of shares (including any reverse stock split)
or any recapitalization, reorganization or reclassification of, or any
merger or consolidation involving, the Company, or (d) as required by the
Voting Trust Agreement.
"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.
"Fully-Diluted Shares" means, as of any date of determination, the
number of shares of such Common Stock outstanding plus (without
duplication) all shares of such 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.
"Holdings" has the meanings set forth in the preface.
"Holdings Demand Right" has the meaning given such term in Section
5.1(a).
"Holdings Securities" means (a) Holdings Shares, (b) Securities,
Common Stock or Preferred Stock hereafter acquired by Holdings or the
Members, and (c) any securities of the Company issued with respect to the
securities referred to in clauses (a) or (b) above by way of a
payment-in-kind, stock dividend, or stock split or in connection with
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a combination of shares, exchange, conversion, recapitalization,
merger, consolidation or other reorganization.
"Holdings Shares" means the shares of Common Stock and Preferred
Stock issued to Holdings on the Closing Date.
"Incidental Registration" has the meaning given such term in
Section 5.2(a).
"Incidental Registration Statement" has the meaning given to such
term in Section 5.2(a).
"Indemnified Party" has the meaning given such term in Section
5.6(a).
"Independent Third Party" means any Person who, immediately prior
to the contemplated transaction, does not beneficially own five percent
(5%) or more of the Fully-Diluted Shares or the Preferred Stock, who is not
an Affiliate of any such five percent (5%) beneficial owner and is not a
member of the Family Group of any such five percent (5%) beneficial owner.
"Limited Partner" means a limited partner in Vestar (excluding any
such limited partner who is an employee of the general partner of Vestar or
any Affiliate of the general partner of Vestar).
"Liquidation" has the meaning given to such term in the Company's
Certificate of Incorporation.
"Liquidation Value" has the meaning given to such term in the
Company's Certificate of Incorporation.
"Losses" has the meaning given such term in Section 5.6(a).
"Management Subscription Agreements" mean the management common
stock subscription agreements between the Company and each of the
Employees.
"Member" has the meaning given such term in the Operating
Agreement.
"NASD" has the meaning given such term in Section 5.4(j).
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"New Securityholder" means any Person who executes a counterpart
of this Agreement with the consent of the Vestar Holders who is not a
transferee of Holdings, Employees or Equityholders.
"New Securityholder Securities" means [(a) Common Stock or
Preferred Stock hereafter acquired by a New Securityholder and (b) any
securities of the
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Company issued with respect to the securities referred to in clause (a)
above by way of payment-in-kind, stock dividend or stock split, or in
connection with a combination of shares, exchange, recapitalization,
merger, consolidation or other reorganization.]
"Operating Agreement" means the Operating Agreement dated as of
April 17, 1996 among Vestar and the other parties thereto.
"Options" means any options to purchase shares of Common Stock
granted by the Company to any Employee on or after the date of this
Agreement.
"Other Holder" has the meaning given such term in Section 3.2(a).
"Other Registration Rights" has the meaning given such term in
Section 5.1(a).
"Ownership Percentage" means, for each Securityholder and with
respect to a type and class of Security (other than Excluded Securities),
the percentage obtained by dividing the number of shares of such Security
held by such Securityholder by the total number of shares of such Security
(other than Excluded Securities) outstanding.
"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.
"Pledge Agreements" means the pledge agreements between the
Company and each of the Employees.
"Preferred Stock" means the Company's 12.5% Preferred Stock, par
value $.01 per share, and any other class or series of authorized capital
stock of the Company that is limited to a fixed sum or percentage of par
value or stated value in respect of the rights of the holders thereof to
participate in dividends and in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Company.
"Priority Right" has the meaning given such term in Section
5.1(c).
"Proceeding" has the meaning given such term in Section 5.6(c).
"Public Offering" means a sale of Common Stock to the public in an
offering pursuant to an effective registration statement filed with the SEC
pursuant to the Securities Act, 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.
"Public Sale" means a sale of Securities pursuant to a Public
Offering or a Rule 144 Sale.
"Registrable Securities" means (i) any Common Stock issued as of
the Closing Date or issuable upon the exercise of the Options, (ii) any
Common Stock issued or
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issuable with respect to the securities referred to in clause (i) (or with
respect to any Preferred Stock issued as of the Closing Date) by way of a
conversion right, stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Registrable Securities, such
securities will cease to be Registrable Securities when they have been (i)
Transferred in a Public Sale or (ii) otherwise Transferred and new
certificates not bearing the legend set forth in Section 7.2(b) shall have
been delivered by the Company and subsequent disposition of such securities
shall not require registration or qualification of such securities under
the Securities Act or such state securities or blue sky laws then in force.
For purposes of this Agreement, a Person will be deemed to be a holder of
Registrable Securities whenever such Person has the right to acquire such
Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such
acquisition has actually been affected. Registrable Securities deposited
with the Voting Trustee shall, for purposes of this definition and Article
V, be deemed to be held by the Person holding the Voting Trust Certificate
representing the beneficial ownership of such Registrable Securities and
the Voting Trustee shall not be deemed to be a holder thereof for any of
such purposes. Notwithstanding the foregoing, the Company shall not be
required to register any securities other than shares of its Common Stock.
"Registration Notice" has the meaning given such term in Section
5.1(a).
"Registration Request" has the meaning given such term in Section
5.1(a).
"Registration Statement" means any registration statement of the
Company under which any of the Registrable Securities are included therein
pursuant to the provisions of this Agreement, including the prospectus,
amendments and supplements to such registration statement, including
post-effective amendments, all exhibits, and all material incorporated by
reference or deemed to be incorporated by reference in such registration
statement.
"Requesting Holder" has the meaning given such term in Section 5.1
(a).
"Rule 144" means Rule 144 adopted under the Securities Act (or any
successor rule or regulation).
"Rule 144A" means Rule 144A adopted under the Securities Act (or
any successor rule or regulation).
"Rule 144 Sale" means a sale of Securities to the public through a
broker, dealer or market-maker pursuant to the provisions of Rule 144
adopted under the Securities Act (or any successor rule or regulation).
"Sale of the Company" means the consummation of a transaction,
whether in a single transaction or in a series of related transactions that
are consummated contemporaneously (or consummated pursuant to
contemporaneous agreements), (i) with an Independent Third Party or a group
of Independent Third Parties or (ii) with any other
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Person or Persons on an arm's-length basis pursuant to which such party or
parties (a) acquire (whether by merger, stock purchase, recapitalization,
reorganization, redemption, issuance of capital stock or otherwise) more
than 50% of the Holdings Shares or (b) acquire assets constituting all or
substantially all of the assets of the Company and its Subsidiaries on a
consolidated basis.
"Sale Notice" has the meaning given such term in Section 3.2(a).
"SEC" means the Securities and Exchange Commission.
"Securities" means, collectively, the Holdings Securities, the
Equityholder Securities, the Employee Securities and the New Securityholder
Securities.
"Securityholder" has the meaning given such term in the preface.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Selling Holder" has the meaning given such term in Section
3.2(a).
"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.
"Tag-Along Notice" has the meaning given such term in Section 3.2
(a).
"Transfer" means (in either the noun or the verb form, including
with respect to the verb form, all conjugations thereof within their
correlative meanings) with respect to any Security, the gift, sale,
assignment, transfer, pledge, hypothecation or other disposition (whether
for or without consideration, whether directly or indirectly, and whether
voluntary, involuntary or by operation of law) of such Security or any
interest therein.
"Vestar" means Vestar Equity Partners, L.P., a Delaware limited
partnership.
"Vestar Holders" means Vestar (a) in its capacity as the manager
of Holdings prior to the distribution of the Holdings Securities to the
Members and/or the liquidation and dissolution of Holdings and (b) in its
individual capacity thereafter.
"Voting Trust Agreement" has the meaning given such term in the
preface.
"Voting Trust Certificates" means any voting trust certificates
issued pursuant to the Voting Trust Agreement.
"Voting Trustee" has the meaning given such term in the preface.
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7.2 Legends.
(a) Securityholders Agreement. Each certificate or instrument
evidencing Securities and each certificate or instrument issued in exchange
for or upon the Transfer of any such Securities (if such securities remain
subject to this Agreement after such Transfer) shall be stamped or
otherwise imprinted with a legend (as appropriately completed under the
circumstances) in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE CONSTITUTE
["EMPLOYEE SECURITIES"] ["EQUITYHOLDER SECURITIES"]
["HOLDINGS SECURITIES"] UNDER A CERTAIN SECURITYHOLDERS
AGREEMENT DATED AS OF APRIL 17, 1996 AMONG THE ISSUER OF SUCH
SECURITIES (THE "COMPANY") AND CERTAIN OF THE COMPANY'S
SECURITYHOLDERS AND, AS SUCH, ARE SUBJECT TO CERTAIN VOTING
PROVISIONS, PURCHASE RIGHTS AND RESTRICTIONS ON TRANSFER SET
FORTH IN THE SECURITYHOLDERS AGREEMENT. A COPY OF SUCH
SECURITYHOLDERS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY
THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST."
(b) Restricted Securities. Each instrument or certificate
evidencing Securities and each instrument or certificate issued in exchange
or upon the Transfer of any Securities shall be stamped or otherwise
imprinted with a legend substantially in the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY
NOT BE OFFERED OR SOLD UNLESS IT HAS BEEN REGISTERED UNDER
THE SECURITIES ACT OR UNLESS AN EXEMPTION FROM REGISTRATION
IS AVAILABLE (AND, IN SUCH CASE, AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY SHALL HAVE BEEN
DELIVERED TO THE COMPANY TO THE EFFECT THAT SUCH OFFER OR
SALE IS NOT REQUIRED TO BE REGISTERED UNDER THE SECURITIES
ACT)."
(c) Removal of Legends. Whenever in the opinion of the Company and
counsel reasonably satisfactory to the Company (which opinion shall be
delivered to the Company in writing) the restrictions described in any
legend set forth above cease to be applicable to any Securities, the holder
thereof shall be entitled to receive from the Company, without expense to
the holder, a new instrument or certificate not bearing a legend stating
such restriction.
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7.3 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law
or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other
jurisdiction, but this Agreement shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision
had never been contained herein.
7.4 Entire Agreement. Except as otherwise expressly contemplated
hereby, this document embodies the complete agreement and understanding
among the parties hereto with respect to the subject matter hereof and
supersedes and preempts any prior understandings, agreements or
representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
7.5 Successors and Assigns. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by
the Company and its successors and assigns and the Securityholders and any
subsequent holders of Securities and the respective successors and assigns
of each of them, so long as they hold Securities.
7.6 Counterparts. This Agreement may be executed in separate
counterparts each of which shall be an original and all of which taken
together shall constitute one and the same agreement.
7.7 Remedies. The Company and the Securityholders shall be
entitled to enforce their rights under this Agreement specifically, to
recover damages by reason of any breach of any provision of this Agreement
(including costs of enforcement) and to exercise all other rights existing
in their favor. The parties hereto agree and acknowledge that money damages
may not be an adequate remedy for any breach of the provisions of this
Agreement and that the Company or any Securityholder may in such Person's
sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance or injunctive relief (without posting
a bond or other security) in order to enforce or prevent any violation of
the provisions of this Agreement.
7.8 Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed first class
mail (postage prepaid) or sent by reputable overnight courier service
(charges prepaid) to the Company at the address set forth below and to any
other recipient at the address indicated on the attached Schedule of
Securityholders and to any subsequent holder of Securities subject to this
Agreement at such address as indicated by the Company's records, or at such
address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending party. Notices will be
deemed to have been given hereunder when sent by facsimile (receipt
confirmed) delivered personally, five days after deposit in the U.S. mail
and one day after deposit with a reputable overnight courier service. The
Company's address is:
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Clark-Schwebel Holdings, Inc.
c/o Vestar Equity Partners, L.P.
245 Park Avenue, 41st Floor
New York, New York 10167
Attn: Sander M. Levy
A copy of each notice given to the Company shall be given to Vestar (and no
notice to the Company shall be effective until such copy is delivered to
Vestar) at the following address:
Vestar Equity Partners, L.P.
245 Park Avenue, 41st Floor
New York, New York 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
7.9 Governing Law. The General Corporation Law of the State of
Delaware shall govern all questions arising under this Agreement concerning
the relative rights of the Company and its stockholders. All other
questions concerning the construction, validity and interpretation of this
Agreement shall be governed by and construed in accordance with the
domestic laws of the State of New York, without giving effect to any choice
of law or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
7.10 Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
7.11 Voting Trust Certificates. With respect to any determination
of the number of Securities, the price per type and class of Security, the
Ownership Percentage of each Securityholder with respect to any Security,
the participation rights to be afforded to each type and class of Security,
and any other determination requiring a comparison of Securities under
Sections 3.2(a) or 4.1, any Voting Trust Certificates held by any
Securityholder shall be ignored and the Securities in which such Voting
Trust Certificates represent the beneficial ownership shall be counted in
respect of all references therein to "Securities;" provided, however, that,
notwithstanding the foregoing, subject to any provision in the Voting Trust
Agreement to the contrary, such Voting Trust Certificates shall be the
Securities to be Transferred under Sections 3.2(a) or 4.1.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Securityholders Agreement on the day and year first above written.
CLARK-SCHWEBEL HOLDINGS, INC.
By:
--------------------------------
Its:
--------------------------------
VESTAR/CS HOLDING COMPANY, L.L.C.
By:
--------------------------------
Its:
--------------------------------
EQUITYHOLDERS:
--------------------------------
Barbara S. Davis
--------------------------------
Diane S. Freedman
--------------------------------
Judith S. Lerman
EMPLOYEES:
--------------------------------
William D. Bennison
--------------------------------
Richard C. Wolfe
--------------------------------
Donald R. Burnette
<PAGE>
--------------------------------
William H. Boyles
--------------------------------
Dieter R. Wachter
--------------------------------
Harvey A. Morse
--------------------------------
Jeffrey Ettin
--------------------------------
E. J. Geddings
--------------------------------
Michael C. Marshall
--------------------------------
Hughlyn H. Burgess
--------------------------------
Randall T. Brown
--------------------------------
Robert B. Hinton
--------------------------------
Thomas J. Bettencourt
--------------------------------
Kyle J. Davidson
<PAGE>
SCHEDULE OF SECURITYHOLDERS
1. Vestar/CS Holding Company, L.L.C. 11. Jeffrey Ettin
c/o Vestar Equity Partners, L.P. P.O. Box 5918
245 Park Avenue, 41st Floor 886 Saybrook Lane
New York, New York 10167 Buffalo Grove, IL 60089
Attention: Sander M. Levy
Managing Director 12. E. J. Geddings
P.O. Box 808
2. Barbara S. Davis Washington, GA 30673
91 Central Park West
Apartment 8C 13. Michael C. Marshall
New York, New York 10023 164 Eastwood Drive
Statesville, NC 28677
3. Diane S. Freedman
32 Brett Lane 14. Hughlyn H. Burgess
Bedford, New York 10506 110 Worthington
Anderson, SC 29621
4. Judith S. Lerman
8 Wyeth Court 15. Randall T. Brown
Pleasantville, New York 10570 P.O. Box 1273
Cleveland, GA 30528
5. William D. Bennison
422 Sweetwater Road 16. Robert B. Hinton
Greer, SC 29650 102 Arden Chase
Anderson, SC 29621
6. Richard C. Wolfe
205 Fox Creek Road 17. Thomas J. Bettencourt
Anderson, SC 29621 207 Hartsdale Lane
Greer, SC 29650
7. Donald R. Burnette
32 Reagan Court 18. Kyle J. Davidson
Spartanburg, SC 29303 226 Deer Springs Lane
Simpsonville, SC 29681
8. William H. Boyles
300 Belfrey Drive
Greer, SC 29650
9. Dieter R. Wachter
44 Maywood Road
Darien, CT 06820
10. Harvey A. Morse
408 Sutton Road
Anderson, SC 29621
EXHIBIT 9.1
VOTING TRUST AGREEMENT
THIS VOTING TRUST AGREEMENT (this "Agreement") is made as of April 17,
1996, by and among Clark-Schwebel Holdings, Inc., a Delaware corporation (the
"Company"), Vestar/CS Holding Company, L.L.C., a Delaware limited liability
company, in its individual capacity ("Holdings") and as trustee (together with
its successors-in-interest as trustee, the "Trustee"), the other initial parties
to the Equity Purchase Agreement (each, an "Equityholder" and, collectively, the
"Equityholders"), and the initial parties to the Securityholders Agreement who
are identified as "Employees" on the signature page thereto (each an "Employee"
and, collectively, the "Employees"). Certain capitalized terms used herein are
defined in Section 4.1. Capitalized terms used but not defined herein have the
respective meanings set forth in the Securityholders Agreement.
WHEREAS, Holdings, the Equityholders and the Employees, being all of the
initial stockholders of the Company, have entered into the Securityholders
Agreement in order to set forth certain terms and conditions for the governance
of the Company; and
WHEREAS, the Securityholders Agreement requires each Stockholder to enter
into a voting trust agreement, to designate Holdings as trustee thereof and to
deposit their Capital Stock in such voting trust;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
VOTING TRUST
1.1 Creation of Voting Trust. Subject to the terms and conditions of this
Agreement, a voting trust (the "Voting Trust") is hereby created and established
in accordance with Section 218 of the Delaware General Corporation Law. The
Trustee accepts the trust created by this Agreement and agrees to its
appointment as Trustee (with all attendant rights and duties hereunder). Upon
the execution of this Agreement by all the parties hereto, the Trustee shall
file an executed counterpart of this Agreement (and of every supplemental or
amendatory agreement) at the Company's principal office in New York, New York
and at the Company's registered office in the State of Delaware. The copy of
this Agreement so filed shall be open to inspection at any reasonable time by
any stockholder of the Company, the holder of any Voting Trust Certificate(s) or
any holder of a beneficial interest in this Voting Trust, in person or by agent
or attorney, as provided in Section 218 of the Delaware General Corporation Law.
The Trustee shall also maintain, or cause to be maintained, such other records
and books as are necessary or appropriate to enable the Trustee to carry out the
terms and provisions of this Agreement.
1.2 Deposit of Shares; Voting Trust Certificates.
(a) Upon execution and delivery of this Agreement (or a joinder
hereto) by each Stockholder, such Person shall deposit with the Trustee
certificates representing all of the outstanding Capital Stock then owned
<PAGE>
directly or beneficially by such Person. The Stockholders shall deposit
additional shares of Capital Stock with the Trustee from time-to-time as
necessary to ensure that the Shares subject hereto at all times represent all of
the shares of Capital Stock owned directly or beneficially by all of the
Stockholders. Each such deposit shall be accompanied by stock powers duly
executed in blank or such other instrument as may be reasonably requested by the
Trustee to enable the Trustee to transfer the Shares to the Trustee's name. Upon
each such deposit, the Shares shall be surrendered by the Trustee to the Company
or its transfer agent and canceled and new certificates representing the Shares
shall be issued to and in the name of the Trustee, as Trustee of this Voting
Trust. Except as hereinafter provided, such Share certificates shall at all
times be and remain in the possession, and under the control, of the Trustee.
(b) Each new certificate for Shares issued to the Trustee shall bear a
legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ISSUED
PURSUANT TO AND ARE SUBJECT TO THE TERMS OF A CERTAIN VOTING
TRUST AGREEMENT, DATED APRIL 17, 1996 AMONG THE ISSUER, THE
TRUSTEE OF THE VOTING TRUST AND THE BENEFICIAL OWNER OF THESE
SECURITIES. THESE SECURITIES MAY NOT BE TRANSFERRED EXCEPT IN
COMPLIANCE WITH THE TERMS OF THE VOTING TRUST AGREEMENT, A COPY
OF WHICH IS ON FILE AT THE ISSUER'S REGISTERED OFFICE IN THE
STATE OF DELAWARE.
A like notation shall be made in the Company's stock transfer records with
respect to such Shares.
(c) Upon receipt of the new certificate representing the Shares, the
Trustee shall deliver to the Stockholders, or to the extent a Stockholder is
party to a Pledge Agreement, the pledgee thereunder, voting trust certificate(s)
substantially in the form of Exhibit A attached hereto (each, a "Voting Trust
Certificate"). Each Voting Trust Certificate shall specify the series or class,
and number of Shares in respect of which it is issued, shall be dated the date
of its issuance and shall be signed manually by a representative of the Trustee.
(d) The Trustee shall retain and hold the certificates representing
the Shares only in accordance with, and subject to the terms and conditions set
forth in, this Agreement. The Trustee shall have no authority to, and shall not
sell, transfer, assign, pledge or otherwise dispose of or encumber the Shares,
except to the extent otherwise specifically required by this Agreement. All
Shares and all cash, securities or other property distributed in respect of the
Shares that is held by the Trustee shall be held in trust for the benefit of the
Stockholders, and in the event such Stockholder is a party to a Pledge
Agreement, the pledgee thereunder, and no creditors of the Trustee shall have
any right to or claim against any of the assets of this Voting Trust.
1.3 Transfer or Exchange of Voting Trust Certificates.
(a) The Trustee will maintain an office or agency in New York, New
York at which Voting Trust Certificates may be presented or surrendered for
registration of transfer or for exchange (the "Registrar"). The Registrar shall
keep a register of the Voting Trust Certificates and of their transfer and
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exchange. The Trustee may appoint any person to act as Registrar on its behalf,
but in the absence of an effective appointment, the Trustee shall act as
Registrar hereunder. The Trustee initially appoints the Company to act as
Registrar to act until such time as the Trustee may determine, and the Company
hereby accepts such appointment.
(b) Subject to the provisions of Section 1.3(c) below, when Voting Trust
Certificates are presented to the Registrar with a request to register the
transfer of such Voting Trust Certificates, or to exchange them for Voting Trust
Certificates of different denominations which in the aggregate represent the
Shares for which such Voting Trust Certificates are being exchanged, in each
case, as accompanied by a duly executed instrument of assignment or exchange
substantially in the form attached as Exhibit B attached hereto, then the
Registrar shall register the transfer or make the exchange as requested;
provided that the Registrar shall require (except as otherwise provided in the
Securityholders Agreement), as a condition to registering a transfer of Voting
Trust Certificates, that the transferee execute and deliver to the Trustee its
written agreement to be bound by the terms of this Agreement as a Stockholder
hereunder substantially in the form of Exhibit C attached hereto.
(c) Notwithstanding the provisions of Section 1.3(b) hereof, no
Stockholder shall sell, transfer, assign, pledge or otherwise dispose of or
encumber any Voting Trust Certificates, except in accordance with the terms of
the Securityholders Agreement.
1.4 Registration of Holders. The Trustee may treat the registered holder of
a Voting Trust Certificate as the owner thereof for all purposes. Every
transferee of a Voting Trust Certificate executing a joinder in the form of
Exhibit C attached hereto shall become a party to this Agreement with the same
force and effect as if such transferee had signed this Agreement, and such
transferee shall for all purposes be considered a Stockholder hereunder.
1.5 Replacement of Voting Trust Certificate. Upon receipt of evidence
reasonably satisfactory to the Trustee (an affidavit of the registered holder
will be satisfactory) of the ownership and the loss, theft, destruction or
mutilation of a Voting Trust Certificate, and in the case of any such loss,
theft or destruction, upon receipt of indemnity reasonably satisfactory to the
Trustee (provided that if the registered holder is a financial institution or
other institutional investor, its own agreement will be satisfactory), or, in
the case of any such mutilation, upon surrender of such certificate, the Trustee
shall (at the registered holder's expense) execute and deliver in lieu of such
certificate a new Voting Trust Certificate of like kind representing the number
of Shares represented by such lost, stolen, destroyed or mutilated certificate
and dated the date of such lost, stolen, destroyed or mutilated certificate.
ARTICLE II
THE TRUSTEE
2.1 Voting of Shares. During the term of this Agreement and for so long as
the Trustee shall hold the Shares pursuant to this Agreement, the Trustee shall
possess and in its sole discretion shall be entitled to and have, the duty to
exercise, through its authorized officers or by their respective nominees or
proxies, all of the Stockholders' voting rights and voting powers in respect of
the Shares, and to take part in or consent to any corporate or stockholders'
3
<PAGE>
action of any kind whatsoever, including the right to vote the Shares for the
election of directors of the Company and on all matters upon which the holders
of Shares are entitled to vote (subject to any limitations imposed by law, the
Company's certificate of incorporation or bylaws or this Agreement). In
discharging such duty, the Trustee shall (a) with respect to matters covered by
Section 2.1, 2.2 or 4.1 of the Securityholders Agreement, vote all of the Shares
in the manner required by such Section 2.1, 2.2 or 4.1 (provided, that any
Person's right to direct the Trustee's action pursuant to Section 2.1, 2.2 or
4.1 of the Securityholders Agreement shall be subject to any limitations on such
right as are expressed in the Securityholders Agreement) and (b) with respect to
voting or granting consent in respect of any matters other than those covered by
Section 2.1, 2.2 or 4.1 of the Securityholders Agreement, shall vote the Shares
in the manner directed by the respective holders of the Voting Trust
Certificates issued in respect of such Shares (provided that for purposes of
this clause (b), the Trustee shall be free to abstain from voting, or granting
consent with respect to, any such Shares unless and until the Trustee receives
written direction from the holders of the Voting Trust Certificates issued in
respect thereof).
2.2 Dividends and Distributions.
(a) Subject to Section 2.2(b) below, each Stockholder, or, in the
event such Stockholder is party to a Pledge Agreement, the pledgee thereunder,
shall be entitled to receive dividends or distributions of money, securities, or
other property, if any, collected or received by the Trustee with respect to the
Shares represented by the Voting Trust Certificates. Any such payments received
by the Trustee shall be held in trust for the benefit of the Stockholders (or
their respective pledgees under any Pledge Agreements) and shall be paid over to
the Stockholders (or their respective pledgees under any Pledge Agreements) by
the Trustee promptly upon the Trustee's receipt of such dividends or
distributions. In lieu of receiving dividends or distributions and paying them
to the Stockholders, the Trustee may instruct the Company in writing to pay the
dividends or distributions (other than dividends consisting of Capital Stock)
directly to the Stockholders (or their respective pledgees under any Pledge
Agreements). In the event any such instruction is given to the Company, all
liability of the Trustee with regard to the payment of such dividends or
distributions shall cease, unless and until such instruction is revoked.
(b) Notwithstanding Section 2.2(a) above, in the event that the
Trustee receives any additional shares of Capital Stock through a dividend or
other distribution with respect to any Shares, the Trustee shall hold such
Capital Stock subject to this Agreement for the benefit of the Stockholders (and
their respective pledgees under any Pledge Agreements) and such Capital Stock
shall become subject to all of the terms and conditions of this Agreement to the
same extent as if it were originally deposited as Shares hereunder. The Trustee
shall issue Voting Trust Certificates in respect of such Capital Stock to the
Stockholders (or their respective pledgees under any Pledge Agreements) as soon
as practicable after the Trustee's receipt of such Capital Stock.
2.3 Expenses; Exculpation; etc. The Trustee shall serve without
compensation for its services as Trustee hereunder. The Trustee is expressly
authorized to incur and pay and be promptly reimbursed by the Company for all
reasonable charges and other expenses which the Trustee deems necessary and
proper in the performance of its duties under this Agreement; provided, however,
that the Company shall have the right to approve all expenditures that, either
singly or together with all other such expenditures incurred or paid hereunder
during the calendar year in which such expenditure was paid or incurred, exceed
$5,000.00. Nothing contained herein shall disqualify the Trustee from engaging
in any transaction with the Company or any of its subsidiaries, or otherwise
5
<PAGE>
serving the Company or any of its subsidiaries in any other capacity, and in
such capacity receiving compensation. The Trustee need only perform such duties
as are specifically set forth in this Agreement and no covenants or obligations
shall be implied in this Agreement that are adverse to the Trustee. The Trustee
shall not be liable for its action or failure to act hereunder, unless such
action or failure to act constitutes gross negligence or willful misconduct on
its part. The Trustee shall not be required to give any bond or other security
for the discharge of its duties under this Agreement.
2.4 Successor Trustee. The Trustee may assign its rights and delegate its
obligations to a successor Trustee. Any successor Trustee appointed hereunder
shall indicate such Person's acceptance of such appointment by executing a
counterpart of this Agreement and thereupon such successor shall be vested with
all the rights, powers, duties and immunities herein conferred upon the Trustee
as though such successor had been originally a party to this Agreement as
Trustee. Upon assignment of its rights and delegation of its duties pursuant to
this paragraph 2.4, the Trustee's authority to vote or otherwise exercise any
rights with respect to the Shares shall immediately terminate, and the Trustee
shall immediately surrender all certificates for Shares held by it to the
Company accompanied by stock powers duly executed in blank. The Company shall
cancel such certificates and shall issue new certificates representing the
Shares to and in the name of the successor Trustee, as trustee of this Voting
Trust.
ARTICLE III
TERM OF VOTING TRUST;
RELEASE OF SECURITIES
3.1 Term of Voting Trust.
(a) The Voting Trust created by this Agreement shall commence upon the
execution of this Agreement by the parties hereto and shall continue until
terminated in accordance with paragraph 3.1(b) below.
(b) This Agreement and the Voting Trust created hereby shall terminate
upon the occurrence of any of the following events (each, a "Trust Termination
Event"):
(i) the Vestar Holders and the Trustee agree to terminate this Agreement
and the Voting Trust created hereby;
(ii) the Trustee's resignation (other than in connection with an assignment
of the Trustee's duties in accordance with Section 2.4);
(iii) the consummation of a Public Offering if, and only to the extent,
required by the managing underwriter of such Public Offering; or
(iv) the termination of the Securityholders Agreement.
(c) Upon the termination of this Agreement pursuant to paragraph
3.1(b) above, and the surrender by the Stockholders to the Trustee of the Voting
6
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Trust Certificates issued by the Trustee in respect of the Shares, the Trustee
shall surrender the certificates representing the Shares to the Company properly
endorsed for transfer to the Stockholders, or, in the event a Stockholder is
party to a Pledge Agreement, the pledgee thereunder, shall take all other
actions appropriate to effectuate the transfer of the Shares to the Stockholders
(or their respective pledgees under any Pledge Agreements) and shall distribute
all other property held in trust for the Stockholders (or their respective
pledgees under any Pledge Agreements).
3.2 Release of Securities for Public Sale. If at any time after the Company
has effected its first Public Offering, a Stockholder desires to effect a Public
Sale of Shares in accordance with the terms of the Securityholders Agreement,
such Stockholder shall give written notice to the Trustee of such sale not more
than thirty (30) nor less than ten (10) days prior to the proposed date of sale,
specifying the intended method of distribution and the number of shares to be
sold, and shall surrender to the Trustee the Voting Trust Certificates issued by
the Trustee in respect of the Shares proposed to be sold. Upon receipt of such
notice and the related Voting Trust Certificates, the Trustee shall deliver the
certificates representing the Shares to be sold, endorsed in blank, to the
Company or its transfer agent for registration of transfer to the purchaser (or
its intermediary) in such Public Sale. If less than all the Shares represented
by a particular certificate are being sold in such Public Sale, the Company
shall, or shall cause its transfer agent to, issue and deliver to the Trustee a
certificate for the Shares not being sold. If such Shares are not sold in a
Public Sale within thirty (30) days after delivered by the Trustee, the
Stockholder holding such Shares will promptly redeliver such Shares to the
Trustee in the manner provided in Section 1.2(a) hereof.
3.3 Release of Securities to Pledgee. If at any time, a pledgee under a
Pledge Agreement (i) notifies the Trustee that a default exists under such
Pledge Agreement or that such pledgee is otherwise authorized under the terms of
such Pledge Agreement to transfer, distribute or otherwise dispose of the Shares
in accordance with such Pledge Agreement and (ii) surrenders to the Trustee any
Voting Trust Certificates issued by the Trustee in respect of the Shares subject
to such Pledge Agreement, the Trustee shall deliver the certificates
representing such Shares, endorsed in blank, to the Company for delivery to such
pledgee. If less than all the Shares represented by a particular certificate are
required to be turned over to any pledgee pursuant to the preceding sentence,
the Company shall, or shall cause its transfer agent to, issue and deliver to
the Trustee a certificate for the remaining Shares.
ARTICLE IV
MISCELLANEOUS
4.1 Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"Affiliate" of any particular Person means any other Person
Controlling, Controlled by or under common Control with such particular
Person or, in the case of a natural Person, any other member of such
Person's immediate family, natural lineal descendants of such Person or a
trust for the exclusive benefit of such Persons.
7
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"Agreement" has the meaning given such term in the preface.
"Capital Stock" means each class or series of the Company's authorized
capital stock.
"Company" has the meaning given such term in the preface.
"Control" (including, with correlative meaning, all conjugations
thereof) means with respect to any Person, the ability of another Person to
direct the actions or policies of such first Person, whether by ownership
of voting securities, by contract or otherwise.
"Employee" has the meaning given such term in the preface.
"Equityholder" has the meaning given to such term in the preface.
"Equity Purchase Agreement" means the Equity Purchase Agreement of even
date herewith among the Company, Holdings, Barbara S. Davis, Diane S. Freedman
and Judith S. Lerman.
"Holdings" has the meaning given such term in the preface.
"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.
"Public Offering" has the meaning given such term in the Securityholders
Agreement.
"Public Sale" has the meaning given such term in the Securityholders
Agreement.
"Registrar" has the meaning given such term in Section 1.3(a).
"Securityholders Agreement" means the Securityholders Agreement of
even date herewith among the Company, Holdings, the Equityholders and the
Employees, as the same may be amended from time to time.
"Shares" means and includes all shares of Capital Stock deposited by
the Stockholders with the Trustee pursuant to this Agreement and any
additional shares of Capital Stock of the Company issued or distributed by
the Company to the Trustee by way of a dividend or distribution on Shares.
"Stockholders" means each of the Equityholders, the Employees, any
Person who becomes a party hereto after the date hereof and any of their
respective successors-in-interest.
"Trustee" has the meaning given such term in the preface.
"Trust Termination Event" has the meaning given such term in Section
3.1(b).
"Voting Trust" has the meaning given such term in Section 1.1.
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"Voting Trust Certificate" has the meaning given such term in Section
1.2(c).
4.2 Merger; Amendment. This Agreement constitutes the entire agreement
among the parties hereto with respect to the subject matter hereof and
supersedes all prior oral or written agreements, commitments or understandings
with respect to the matters provided for herein. This Agreement shall not be
amended, altered or modified except by a written instrument that expressly
refers to this Agreement, is signed by each of the Company, Holdings, the
Trustee and the Stockholders and is filed with the Company's registered office
within the State of Delaware.
4.3 Binding Effect; Assignment. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective permitted
successors and permitted assigns. The rights and duties of any party to this
Agreement shall not be assigned or delegated, except in connection with the
resignation or removal of any Trustee and the appointment of a successor Trustee
in accordance with Section 2.4 hereof.
4.4 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.
(i) If to the Company :
Clark-Schwebel Holdings, Inc.
c/o Vestar Equity Partners
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
(ii) If to the Trustee or Holdings:
Vestar/CS Holding Company, L.L.C.
c/o Vestar Equity Partners
245 Park Avenue, 41st Floor
New York, NY 10167
Attn: Sander M. Levy
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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
(iii) If to an Equityholder or an Employee, addressed to such Equityholder
or Employee at the address set forth in the Securityholders Agreement.
4.5 Severability. If any provision of this Agreement or any other
agreement, document or writing given pursuant to or in connection with this
Agreement shall be found by a court of competent jurisdiction to be invalid or
unenforceable under applicable law, such provision shall be ineffective to the
extent of such invalidity only, without in any way affecting the remainder of
such provision or the remaining provisions of this Agreement.
4.6 Specific Enforcement. The Company, Holdings, the Trustee and the
Stockholders shall be entitled to enforce their rights under this Agreement
specifically, to recover damages by reason of any breach of any provision of
this Agreement and to exercise all other rights existing in their favor. The
parties hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that the Company,
Holdings, the Trustee or any Stockholder may in its or his sole discretion apply
to any court of law or equity of competent jurisdiction for specific performance
or injunctive relief (without posting a bond or other security) in order to
enforce or prevent any violation of the provisions of this Agreement.
4.7 Headings. The headings of the paragraphs of this Agreement are inserted
for convenience of reference only and do not form a part or affect the meaning
hereof.
4.8 Governing Law. The General Corporation Law of the State of Delaware
shall govern all questions arising under this Agreement concerning the relative
rights of the Company and its stockholders. All other questions concerning the
construction, validity and interpretation of this Agreement shall be governed by
and construed in accordance with the domestic laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York.
4.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of which
shall be deemed to be one and the same instrument.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Voting Trust
Agreement as of the date first above written.
CLARK-SCHWEBEL HOLDINGS, INC.
By:
Its:
VESTAR/CS HOLDING COMPANY, L.L.C.,
in its individual capacity and as Trustee
By:
Its:
EQUITYHOLDERS:
Barbara S. Davis
Diane S. Freedman
Judith S. Lerman
EMPLOYEES:
William D. Bennison
Richard C. Wolfe
<PAGE>
Donald R. Burnette
William H. Boyles
Dieter R. Wachter
Harvey A. Morse
Jeffrey Ettin
E.J. Geddings
Michael C. Marshall
Hugh Lyn H. Burgess
Randall T. Brown
Robert B. Hinton
Thomas J. Bettencourt
Kyle J. Davidson
<PAGE>
EXHIBIT A
THIS VOTING TRUST CERTIFICATE IS ISSUED PURSUANT TO AND IS SUBJECT TO THE TERMS
OF A CERTAIN VOTING TRUST AGREEMENT, DATED APRIL 17 , 1996 AMONG CLARK-SCHWEBEL
HOLDINGS, INC. (THE "COMPANY"), THE TRUSTEE OF THE VOTING TRUST AND THE
BENEFICIARIES OF THE VOTING TRUST. THE BENEFICIAL INTEREST IN SHARES OF THE
CAPITAL STOCK OF THE COMPANY REPRESENTED BY THIS VOTING TRUST CERTIFICATE MAY
NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE VOTING TRUST
AGREEMENT, A COPY OF WHICH IS ON FILE AT THE ISSUER'S REGISTERED OFFICE IN THE
STATE OF DELAWARE.
THE SECURITIES REPRESENTED BY THIS VOTING TRUST CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE
SECURITIES LAW AND THE SECURITIES REPRESENTED HEREBY CANNOT BE TRANSFERRED
UNLESS THEY ARE REGISTERED OR QUALIFIED UNDER SUCH FEDERAL AND ANY APPLICABLE
STATE SECURITIES LAW OR UNLESS AN EXEMPTION FROM REGISTRATION OR QUALIFICATION
IS AVAILABLE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE CONSTITUTE ["EMPLOYEE
SECURITIES"]["EQUITYHOLDER SECURITIES"] UNDER A CERTAIN SECURITYHOLDERS
AGREEMENT DATED AS OF APRIL 17, 1996 AMONG THE ISSUER OF SUCH SECURITIES (THE
"COMPANY") AND CERTAIN OF THE COMPANY'S SECURITYHOLDERS AND, AS SUCH, ARE
SUBJECT TO CERTAIN VOTING PROVISIONS, PURCHASE RIGHTS AND RESTRICTIONS ON
TRANSFER SET FORTH IN SUCH SECURITYHOLDERS AGREEMENT. A COPY OF SUCH
SECURITYHOLDERS AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE
HOLDER HEREOF UPON WRITTEN REQUEST.
Certificate No. VTC - _______ Date of Issuance: April 17, 1996
Number of Shares Beneficially
Represented Hereby: _______
shares of common stock,
par value $.01 per share
VOTING TRUST CERTIFICATE
This Voting Trust Certificate (this "Certificate") certifies that the
undersigned Trustee has received certificate(s) representing ________ shares of
common stock, par value $.01 per share (the "Shares") of Clark-Schwebel
Holdings, Inc., a Delaware corporation (the "Company"), on behalf of
________________________ (the "Holder"), duly registered in the name of the
undersigned Trustee, on the following terms and conditions:
Rights of Holders
The Holder agrees to, accepts and ratifies all of the terms,
conditions and covenants of that certain Voting Trust Agreement dated April 17,
1996 (the "Agreement"), a counterpart of which is on file with the registered
office of the Company in the State of Delaware, and which is hereby incorporated
herein by reference. Capitalized terms used but not otherwise defined in this
Certificate shall have the meanings given such terms in the Agreement. The
Holder shall possess and be entitled to rights of ownership of the Shares only
as provided in the Agreement. The Holder of this Certificate shall transfer or
replace this Certificate only as provided in the Agreement.
11
<PAGE>
Voting And Other Rights
The Trustee during the term of the Agreement shall have sole voting
rights and certain other rights with respect to the Shares as specified in the
Agreement (subject to the limitations imposed by the Company's certificate of
incorporation, bylaws or any agreement to which the Shares may be subject). No
voting rights are granted by this Certificate and only those rights provided to
the Holder of a Certificate by the Agreement are represented by this
Certificate.
Dividends and Distributions
Subject to the provisions of the Agreement, The Holder of this
Certificate shall be entitled to receive all dividends or other distributions of
cash, securities or other property by the Company received by the undersigned
Trustee in respect of the Shares, except that in the event of dividends or
distributions of shares of Capital Stock the Trustee shall receive and hold any
such dividends or distributions pursuant to the terms of the Agreement and shall
issue to the Holder hereof additional Certificates representing such additional
Shares. In lieu of the Trustee receiving dividends and distributions and paying
them to the Holder of this Certificate, the Trustee may instruct the Company to
pay the dividends or distributions directly to the Holder, as provided in the
Agreement.
Termination
The Voting Trust shall terminate upon the occurrence of a Trust
Termination Event, as provided in the Agreement.
Subject to Voting Trust Agreement
This Certificate is governed in all respects by the Agreement. In the
event of any inconsistency between the terms and conditions of this Certificate
and the Agreement, the Agreement shall control.
Subject to Securityholders Agreement
This Certificate evidences "Securities", as defined in, and subject to the
terms of, the Securityholders Agreement.
<PAGE>
IN WITNESS WHEREOF, this Voting Trust Certificate is executed and
issued to the Holder by the undersigned Trustee as of the date first written
above.
VESTAR/CS HOLDING COMPANY, L.L.C.,
as Trustee
By:
Its:
<PAGE>
EXHIBIT B
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers undersigned's right, title and interest in and to the attached Voting
Trust Certificate, certificate number VTC-____, the beneficial interest in the
shares of capital stock of Clark-Schwebel Holdings, Inc., a Delaware corporation
(the "Company"), represented thereby and all related rights under the Voting
Trust Agreement dated as of April ___ , 1996 (the "Voting Trust Agreement"),
among Vestar/CS Holding Company, L.L.C., or its successor-in-interest, as
trustee (the "Trustee") and the other parties thereto, to ______________________
and authorizes ____________________________ to surrender the attached Voting
Trust Certificate to the Trustee or its designee for registration of transfer.
Date: _______________
[Signature of Stockholder]
<PAGE>
EXHIBIT C
JOINDER AGREEMENT
THIS JOINDER AGREEMENT (this "Agreement") is made as of the date
written below by the undersigned (the "Joining Party") in favor of and for the
benefit of (i) Vestar/CS Holding Company, L.L.C., a Delaware limited liability
company, or its successor-in-interest (the "Voting Trustee") and the other
Persons party to the Voting Trust Agreement, dated as of April ___, 1996 (the
"Voting Trust Agreement"), among the Voting Trustee and such other Persons and
(ii) Clark-Schwebel Holdings, Inc., a Delaware corporation (the "Company"), and
the other Persons party to the Securityholders Agreement, dated as of April ___,
1996 (the "Securityholders Agreement"), among the Company and such other
Persons. Capitalized terms used but not defined herein shall have the meanings
given such terms in the Securityholders Agreement.
Accordingly, the Joining Party hereby agrees as follows:
1. The Joining Party hereby acknowledges, agrees and confirms that, by
its execution of this Joinder, the Joining Party will be deemed to be a party to
the Voting Trust Agreement and shall have all of the obligations of a
Stockholder thereunder as if it had executed the Voting Trust Agreement. The
Joining Party hereby ratifies, as of the date hereof, and agrees to be bound by,
all of the terms, provisions and conditions contained in the Voting Trust
Agreement.
2. The Joining Party hereby acknowledges, agrees and confirms that, by
its execution of this Joinder, the Joining Party will be deemed to be a party to
the Securityholders Agreement and shall have all of the obligations of a
Securityholder and a holder of [Employee Securities] [Member Securities]
thereunder as if it had executed the Securityholders Agreement. The Joining
Party hereby ratifies, as of the date hereof, and agrees to be bound by, all of
the terms, provisions and conditions contained in the Securityholders Agreement.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Joinder
Agreement as of the date written below.
Date: __________________
[Joining Party]
[By:
Its:]
EXECUTION COPY
================================================================================
CREDIT AGREEMENT
Dated as of April 17, 1996,
Among
CLARK-S ACQUISITION CORPORATION
(to be ultimately merged into
CLARK-SCHWEBEL, INC.),
CLARK-SCHWEBEL HOLDINGS, INC.
THE FINANCIAL INSTITUTIONS LISTED ON SCHEDULE 2.01,
CHEMICAL BANK,
as Administrative Agent, Collateral Agent,
Documentation Agent and Syndication Agent
CHEMICAL BANK DELAWARE,
as Issuing Bank,
and
BANKERS TRUST COMPANY,
FLEET NATIONAL BANK
NATIONSBANK, N.A.,
as Co-Agents
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS.................................................... 2
SECTION 1.01. Defined Terms......................................... 2
SECTION 1.02. Terms Generally....................................... 24
ARTICLE II. THE CREDITS................................................... 24
SECTION 2.01. Commitments........................................... 24
SECTION 2.02. Loans................................................. 25
SECTION 2.03. Borrowing Procedure................................... 27
SECTION 2.04. Evidence of Debt; Repayment of Loans.................. 27
SECTION 2.05. Fees.................................................. 28
SECTION 2.06. Interest on Loans..................................... 29
SECTION 2.07. Default Interest...................................... 30
SECTION 2.08. Alternate Rate of Interest............................ 30
SECTION 2.09. Termination and Reduction of Commitments.............. 30
SECTION 2.10. Conversion and Continuation of Borrowings............. 31
SECTION 2.11. Repayment of Term Borrowings.......................... 32
SECTION 2.12. Prepayment............................................ 33
SECTION 2.13. Reserve Requirements; Change in Circumstances......... 36
SECTION 2.14. Change in Legality.................................... 38
SECTION 2.15. Indemnity............................................. 39
SECTION 2.16. Pro Rata Treatment.................................... 40
SECTION 2.17. Sharing of Setoffs.................................... 40
SECTION 2.18. Payments.............................................. 40
SECTION 2.19. Taxes................................................. 41
SECTION 2.20. Letters of Credit..................................... 44
ARTICLE III. REPRESENTATIONS AND WARRANTIES............................... 48
SECTION 3.01. Organization; Powers.................................. 48
SECTION 3.02. Authorization......................................... 48
SECTION 3.03. Enforceability........................................ 49
SECTION 3.04. Approvals............................................. 49
SECTION 3.05. Financial Statements.................................. 49
SECTION 3.06. No Material Adverse Change............................ 50
SECTION 3.07. Title to Properties; Possession Under Leases.......... 50
SECTION 3.08. Subsidiaries.......................................... 51
SECTION 3.09. Litigation; Compliance with Laws...................... 51
SECTION 3.10. Agreements............................................ 51
SECTION 3.11. Federal Reserve Regulations........................... 51
SECTION 3.12. Investment Company Act; Public Utility Holding Company
Act................................................... 51
SECTION 3.13. Use of Proceeds....................................... 52
SECTION 3.14. Tax Returns........................................... 52
SECTION 3.15. No Material Misstatements............................. 52
SECTION 3.16. Employee Benefit Plans................................ 52
-i-
<PAGE>
Page
----
SECTION 3.17. Environmental Matters................................. 53
SECTION 3.18. Insurance............................................. 54
SECTION 3.19. Labor Matters......................................... 54
SECTION 3.20. Capitalization........................................ 54
SECTION 3.21. Security Documents.................................... 54
SECTION 3.22. Location of Real Property and Leased Premises......... 55
SECTION 3.23. Employment and Management Agreements.................. 55
SECTION 3.24. Merger Documents and Senior Notes Documents........... 56
ARTICLE IV. CONDITIONS OF LENDING......................................... 56
SECTION 4.01. All Credit Events..................................... 56
SECTION 4.02. First Credit Event.................................... 57
ARTICLE V. AFFIRMATIVE COVENANTS.......................................... 61
SECTION 5.01. Existence; Businesses and Properties.................. 61
SECTION 5.02. Insurance............................................. 62
SECTION 5.03. Obligations and Taxes................................. 62
SECTION 5.04. Financial Statements, Reports, etc.................... 62
SECTION 5.05. Litigation and Other Notices.......................... 65
SECTION 5.06. ERISA................................................. 65
SECTION 5.07. Maintaining Records; Access to Properties
and Inspections ...................................... 65
SECTION 5.08. Use of Proceeds....................................... 66
SECTION 5.09. Compliance with Environmental Laws.................... 66
SECTION 5.10. Preparation of Environmental Reports.................. 67
SECTION 5.11. Further Assurances.................................... 67
SECTION 5.12. Surveys............................................... 68
SECTION 5.13. Fiscal Year........................................... 68
SECTION 5.14. Mergers............................................... 68
ARTICLE VI. NEGATIVE COVENANTS............................................ 68
SECTION 6.01. Indebtedness.......................................... 68
SECTION 6.02. Liens................................................. 70
SECTION 6.03. Sale and Leaseback Transactions....................... 72
SECTION 6.04. Investments, Loans and Advances....................... 72
SECTION 6.05. Mergers, Consolidations, Sales of Assets and
Acquisitions ......................................... 75
SECTION 6.06. Dividends and Distributions........................... 76
SECTION 6.07. Transactions with Affiliates.......................... 77
SECTION 6.08. Business of Parent, Borrower and Subsidiaries......... 78
SECTION 6.09. Limitations on Certain Debt Payments and Interest
Payments ............................................. 78
SECTION 6.10. Amendment of Certain Documents; Certain Agreements.... 78
SECTION 6.11. Limitation on Capital Lease Obligations............... 78
SECTION 6.12. Capital Expenditures.................................. 79
SECTION 6.13. Fixed Charge Coverage Ratio........................... 79
SECTION 6.14. Interest Expense Coverage Ratio....................... 79
SECTION 6.15. Senior Debt Ratio..................................... 80
ARTICLE VII. EVENTS OF DEFAULT............................................ 81
-ii-
<PAGE>
Page
----
ARTICLE VIII. THE AGENTS.................................................. 84
ARTICLE IX. MISCELLANEOUS................................................. 86
SECTION 9.01. Notices............................................... 86
SECTION 9.02. Survival of Agreement................................. 87
SECTION 9.03. Binding Effect........................................ 87
SECTION 9.04. Successors and Assigns................................ 87
SECTION 9.05. Expenses; Indemnity................................... 91
SECTION 9.06. Right of Setoff....................................... 91
SECTION 9.07. Applicable Law........................................ 92
SECTION 9.08. Waivers; Amendment.................................... 92
SECTION 9.09. Interest Rate Limitation.............................. 93
SECTION 9.10. Entire Agreement...................................... 93
SECTION 9.11. WAIVER OF JURY TRIAL.................................. 93
SECTION 9.12. Severability.......................................... 94
SECTION 9.13. Counterparts.......................................... 94
SECTION 9.14. Headings.............................................. 94
SECTION 9.15. Jurisdiction; Consent to Service of Process........... 94
SECTION 9.16. Mortgaged Property Casualty and Condemnation.......... 95
SECTION 9.17. Confidentiality....................................... 98
-iii-
<PAGE>
LIST OF EXHIBITS
EXHIBIT A Form of Administrative Questionnaire
EXHIBIT B Form of Assignment and Acceptance
EXHIBIT C Form of Borrowing Request
EXHIBIT D Form of Guarantee Agreement
EXHIBIT E Form of Intellectual Property Security Agreement
EXHIBIT F Form of Mortgage
EXHIBIT G Form of Pledge Agreement
EXHIBIT H Form of Security Agreement
EXHIBIT I Forms of Legal Opinions
LIST OF SCHEDULES
Schedule 1.01 Mortgaged Properties
Schedule 2.01 Commitments
Schedule 3.07(a) Leases
Schedule 3.07(c) Notice of Condemnation
Schedule 3.07(d) Obligations In Respect of Mortgaged Properties
Schedule 3.08 Subsidiaries
Schedule 3.09 Litigation
Schedule 3.17 Environmental Matters
Schedule 3.18 Insurance
Schedule 3.19 Labor Matters
Schedule 3.20 Stock Ownership
Schedule 3.21 Filing Offices
Schedule 3.22(a) Owned Real Property
Schedule 3.22(b) Leased Real Property
Schedule 3.23 Employment and Management Agreements
Schedule 4.01(q) Sources and Uses of Funds
Schedule 6.01 Indebtedness
Schedule 6.02 Liens
-iv-
<PAGE>
CREDIT AGREEMENT dated as of April 17, 1996, among
CLARK-S ACQUISITION CORPORATION, a Delaware corporation (the
"Purchaser"); CLARK-SCHWEBEL HOLDINGS, INC., a Delaware
corporation (the "Parent"); the financial institutions from
time to time party hereto, initially consisting of those
listed on Schedule 2.01 (the "Lenders"); CHEMICAL BANK, a New
York banking corporation ("Chemical"), as agent (in such
capacity, the "Administrative Agent"), collateral agent (in
such capacity, the "Collateral Agent"), documentation agent
(in such capacity, the "Documentation Agent") and syndication
agent (in such capacity, the "Syndication Agent") for the
Lenders; CHEMICAL BANK DELAWARE, a Delaware banking
corporation, as issuing bank (in such capacity, the "Issuing
Bank"); and BANKERS TRUST COMPANY, a New York banking
corporation ("BTCo."), FLEET NATIONAL BANK, a national banking
association ("Fleet"), and NATIONSBANK, N.A., a national
banking association ("NationsBank"); as co-agents (in such
capacity, the "Co-Agents").
The Purchaser is a wholly owned subsidiary of the Parent. Vestar/CS
Holding Company, L.L.C., a Delaware limited liability company ("Vestar"), and
the Purchaser have entered into the Agreement and Plan of Merger dated as of
February 24, 1996 (the "Merger Agreement"), with Spring Industries, Inc. , a
South Carolina corporation (the "Seller"), and Fort Mill A Inc., a Delaware
corporation ("Fort Mill"), pursuant to which the Purchaser will purchase (the
"Acquisition") all of the issued and outstanding capital stock of Fort Mill from
the Seller. Concurrently with the consummation of the Acquisition, the Purchaser
will merge (the "Fort Mill Merger") into Fort Mill, with Fort Mill as the
surviving corporation, and CS Finance Corporation, a wholly-owned subsidiary of
the Purchaser will merge (the "CS Finance Merger") into Clark-Schwebel, Inc., a
Delaware corporation (the "Company"), with the Company as the surviving
corporation. On the day following the Closing Date, Fort Mill will merge (the
"Post-Closing Merger") into the Company. Immediately following the Post-Closing
Merger, the Parent's sole asset will be all of the capital stock of the Company.
As a result of, and on the effective date of, the Acquisition, Vestar and its
affiliates and certain members of management of the Company will own 100% of the
capital stock of the Parent, which in turn shall own 100% of the capital stock
of Fort Mill. The aggregate consideration for the Acquisition payable to the
Seller consists of a cash purchase price of approximately $192,700,000, subject
to certain adjustments as provided in the Merger Agreement. Vestar and certain
members of management of the Company will contribute (the "Equity
Contribution"), in the aggregate, $45,000,000 (consisting of at least
$44,150,000 in cash and up to $850,000 funded with the proceeds of the Loans) to
the Parent in exchange for all of the capital stock of the Parent.
The Borrower has requested (a) the Lenders to extend credit in order
to enable the Borrower on the terms and subject to the conditions of this
Agreement, to borrow (i) on a term basis, Term Loans (such term and each other
capitalized term used herein but not defined herein having the meaning given to
such terms in Article I) in an aggregate principal amount not to exceed
$15,000,000, and (ii) on a revolving basis, at any time and from time to time
prior to the Revolving Credit Maturity Date, an aggregate principal amount at
any time
<PAGE>
2
outstanding not in excess of $55,000,000 less the L/C Exposure at such time and
(b) the Issuing Bank to issue, on the terms and subject to the conditions of
this Agreement, Letters of Credit in an aggregate face amount at any time
outstanding not in excess of $5,000,000.
The proceeds of the Term Loans will be used by the Borrower,
together with the entire amount of the net proceeds from the issuance by the
Borrower of the Senior Notes, up to $35,000,000 of Revolving Credit Borrowings
on the Closing Date and $45,000,000 of equity contributions to the Borrower from
the Parent, solely (a) to finance the cash purchase price to be paid pursuant to
the Merger Agreement, (b) to pay fees and expenses in connection with the
Acquisition and (c) to fund up to $850,000 of loans to be made by the Parent to
the Management Participants to finance their purchase of Parent Common Stock.
The proceeds of the Revolving Loans will be used, except as set forth in the
preceding sentence, for working capital and general corporate purposes,
including loans to and investments in Joint Ventures. Letters of Credit will be
used by the Borrower for ordinary course purposes.
ARTICLE I. DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the
following terms shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Loan" shall mean any ABR Term Loan or ABR Revolving Loan.
"ABR Revolving Loan" shall mean any Revolving Loan bearing interest
at a rate determined by reference to the Alternate Base Rate in accordance with
the provisions of Article II.
"ABR Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Acquisition" shall have the meaning given in the introduction to
this Agreement.
"Adjusted LIBO Rate" shall mean, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate
in effect for such Interest Period and (b) Statutory Reserves.
"Administrative Agent Fees" shall have the meaning assigned to such
term in Section 2.05.
<PAGE>
3
"Administrative Questionnaire" shall mean an Administrative
Questionnaire in the form of Exhibit A.
"Affiliate" shall mean, when used with respect to a specified
Person, another Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with the
Person specified.
"Agents" shall have the meaning assigned to such term in Article
VIII.
"Aggregate Revolving Credit Exposure" shall mean the aggregate
amount of the Lenders' Revolving Credit Exposures.
"Agreement" shall mean this Credit Agreement, as amended, modified
or supplemented from time to time.
"Alternate Base Rate" shall mean, for any day, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greater of
(a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. If for any reason the Administrative
Agent shall have determined (which determination shall be conclusive absent
manifest effort) that it is unable to ascertain the Federal Funds Effective Rate
for any reason, including the inability or failure of the Agent to obtain
sufficient quotations in accordance with the terms thereof, the Alternate Base
Rate shall be determined without regard to clause (b) of the first sentence of
this definition until the circumstances giving rise to such inability no longer
exist. Any change in the Alternate Base Rate due to a change in the Prime Rate
or the Federal Funds Effective Rate shall be effective on the effective date of
such change in the Prime Rate or the Federal Funds Effective Rate, respectively.
"Applicable Percentage" shall mean, with respect to any Eurodollar
Loan or ABR Loan, or with respect to the Commitment Fees, as applicable, the
applicable percentage set forth below under the caption "Eurodollar Spread",
"ABR Spread" or "Fee Percentage", as applicable, based upon the ratios described
below:
================================================================================
Eurodollar ABR Fee
Spread Spread Percentage
- --------------------------------------------------------------------------------
Category 1
- --------------------------------------------------------------------------------
Leverage Ratio of greater than or 2.00% 0.75% 0.500%
equal to 4.0 to 1.0
- --------------------------------------------------------------------------------
Category 2
- --------------------------------------------------------------------------------
Leverage Ratio of greater than or 1.75% 0.50% 0.500%
equal to 3.5 and less than 4.0 to 1.0
- --------------------------------------------------------------------------------
Category 3
- --------------------------------------------------------------------------------
Leverage Ratio of less than 3.5 to 1.0 1.50% 0.25% 0.375%
================================================================================
<PAGE>
4
For purposes of the foregoing, the Applicable Percentage for any
date shall be (i) if such date is prior to six months after the Closing Date, as
set forth in Category 1 and (ii) otherwise, determined by reference to the
Leverage Ratio as of the last day of the Borrower's fiscal quarter most recently
ended as of such date. Any change in the Applicable Percentage shall become
effective on the first day of the fiscal quarter following the last day of the
fiscal period covered by such financial statements.
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the Administrative
Agent, in the form of Exhibit B or such other form as shall be approved by the
Administrative Agent.
"Attributable Debt" in respect of a Sale and Leaseback Transaction
shall mean, at the time of determination, the present value (discounted at the
actual rate of interest implicit in such transaction) of the obligation of the
lessee for net rental payments during the remaining terms 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" shall mean the Board of Governors of the Federal Reserve
System of the United States.
"Borrower" shall mean (i) initially, the Purchaser, (ii) upon
consummation of the Fort Mill Merger, Fort Mill, as the surviving corporation of
the Fort Mill Merger, and (iii) upon consummation of the Post-Closing Merger,
the Company, as the surviving corporation of the Post-Closing Merger.
"Borrower Common Stock" shall mean the common stock, par value $.01
per share, of the Company.
"Borrowing" shall mean a group of Loans of a single Type made by the
Lenders on a single date and as to which a single Interest Period is in effect,
provided that ABR Loans made pursuant to Section 2.14(a) shall be considered
part of the related Borrowing of Eurodollar Loans.
"Borrowing Request" shall mean a request by the Borrower in
accordance with the terms of Section 2.03 and in the form of Exhibit C.
"Business Day" shall mean any day other than a Saturday, Sunday or
day on which banks in New York City or South Carolina are authorized or required
by law to close; provided, however, that when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in Dollar deposits in the London interbank
market.
<PAGE>
5
"Capital Expenditures" shall mean, for any period, the sum of all
amounts that would, in accordance with GAAP, be included as additions to
property, plant and equipment and other capital expenditures on a consolidated
statement of cash flows for the Parent for such period; provided, however, that
Capital Expenditures shall not include (i) expenditures made to make any
investment permitted by Section 6.04(a) through (i), (k), (m), (o), (p), (q),
(r) and (s), (ii) expenditures of proceeds of insurance settlements,
condemnation awards and other settlements in respect of lost, destroyed, damaged
or condemned assets or property to the extent such expenditures are made to
repair or replace such lost, destroyed, damaged or condemned assets or property
within 360 days of receipt of such proceeds, (iii) expenditures actually paid by
a Person other than the Parent or any of its Subsidiaries and for which none of
the Parent and its Subsidiaries has provided or is required to provide or incur,
directly or indirectly, any consideration or obligation to such third party or
any other Person (whether before, during or after such period), (iv)
expenditures from Net Cash Proceeds of asset sales and transfers permitted by
Section 6.05 which are not required to be applied in accordance with Section
2.12, (v) expenditures from Net Cash Proceeds from the sale or issuance by the
Parent of its equity securities after the Closing Date which are not required to
be applied in accordance with Section 2.12, (vi) expenditures from the Net Cash
Proceeds of Indebtedness incurred under Section 6.01 which are not required to
be applied in accordance with Section 2.12, (vii) expenditures from proceeds
constituting dividends or distributions paid by any Joint Venture to the
Borrower and its Subsidiaries and (viii) expenditures from the portion of Excess
Cash Flow which the Borrower is permitted to retain.
"Capital Lease Obligations" of any Person shall mean the obligations
of such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Cash Interest Expense" shall mean, for any period, the gross cash
interest expense of the Parent and its Subsidiaries for such period, excluding
any fees (other than the Commitment Fee) and expenses payable or amortized
during such period by the Parent and the Borrower in connection with the
Transactions, less gross cash interest income of the Parent and its subsidiaries
for such period and excluding the effects of (i) the amortization of debt
discount, (ii) deferred financing fees payable in connection with the
Transaction and (iii) interest expense on deferred compensation arrangements, in
each case determined on a consolidated basis in accordance with GAAP; provided
that for purposes of calculating Cash Interest Expense as of the last day of
each of the fiscal quarters ending on June 29, 1996, September 28, 1996 and
December 28, 1996, Cash Interest Expense shall be determined by multiplying Cash
Interest Expense for the period commencing on the Closing Date and ending as of
the end of such fiscal quarter by (i) 4, in the case of the fiscal quarter
ending June 29, 1996, (ii) 2, in the case of the fiscal quarter ending September
28, 1996 and (iii) 4/3, in the case of the fiscal quarter ending December 28,
1996.
<PAGE>
6
"Casualty" shall have the meaning assigned to such term in Section
9.16.
"Certificate of Designation" shall mean the Certificate of
Designation of the Parent.
A "Change in Control" shall be deemed to have occurred if (a) the
Parent shall cease to directly own, beneficially and of record, free and clear
of any and all Liens (other than Liens in favor of the Collateral Agent pursuant
to the Pledge Agreement), 100% of the issued and outstanding capital stock of
the Borrower, (b) prior to an initial public offering by the Parent of the
Parent Common Stock (other than a public offering pursuant to a registration
statement on Form S-8), Designated Persons or a combination of Designated
Persons shall cease to have, directly or indirectly, in the aggregate at least
51% of the voting power of the voting stock of the Parent, (c) after an initial
public offering by the Parent of the Parent Common Stock (other than a public
offering pursuant to a registration statement on Form S- 8), (A) any Person or
group (within the meaning of Rule 13d-5 under the Securities Exchange Act of
1934 as in effect from time to time) shall 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 Parent on a fully-diluted basis
after giving effect to the conversion and exercise of all outstanding warrants,
options and other securities of the Parent (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 Parent, on fully-diluted basis, then
beneficially owned by Designated Persons, (d) there occurs a sale, lease or
transfer of all or substantially all of the assets of the Borrower to any Person
or group, (e) during any period of two consecutive calendar years, individuals
who at the beginning of such period constituted the Board of Directors of the
Borrower (together with any new directors whose election by the Board of
Directors of the Borrower or whose nomination for election by the shareholders
of the Borrower, 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
Borrower, as the case may be, then in office, (f) a "Change of Control" (however
denominated) under any other Indebtedness of the Parent or its Subsidiaries
shall occur, or (g) after an initial public offering by the Parent of the Parent
Common Stock (other than a public offering pursuant to a registration statement
on Form S-8), Vestar Equity shall cease to own or control, directly or
indirectly, at least 20% of the voting power of the voting stock of the Parent.
"Closing Date" shall mean April 17, 1996.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall mean all the "Collateral" as defined in any
Security Document and shall also include the Mortgaged Properties.
<PAGE>
7
"Commitment" shall mean, with respect to any Lender, such Lender's
Revolving Credit Commitment and Term Loan Commitment and, with respect to the
Issuing Bank, its L/C Commitment.
"Commitment Fee" shall have the meaning assigned to such term in
Section 2.05.
"Commitment Reduction Amount" shall have the meaning provided in the
definition of "Commitment Reduction Event".
"Commitment Reduction Event" shall mean a Prepayment Event that (i)
occurs after the Term Loans have been repaid in full; (ii) results from a sale,
transfer or other disposition of assets of the Parent or any Subsidiary; and
(iii) results in the Net Cash Proceeds received by the Parent or any Subsidiary
therefrom, when aggregated with the Net Cash Proceeds received by the Parent or
any Subsidiary from all other such Prepayment Events occurring after the Term
Loans have been repaid in full and in the same fiscal year as such Commitment
Reduction Event and which resulted from a sale, transfer of other disposition of
assets of the Parent or any Subsidiary, exceeding an amount equal to 10% of the
book value of all of the assets of the Parent and its Subsidiaries as of the
first day of the fiscal year in which such Commitment Reduction Event occurs
(such excess amount and only that portion exceeding such 10% of the book value
of all of the assets of the Parent and its Subsidiaries as of the date of
determination therefor) shall be hereinafter referred to as the "Commitment
Reduction Amount" with respect to such Commitment Reduction Event.
"Condemnation" shall have the meaning assigned to such term in
Section 9.16.
"Condemnation Proceeds" shall have the meaning assigned to such term
in Section 9.16.
"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise, and the terms "Controlling" and "Controlled" shall have meanings
correlative thereto.
"Credit Event" shall have the meaning assigned to such term in
Section 4.01.
"CS Finance Merger" shall have the meaning given in the introduction
to this Agreement.
"Currency Protection Agreement" shall mean any foreign exchange
contract, currency swap agreement, commodity agreement or other similar
agreement or arrangement designed to protect against fluctuations of currency
values. Each Currency Protection Agreement shall be on terms (including terms
relating to the calculation of payments for early termination) reasonably
<PAGE>
8
satisfactory to the Administrative Agent with a counterparty that is either
reasonably satisfactory to the Administrative Agent or a Lender.
"Current Assets" shall mean, as of any date, the total assets
(excluding cash, cash equivalents, and, from the Joint Ventures, receivables)
that would properly be classified as current assets of the Parent and its
Subsidiaries as of such date determined on a consolidated basis in accordance
with GAAP.
"Current Liabilities" shall mean, as of any date, the total
liabilities (excluding indebtedness for borrowed money) that would properly be
classified as current liabilities of the Parent and its Subsidiaries as of such
date determined on a consolidated basis in accordance with GAAP.
"Default" shall mean any event or condition which upon notice, lapse
of time or both would constitute an Event of Default.
"Designated Person" shall mean Vestar or Vestar Equity or any of
their respective Controlled Affiliates.
"Dollars" or "$" shall mean lawful money of the United States of
America.
"Domestic Subsidiary" shall mean any Subsidiary incorporated under
the laws of the United States or any political subdivision thereof.
"EBITDA" shall mean, for any period, without duplication, the sum of
(a) Net Income for such period, (b) all Federal, state, local and foreign income
taxes deducted in determining such Net Income, (c) interest expense deducted in
determining such Net Income, (d) depreciation, amortization and other noncash
expenses or charges (including any charges resulting from the write-up of
inventory) deducted in determining such Net Income (and not already excluded
from the definition of the term "Net Income") and (e) fees and expenses in
connection with the Transaction deducted in determining EBITDA for such period.
EBITDA for the fiscal quarters ended September 30, 1995, December 30, 1995 and
March 30, 1996 shall be deemed to have been $9,600,000 for each such fiscal
quarter.
"environment" shall mean ambient air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata, the workplace or as otherwise defined in any Environmental
Law.
"Environmental Claim" shall mean any written accusation, allegation,
notice of violation, claim, demand, order, directive, cost recovery action or
other cause of action by, or on behalf of, any Governmental Authority or any
Person for damages, injunctive or equitable relief, personal injury (including
sickness, disease or death), Remedial Action costs, tangible or intangible
property damage, natural resource damages, nuisance, pollution, any adverse
effect on the environment caused by any Hazardous Material, or for fines,
penalties or restrictions, resulting from or based upon: (a) the existence, or
<PAGE>
9
the continuation of the existence, of a Release (including sudden or non-sudden,
accidental or non-accidental Releases); (b) exposure to any Hazardous Material;
(c) the presence, use, handling, transportation, storage, treatment or disposal
of any Hazardous Material; or (d) the violation or alleged violation of any
Environmental Law or Environmental Permit.
"Environmental Law" shall mean any and all applicable present and
future treaties, laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, enforceable notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, each having the force
and effect of law, relating in any way to the environment, preservation or
reclamation of natural resources, the management, Release or threatened Release
of any Hazardous Material or to health and safety matters, including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.
ss.ss. 9601 et seq. (collectively "CERCLA"), the Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of 1976 and Hazardous and
Solid Amendments of 1984, 42 U.S.C. ss.ss. 6901 et seq., the Federal Water
Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C.
ss.ss. 1251 et seq., the Clean Air Act of 1970, as amended 42 U.S.C. ss.ss. 7401
et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. ss.ss. 2601 et
seq., the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C.
ss.ss. 651 et seq., the Emergency Planning and Community Right-to-Know Act of
1986, 42 U.S.C. ss.ss. 11001 et seq., the Safe Drinking Water Act of 1974, as
amended, 42 U.S.C. ss.ss. 300(f) et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. ss.ss. 1801 et seq., and any similar or implementing state or
local law, and all amendments or regulations promulgated thereunder.
"Environmental Permit" shall mean any applicable permit, approval,
authorization, certificate, license, variance, filing or permission required by
or from any Governmental Authority pursuant to any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code, or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"Eurodollar Borrowing" shall mean a Borrowing comprised of
Eurodollar Loans.
"Eurodollar Loan" shall mean any Eurodollar Revolving Loan or
Eurodollar Term Loan.
<PAGE>
10
"Eurodollar Revolving Loan" shall mean any Revolving Loan bearing
interest at a rate determined by reference to the Adjusted LIBO Rate in
accordance with the provisions of Article II.
"Eurodollar Term Loan" shall mean any Term Loan bearing interest at
a rate determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.
"Event of Default" shall have the meaning assigned to such term in
Article VII.
"Excess Cash Flow" shall mean, for any period, the sum of EBITDA for
such period, plus any remaining carry-over amounts relating to Capital
Expenditures under Section 6.12 which are no longer permitted to be carried
forward into the next period, minus, without duplication (a) the sum of (i)
Capital Expenditures permitted for such period and without regard to any
carry-over amount from prior years or any amount permitted pursuant to clauses
(ii) and (iv) of the definition of "Capital Expenditures", (ii) increases in Net
Working Capital during such period, (iii) decreases in Long-term Reserves during
such period, (iv) all Federal, state, local and foreign income taxes added back
to Net Income to determine EBITDA for such period, (v) Cash Interest Expense for
such period, (vi) all scheduled debt amortization during such period and all
prepayments of Term Loans pursuant to Sections 2.12(a), (c) or (d) during such
period, (vii) all reductions of Revolving Credit Commitments during such period,
(viii) permitted Restricted Payments paid in cash by the Borrower or the Parent
during such period, (ix) payments received in cash in respect of a purchase
price adjustment under the Merger Agreement and (x) with respect to the fiscal
period from the Closing Date to December 28, 1996, 100% of the Payables Increase
Amount and plus (b) the sum of (i) decreases in Net Working Capital during such
period and (ii) increases in Long-term Reserves during such period. In
calculating Excess Cash Flow, the effects of fees and expenses in connection
with the Transaction shall be excluded from all determinations of Excess Cash
Flow for all purposes.
"Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the average of
the quotations for the day for such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.
"Fees" shall mean the Commitment Fees, the Administration Agents
Fees, the L/C Participation Fees and the Issuing Bank Fees.
"Financial Officer" of any corporation shall mean the chief
financial officer, principal accounting officer, treasurer or controller of such
corporation.
<PAGE>
11
"Fixed Charge Coverage Ratio" shall mean, for any period, the ratio
of (a) the difference between (i) EBITDA for such period and (ii) the sum of (A)
Capital Expenditures for such period and (B) cash income taxes paid by the
Parent and its Subsidiaries on a consolidated basis during such period to (b)
the sum of (i) Cash Interest Expense for such period and (ii) all scheduled debt
amortization during such period, provided that for purposes of calculating cash
income taxes paid by the Parent and its Subsidiaries as of the last day of the
fiscal year ended December 28, 1996, such cash taxes shall be determined by
multiplying (x) the cash income taxes payable by the Parent and its Subsidiaries
for the period commencing on the Closing Date and ending as of the end of the
fiscal year ended December 28, 1996 by (y) 4/3.
"Foreign Subsidiary" shall mean any Subsidiary other than a Domestic
Subsidiary.
"Fort Mill Merger" shall have the meaning given in the introduction
to this Agreement.
"GAAP" shall mean generally accepted accounting principles in the
United States applied on a consistent basis.
"Governmental Authority" shall mean any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or regulatory
body.
"Guarantee" of or by any Person shall mean any obligation,
contingent or otherwise, of such Person guaranteeing or having the economic
effect of guaranteeing any Indebtedness of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, and including any
obligation of such Person, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness or to
purchase (or to advance or supply funds for the purchase of) any security for
the payment of such Indebtedness, (b) to purchase or lease property, securities
or services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness or (c) to maintain working capital, equity capital
or any other financial statement condition or liquidity of the primary obligor
so as to enable the primary obligor to pay such Indebtedness; provided, however,
that the term "Guarantee" shall not include endorsements for collection or
deposit in the ordinary course of business.
"Guarantee Agreement" shall mean the Guarantee Agreement,
substantially in the form of Exhibit D, made by the Guarantors in favor of the
Collateral Agent for the benefit of the Secured Parties.
"Guarantor" shall mean the Parent and each existing and each
subsequently acquired or organized Domestic Subsidiary (other than the Joint
Ventures).
<PAGE>
12
"Hazardous Materials" shall mean all explosive or radioactive
substances or wastes, hazardous or toxic substances or wastes, pollutants,
solid, liquid or gaseous wastes, including petroleum or petroleum distillates,
friable asbestos or asbestos-containing materials, polychlorinated biphenyls
("PCBs") or PCB-containing materials or equipment, radon gas, infectious or
medical wastes regulated pursuant to any Environmental Law and all other
substances or wastes of any nature regulated pursuant to any Environmental Law.
"Holdings Guarantee" shall mean the Holdings Guarantee, dated as of
April 17, 1996 made by the Parent in respect of the Senior Notes, as amended,
modified or supplemented from time to time.
"Indebtedness" of any Person shall mean, without duplication, (a)
all obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person under conditional sale or other title retention
agreements relating to property or assets purchased by such Person, (d) all
obligations of such Person issued or assumed as the deferred purchase price of
property or services (excluding trade accounts payable and accrued obligations
incurred in the ordinary course of business), (e) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the obligations secured thereby have
been assumed, (f) all Guarantees by such Person of Indebtedness of others, (g)
all Capital Lease Obligations of such Person, (h) all obligations of such Person
in respect of interest rate protection agreements, foreign currency exchange
agreements or other interest or exchange rate hedging arrangements and (i) all
obligations of such Person as an account party in respect of letters of credit
and bankers' acceptances. The Indebtedness of any Person shall include the
Indebtedness of any partnership or joint venture in which such Person is a
general partner or member, other than to the extent that the instrument or
agreement evidencing such Indebtedness expressly limits the liability of such
Person in respect thereof pursuant to provisions and terms reasonably
satisfactory to the Administrative Agent.
"Insurance Proceeds" shall have the meaning assigned to such term in
Section 9.16.
"Intellectual Property Security Agreement" shall mean the
Intellectual Property Security Agreement, substantially in the form of Exhibit
E, between the Loan Parties and the Collateral Agent for the benefit of the
Secured Parties.
"Interest Expense Coverage Ratio" shall mean, for any period, the
ratio of (a) EBITDA for such period to (b) Cash Interest Expense for such
period.
"Interest Payment Date" shall mean, with respect to any Loan, the
last day of the Interest Period applicable to the Borrowing of which such Loan
is a part and, in the case of a Eurodollar Borrowing with an Interest Period of
more than three months' duration, each day that would have been an Interest
Payment Date had successive Interest Periods of three months' duration been
<PAGE>
13
applicable to such Borrowing, and, in addition, the date of any conversion of
such Borrowing with or to a Borrowing of a different Type.
"Interest Period" shall mean (a) as to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such Borrowing, as the case
may be, and ending on the numerically corresponding day (or, if there is no
numerically corresponding day, on the last day) in the calendar month that is 1,
2, 3 or 6 months (or, if available to all the Lenders, 9 or 12 months)
thereafter, as the Borrower may elect and (b) as to any ABR Borrowing, the
period commencing on the date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such Borrowing, as the case
may be, and ending on the earliest of (i) the next succeeding March 31, June 30,
September 30 or December 31 and (ii) the Revolving Credit Maturity Date or the
Term Loan Maturity Date, as applicable; provided, however, that if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless, in the case of a
Eurodollar Borrowing only, such next succeeding Business Day would fall in the
next calendar month, in which case such Interest Period shall end on the next
preceding Business Day. Interest shall accrue from and including the first day
of an Interest Period to but excluding the last day of such Interest Period.
"Investors" shall mean Vestar and the Management Participants.
"Issuing Bank Fees" shall have the meaning assigned to such term in
Section 2.05.
"Joint Ventures" shall mean (a) Asahi-Schwebel Co., Ltd., a Japanese
corporation, (b) CS Interglas AG, a German corporation, (c) Clark-Schwebel
Tech-Fab Company, a New York partnership, (d) Clark-Schwebel Holding
Corporation, a New York corporation, (e) any Person created which acts solely as
a direct or indirect holding company of a Joint Venture or any other interest
comprising part of a Joint Venture and whose sole assets are such interests, (f)
any subsidiary of a Joint Venture and (g) legal successors of any Joint Venture
to the extent such successor is not merged with any business of the Borrower or
its Subsidiaries that are Guarantors.
"L/C Commitment" shall mean the commitment of the Issuing Bank to
issue Letters of Credit pursuant to Section 2.20.
"L/C Disbursement" shall mean a payment or disbursement made by the
Issuing Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit at such time plus (b) the
aggregate principal amount of all L/C Disbursements that have not yet been
reimbursed at such time. The L/C Exposure of any Revolving Credit Lender at any
<PAGE>
14
time shall mean its Pro Rata Percentage of the aggregate L/C Exposure at such
time.
"L/C Participation Fee" shall have the meaning assigned to such term
in Section 2.05.
"Letter of Credit" shall mean any letter of credit issued pursuant
to Section 2.20.
"Leverage Ratio" shall mean, as of any date, the ratio of (a) the
sum of (i) the aggregate principal amount of Loans and the Senior Notes
outstanding as of such date, and (ii) without duplication, the aggregate
principal amount of all other indebtedness for borrowed money of, and letters of
credit issued for the account of, the Parent and its Subsidiaries outstanding as
of such date, to (b) EBITDA for the period of twelve consecutive fiscal months
ended on such date.
"LIBO Rate" shall mean the rate per annum equal to the rate at which
Chemical is offered Dollar deposits approximately equal to Chemical's portion of
the applicable Eurodollar Borrowing and for a period comparable to the
applicable Interest Period are offered to Chemical in immediately available
funds in the interbank eurodollar market where the eurodollar and foreign
currency and exchange operations in respect of its Eurodollar Loans are then
being conducted for delivery on the first day of such Interest Period at
approximately 10:00 a.m., New York time, on the day that is two Business Days
prior to the first day of such Interest Period.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset, (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities and (d) any
zoning or land use restrictions relating to such asset; and shall include any
agreement to give any of the foregoing.
"Loan Documents" shall mean this Agreement, the Letters of Credit,
the Guarantee Agreement and the Security Documents.
"Loan Parties" shall mean the Borrower, the Parent and the other
Guarantors.
"Loans" shall mean the Revolving Loans and the Term Loans.
"Long-term Reserves" shall mean, as of any date, the non-current
liabilities of the Parent and its Subsidiaries as of such date in respect of (a)
pension benefits, (b) post-retirement benefits other than pensions, such as
retirement health care and life insurance benefits, and (c) post-employment
<PAGE>
15
benefits, in each case determined on a consolidated basis in accordance with
GAAP.
"Management Advisory Agreement" shall mean the Agreement dated as of
April 17, 1996 among Vestar Capital, the Borrower and the Parent.
"Management Participants" shall mean the employees and directors of
the Borrower who on the Closing Date shall have purchased Parent Common Stock.
"Margin Stock" shall have the meaning assigned to such term in
Regulation U.
"Material Adverse Effect" shall mean a (a) materially adverse effect
on the business, assets, operations, properties, financial condition or
contingent liabilities of the Parent and the Subsidiaries taken as a whole, (b)
material impairment of the ability of the Parent or any Subsidiary to perform
any of its material obligations under any Loan Document to which it is or will
be a party or (c) material impairment of the rights of or benefits available to
the Lenders under any Loan Document.
"Merger Agreement" shall have the meaning given in the introduction
to this Agreement.
"Merger Documents" shall mean the collective reference to the Merger
Agreement, the Certificate of Designation and the Parent Preferred Stock.
"Mortgaged Properties" shall mean the owned real properties of the
Loan Parties specified on Schedule 1.01.
"Mortgages" shall mean the mortgages, deeds of trust, leasehold
mortgages, assignments of leases and rents, modifications and other security
documents delivered pursuant to clause (i) of Section 4.02(j) or pursuant to
Section 5.11, each substantially in the form of Exhibit F.
"Multiemployer Plan" shall mean (a) a multiemployer plan as defined
in Section 4001(a)(3) of ERISA to which the Borrower or any Subsidiary or ERISA
Affiliate is making or accruing an obligation to make contributions and (b) any
multiemployer plan (as so defined) to which the Borrower or any Subsidiary or
ERISA Affiliate has within any of the preceding five plan years made or accrued
an obligation to make contributions, but in the case of this clause (b) only if
the Borrower, a Subsidiary or an ERISA Affiliate of either would be liable under
Title IV of ERISA in respect of such plan.
"Net Cash Proceeds" shall mean, with respect to any Prepayment Event
or other event, (a) the gross proceeds in the form of cash or Permitted
Investments (including insurance proceeds, condemnation awards and payments from
time to time in respect of installment obligations, if applicable) received by
or on behalf of the Parent or any Subsidiary in respect of such Prepayment Event
<PAGE>
16
or other event less (b) the sum of (i) in the case of any Prepayment Event, the
amount, if any, of all taxes (other than income taxes) payable by the Parent or
any Subsidiary in connection with such Prepayment Event and the Borrower's
good-faith best estimate of the amount of all income taxes payable in connection
with such Prepayment Event, (ii) in the case of a Prepayment Event that is an
asset sale or disposition, the amount of any reasonable reserve established in
accordance with GAAP against any liabilities associated with the assets sold or
disposed of and retained by the Parent or any Subsidiary, provided that the
amount of any subsequent reduction of such reserve (other than in connection
with a payment in respect of any such liability) shall be deemed to be Net Cash
Proceeds of a Prepayment Event occurring on the date of such reduction, (iii) in
the case of a Prepayment Event that is an asset sale or disposition, the amount
of Indebtedness secured by the asset which is the subject of such sale or
disposition to the extent such Indebtedness is required to be repaid in
connection therewith, (iv) in the case of a Prepayment Event that is an asset
sale or disposition, the amount of costs incurred or reasonably expected to be
incurred as a result of related discontinuing operations and (v) reasonable and
customary fees, commissions and expenses and other costs paid or payable by the
Parent or any Subsidiary in connection with such Prepayment Event or other
event, in each case only to the extent not already deducted in arriving at the
amount referred to in clause (a) above.
"Net Income" shall mean, for any period, the aggregate net income
(or net deficit) from continuing operations (before any dividends) of the Parent
and its Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP, which shall be equal to gross revenues for the Parent and
its Subsidiaries determined on a consolidated basis during such period less the
aggregate for the Parent and its Subsidiaries determined on a consolidated basis
during such period of, without duplication, (a) cost of goods sold, (b) interest
expense, (c) operating expenses, (d) selling, general and administrative
expenses, (e) taxes, (f) depreciation, depletion and amortization of properties
and (g) any other items that are treated as expense under GAAP, all computed in
accordance with GAAP; provided, however that the term "Net Income" shall exclude
(i) extraordinary gains and losses from the sale of assets other than in the
ordinary course of business (including dispositions of obsolete fixed assets),
(ii) other noncash income not otherwise excluded from the definition of the term
"Net Income" and any charge resulting from the write-up after the Closing Date
in the value of any asset and (iii) distributions received from, and the
financial results of, Joint Ventures.
"Net Working Capital" shall mean, as of any date, Current Assets as
of such date less Current Liabilities as of such date.
"Obligations" shall mean all obligations defined as "Obligations" in
the Guarantee Agreement and the Security Documents.
"Offering Memorandum" shall mean the Offering Memorandum dated April
1996 relating to the Senior Notes.
"Parent" shall have the meaning given in the introduction to this
Agreement.
<PAGE>
17
"Parent Common Stock" shall mean the common stock, par value $.01
per share, of the Parent.
"Parent Preferred Stock" shall mean the 12.5% Holdings Participating
Preferred Stock, par value $.01 per share, of the Parent.
"Payables Increase Amount" shall have the meaning assigned such term
in Section 2.12(c).
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred
to and defined in ERISA.
"Perfection Certificate" shall mean the Perfection Certificate
substantially in the form of Annex 2 to the Security Agreement.
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in
each case maturing within one year from the date of acquisition thereof;
(b) without limiting the provisions of clause (d) below, investments
in commercial paper maturing within 270 days from the date of acquisition
thereof and having, at such date of acquisition, the highest credit rating
obtainable from Standard & Poor's Ratings Group or from Moody's Investors
Service, Inc.;
(c) investments in certificates of deposit, bankers' acceptances and
time deposits (including eurodollar time deposits) maturing within one
year from the date of acquisition thereof issued or guaranteed by or
placed with, and money market deposit accounts issued or offered by, (i)
any domestic office of the Administrative Agent or (ii) any domestic
office of any other commercial bank organized under the laws of the United
States of America or any State thereof, or any Lender that is a commercial
bank, that has a combined capital and surplus and undivided profits of not
less than $100,000,000 and that is rated (or the senior debt securities of
the holding company of such commercial bank are rated) A or better by
Standard & Poor's Ratings Group or A2 or better by Moody's Investors
Service, Inc., or carrying an equivalent rating by another nationally
recognized rating agency if neither of the two named rating agencies shall
rate such commercial bank (or the holding company of such commercial
bank);
(d) investments in commercial paper and variable or fixed rate notes
maturing within one year from the date of acquisition thereof and issued
by (i) the holding company of the Administrative Agent or (ii) the holding
company of any other commercial bank of recognized standing organized
under the laws of the United States of America or any state thereof, or
any Lender that is a commercial bank, that has (A) a combined capital and
<PAGE>
18
surplus in excess of $100,000,000 and (B) commercial paper rated at least
A-1 or the equivalent thereof by Standard & Poor's Ratings Group or at
least P-1 or the equivalent thereof by Moody's Investors Service, Inc., or
carrying an equivalent rating by another nationally recognized rating
agency if neither of the two named rating agencies rate such holding
company;
(e) repurchase agreements having a term of seven days or fewer with
(i) any domestic office of the Administrative Agent or (ii) any domestic
office of any other commercial bank of recognized standing organized under
the laws of the United States of America or any state thereof, or any
Lender that is a commercial bank, that has a combined capital and surplus
and undivided profits of not less than $100,000,000 and that is rated (or
the senior debt securities of the holding company of such commercial bank
are rated) A or better by Standard & Poor's Ratings Group or A2 or better
by Moody's Investors Service, Inc. or carrying an equivalent rating by
another nationally recognized rating agency if neither of the two named
rating agencies shall rate such commercial bank (or the holding company of
such commercial bank), and relating to marketable direct obligations
issued or unconditionally guaranteed by the United States but only if the
securities collateralizing such repurchase agreements are delivered to or
to the order of the Collateral Agent; and
(f) investments in money market funds substantially all of the
assets of which are comprised of securities of the type described in
paragraphs (a)-(e) above.
"Person" shall mean any natural person, corporation, business trust,
joint venture, association, company, limited liability company, partnership or
Governmental Authority.
"Plan" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code that is maintained [by the Borrower, any Subsidiary or any ERISA
Affiliate] for current or former employees, or any beneficiary thereof, of the
Borrower, any Subsidiary or any ERISA Affiliate.
"Pledge Agreement" shall mean the Pledge Agreement, substantially in
the form of Exhibit G, among, the Parent, the Borrower, the Subsidiaries party
thereto and the Collateral Agent for the benefit of the Secured Parties.
"Post-Closing Merger" shall have the meaning given in the
introduction to this Agreement.
"Prepayment Account" shall have the meaning assigned to such term in
Section 2.12.
"Prepayment Event" shall mean (a) any sale, transfer or other
disposition of any business units, assets or other properties of the Parent or
any Subsidiary (including dispositions in the nature of casualties (to the
extent covered by insurance) or condemnations (including any Casualty or
Condemnation in respect of any Mortgaged Property, as contemplated by Section
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19
9.16)), (b) the issuance or incurrence by the Parent or any Subsidiary of any
Indebtedness (excluding any Indebtedness incurred in accordance with Section
6.01 as in effect on the date hereof), or the issuance or sale by the Parent or
any Subsidiary of any debt securities or any obligations convertible into or
exchangeable for, or giving any Person or entity any right, option or warrant to
acquire from the Parent or any Subsidiary any Indebtedness or any such debt
securities or any such convertible or exchangeable obligations (excluding
Indebtedness permitted under Section 6.01 as in effect on the date hereof) or
(c) the issuance or sale by the Parent or any Subsidiary of any equity
securities or any obligations convertible into or exchangeable for, or giving
any Person any right, option or warrant to acquire from the Parent or any
Subsidiary, any equity securities or any such convertible or exchangeable
obligations. Notwithstanding the foregoing, the term "Prepayment Event" shall
not include:
(i) sales, transfers and other dispositions of used or surplus
equipment, vehicles and other assets in the ordinary course of business
permitted by Section 6.05(b), except to the extent the proceeds thereof
are in excess of $3,000,000 in the aggregate in any fiscal year; provided,
however, that to the extent that the Borrower shall have reinvested on the
date of such Prepayment Event (or certified to the Administrative Agent
that it intends to reinvest within 360 days of such Prepayment Event) any
of such excess proceeds in equipment, vehicles or other assets used in the
principal lines of business of the Borrower, the resultant Prepayment
Event shall be reduced by the amount so reinvested or to be reinvested;
(ii) sales of inventory in the ordinary course of business and
sales of Permitted Investments;
(iii) the receipt of insurance or condemnation proceeds (other
than Condemnation Proceeds and Insurance Proceeds in respect of Mortgaged
Properties), except to the extent in excess of $3,000,000 in the aggregate
in any fiscal year; provided, however, that to the extent that the
Borrower shall have reinvested on the date of such Prepayment Event (or
certified to the Administrative Agent that it intends to reinvest within
360 days of such Prepayment Event) any of such excess proceeds in
equipment, vehicles or other assets used in the Borrower's principal lines
of business, the resultant Prepayment Event shall be reduced by the amount
so reinvested or to be reinvested;
(iv) the receipt of Condemnation Proceeds and Insurance Proceeds
in respect of Mortgaged Properties to the extent that (A) such
Condemnation Proceeds or Insurance Proceeds are used to restore, repair or
locate, acquire and replace the related Mortgaged Property in accordance
with Section 9.16 or (B) to the extent permitted by Section 9.16, such
Condemnation Proceeds or Insurance Proceeds are reinvested in equipment,
vehicles or other assets used in the Borrower's principal lines of
business within 360 days after the receipt thereof;
(v) the Transaction;
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20
(vi) the proceeds of Parent Common Stock (or warrants or options
to acquire Parent Common Stock) issued by the Parent to management of any
Loan Party in connection with permitted employee compensation and
incentive arrangements;
(vii) the receipt of cash or Permitted Investments, dividends or
other distributions from any Joint Venture;
(viii) the receipt of proceeds from the issuance of Parent Common
Stock (or any other equity securities of Parent) by the Parent in a
registered initial public offering thereof, to the extent that the Term
Loans (and accrued interest thereon) have been paid in full or are paid in
full with a portion of such proceeds;
(ix) the receipt of proceeds from the issuance of capital stock
(or options or warrants therefor) by the Parent in a transaction prior to
the initial registered public offering of the Parent Common Stock,
provided, that the Leverage Ratio (determined on a pro forma basis after
giving effect to such issuance and the application of the proceeds
thereof) as of the end of the most recent fiscal quarter is less than 3.0
to 1.0;
(x) transactions permitted by paragraphs (c), (e), (f), (k) and
(m) of Section 6.05;
(xi) the receipt of proceeds from the issuance of capital stock
(or options or warrants therefor) by the Parent in a transaction prior to
the initial registered public offering of the Parent Common Stock,
provided that such proceeds are advanced, loaned, contributed or otherwise
invested in a Joint Venture; and
(xii) the receipt of proceeds from the issuance of capital stock
(or options or warrants therefor) by the Borrower or any subsidiary of the
Borrower to the Parent.
"Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by Chemical as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective on the date such change is publicly announced as being effective.
"Pro Rata Percentage" of any Revolving Credit Lender at any time
shall mean the percentage of the Total Revolving Credit Commitment represented
by such Lender's Revolving Credit Commitment.
"Properties" shall have the meaning assigned to such term in Section
3.17.
"Purchaser" shall have the meaning given in the introduction to this
Agreement.
"Rate Protection Agreements" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or
similar agreement entered into by the Borrower to provide protection to the
Borrower and the Subsidiaries against fluctuations in interest rates. Each Rate
Protection Agreement shall be on terms (including terms relating to the
calculation of payments for early termination) reasonably satisfactory to the
Administrative Agent with a counterparty that is either reasonably satisfactory
<PAGE>
21
to the Administrative Agent or a Lender.
"Register" shall have the meaning assigned to such term in Section
9.04(d).
"Regulation G" shall mean Regulation G of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Release" shall mean any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing or depositing, or threat thereof, of any Hazardous Material in, into,
onto or through the environment.
"Remedial Action" shall mean (a) "remedial action" as such term is
defined in CERCLA, 42 U.S.C. Section 9601(24), and (b) all other actions
required by any Governmental Authority or voluntarily undertaken to (i) clean
up, remove, treat, abate or in any other way address any Hazardous Material in
the environment, (ii) prevent the Release, or minimize the further Release of
any Hazardous Material so it does not migrate or endanger or threaten to
endanger public health, welfare or the environment, or (iii) perform studies and
investigations in connection with, or as a precondition to, actions described in
clauses (i) or (ii) above.
"Reportable Event" shall mean any reportable event as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event as to which the 30-day notice requirement has been
waived).
"Required Lenders" shall mean, at any time, Lenders having Loans,
L/C Exposures and unused Revolving Credit and Term Loan Commitments representing
in excess of 50% of the sum of all Loans outstanding, L/C Exposures and unused
Revolving Credit and Term Loan Commitments at such time.
"Responsible Officer" of any corporation shall mean any executive
officer or Financial Officer of such corporation and any other officer or
similar official thereof responsible for the administration of the obligations
of such corporation in respect of this Agreement.
"Restricted Payment" shall have the meaning provided in Section
6.06.
"Revolving Credit Borrowing" shall mean a Borrowing comprised of
Revolving Loans.
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22
"Revolving Credit Commitment" shall mean, with respect to each
Lender, the commitment of such Lender to make Revolving Loans hereunder as set
forth in Section 2.01(b), or in the Assignment and Acceptance pursuant to which
such Lender assumed its Revolving Credit Commitment, as applicable, as the same
may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.04.
"Revolving Credit Exposure" shall mean, with respect to any
Revolving Credit Lender at any time, the aggregate principal amount at such time
of all outstanding Revolving Loans of such Lender, plus the aggregate amount at
such time of such Lender's L/C Exposure.
"Revolving Credit Lender" shall mean a Lender with a Revolving
Credit Commitment.
"Revolving Credit Maturity Date" shall mean the sixth anniversary of
the Closing Date.
"Revolving Loans" shall mean the revolving loans made by the
Revolving Credit Lenders to the Borrower pursuant to Section 2.01(b). Each
Revolving Loan shall be a Eurodollar Revolving Loan or an ABR Revolving Loan.
"Sale and Leaseback Transaction" shall have the meaning assigned
such term in Section 6.03.
"Secured Parties" shall have the meaning assigned to such term in
the Security Agreement.
"Security Agreement" shall mean the Security Agreement,
substantially in the form of Exhibit H, among the Parent, the Borrower, the
Subsidiaries party thereto and the Collateral Agent for the benefit of the
Secured Parties.
"Security Documents" shall mean the Mortgages, the Security
Agreement, the Pledge Agreement, the Intellectual Property Security Agreement
and each of the security agreements, mortgages and other instruments and
documents executed and delivered pursuant to any of the foregoing or pursuant to
Section 5.11.
"Seller" shall have the meaning given in the introduction to this
Agreement.
"Senior Notes" shall mean the unsecured $110,000,000 of 10 1/2%
Senior Notes due April 15, 2006 issued by the Borrower pursuant to the Senior
Notes Indenture.
"Senior Notes Documents" shall mean the collective reference to the
Senior Notes, the Senior Notes Purchase Agreement, the Senior Notes Indenture
and the Holdings Guarantee.
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23
"Senior Notes Indenture" shall mean the Indenture dated as of April
17, 1996 between the Borrower and Fleet National Bank, as trustee, pursuant to
which the Senior Notes were issued.
"Senior Notes Purchase Agreement" shall mean the Note Purchase
Agreement dated as of April 12, 1996 among the Borrower, the purchasers thereto
and the Parent relating to the Senior Notes.
"Statutory Reserves" shall mean a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board and any other banking authority, domestic or foreign,
to which the Administrative Agent or any Lender (including any Funding Office
making or holding a Loan) is subject for Eurocurrency Liabilities (as defined in
Regulation D of the Board). Such reserve percentages shall include those imposed
pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute
Eurocurrency Liabilities and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to any Lender under such Regulation D. Statutory Reserves
shall be adjusted automatically on and as of the effective date of any change in
any reserve percentage.
"subsidiary" shall mean, with respect to any Person (herein referred
to as the "parent"), any corporation, partnership, company, limited liability
company, association or other business entity (a) of which securities or other
ownership interests representing more than 50% of the equity or more than 50% of
the ordinary voting power or more than 50% of the general partnership interests
are, at the time any determination is being made, owned, controlled or held, or
(b) that is, at the time any determination is made, otherwise Controlled, by the
parent or one or more subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent.
"Subsidiary" shall mean any subsidiary of the Parent (other than a
Joint Venture).
"Term Borrowing" shall mean a Borrowing comprised of Term Loans.
"Term Loan Commitment" shall mean, with respect to any Lender, the
commitment of such Lender to make Term Loans hereunder as set forth in Section
2.01(a), or in the Assignment and Acceptance pursuant to which such Lender
agreed to make its Term Loan, as the same may be (a) reduced from time to time
pursuant to Section 2.09 and (b) reduced or increased from time to time pursuant
to assignments by or to such Lender pursuant to Section 9.04.
"Term Loan Maturity Date" shall mean the sixth anniversary of the
Closing Date.
"Term Loan Repayment Amount" shall have the meaning assigned to such
term in Section 2.11(a).
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24
"Term Loan Repayment Date" shall have the meaning assigned to such
term in Section 2.11(a).
"Term Loans" shall mean the term loans made by the Lenders to the
Borrower pursuant to Section 2.01(a). Each Term Loan shall be either a
Eurodollar Term Loan or an ABR Term Loan.
"Total Revolving Credit Commitment" shall mean, at any time, the
aggregate amount of the Revolving Credit Commitments, as in effect at such time.
"Transaction" shall mean (a) the execution, delivery and performance
by each Loan Party of each of the Loan Documents and the borrowings hereunder,
(b) the execution, delivery and performance by each party thereto of each of the
Senior Notes Documents and the issuance of the Senior Notes thereunder, (c) the
execution, delivery and performance by each party thereto of each of the Merger
Documents, (d) the making of the Equity Contribution and the simultaneous
contribution of the proceeds thereof to the Company, (e) the consummation of the
Acquisition, (f) the consummation of the Fort Mill Merger, (g) the consummation
of the CS Finance Merger and (h) the consummation of the Post-Closing Merger.
"Transaction Documents" shall mean (a) the Loan Documents, (b) the
Senior Notes Documents and (c) the Merger Documents.
"Type", when used in respect of any Loan or Borrowing, shall refer
to the Rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined. For purposes hereof, the term "Rate"
shall include the Adjusted LIBO Rate and the Alternate Base Rate.
"Vestar" shall have the meaning giving in the introduction to this
Agreement.
"Vestar Capital" shall mean Vestar Capital Partners, a New York
general partnership.
"Vestar Equity" shall mean Vestar Equity Partners, L.P., a Delaware
limited partnership.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
<PAGE>
25
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, (a) any reference in this Agreement to any Loan
Document shall mean such document as amended, restated, supplemented or
otherwise modified from time to time and (b) all terms of an accounting or
financial nature shall be construed in accordance with GAAP, as in effect from
time to time; provided, however, that for purposes of determining compliance
with the covenants contained in Article VI, all accounting terms herein shall be
interpreted and all accounting determinations hereunder shall be made in
accordance with GAAP as in effect on the Closing Date and applied on a basis
consistent with the application used in the financial statements referred to in
Section 3.05. If the Borrower notifies the Administrative Agent that the
Borrower wishes to amend any covenant in Section 2.12(d) or Article VI or any
related definition to eliminate the effect of any change in GAAP occurring after
the date of this Agreement on the operation of such covenant (or if the
Administrative Agent notifies the Borrower that the Required Lenders wish to
amend Section 2.12(d) or Article VI or any related definition for such purpose),
then (i) the Borrower and the Administrative Agent shall negotiate in good faith
to agree upon an appropriate amendment to such covenant and (ii) the Borrower's
compliance with such covenant shall be determined on the basis of GAAP in effect
immediately before the relevant change in GAAP became effective until such
covenant is amended in a manner satisfactory to the Borrower and the Required
Lenders.
ARTICLE II. THE CREDITS
SECTION 2.01. Commitments. On the terms and subject to the
conditions and relying upon the representations and warranties herein set forth:
(a) each Lender having a Term Loan Commitment agrees severally and
not jointly to make Term Loans to the Borrower on the Closing Date in an
aggregate principal amount not to exceed such Lender's Term Loan
Commitment; and
(b) each Lender having a Revolving Credit Commitment agrees
severally and not jointly to make Revolving Loans to the Borrower, at any
time and from time to time on and after the Closing Date, and until the
earlier of the Revolving Credit Maturity Date and the termination of the
Revolving Credit Commitment of such Lender in accordance with the terms
hereof, in an aggregate principal amount at any time outstanding that will
not result in (i) such Lender's Revolving Credit Exposure exceeding (ii)
such Lender's Revolving Credit Commitment (exclusive of unpaid L/C
Disbursements which are simultaneously paid with the proceeds of Revolving
Credit Loans).
Within the limits set forth in clause (b) of the preceding sentence,
the Borrower may borrow, pay or prepay and reborrow Revolving Loans on and after
the Closing Date and prior to the Revolving Credit Maturity Date, subject to the
terms, conditions and limitations set forth herein. Amounts paid or prepaid in
respect of Term Loans may not be reborrowed.
SECTION 2.02. Loans. (a) Each Loan shall be made as part of a
Borrowing consisting of Loans made by the Lenders ratably in accordance with
their respective Term Loan Commitments or Revolving Credit Commitments, as
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26
applicable; provided, however, that the failure of any Lender to make any Loan
shall not in itself relieve any other Lender of its obligation to lend hereunder
(it being understood, however, that no Lender shall be responsible for the
failure of any other Lender to make any Loan required to be made by such other
Lender). Except as provided in Section 2.02(f), the Loans comprising each
Borrowing shall be in an aggregate principal amount that is (i) an integral
multiple of $250,000 and, in the case of Eurodollar Borrowings, not less than
$1,000,000 or (ii) equal to the remaining available balance of the applicable
Commitments.
(b) Subject to Sections 2.08 and 2.14, each Borrowing shall be
comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request
pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan
by causing any domestic or foreign branch or Affiliate of such Lender to make
such Loan; provided, however, that any exercise of such option shall not (i)
affect the obligation of the Borrower to repay such Loan in accordance with the
terms of this Agreement or (ii) impose any additional obligation on the part of
the Borrower pursuant to Section 2.13 or 2.19. Borrowings of more than one Type
may be outstanding at the same time; provided, however, that the Borrower shall
not be entitled to request any Borrowing that, if made, would result in more
than eight Eurodollar Borrowings outstanding hereunder at any one time. For
purposes of the foregoing, Borrowings having different Interest Periods,
regardless of whether they commence on the same date, shall be considered
separate Borrowings.
(c) Each Lender shall make each Loan to be made by it hereunder on
the proposed date thereof by wire transfer to such account in New York City as
the Administrative Agent may designate in federal funds not later than 12:00
(noon), New York City time, and the Administrative Agent shall by 3:00 p.m., New
York City time, credit the amounts so received to the general deposit account
with the Administrative Agent of the Borrower (or, if agreed in advance by the
Borrower and the Administrative Agent, the Administrative Agent shall transfer,
at Borrower's expense, such amounts so received to other accounts designated by
the Borrower) or, if a Borrowing shall not occur on such date because any
condition precedent herein specified shall not have been met, return the amounts
so received to the respective Lenders on such date.
(d) Unless the Administrative Agent shall have received notice from
a Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's portion of such Borrowing,
the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the date of such Borrowing in
accordance with paragraph (c) above and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If the Administrative Agent shall have so made funds
available then, to the extent that such Lender shall not have made such portion
available to the Administrative Agent, such Lender severally agrees to repay to
the Administrative Agent forthwith on demand such corresponding amount together
with interest thereon. If such Lender does not make the corresponding amount
available to the Administrative Agent, the Borrower shall repay such
corresponding amount to the Administrative Agent on demand together with
interest thereon. Interest shall be payable for each day from the date such
amount is made available to the Borrower until the date such amount is repaid to
the Administrative Agent at (i) in the case of the Borrower, the interest rate
<PAGE>
27
applicable at the time to the Loans comprising such Borrowing and (ii) in the
case of such Lender, a rate determined by the Administrative Agent to represent
its cost of overnight or short-term funds (which determination shall be
conclusive absent manifest error). If such Lender shall repay to the
Administrative Agent such corresponding principal amount, such principal amount
shall constitute such Lender's Loan as part of such Borrowing for purposes of
this Agreement.
(e) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request any Revolving Credit Borrowing if the
Interest Period requested with respect thereto would end after the Revolving
Credit Maturity Date.
(f) If the Issuing Bank shall not have received from the Borrower
the payment required to be made by Section 2.20(e) within one Business Day after
the Borrower shall have received notice from the Issuing Bank that payment of a
draft presented under any Letter of Credit has been made, or, if the Borrower
shall have received such notice later than 2:00 p.m., New York City time, on any
Business Day, not later than 10:00 a.m., New York City time, on the second
immediately following Business Day, as provided in Section 2.20(e), the Issuing
Bank will promptly notify the Administrative Agent of the L/C Disbursement and
the Administrative Agent will promptly notify each Revolving Credit Lender of
such L/C Disbursement and its Pro Rata Percentage thereof. Each Revolving Credit
Lender shall pay by wire transfer of immediately available funds to the
Administrative Agent not later than 2:00 p.m., New York City time, on the date
of notification by the Administrative Agent (or, if such Revolving Credit Lender
shall have received such notice later than 12:00 (noon), New York City time, on
any day, not later than 10:00 a.m., New York City time, on the immediately
following Business Day), an amount equal to such Lender's Pro Rata Percentage of
such L/C Disbursement (it being understood that such amount shall be deemed to
constitute an ABR Revolving Loan of such Lender and such payment shall be deemed
to have reduced the L/C Exposure), and the Administrative Agent will promptly
pay to the Issuing Bank amounts so received by it from the Revolving Credit
Lenders. The Administrative Agent will promptly pay to the Issuing Bank any
amounts received by it from the Borrower pursuant to Section 2.20(e) prior to
the time that any Revolving Credit Lender makes any payment pursuant to this
paragraph (f); any such amounts received by the Administrative Agent thereafter
will be remitted on the day of receipt by the Administrative Agent to the
Revolving Credit Lenders that shall have made such payments and to the Issuing
Bank, as their interests may appear. If any Revolving Credit Lender shall not
have made its Pro Rata Percentage of such L/C Disbursement available to the
Administrative Agent as provided above, such Lender agrees to pay interest on
such amount, for each day from and including the date such amount is required to
be paid in accordance with this paragraph (f) to but excluding the date such
amount is paid, to the Administrative Agent at, for the first such day, the
Federal Funds Effective Rate, and for each day thereafter, the Alternate Base
Rate.
SECTION 2.03. Borrowing Procedure. In order to request a Borrowing
(other than a deemed Borrowing of ABR Loans pursuant to Section 2.02(f) or
Section 2.08), the Borrower shall give telephonic notice to the Administrative
Agent (promptly confirmed by delivery of a duly completed Borrowing Request) (a)
in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City
time, three Business Days before a proposed Borrowing, and (b) in the case of an
ABR Borrowing, not later than 11:00 a.m., New York City time, on the Business
<PAGE>
28
Day of such proposed Borrowing; provided, however, that Borrowing Requests with
respect to Borrowings to be made on the Closing Date may, at the discretion of
the Administrative Agent, be delivered later than the times specified above.
Each Borrowing Request shall be irrevocable, signed by or on behalf of the
Borrower and shall specify the following information: (a) whether the Borrowing
then being requested is to be a Term Borrowing or a Revolving Credit Borrowing,
and whether such Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing;
(b) the date of such Borrowing (which shall be a Business Day) and the amount
thereof; and (c) if such Borrowing is to be a Eurodollar Borrowing, the Interest
Period with respect thereto; provided, however, that, notwithstanding any
contrary specification in any Borrowing Request, each requested Borrowing shall
comply with the requirements set forth in Section 2.02. If no election as to the
Type of Borrowing is specified in any such notice, then the requested Borrowing
shall be an ABR Borrowing. If no Interest Period with respect to any Eurodollar
Borrowing is specified in any such notice, then the Borrower shall be deemed to
have selected an Interest Period of one month's duration. If the Borrower shall
not have delivered a Borrowing Request in accordance with this Section 2.03
prior to the end of the Interest Period then in effect for any Revolving Credit
Borrowing and requesting that such Borrowing be refinanced, then the Borrower
shall (unless the Borrower has notified the Administrative Agent, not less than
one Business Day prior to the end of such Interest Period, that such Borrowing
is to be repaid at the end of such Interest Period) be deemed to have delivered
a Borrowing Request requesting that such Borrowing be refinanced with a new
Borrowing of equivalent amount, and such new Borrowing shall be an ABR
Borrowing. The Administrative Agent will promptly advise the applicable Lenders
of any notice given pursuant to this Section 2.03 (and the contents thereof) and
of each Lender's portion of the requested Borrowing.
SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The Borrower
hereby unconditionally promises to pay to the Administrative Agent for the
account of each Lender (i) the then-unpaid principal amount of each Revolving
Loan of such Lender on the Revolving Credit Maturity Date (or such earlier date
on which the Revolving Loans shall become due and payable pursuant to Article
VII) and (ii) the principal amount of the Term Loans of such Lender as provided
in Section 2.11 (or the then-unpaid principal amount of such Term Loans on the
date that the Term Loans shall become due and payable pursuant to Article VII).
Each Loan shall bear interest from and including the date of the first Borrowing
hereunder on the outstanding principal balance thereof as set forth in Section
2.06.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender from time to time, including
the amounts of principal and interest payable and paid such Lender from time to
time under this Agreement.
(c) The Administrative Agent shall maintain accounts in which it
will record (i) the amount of each Loan made hereunder, the Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder from the Borrower and each Lender's share thereof.
<PAGE>
29
(d) The entries made in the accounts maintained pursuant to
paragraphs (b) and (c) above shall, to the extent permitted by applicable law,
be prima facie evidence of the existence and amounts of the obligations of the
Borrower therein recorded; provided, however, that the failure of any Lender or
the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligations of the Borrower to repay (with the
applicable interest) the Loans in accordance with the terms of this Agreement.
(e) Notwithstanding any other provision of this Agreement, in the
event any Lender shall request a note payable to such Lender and its registered
assigns, the Borrower will issue such a note and the interests represented by
such note shall at all times (including after any assignment of all or part of
such interests pursuant to Section 9.04) be represented by one or more notes
payable to the payee named therein or its registered assigns.
SECTION 2.05. Fees. (a) The Borrower agrees to pay to each Lender,
through the Administrative Agent, on the Closing Date, on the last day of March,
June, September and December in each year, commencing June 30, 1996, and on each
date on which any Commitment of such Lender shall expire or be terminated as
provided herein, a commitment fee (a "Commitment Fee") equal to the Applicable
Percentage per annum (as set forth under the heading "Fee Percentage" in the
table within the definition of the term "Applicable Percentage") in effect from
time to time on the average daily unused amount of the Term Loan Commitment and
the Revolving Credit Commitment of such Lender during the preceding quarter (or
other period commencing with the later of the Closing Date and the date of
acceptance by the Borrower of the Commitment of such Lender or ending with the
Revolving Credit Maturity Date or the date on which the Revolving Credit
Commitment of such Lender shall expire or be terminated). All Commitment Fees
shall be computed on the basis of the actual number of days elapsed in a year of
360 days. The Commitment Fee due to each Lender shall commence to accrue on the
date of acceptance by the Borrower of the Commitment of such Lender and shall
cease to accrue on the later of the Closing Date and the date on which the
Commitments of such Lender shall expire or be terminated as provided herein. For
the purpose of calculating Commitment Fees in respect of Revolving Credit
Commitments, any portion of the Revolving Credit Commitments unavailable due to
outstanding Letters of Credit shall be deemed to be used amounts.
(b) The Borrower agrees to pay to the Administrative Agent, for its
own account, on the Closing Date, the administration fees payable to the
Administrative Agent (the "Administrative Agent Fees").
(c) The Borrower agrees to pay to the Administrative Agent, for
payment to the other Lenders (for the extent applicable), on the Closing Date
the fees required to be paid, and the Agent shall pay to each Lender on the
Closing Date that portion of such fees as shall be owing to such Lender.
(d) The Borrower agrees to pay (i) to each Revolving Credit Lender,
through the Administrative Agent, on the last day of March, June, September and
December of each year, commencing June 30, 1996, and on the date on which the
Revolving Credit Commitment of such Lender shall be terminated as provided
herein, a fee (an "L/C Participation Fee") calculated on such Lender's Pro Rata
Percentage of the average daily aggregate L/C Exposure (excluding the portion
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30
thereof attributable to unreimbursed L/C Disbursements) during the preceding
quarter (or shorter period commencing with the Closing Date or ending with the
Revolving Credit Maturity Date or the date on which all Letters of Credit have
been canceled or have expired and Revolving Credit Commitment of such Lender
shall have been terminated) at the Applicable Percentage, less the Fronting Fee
payable to the Issuing Bank pursuant to clause (ii) below, for purposes of
determining the interest rate on Revolving Credit Borrowings comprised of
Eurodollar Loans pursuant to Section 2.06, and (ii) to the Issuing Bank on the
last day of March, June, September and December of each year, a fronting fee (a
"Fronting Fee") of 0.125% per annum on the average daily aggregate L/C Exposure
(excluding the portion thereof attributable to unreimbursed L/C Disbursements)
during the preceding quarter (or shorter period commencing with the Closing Date
or ending with the Revolving Credit Maturity Date or the date on which all
Letters of Credit have been canceled or have expired and the Revolving Credit
Commitments of all Lenders shall have been terminated) and, with respect to each
Letter of Credit, any other fees agreed upon by the Borrower and the Issuing
Bank plus, in connection with the issuance, amendment or transfer of any Letter
of Credit or any L/C Disbursement, the Issuing Bank's customary documentary and
processing charges (collectively, the "Issuing Bank Fees"). All L/C
Participation Fees and Issuing Bank Fees shall be computed on the basis of the
actual number of days elapsed in a year of 360 days.
(e) All Fees shall be paid on the dates due, in immediately
available funds, to the Administrative Agent for distribution, if and as
appropriate, among the Lenders, except that the Issuing Bank Fees shall be paid
directly to the Issuing Bank. Once paid, none of the Fees shall be refundable
under any circumstances (other than corrections of error in payment).
SECTION 2.06. Interest on Loans. (a) Subject to the provisions of
Section 2.07, the unpaid principal amount of Loans comprising each ABR Borrowing
shall bear interest (computed on the basis of the actual number of days elapsed
over a year of 365 or 366 days, as the case may be, when the Alternate Base Rate
is determined by reference to the Prime Rate and over a year of 360 days at all
other times) at a rate per annum equal to the Alternate Base Rate plus the
Applicable Percentage in effect from time to time.
(b) Subject to the provisions of Section 2.07, the unpaid principal
amount of Loans comprising each Eurodollar Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over a year of 360
days) at a rate per annum equal to the Adjusted LIBO Rate for the Interest
Period in effect for such Borrowing plus the Applicable Percentage in effect
from time to time.
(c) Interest on each Loan shall be payable on the Interest Payment
Dates applicable to such Loan except as otherwise provided in this Agreement.
The applicable Alternate Base Rate or Adjusted LIBO Rate for each Interest
Period or day within an Interest Period, as the case may be, shall be determined
by the Administrative Agent, and such determination shall be conclusive absent
manifest error.
SECTION 2.07. Default Interest. If the Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount becoming
due hereunder, by acceleration or otherwise, or under any other Loan Document,
the Borrower shall on demand from time to time pay interest, to the extent
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31
permitted by law, on such defaulted amount to but excluding the date of actual
payment (after as well as before judgment) (a) in the case of overdue principal,
at the rate otherwise applicable to such Loan pursuant to Section 2.06 plus
2.00% per annum and (b) in all other cases, at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of 365 or 366 days, as
the case may be, when determined by reference to the Prime Rate and over a year
of 360 days at all other times) equal to the sum of the Alternate Base Rate plus
the Applicable Margin therefor plus 2.00%.
SECTION 2.08. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent shall have
determined that the rates at which such Dollar deposits are being offered will
not adequately and fairly reflect the cost to Lenders that would hold more than
50% of the Loans comprising such Borrowing of making or maintaining such Loans,
or that reasonable means do not exist for ascertaining the Adjusted LIBO Rate on
the basis provided in the definition thereof, the Administrative Agent shall, as
soon as practicable thereafter, give written notice of such determination to the
Borrower and the Lenders. In the event of any such determination, until the
Administrative Agent shall have advised the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, any request by the
Borrower for a Eurodollar Borrowing pursuant to Section 2.03 or 2.10 shall be
deemed to be a request for an ABR Borrowing. Each determination by the
Administrative Agent hereunder shall be conclusive absent manifest error.
SECTION 2.09. Termination and Reduction of Commitments. (a) The Term
Loan Commitments shall automatically terminate at 5:00 p.m., New York City time,
on the Closing Date. The Revolving Credit Commitments and the L/C Commitment
shall automatically terminate on the Revolving Credit Maturity Date.
Notwithstanding the foregoing, all the Commitments shall automatically terminate
at 5:00 p.m., New York City time, on May 30, 1996, if the initial Borrowing
shall not have occurred by such time.
(b) Upon at least two Business Days' prior irrevocable written
notice to the Administrative Agent, the Borrower may at any time in whole
permanently terminate, or from time to time in part permanently reduce, the
Commitments; provided, however, that (i) each partial reduction of the
Commitments shall be in an integral multiple of $250,000 and in a minimum
principal amount of $1,000,000 and (ii) the Total Revolving Credit Commitment
shall not be reduced to an amount that is less than the sum of the Aggregate
Revolving Credit Exposure at the time.
(c) On each date after the Term Loans have been repaid in full and
prior to the Revolving Credit Maturity Date that a Commitment Reduction Event
occurs, the Total Revolving Credit Commitment shall be permanently reduced by
the Commitment Reduction Amount with respect to such Commitment Reduction Event.
(d) Each reduction in the Commitments hereunder shall be made
ratably among the applicable Lenders in accordance with their respective
applicable Commitments.
(e) If the Borrower would ever be required to offer to repurchase a
portion of the Senior Notes in accordance with Section 4.8 of the Senior Notes
Indenture, without giving effect to this paragraph (e), then the Total Revolving
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32
Credit Commitment shall be reduced permanently and automatically in an amount
equal to the minimum amount necessary so that no such offer to repurchase shall
be required under Section 4.8 of the Senior Note Indenture.
SECTION 2.10. Conversion and Continuation of Borrowings. (a) The
Borrower shall have the right at any time (subject to Section 2.08) upon prior
irrevocable notice to the Administrative Agent (i) not later than 12:00 (noon),
New York City time, one Business Day prior to conversion, to convert any
Eurodollar Borrowing into an ABR Borrowing, (ii) not later than 11:00 a.m., New
York City time, three Business Days prior to conversion or continuation, to
convert any ABR Borrowing into a Eurodollar Borrowing or to continue any
Eurodollar Borrowing as a Eurodollar Borrowing for an additional Interest
Period, and (iii) not later than 11:00 a.m., New York City time, three Business
Days prior to conversion, to convert the Interest Period with respect to any
Eurodollar Borrowing to other permissible Interest Periods, subject in each case
to the following:
(A) each conversion or continuation shall be made pro rata among the
Lenders in accordance with the respective principal amounts of the Loans
comprising the converted or continued Borrowing;
(B) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, then each resulting Borrowing
shall satisfy the limitations specified in Sections 2.02(a) and 2.02(b)
regarding the principal amount and maximum number of Borrowings of the
relevant Type;
(C) each conversion shall be effected by each Lender by recording
for the account of such Lender the new Loan of such Lender resulting from
such conversion and reducing the Loan (or portion thereof) of such Lender
being converted by an equivalent principal amount; accrued interest on any
Eurodollar Loan (or portion thereof) being converted shall be paid by the
Borrower at the time of conversion;
(D) if any Eurodollar Borrowing is converted at a time other than
the end of the Interest Period applicable thereto, the Borrower shall pay,
upon demand, any amounts due to the Lenders pursuant to Section 2.15;
(E) any portion of a Borrowing maturing or required to be repaid in
less than one month may not be converted into or continued as a Eurodollar
Borrowing;
(F) any portion of a Eurodollar Borrowing that cannot be converted
into or continued as a Eurodollar Borrowing by reason of the immediately
preceding clause shall be automatically converted at the end of the
Interest Period in effect for such Borrowing into an ABR Borrowing; and
(G) no Interest Period may be selected for any Eurodollar Term
Borrowing that would end later than any Term Loan Repayment Date if, after
giving effect to such selection, the aggregate outstanding amount of (I)
the Eurodollar Term Borrowings comprised of Term Loans with Interest
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33
Periods ending on or prior to such Term Loan Repayment Date and (II) the
ABR Term Borrowings, would not be at least equal to the principal amount
of Term Borrowings to be paid on such Term Loan Repayment Date.
(b) Each notice pursuant to this Section 2.10 shall be irrevocable
and shall refer to this Agreement and specify (i) the identity and amount of the
Borrowing that the Borrower requests be converted or continued and whether such
Borrowing is a Term Borrowing or a Revolving Credit Borrowing, (ii) whether such
Borrowing is to be converted to or continued as a Eurodollar Borrowing or an ABR
Borrowing, (iii) if such notice requests a conversion, the date of such
conversion (which shall be a Business Day) and (iv) if such Borrowing is to be
converted to or continued as a Eurodollar Borrowing, the Interest Period with
respect thereto. If no Interest Period is specified in any such notice with
respect to any conversion to or continuation as a Eurodollar Borrowing, the
Borrower shall be deemed to have selected an Interest Period of one month's
duration. The Administrative Agent shall promptly advise the other Lenders of
any notice given pursuant to this Section 2.10 and of each Lender's portion of
any converted or continued Borrowing. If the Borrower shall not have given
notice in accordance with this Section 2.10 to continue any Borrowing into a
subsequent Interest Period (and shall not otherwise have given notice in
accordance with this Section 2.10 to convert such Borrowing), such Borrowing
shall, at the end of the Interest Period applicable thereto (unless repaid
pursuant to the terms hereof), automatically be continued into a new Interest
Period as an ABR Borrowing.
SECTION 2.11. Repayment of Term Borrowings. (a) The Term Borrowings
shall be payable as to principal in 24 consecutive installments payable on the
dates (each a "Term Loan Repayment Date") and in the amounts set forth below,
subject to adjustment pursuant to paragraph (b) below (the "Term Loan Repayment
Amount"):
Repayment Date Amount
-------------- ------
September 30, 1996 $ 250,000
December 31, 1996 $ 250,000
March 31, 1997 $ 250,000
June 30, 1997 $ 250,000
September 30, 1997 $ 500,000
December 31, 1997 $ 500,000
March 31, 1998 $ 500,000
June 30, 1998 $ 500,000
September 30, 1998 $ 500,000
December 31, 1998 $ 500,000
March 31, 1999 $ 500,000
June 30, 1999 $ 500,000
September 30, 1999 $ 750,000
December 31, 1999 $ 750,000
March 31, 2000 $ 750,000
June 30, 2000 $ 750,000
September 30, 2000 $ 750,000
December 31, 2000 $ 750,000
March 31, 2001 $ 750,000
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34
June 30, 2001 $ 750,000
September 30, 2001 $1,000,000
December 31, 2001 $1,000,000
March 31, 2002 $1,000,000
Term Loan Maturity Date $1,000,000
(b) Except as otherwise specifically provided herein, each
prepayment of principal of the Term Borrowings pursuant to Section 2.12 shall be
applied pro rata to reduce remaining scheduled repayments of principal due under
this Section 2.11.
(c) To the extent not previously paid, all Term Borrowings shall be
due and payable on the Term Loan Maturity Date.
(d) Each repayment of Term Borrowings pursuant to this Section 2.11
shall be subject to Section 2.15 but shall otherwise be without premium or
penalty. Each repayment of Term Borrowings pursuant to this Section 2.11 shall
be accompanied by accrued interest on the principal amount paid to but excluding
the date of payment.
SECTION 2.12. Prepayment. (a) The Borrower shall have the right at
any time and from time to time to prepay (i) any Eurodollar Borrowing, in whole
or in part, upon at least two Business Days' telephonic notice (promptly
confirmed in writing) to the Administrative Agent before 11:00 a.m., New York
City time; provided, however, that each partial prepayment shall be in an amount
that is an integral multiple of $250,000 and not less than $1,000,000; and (ii)
any ABR Borrowing, in whole or in part, upon at least one Business Day's
telephonic notice (promptly confirmed in writing) to the Administrative Agent
before 11:00 a.m., New York City time; provided, however, that each such partial
prepayment shall be in an amount not less than $1,000,000 or an integral
multiple of $250,000.
(b) In the event of any termination of the Revolving Credit
Commitments, the Borrower shall repay or prepay all its outstanding Revolving
Credit Borrowings on the date of such termination. In the event of any partial
reduction of the Revolving Credit Commitments, then (i) at or prior to the
effective date of such reduction, the Administrative Agent shall notify the
Borrower and the Revolving Credit Lenders of the Aggregate Revolving Credit
Exposure and (ii) if the Aggregate Revolving Credit Exposure would exceed the
Total Revolving Credit Commitment after giving effect to such reduction, then
the Borrower shall, on the date of such reduction, repay or prepay Revolving
Credit Borrowings in an amount sufficient to eliminate such excess.
(c) So long as any Borrowings remain outstanding, in the event and
on each occasion that a Prepayment Event occurs, the Borrower shall apply an
amount equal to 100% of the Net Cash Proceeds therefrom to prepay Loans
outstanding under this Agreement by, substantially simultaneously with (and in
any event not later than the Business Day next following) the occurrence of such
Prepayment Event, paying to the Administrative Agent an amount equal to 100% of
the Net Cash Proceeds from such Prepayment Event for application to the
prepayment of outstanding Borrowings in accordance with the following paragraphs
of this Section 2.12, provided that if the applicable Prepayment Event is the
issuance of capital stock by the Parent in a sale transaction prior to the
registered initial offering of the Parent Common Stock at a time when the
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35
Leverage Ratio (determined on a pro forma basis after giving effect to such
issuance and the application of the proceeds thereof) as of the end of the most
recent fiscal quarter is greater than or equal to 3.0 to 1.0, then only 50% of
the Net Cash Proceeds therefrom shall be applied in accordance with this Section
2.12(c). In addition, no later than three Business Days after September 30, 1996
the Term Loans shall be prepaid in an amount (not to exceed $2,500,000) equal to
20% of the amount by which the amount of payables of the Parent and its
Subsidiaries on a consolidated basis on August 31, 1996 exceed the amount of
such payables on the Closing Date (the full amount of such excess, the "Payables
Increase Amount"), it being understood and agreed that in determining such
Payables Increase Amount, all fees and expenses payable in connection with the
Transaction shall be excluded from such calculation. Such prepayment shall be
applied to the installments of the Term Loans in the direct order of maturity.
(d) So long as any Borrowings remain outstanding and the Leverage
Ratio is greater than 3.00 to 1.00 at the end of the applicable fiscal year, not
later than the earlier of (i) 110 days after the end of each fiscal year of the
Borrower, commencing with the fiscal year ending on or about December 28, 1996,
and (ii) the date on which the financial statements with respect to such fiscal
year are delivered pursuant to Section 5.04, the Borrower shall prepay Loans
outstanding under this Agreement in an aggregate principal amount equal to 50%
of Excess Cash Flow for such fiscal year (or, in the case of the fiscal year
ending December 28, 1996, for the period from and including the Closing Date to
and including December 28, 1996), by paying to the Administrative Agent such
amount for application to the prepayment of outstanding Borrowings in accordance
with the following paragraphs of this Section 2.12.
(e) Mandatory prepayments pursuant to paragraphs (c) (except as set
forth in the second and third sentences thereof) and (d) above shall be applied
to the prepayment in full of all outstanding Term Borrowings on a pro rata
basis, except as set forth in paragraph (g) below.
(f) The Borrower will deliver to the Administrative Agent at the
time of each prepayment required under paragraph (c) above, a certificate signed
by a Financial Officer of the Borrower setting forth in reasonable detail the
calculation of the amount of such prepayment. Such certificate shall also
describe in reasonable detail the facts and circumstances giving rise to the
applicable Prepayment Event and a reasonably detailed calculation of the Net
Cash Proceeds therefrom.
(g) Net Cash Proceeds and any other amounts to be applied pursuant
to paragraph (a), (b), (c) or (d) above to the prepayment of Term Borrowings
shall be applied first to reduce outstanding ABR Term Borrowings and any amounts
remaining after such application shall, at the option of the Borrower, be
applied to prepay Eurodollar Term Borrowings immediately or shall be deposited
in the Prepayment Account. Net Cash Proceeds and any other amounts to be applied
pursuant to paragraph (a) above to the prepayment of Revolving Credit Borrowings
shall be applied first to reduce outstanding ABR Revolving Credit Borrowings,
and any amounts remaining after such application shall, at the option of the
Borrower, be applied to prepay Eurodollar Revolving Credit Borrowings
immediately or shall be deposited in the Prepayment Account. The Administrative
Agent will apply any cash deposited in the Prepayment Account (i) allocable to
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36
Term Borrowings to prepay Eurodollar Term Borrowings and (ii) allocable to
Revolving Credit Borrowings to prepay Eurodollar Revolving Credit Borrowings, in
each case on the last day of their respective Interest Periods (or, at the
direction of the Borrower, on any earlier date) until all outstanding Term
Borrowings or Revolving Credit Borrowings, as the case may be, have been prepaid
or until all the allocable cash held in the Prepayment Account with respect to
such Borrowings has been exhausted. The term "Prepayment Account" shall mean an
account established by the Borrower with the Administrative Agent and over which
the Administrative Agent shall have exclusive dominion and control, including
the exclusive right of withdrawal for application in accordance with this
paragraph (g). The Administrative Agent will, at the written or telephonic
request (which shall promptly be confirmed in writing) of the Borrower, use its
reasonable efforts to invest amounts on deposit in the Prepayment Account in the
Permitted Investments specified in such request; provided, however, that (i) the
Administrative Agent shall not be required to make any investment that, in its
sole judgment, would require or cause the Administrative Agent to be in, or
would result in any, violation of any law, statute, rule or regulation, (ii) the
Administrative Agent shall have no obligation to invest amounts on deposit in
the Prepayment Account if an Event of Default shall have occurred and be
continuing and (iii) no Permitted Investment shall mature after the last day of
the applicable Interest Periods of the Eurodollar Term Borrowings or Eurodollar
Revolving Credit Borrowings to be prepaid, as the case may be. The Borrower
shall indemnify the Administrative Agent for any losses relating to the
investments so that the amount available to prepay Eurodollar Borrowings on the
last day of the applicable Interest Periods is not less than the amount that
would have been available had no investments been made pursuant thereto. Until
no Term Borrowings or Revolving Credit Borrowings, as the case may be, are
outstanding, interest or profits, if any, on such investments shall be deposited
in the Prepayment Account and reinvested as specified above. Upon prepayment or
payment in full of all Term Borrowings or Revolving Credit Borrowings, as the
case may be, any amount remaining on deposit in the Prepayment Account with
respect to such Borrowings shall be paid to the Borrower. If the maturity of the
Loans has been accelerated pursuant to Article VII, the Administrative Agent
may, in its sole discretion, apply all amounts on deposit in the Prepayment
Account to satisfy any of the Obligations. The Borrower hereby grants to the
Administrative Agent, for its benefit and the benefit of the Issuing Bank, the
other Agents and the Lenders, a security interest in the Prepayment Account.
(h) Each notice of prepayment given pursuant to Section 2.12(a)
shall specify the prepayment date and the principal amount of each Borrowing (or
portion thereof) to be prepaid, shall state the Type of each Borrowing to be
repaid, shall state whether Term Borrowings or Revolving Credit Borrowing are to
be repaid and respective principal amounts so to be repaid, shall be irrevocable
and shall commit the Borrower to prepay such Borrowing by the amount stated
therein on the date stated therein. All prepayments under this Section 2.12
shall be subject to Section 2.15 but otherwise without premium or penalty. All
prepayments under this Section 2.12 (other than pursuant to paragraph (c) or (d)
above) shall be accompanied by accrued interest on the principal amount being
prepaid to the date of payment. All prepayments under paragraph (d) above shall
be applied first to the payment of accrued interest and then to the payment of
principal.
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37
SECTION 2.13. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision of this Agreement, if after the Closing Date
any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall subject any Lender to any tax of any kind whatsoever with respect to
this Agreement or any Eurodollar Loan made by it, or change the basis of
taxation of payments to such Lender in respect thereof (except for Non-Excluded
Taxes covered by Section 2.19 and the imposition of or changes in the rate of
tax on the overall net income of such Lender), impose, modify or deem applicable
any reserve, special deposit or similar requirement against assets of, deposits
with or for the account of or credit extended by such Lender or the Issuing Bank
(except any such reserve requirement that is reflected in the Adjusted LIBO Rate
or in the Alternate Base Rate) or shall impose on such Lender or the Issuing
Bank any other condition affecting this Agreement or Eurodollar Loans made by
such Lender or any Letter of Credit or participation therein, and the result of
any of the foregoing shall be to increase the cost to such Lender or the Issuing
Bank of making or maintaining any Eurodollar Loan or increase the cost to any
Lender of issuing or maintaining any Letter of Credit or purchasing or
maintaining a participation therein, or to reduce the amount of any sum received
or receivable by such Lender or the Issuing Bank hereunder (whether of
principal, interest or otherwise) by an amount deemed by such Lender or the
Issuing Bank to be material, then the Borrower will pay to such Lender or the
Issuing Bank, as the case may be, following receipt of a certificate of such
Lender to such effect in accordance with paragraph (c) below such additional
amount or amounts as will compensate such Lender or the Issuing Bank, as the
case may be, for such additional costs incurred or reduction suffered.
(b) If any Lender or the Issuing Bank shall have determined that the
adoption after the Closing Date of any law, rule, regulation, agreement or
guideline regarding capital adequacy, or any change after the date hereof in any
such law, rule, regulation, agreement or guideline (whether such law, rule,
regulation, agreement or guideline has been adopted) or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender) or the Issuing Bank or any Lender's or the
Issuing Bank's holding company with any request or directive regarding capital
adequacy issued under any law, rule, regulation or guideline (whether or not
having the force of law) of any Governmental Authority has or would have the
effect of reducing the rate of return on such Lender's or the Issuing Bank's
capital or on the capital of such Lender's or the Issuing Bank's holding
company, if any, as a consequence of this Agreement or the Loans made by such
Lender or participations in Letters of Credit purchased by such Lender pursuant
hereto or the Letters of Credit issued by the Issuing Bank pursuant hereto to a
level below that which such Lender or the Issuing Bank or such Lender's or the
Issuing Bank's holding company could have achieved but for such applicability,
adoption, change or compliance (taking into consideration such Lender's or the
Issuing Bank's policies and the policies of such Lender's or the Issuing Bank's
holding company with respect to capital adequacy) by an amount deemed by such
Lender or the Issuing Bank to be material, then from time to time the Borrower
will pay to such Lender or the Issuing Bank, as the case may be, following
receipt of a certificate of such Lender to such effect in accordance with
paragraph (c) below, such additional amount or amounts as shall compensate such
Lender or the Issuing Bank or such Lender's or the Issuing Bank's holding
company for any such reduction suffered.
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38
(c) A certificate of any Lender or the Issuing Bank submitted in
good faith setting forth such amount or amounts as shall be necessary to
compensate such Lender or the Issuing Bank or its holding company, as
applicable, as specified in paragraph (a) or (b) above, and setting forth in
reasonable detail an explanation of the basis of requesting such compensation in
accordance with paragraph (a) or (b) above, shall be delivered to the Borrower
and shall be conclusive absent manifest error. The Borrower will pay such Lender
or the Issuing Bank the amount shown as due on any such certificate delivered by
such Lender or the Issuing Bank within 20 days after the Borrower's receipt of
the same unless the Borrower has notified such Lender or the Issuing Bank, as
the case may be, that it intends to exercise its rights under the next
succeeding sentence. The Borrower, at its expense, at any time within 180 days
after the delivery of such certificate, so long as no Event of Default shall
have occurred and be continuing, may require such Lender or the Issuing Bank, as
the case may be, to assign in accordance with the provisions of Section 9.04, at
par plus accrued interest, without recourse or warranty and pursuant to an
Assignment and Acceptance, its rights and obligations hereunder to a financial
institution specified by the Borrower that is willing to accept an assignment of
such rights and obligations on the terms hereof and that is reasonably
acceptable to the Administrative Agent; provided, however, that (i) such
assignment shall not conflict with or violate any law or regulation applicable
to or binding on such Lender or the Issuing Bank, as the case may be, (ii) the
Borrower shall have paid to the assigning Lender all amounts (other than
principal and interest) accrued and owing hereunder to it (including amounts
accrued and owing pursuant to this Section 2.13) and (iii) the assignee Lender
shall have executed and delivered an Assignment and Acceptance in accordance
with Section 9.04. Notwithstanding anything in this Section 2.13(c) to the
contrary, the Borrower shall not be entitled to require an assignment under this
Section 2.13(c) with respect to any Lender or the Issuing Bank if, prior to any
such requirement, such Lender or the Issuing Bank, as the case may be, shall
have taken any action under Section 2.13(e) so as to eliminate the continued
incurrence of the costs in respect of which payment was demanded.
(d) Failure on the part of any Lender or the Issuing Bank to demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital with respect to any period shall
not constitute a waiver of such Lender's or the Issuing Bank's right to demand
such compensation with respect to such period or any other period, except that
none of any Lender or the Issuing Bank shall be entitled to compensation under
this Section 2.13 for any costs incurred or reduction suffered with respect to
any date unless such Lender or the Issuing Bank, as applicable, shall have
notified the Borrower that it will demand compensation for such costs or
reductions under paragraph (c) above, not more than six months after the later
of (i) such date and (ii) the earlier of the date on which such Lender or the
Issuing Bank, as applicable, shall have become aware or should have become aware
of such costs or reduction.
(e) Each Lender will, at the request of the Borrower, either
designate a different lending office or transfer its Loans to an Affiliate of
such Lender if such designation or transfer, as the case may be, (i) would avoid
the need for, or minimize the amount of, any compensation to which such Lender
is entitled pursuant to this Section 2.13 and (ii) would not, in the sole
judgment of such Lender, be otherwise disadvantageous to such Lender in any
material respect.
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SECTION 2.14. Change in Legality. (a) Notwithstanding any other
provision of this Agreement, if, after the Closing Date, any change in any law
or regulation or in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof shall make it unlawful
for any Lender to make or maintain any Eurodollar Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Loan, then, by
written notice to the Borrower and to the Administrative Agent such Lender may:
(i) declare that Eurodollar Loans will not thereafter (for the
duration of such unlawfulness) be made by such Lender hereunder (or be
continued for additional Interest Periods and ABR Loans will not
thereafter (for such duration) be converted into Eurodollar Loans),
whereupon any request for a Eurodollar Borrowing (or to convert an ABR
Borrowing to a Eurodollar Borrowing or to continue a Eurodollar Borrowing
for an additional Interest Period) shall, as to such Lender only, be
deemed a request for an ABR Loan (or request to continue an ABR Loan as
such for an additional Interest Period or to convert a Eurodollar Loan
into an ABR Loan, as the case may be), unless such declaration shall be
subsequently withdrawn); and
(ii) require that all outstanding Eurodollar Loans made by it be
converted to ABR Loans, in which event all such Eurodollar Loans shall be
automatically converted to ABR Loans as of the effective date of such
notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under clause (i) or (ii)
above, all payments and prepayments of principal that would otherwise have been
applied to repay the Eurodollar Loans that would have been made by such Lender
or the converted Eurodollar Loans of such Lender shall instead be applied to
repay the ABR Loans made by such Lender in lieu of, or resulting from the
conversion of, such Eurodollar Loans.
(b) For purposes of this Section 2.14, a notice to the Borrower by
any Lender shall be effective as to each Eurodollar Loan, if lawful, on the last
day of the Interest Period currently applicable to such Eurodollar Loan; in all
other cases such notice shall be effective on the date of receipt by the
Borrower.
(c) The Borrower, at its expense, at any time within 180 days after
the delivery of such notice, so long as no Event of Default shall have occurred
and be continuing, may require such Lender to assign in accordance with the
provisions of Section 9.04, at par plus accrued interest, without recourse or
warranty and pursuant to an Assignment and Acceptance, its rights and
obligations hereunder to a financial institution specified by the Borrower that
is willing to accept an assignment of such rights and obligations on the terms
hereof and that is reasonably acceptable to the Administrative Agent; provided,
however, that (i) such assignment shall not conflict with or violate any law or
regulation applicable to or binding on such Lender, (ii) the Borrower shall have
paid to the assigning Lender all amounts (other than principal and interest)
accrued and owing hereunder to it and (iii) the assignee Lender shall have
executed and delivered an Assignment and Acceptance in accordance with Section
9.04. Notwithstanding anything in this Section 2.14(c) to the contrary, the
Borrower shall not be entitled to require an assignment under this Section
2.14(c) with respect to any Lender if, prior to any such
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40
requirement, such Lender shall have taken any action under Section 2.14(d) so as
to terminate such unlawfulness.
(d) Each Lender will, at the request of the Borrower, either
designate a different lending office or transfer its Loans to an Affiliate of
such Lender if such designation or transfer, as the case may be, (i) would
permit such Lender or Affiliate to make and maintain Eurodollar Loans and (ii)
would not, in the sole judgment of such Lender, be otherwise disadvantageous to
such Lender in any material respect.
SECTION 2.15. Indemnity. (a) The Borrower will indemnify each Lender
against any loss or expense that such Lender may sustain or incur as a
consequence of (i) any failure by the Borrower to fulfill on the date of any
proposed Eurodollar Borrowing the applicable conditions set forth in Article IV,
(ii) any failure by the Borrower to borrow or to refinance, convert or continue
any Eurodollar Loan hereunder after irrevocable notice of such borrowing,
refinancing, conversion or continuation has been given pursuant to Section 2.03
or 2.10, and (iii) any payment, prepayment or conversion of a Eurodollar Loan
required by any other provision of this Agreement or otherwise made or deemed
made on a date other than the last day of the Interest Period applicable
thereto, including, in each such case, any loss or reasonable expense sustained
or incurred or to be sustained or incurred in liquidating or redeploying
deposits from third parties acquired to effect or maintain such Loan or any part
thereof as a Eurodollar Loan. Such loss or reasonable expense shall be equal to
the sum of (A) such Lender's actual costs and expenses incurred (other than any
lost profits) in connection with, or by reason of, any of the foregoing events
and (B) an amount equal to the excess, if any, as reasonably determined by such
Lender of (I) its cost of obtaining the funds for the Loan being paid, prepaid,
converted or not borrowed, converted or continued (assumed to be the Adjusted
LIBO Rate applicable thereto) for the period from and including the date of such
payment, prepayment, conversion or failure to borrow, convert or continue to but
excluding the last day of the Interest Period for such Loan (or in the case of a
failure to borrow, convert or continue, the Interest Period for such Loan that
would have commenced on the date of such failure) over (II) the amount of
interest (as reasonably determined by such Lender) that would be realized by
such Lender in redeploying the funds so paid, prepaid, converted or not
borrowed, converted or continued for such period or Interest Period, as the case
may be. A certificate of any Lender setting forth any amount or amounts that
such Lender is entitled to receive pursuant to this Section 2.15 shall be
delivered to the Borrower and shall be conclusive absent manifest error. Without
prejudice to the survival of any other agreement contained herein, the
agreements and obligations contained in this Section 2.15 shall survive the
payment in full of the principal of and interest hereunder or any Loan Document.
(b) Failure on the part of any Lender to demand compensation for any
loss or expense as a result of the occurrence of any of the events described in
Section 2.15(a) shall not constitute a waiver of such Lender's right to demand
such compensation with respect to the occurrence of any other event described in
Section 2.15(a), except that no Lender shall be entitled to compensation under
this Section 2.15 for any loss or expense with respect to any date unless such
Lender shall have notified the Borrower that it will demand compensation for
such loss or expense under paragraph (a) above not more than six months after
the later of (i) such date and (ii) the earlier of the date on which such Lender
shall have become aware or should have become aware of such loss or expense.
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41
SECTION 2.16. Pro Rata Treatment. Except as required under Section
2.14, each Borrowing, each payment or prepayment of principal of any Borrowing,
each payment of interest on the Loans, each payment of the Commitment Fees, each
payment of the L/C Participation Fees, each reduction of the Commitments and
each refinancing of any Borrowing with, conversion of any Borrowing to or
continuation of any Borrowing as a Borrowing of any Type shall be allocated pro
rata among the Lenders in accordance with their respective applicable
Commitments (or, if such Commitments shall have expired or been terminated, in
accordance with the respective principal amounts of their applicable outstanding
Loans). Each Lender agrees that in computing such Lender's portion of any
Borrowing to be made hereunder, the Administrative Agent may, in its discretion,
round each Lender's percentage of such Borrowing, computed in accordance with
Section 2.01, to the next higher or lower whole Dollar amount.
SECTION 2.17. Sharing of Setoffs. Each Lender agrees that if it
shall, through the exercise of a right of banker's lien, setoff or counterclaim
against the Borrower, or pursuant to a secured claim under Section 506 of Title
11 of the United States Code or other security or interest arising from, or in
lieu of, such secured claim, received by such Lender under any applicable
bankruptcy, insolvency or other similar law or otherwise, or by any other means,
obtain payment (voluntary or involuntary) in respect of any Loan or Loans or L/C
Disbursement as a result of which the unpaid principal portion of its Loans and
participations in L/C Disbursements shall be proportionately less than the
unpaid principal portion of the Loans and participations in L/C Disbursements of
any other Lender, it shall be deemed simultaneously to have purchased from such
other Lender at face value, and will promptly pay to such other Lender the
purchase price for, a participation in the Loans and L/C Exposure of such other
Lender, so that the aggregate unpaid principal amount of the Loans and L/C
Exposure and participations in Loans and L/C Exposure held by each Lender shall
be in the same proportion to the aggregate unpaid principal amount of all Loans
and L/C Exposure then outstanding as the principal amount of such Lender's Loans
and L/C Exposure prior to such exercise of banker's lien, setoff or counterclaim
or other event was to the principal amount of all Loans and L/C Exposure
outstanding prior to such exercise of banker's lien, setoff or counterclaim or
other event; provided, however, that, if any such purchase or purchases or
adjustments shall be made pursuant to this Section and the payment giving rise
thereto shall thereafter be recovered, such purchase or purchases or adjustments
shall be rescinded to the extent of such recovery and the purchase price or
prices or adjustment restored without interest. The Borrower expressly consents
to the foregoing arrangements and agrees that any Lender holding a participation
in a Loan or L/C Disbursement deemed to have been so purchased may exercise any
and all rights of banker's lien, setoff or counterclaim with respect to any and
all moneys owing by the Borrower to such Lender by reason thereof as fully as if
such Lender had made a Loan directly to the Borrower in the amount of such
participation.
SECTION 2.18. Payments. (a) Except as otherwise specifically
provided herein in Sections 2.19(a) and 2.20(h), the Borrower shall make each
payment (including principal of or interest on any Borrowing or any L/C
Disbursement or any Fees or other amounts) hereunder and under any other Loan
Document not later than 12:00 (noon), New York City time, on the date when due
in immediately available funds without setoff, counterclaim, withholding or
deduction of any kind. Each such payment (other than (i) Issuing Bank Fees,
which shall be paid directly to the Issuing Bank) shall be made to the
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42
Administrative Agent at its offices at 270 Park Avenue, New York, New York. Each
such payment shall be made in Dollars.
(b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
interest or Fees, if applicable.
SECTION 2.19. Taxes. (a) Any and all payments by the Borrower
hereunder shall be made, in accordance with Section 2.18, free and clear of and
without deduction for any and all current or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding (i) taxes imposed on the net income of any Agent, the Issuing Bank or
any Lender (or any transferee or assignee thereof, including a participation
holder (any such entity being called a "Transferee")) and (ii) franchise taxes
imposed on the net income of any Agent, the Issuing Bank or any Lender (or
Transferee) by (A) the United States or (B) any jurisdiction under the laws of
which the Agents, the Issuing Bank or any such Lender (or Transferee) is
organized or has its principal office or lending office (or political
subdivision or taxing authority thereof or therein) (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Non-Excluded Taxes"). If any Non-Excluded Taxes are
required to be deducted from or in respect of any sum payable hereunder to any
Lender (or any Transferee), any Agent or the Issuing Bank, (i) the sum payable
shall be increased by the amount (an "additional amount") necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.19) such Lender (or Transferee),
such Agent or the Issuing Bank (as the case may be) shall receive an amount
equal to the sum it would have been received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower shall pay
the full amount deducted to the relevant taxing authority or other Governmental
Authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any current or future
stamp, intangible or documentary taxes or any other excise or property taxes,
charges or similar levies (including mortgage recording taxes and similar fees),
together with interest, penalties and fees, that arise from any payment made
hereunder or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement, any Assignment and Acceptance entered into at the
request of the Borrower or any other Loan Document (hereinafter referred to as
"Other Taxes").
(c) The Borrower will indemnify each Lender (or Transferee), each
Agent and the Issuing Bank for the full amount of Non-Excluded Taxes and Other
Taxes paid by such Lender (or Transferee) or Agent or the Issuing Bank, as the
case may be, and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto, whether or not such Non-Excluded
Taxes or Other Taxes were correctly or legally asserted by v
<PAGE>
43
Taxes or Other Taxes as to which it has been indemnified by the Borrower
pursuant to this Section 2.19, it shall promptly notify the Borrower of the
availability of such refund and shall, within 30 days after receipt of a request
by the Borrower, apply for such refund at the Borrower's expense. If any Lender
(or Transferee), any Agent or the Issuing Bank receives a refund in respect of
any Non-Excluded Taxes or Other Taxes as to which it has been indemnified by the
Borrower pursuant to this Section 2.19, it shall promptly notify the Borrower of
such refund and shall, within 15 days of receipt, repay such refund to the
Borrower, net of all out-of-pocket expenses of such Lender, such Agent or the
Issuing Bank and without any interest (other than the interest, if any, included
in such refund); provided, however, that the Borrower, upon the request of such
Lender (or Transferee), any Agent or the Issuing Bank, agrees to return such
refund (plus penalties, interest or other charges) to such Lender (or
Transferee), any Agent or the Issuing Bank in the event such Lender (or
Transferee) or Agent or the Issuing Bank is required to repay such refund. If
the Borrower determines in good faith that a reasonable basis exists for
contesting any Non-Excluded Taxes or Other Taxes, the relevant Lender (or
Transferee) or Agent or the Issuing Bank, as applicable, shall cooperate with
the Borrower in challenging such Non-Excluded Taxes or Other Taxes at the
Borrower's expense and if requested by the Borrower in writing; provided,
however, that no Lender (or Transferee), Agent or Issuing Bank shall be required
to take any action hereunder which, in the reasonable discretion of such Person,
would cause such Person or its applicable lending office to suffer a material
economic, legal or regulatory disadvantage.
(d) Within 30 days after the date of any payment of Non-Excluded
Taxes or Other Taxes withheld by the Borrower in respect of any payment to any
Lender (or Transferee), any Agent or the Issuing Bank, the Borrower will furnish
to the Administrative Agent, at its address referred to in Section 9.01, the
original or a certified copy of a receipt evidencing payment thereof or other
evidence reasonably satisfactory to such Lender (or Transferee), such Agent or
the Issuing Bank, as the case may be.
(e) Without prejudice to the survival of any other agreement
contained herein, the agreements and obligations contained in this Section 2.19
shall survive the payment in full of the principal of and interest hereunder or
any Loan Document.
(f) Any Agent, any Issuing Bank and any Lender (or Transferee) that
itself is not incorporated under the laws of the United States of America or a
state thereof or that is lending from a lending office not located within the
United States of America or a state thereof (a "Non-U.S. Lender") shall deliver
to the Borrower and the Agent two copies of either United States Internal
Revenue Service Form 1001 or Form 4224, or, in the case of a Non-U.S. Lender
claiming exemption from U.S. Federal withholding tax under Section 871(h) or
881(c) of the Code with respect to payments of "portfolio interest", a Form W-8,
or any subsequent versions thereof or successors thereto (and, if such Non-U.S.
Lender delivers a Form W-8, a certificate representing that such Non-U.S. Lender
(i) is not a bank for purposes of Section 881(c) of the Code, is not subject to
regulatory or other legal requirements as a bank in any jurisdiction, has not
been treated as a bank for purposes of any tax, securities law or other filing
or submission made to any governmental authority, any application made to a
rating agency or qualification for any exemption from tax, securities law or
other legal requirements, (ii) is not a 10-percent shareholder (within the
meaning of Section 871(h)(3)(B) of the Code) of the Borrower, (iii) is not a
controlled foreign corporation related to the Borrower (within the meaning of
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44
Section 864(d)(4) of the Code) and (iv) is not acting as a conduit entity
(within the meaning of U.S. Treasury Regulation Section 1.881-3 and any
successor thereto and any other regulations promulgated under the authority of
Section 7701(1) of the Code)), properly completed and duly executed by such
Non-U.S. Lender claiming complete exemption from, or reduced rate of, United
States Federal withholding tax on payments by the Borrower under this Agreement
and the other Loan Documents. Such forms shall be delivered by each Non-U.S.
Lender on or before the date it becomes a party to this Agreement (or, in the
case of a Transferee that is a participation holder, on or before the date such
participation holder becomes a Transferee hereunder) and on or before the date,
if any, such Non-U.S. Lender changes its applicable lending office by
designating a different lending office (a "New Lending Office"). In addition,
each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non-U.S. Lender.
Notwithstanding any other provision of this Section 2.19(f), a Non-U.S. Lender
shall not be required to deliver any form pursuant to this Section 2.19(f) that
such Non-U.S. Lender is not legally able to deliver.
(g) The Borrower shall not be required to indemnify any Non-U.S.
Lender, or to pay any additional amounts to any Non-U.S. Lender, in respect of
United States Federal withholding tax pursuant to paragraph (a) or (c) above to
the extent that (i) the obligation to withhold amounts with respect to United
States Federal withholding tax existed on the date such Non-U.S. Lender became a
party to this Agreement (or, in the case of a Transferee that is a participation
holder, on the date such participation holder became a Transferee hereunder) or,
with respect to payments to a New Lending Office, the date such Non-U.S. Lender
designated such New Lending Office with respect to a Loan; provided, however,
that this clause (i) shall not apply to any Transferee or New Lending Office
that becomes a Transferee or new Lending Office as a result of an assignment,
participation, transfer or designation made at the request of the Borrower; and
provided further, however, that this clause (i) shall not apply to the extent
that the indemnity payment or additional amounts any Transferee, or Lender (or
Transferee) through a New Lending Office, would be entitled to receive (without
regard to this clause (i)) do not exceed the indemnity payment or additional
amounts that the person making the assignment, participation or transfer to such
Transferee, or Lender (or Transferee) making the designation of such New Lending
Office, would have been entitled to receive in the absence of such assignment,
participation, transfer or designation or (ii) the obligation to pay such
additional amounts would not have arisen but for a failure by such Non-U.S.
Lender to comply with the provisions of paragraph (f) above.
(h) Any Agent, Issuing Bank or Lender (or Transferee) claiming any
additional amounts payable pursuant to this Section 2.19 will use reasonable
efforts (consistent with legal and regulatory restrictions) (including
reasonable efforts to change the jurisdiction of its applicable lending office
or to transfer its Loans to an Affiliate of such Lender) to avoid the need for
or reduce the amount of any such additional amounts that may thereafter accrue;
provided, however, that such efforts would not, in the sole determination of
such Lender (or Transferee), Agent or Issuing Bank as the case may be, be
otherwise disadvantageous to such Lender (or Transferee), Agent or Issuing Bank
in any material respect. In addition, the Borrower, at its expense, at any time
within 180 days after receipt of notice that additional amounts are payable
under this Section 2.19, so long as no Event of Default shall have occurred and
be continuing, may require the Issuing Bank or such Lender, as the case may be,
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45
to assign in accordance with the provisions of Section 9.04, at par plus accrued
interest, without recourse or warranty and pursuant to an Assignment and
Acceptance, its rights and obligations hereunder to a financial institution
specified by the Borrower that is willing to accept an assignment of such rights
and obligations on the terms hereof and is reasonably acceptable to the
Administrative Agent; provided, however, that (i) such assignment shall not
conflict with or violate any law or regulation applicable to a binding on such
Agent, Issuing Bank or Lender, as applicable, (ii) the Borrower shall have paid
to the assigning Lender all amounts (other than principal and interest) accrued
and owing hereunder to it (including amounts accrued and owing pursuant to this
paragraph (h)) and (iii) the assignee Lender shall have executed and delivered
an Assignment and Acceptance in accordance with Section 9.04. Notwithstanding
anything in this paragraph (h) to the contrary, the Borrower shall not be
entitled to require an assignment under this paragraph (h) with respect to the
Issuing Bank or any Lender if, prior to any such requirement, the Issuing Bank
or such Lender, as applicable, shall have taken any action under the first
sentence of this paragraph (h) so as to eliminate the continued need for payment
of additional amounts under this Section 2.19.
(i) Nothing contained in this Section 2.19 shall require any Lender
(or Transferee), any Agent or the Issuing Bank to make available any of its tax
returns (or any other information relating to its taxes that it deems to be
confidential).
SECTION 2.20. Letters of Credit. (a) General. The Borrower may
request the issuance of a Letter of Credit, in a form reasonably acceptable to
the Administrative Agent and the Issuing Bank, appropriately completed, for the
account of the Borrower, at any time and from time to time while the Revolving
Credit Commitments remain in effect and, subject to the terms and conditions
hereof and relying upon the representations and warranties herein set forth, the
Issuing Bank hereby agrees to issue Letters of Credit as requested at any time
and from time to time on or after the date hereof and until the earlier of (i)
the termination of the Revolving Credit Commitments of all Lenders in accordance
with the terms hereof and (ii) the third Business Day prior to the Revolving
Credit Maturity Date. This Section 2.20 shall not be construed to impose an
obligation upon the Issuing Bank to issue any Letter of Credit that is
inconsistent with the terms and conditions of this Agreement.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. In order to request the issuance of a Letter of Credit (or to amend,
renew or extend an existing Letter of Credit), the Borrower shall hand deliver
or telecopy to the Issuing Bank and the Administrative Agent (at least three
Business Days in advance of the requested date of issuance, amendment, renewal
or extension or such shorter period as is acceptable to the Issuing Bank and the
Administrative Agent) a notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or extended, the date of
issuance, amendment, renewal or extension, the date on which such Letter of
Credit is to expire (which shall comply with paragraph (c) below), the amount of
such Letter of Credit, the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare such Letter of Credit.
Following receipt of such notice and prior to the issuance of the requested
Letter of Credit or the applicable amendment, renewal or extension, the
Administrative Agent shall notify the Borrower and the Issuing Bank of the
amount of the Aggregate Revolving Credit Exposure after giving effect to (i) the
issuance, amendment, renewal or extension of such Letter of Credit, (ii) the
issuance or expiration of any other Letter of Credit that is to be issued or
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46
will expire prior to the requested date of issuance of such Letter of Credit and
(iii) the borrowing or repayment of any Revolving Credit Loans that (based upon
notices delivered to the Administrative Agent by the Borrower) are to be
borrowed or repaid prior to the requested date of issuance of such Letter of
Credit. A Letter of Credit shall be issued, amended, renewed or extended only
if, and upon issuance, amendment, renewal or extension of each Letter of Credit
the Borrower shall be deemed to represent and warrant that, after giving effect
to such issuance, amendment, renewal or extension (i) the L/C Exposure shall not
exceed $5,000,000 and (ii) the Aggregate Revolving Credit Exposure shall not
exceed the Total Revolving Credit Commitment. Compliance with clause (ii) of the
preceding sentence shall be determined based upon the assumption that (A) each
Letter of Credit remains outstanding and undrawn in accordance with its terms
until its expiration date (taking into account any rights of renewal or
extension that do not require written notice by or consent of the Issuing Bank,
in its sole discretion, in order to effect such renewal or extension and any
permanent reductions to the stated amount thereof) and (B) the Revolving Credit
Commitments shall not be reduced voluntarily pursuant to Section 2.09(b).
(c) Expiration Date. Each Letter of Credit shall expire at the close
of business on the earlier of the first anniversary of issuance and the date
that is three Business Days prior to the Revolving Credit Maturity Date, unless
such Letter of Credit expires by its terms on an earlier date; provided that any
Letter of Credit may be extendible for successive periods of up to one year (but
not beyond the Revolving Credit Maturity Date) on terms acceptable to the
Issuing Bank.
(d) Participations. By the issuance of a Letter of Credit and
without any further action on the part of the Issuing Bank or the Lenders, the
Issuing Bank hereby grants to each Lender, and each such Lender hereby acquires
from the applicable Issuing Bank, a participation in such Letter of Credit equal
to such Lender's Pro Rata Percentage of the aggregate amount available to be
drawn under such Letter of Credit, effective upon the issuance of such Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of the Issuing Bank, such Lender's Pro Rata Percentage of each L/C
Disbursement made by the Issuing Bank and not reimbursed by the Borrower (or, if
applicable, another party pursuant to its obligations under any other Loan
Document) forthwith on the date due as provided in Section 2.02(f). Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph (d) in respect of Letters of Credit is absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including the occurrence and continuance of a Default or an Event of Default,
and that each such payment shall be made without any offset, abatement,
withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any L/C
Disbursement in respect of a Letter of Credit, the Borrower shall pay the amount
of such L/C Disbursement to the Administrative Agent, not later than the
Business Day after the Borrower shall have received notice from the Issuing Bank
that payment of such draft has been made, or, if the Borrower shall have
received such notice later than 2:00 p.m., New York City time, on any Business
Day, not later than 10:00 a.m., New York City time, on the second immediately
following Business Day, with interest on the amount of such L/C Disbursement
<PAGE>
47
from and including the date such L/C Disbursement is made to but excluding the
date payment is made as set forth in Section 2.20(h).
(f) Obligations Absolute. The Borrower's obligations to reimburse
L/C Disbursements as provided in paragraph (e) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under any and all circumstances whatsoever,
and irrespective of:
(i) any lack of validity or enforceability of any Letter of
Credit;
(ii) any amendment or waiver of or any consent to departure
from all or any of the provisions of any Letter of Credit made with
the consent of the Borrower;
(iii) the existence of any claim, setoff, defense or other
right that the Borrower, any other party guaranteeing, or otherwise
obligated with, the Borrower, any Subsidiary or other Affiliate
thereof or any other Person may at any time have against the
beneficiary under any Letter of Credit, the Issuing Bank, the
Administrative Agent or any Lender or any other Person, whether in
connection with this Agreement, any other Loan Document or any other
related or unrelated agreement or transaction;
(iv) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in
any respect; provided, however, that payment by the Issuing Bank
under such Letter of Credit against presentation of such draft or
document shall not have constituted gross negligence or wilful
misconduct of the Issuing Bank;
(v) payment by the Issuing Bank under a Letter of Credit
against presentation of a draft or other document that does not
comply with the terms of such Letter of Credit; provided, however,
that payment by the Issuing Bank under such Letter of Credit against
presentation of such draft or document shall not have constituted
gross negligence or wilful misconduct of the Issuing Bank; and
(vi) any other act or omission to act or delay of any kind of
the Issuing Bank, the Lenders, the Administrative Agent or any other
Person or any other event or circumstance whatsoever, whether or not
similar to any of the foregoing, that might, but for the provisions
of this Section, constitute a legal or equitable discharge of the
Borrower's obligations hereunder; provided, however, that such other
act, omission or delay shall not constitute gross negligence or
wilful misconduct of the Issuing Bank.
It is understood that in making any payment under any Letter of
Credit (i) the Issuing Bank's exclusive reliance on the documents presented to
it under such Letter of Credit as to any and all matters set forth therein,
including reliance on the amount of any draft presented under such Letter of
Credit, whether or not the amount due to the beneficiary thereunder equals the
amount of such draft and whether or not any document presented pursuant to such
Letter of Credit proves to be insufficient in any respect, if such document on
its face appears to be in order, and, subject to paragraph (iv) set forth above,
whether or not any other statement or any other document presented pursuant to
such Letter of Credit proves to be forged or invalid or any statement therein
<PAGE>
48
proves to be inaccurate or untrue in any respect whatsoever and (ii) any
noncompliance in any immaterial respect of the documents presented under such
Letter of Credit with the terms thereof shall, in each case, be deemed not to
constitute wilful misconduct or gross negligence of the Issuing Bank.
(g) Disbursement Procedures. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The Issuing Bank shall as promptly
as possible give telephonic notification, confirmed by telecopy, to the
Administrative Agent and the Borrower of such demand for payment and whether the
Issuing Bank has made or will make an L/C Disbursement thereunder; provided,
however, that any failure to give or delay in giving such notice shall not
relieve the Borrower of its obligation to reimburse the Issuing Bank and the
Lenders with respect to any such L/C Disbursement. The Administrative Agent
shall promptly give each Lender notice thereof.
(h) Interim Interest. If the Issuing Bank shall make any L/C
Disbursement in respect of a Letter of Credit, then, unless the Borrower shall
reimburse such L/C Disbursement in full on such date, the unpaid amount thereof
shall bear interest for the account of the Issuing Bank, for each day from and
including the date of such L/C Disbursement, to but excluding the date of
payment, at the rate per annum equal to the rate that would apply to such amount
if such amount were an ABR Loan.
(i) Resignation or Removal of the Issuing Bank. The Issuing Bank may
resign at any time by giving 180 days' prior written notice to the
Administrative Agent, the Lenders and the Borrower, and may be removed at any
time by the Borrower by notice to the Issuing Bank, the Administrative Agent and
the Lenders. Subject to this paragraph (i), upon the acceptance of any
appointment as the Issuing Bank hereunder by a successor Issuing Bank, such
successor shall succeed to and become vested with all the interests, rights and
obligations of the retiring Issuing Bank and the retiring Issuing Bank shall be
discharged from its obligations to issue additional Letters of Credit hereunder.
At the time such removal or resignation shall become effective, the Borrower
shall pay all accrued and unpaid fees pursuant to Section 2.05(c)(ii). The
acceptance of any appointment as the Issuing Bank hereunder by a successor
Lender shall be evidenced by an agreement entered into by such successor, in a
form satisfactory to the Borrower and the Administrative Agent, and, from and
after the effective date of such agreement, (i) such successor Lender shall have
all the rights and obligations of the previous Issuing Bank under this Agreement
and the other Loan Documents and (ii) references herein and in the other Loan
Documents to the term "Issuing Bank" shall be deemed to refer to such successor
or to any previous Issuing Bank, or to such successor and all previous Issuing
Banks, as the context shall require. After the resignation or removal of the
Issuing Bank hereunder, the retiring Issuing Bank shall remain a party hereto
and shall continue to have all the rights and obligations of an Issuing Bank
under this Agreement and the other Loan Documents with respect to Letters of
Credit issued by it prior to such resignation or removal, but shall not be
required to issue additional Letters of Credit.
(j) Cash Collateralization. If any Event of Default shall occur and
be continuing, the Borrower shall, on the Business Day it receives notice
thereof from the Administrative Agent or the Required Lenders (or, if the
maturity of the Loans has been accelerated, Revolving Credit Lenders holding
<PAGE>
49
participations in outstanding Letters of Credit representing at least 51% of the
aggregate undrawn amount of all outstanding Letters of Credit) and the amount to
be deposited, deposit in an account with the Collateral Agent, for the benefit
of the Revolving Credit Lenders, an amount in cash equal to the L/C Exposure as
of such date. Such deposit shall be held by the Collateral Agent as collateral
for the payment and performance of the Obligations. The Collateral Agent shall
have exclusive dominion and control, including the exclusive right of
withdrawal, over such account. Amounts on deposit in such account shall be
invested in Permitted Investments, which investments shall be made at the option
and sole discretion of the Collateral Agent and shall be held in such a way as
to preserve the Administrative Agent's first priority Lien thereon. Interest or
profits, if any, on such investments shall accumulate in such account. Moneys in
such account shall (i) automatically be applied by the Collateral Agent to
reimburse the Issuing Bank for L/C Disbursements for which it has not been
reimbursed, (ii) be held for the satisfaction of the reimbursement obligations
of the Borrower for the L/C Exposure at such time and (iii) if the maturity of
the Loans has been accelerated (but subject to the consent of Revolving Credit
Lenders holding participations in outstanding Letters of Credit representing at
least 51% of the aggregate undrawn amount of all outstanding Letters of Credit),
be applied to satisfy the Obligations. If the Borrower is required to provide an
amount of cash collateral hereunder as a result of the occurrence of an Event of
Default, such amount (to the extent not applied as aforesaid) shall be returned
to the Borrower within one Business Day after the earlier of (i) the date on
which all Events of Default have been cured or waived and (ii) the expiration
and return to the Issuing Bank of all outstanding Letters of Credit).
ARTICLE III. REPRESENTATIONS AND WARRANTIES
Each of the Borrower and the Parent represents and warrants to each
of the Lenders that on the Closing Date and on the date of each Credit Event:
SECTION 3.01. Organization; Powers. The Parent and each of the
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has all
requisite power and authority to own its property and assets and to carry on its
business as now conducted and as proposed to be conducted, (c) is qualified to
do business and is in good standing in every jurisdiction where such
qualification is required, except where the failure so to qualify or be in good
standing would not result in a Material Adverse Effect, and (d) has the
corporate power and authority to execute, deliver and perform its obligations
under each of the Transaction Documents and each other agreement or instrument
contemplated thereby to which it is or will be a party and, in the case of the
Borrower, to borrow hereunder.
SECTION 3.02. Authorization. The execution, delivery and performance
by each Loan Party of each of the Transaction Documents to which it is a party
and the borrowings hereunder, the creation of the security interests
contemplated thereby, the consummation of the Transaction and the other
transactions contemplated hereby and thereby (a) have been duly authorized by
all requisite corporate and, if required, stockholder action and (b) will not
(i) violate (A) any provision of law, statute, rule or regulation, or of the
certificate or articles of incorporation or other constitutive documents or
by-laws of the Parent or any Subsidiary, (B) any order of any Governmental
<PAGE>
50
Authority or (C) any material provision of any material indenture, agreement or
other instrument to which the Parent or any Subsidiary is a party or by which
any of them or any of their property (including the Mortgaged Properties) or
assets is or may be bound, (ii) be in conflict with, result in a breach of,
constitute (alone or with notice or lapse of time or both) a default under or
give rise to any right to accelerate any material obligation on the part of the
Parent or any Subsidiary under any such indenture, agreement or other
instrument, other than, with respect to clauses (i) and (ii), such violations,
conflicts and breaches which will not result in a Material Adverse Effect, or
(iii) result in the creation or imposition of any Lien (other than any Lien
created under the Security Documents) upon or with respect to any property or
assets now owned or hereafter acquired by the Parent or any Subsidiary.
SECTION 3.03. Enforceability. This Agreement has been duly executed
and delivered by each of the Parent and the Borrower and constitutes, and each
other Transaction Document when executed and delivered by each of the Parent and
the Borrower and each other Loan Party a party thereto will constitute, a legal,
valid and binding obligation of each of the Parent and the Borrower and such
Loan Party enforceable against each of the Parent and the Borrower and such Loan
Party in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, fraudulent transfer, moratorium or other similar laws affecting
creditors' rights generally and to general principles of equity (regardless of
whether such enforceability is considered in a proceeding at law or in equity).
SECTION 3.04. Approvals. (a) No action, consent or approval of,
registration or filing with or any other action by any Governmental Authority is
or will be required in connection with the Transactions, except for (i) the
filing of Uniform Commercial Code financing statements and filings with the
United States Patent and Trademark Office and the United States Copyright
Office, (ii) recordation of the Mortgages, (iii) such as have been made or
obtained and are in full force and effect and (iv) such as are required to
consummate each of the Fort Mill Merger and the CS Finance Merger, which will be
done on the Closing Date, and the Post-Closing Merger, which will be done on the
first Business Day following the Closing Date.
(b) No consent or authorization of any Person (other than any
Governmental Authority) is required in connection with the Transactions except
(i) such as have been obtained and are in full force and effect or (ii) such the
failure of which to obtain could not reasonably be expected to have a Material
Adverse Effect.
SECTION 3.05. Financial Statements. (a) The Borrower has heretofore
furnished to the Lenders the consolidated balance sheets and statements of
income and cash flows of Fort Mill as of and for the fiscal years ended December
30, 1995, December 31, 1994, and (in the case of statements of income and cash
flow only) January 1, 1994, audited by and accompanied by the opinion of
Deloitte & Touche, independent public accountants. Such financial statements
present fairly the financial condition and results of operations of Fort Mill
and the Company as of such dates and for such periods and were prepared in
accordance with GAAP applied on a consistent basis. Such balance sheets and the
notes thereto disclose all material liabilities, direct or contingent, of Fort
Mill and the Company as of the dates thereof.
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51
(b) The Borrower has heretofore furnished to the Lenders an
unaudited pro forma consolidated balance sheet as of December 30, 1995 of the
Parent on a consolidated basis, which was prepared giving effect to the
Transaction, as if the Transaction had occurred on such date. Such pro forma
balance sheet has been prepared based on the assumptions used to prepare the pro
forma financial information contained in the Offering Memorandum, is based on
the best information available to the Borrower as of the date of delivery
thereof, accurately reflects all adjustments required to be made to give effect
to the Transaction and presents fairly on a pro forma basis the estimated
consolidated financial position of the Parent and its Subsidiaries as of
December 30, 1995, assuming that the Transaction had actually occurred at
December 30, 1995.
(c) The Borrower has heretofore furnished to the Lenders the
unaudited pro forma consolidated statement of income of the Parent on a
consolidated basis for the fiscal year ended December 30, 1995, which was
prepared giving effect to the Transaction as if the Transaction had occurred on
January 1, 1995. Such statement of income is based on the best information
available to the Borrower as of the date of delivery thereof, accurately
reflects all adjustments required to be made to give effect to the Transaction
and presents fairly on a pro forma basis the estimated results of operations of
the Parent and its consolidated Subsidiaries for the fiscal year ended December
30, 1995, assuming that the Transaction had actually occurred on January 1,
1995.
SECTION 3.06. No Material Adverse Change. There has been no material
adverse change in the business, assets, operations, properties, financial
condition or contingent liabilities of the Parent and the Subsidiaries, taken as
a whole, since December 30, 1995.
SECTION 3.07. Title to Properties; Possession Under Leases. (a) Each
of the Parent and the Subsidiaries has good and marketable title to, or valid
leasehold interests in, all its material properties and assets (including all
Mortgaged Property). All such material properties and assets are free and clear
of Liens, other than Liens expressly permitted by Section 6.02. Except as set
forth on Schedule 3.07(a), no material portion of any Mortgaged Property shall
be subject to any lease, license, sublease or other agreement granting to any
person any right to use, occupy or enjoy the same.
(b) Each of the Parent and the Subsidiaries has complied in all
material respects with all obligations under all material leases to which it is
a party and all such leases are in full force and effect. Each of the Parent and
the Subsidiaries enjoys peaceful and undisturbed possession under all such
material leases under which it is a tenant.
(c) Except as set forth on Schedule 3.07(c) or as disclosed in
writing by the Borrower to the Lenders after the Closing Date, the Borrower has
not received any notice of, nor has any knowledge of, any pending or
contemplated condemnation proceeding affecting the Mortgaged Properties or any
sale or disposition thereof in lieu of condemnation.
(d) Except as set forth on Schedule 3.07(d) or as disclosed in
writing by the Borrower to the Lenders after the Closing Date, the Borrower is
not obligated under any right of first refusal, option or other contractual
right to sell, assign or otherwise dispose of any Mortgaged Property or any
interest therein.
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52
SECTION 3.08. Subsidiaries. Schedule 3.08 sets forth as of the
Closing Date a list of all Subsidiaries and the percentage ownership interest of
the Parent therein.
SECTION 3.09. Litigation; Compliance with Laws. (a) Except as set
forth on Schedule 3.09, there are not any actions, suits or proceedings at law
or in equity or by or before any Governmental Authority now pending or, to the
knowledge of the Parent or the Borrower, threatened against or affecting the
Parent or any Subsidiary or any business, property, assets or rights of any such
Person (i) that involve any Transaction Document or the Transaction or (ii) as
to which there is a reasonable possibility of an adverse determination and that,
if adversely determined, could, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
(b) None of the Parent or any of the Subsidiaries or any of their
respective material properties or assets is in violation of, nor will the
continued operation of their material properties and assets as currently
conducted violate, any law, rule, regulation or statute (including any zoning,
building, Environmental Law, ordinance, code or approval or any building
permits) or any restrictions of record or agreements affecting the Mortgaged
Property, or is in default with respect to any judgment, writ, injunction,
decree or order of any Governmental Authority, where such violation or default
could reasonably be expected to result in a Material Adverse Effect.
(c) To the extent required by applicable law in the jurisdiction in
which each Mortgaged Property is located, certificates of occupancy are in
effect for such Mortgaged Property as currently constructed. True and complete
copies of all certificates of occupancy with respect to each Mortgaged Property
have been delivered to the Collateral Agent as mortgagee.
SECTION 3.10. Agreements. Neither the Parent nor any of the
Subsidiaries is in default in any manner under any provision of any indenture or
other agreement or instrument evidencing Indebtedness, or any other material
agreement or instrument to which it is a party or by which it or any of its
properties or assets are or may be bound, where such default could reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.11. Federal Reserve Regulations. (a) Neither the Parent
nor any of the Subsidiaries is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying Margin Stock.
(b) No part of the proceeds of any Loan or any Letter of Credit has
been or will be used by the Parent or any Subsidiary, whether directly or
indirectly, and whether immediately, incidentally or ultimately, (i) to purchase
or carry Margin Stock or to extend credit to others for the purpose of
purchasing or carrying Margin Stock or to refund indebtedness originally
incurred for such purpose, or (ii) for any purpose that entails a violation of,
or that is inconsistent with, the provisions of the Regulations of the Board,
including Regulation G, U and X.
SECTION 3.12. Investment Company Act; Public Utility Holding Company
Act. Neither the Parent nor any Subsidiary (a) is an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of 1940
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53
or (b) is a "holding company" as defined in, or subject to regulation under, the
Public Utility Holding Company Act of 1935.
SECTION 3.13. Use of Proceeds. The Borrower will use the proceeds of
the Loans and will request the issuance of Letters of Credit only for the
purposes specified in the preamble to this Agreement.
SECTION 3.14. Tax Returns. Each of the Parent and each Subsidiary
has filed or caused to be filed all Federal tax returns and material state and
local tax returns required to have been filed by it or with respect to it and
has paid or accrued or caused to be paid or accrued all taxes shown to be due
and payable on such returns or on any assessments received by it or with respect
to it, except taxes that are being contested in good faith by appropriate
proceedings and for which it shall have set aside on its books adequate reserves
in accordance with GAAP. Each of the Parent and each Subsidiary has filed or
made adequate provision in accordance with GAAP on its books for any material
taxes payable by it in connection with the Transaction (including any such taxes
payable in respect of indemnities).
SECTION 3.15. No Material Misstatements. No written information,
report, financial statement, exhibit or schedule furnished by or on behalf of
the Parent or the Borrower to the Administrative Agent or any Lender in
connection with the negotiation of any Loan Document or included therein or
delivered pursuant thereto contained, when taken as a whole, as of the date such
information, report, financial statement, exhibit or schedule was furnished,
contains or will contain any material misstatement of fact or omitted, omits or
will omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were, are or will be made,
not misleading; provided, however, that, to the extent any such information was
based upon or constituted a forecast or projection, that Parent and the Borrower
represent that they acted in good faith and utilized assumptions believed by
them to be reasonable, it being recognized by the Lenders that projections as to
future events are not to be viewed as facts and that actual results during the
period or periods covered thereby may differ from the projected results.
SECTION 3.16. Employee Benefit Plans. The Parent, each Subsidiary
and each ERISA Affiliate is in compliance with the applicable provisions of
ERISA and the Code and the regulations and published interpretations thereunder,
except where failure to comply therewith could not reasonably be expected to
have a Material Adverse Effect. No Reportable Event has occurred within the
five-year period prior to the date upon which this representation is made or
deemed made or exists in respect of any Plan. The present value of all benefit
liabilities under each Plan (based on those assumptions that would be used in a
termination of such Plan) did not, as of the last annual valuation date
applicable thereto, exceed by more than $3,000,000 the value of the assets of
such Plan, on a termination basis. None of the Parent, any Subsidiary or any
ERISA Affiliate has incurred any Withdrawal Liability in an amount that could
reasonably be expected to result in a Material Adverse Effect. None of the
Parent, any Subsidiary or any ERISA Affiliate has received any notification that
any Multiemployer Plan is in reorganization or has been terminated within the
meaning of Title IV of ERISA, and no Multiemployer Plan is reasonably expected
to be in reorganization or to be terminated where such reorganization or
termination has resulted or could reasonably be expected to result, through
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54
increases in the contributions required to be made to such Plan or otherwise, in
a Material Adverse Effect.
SECTION 3.17. Environmental Matters. Except as set forth on Schedule
3.17:
(a) The properties now or formerly owned or operated by the Parent
and the Subsidiaries (the "Properties") do not contain any Hazardous Materials
in amounts or concentrations which (i) constitute, or constituted a violation
of, or (ii) could reasonably be expected to give rise to liability under,
Environmental Laws resulting from any Release of Hazardous Materials during the
Parent's or the Subsidiaries' ownership or operation of the Properties or, to
the knowledge of the Parent or the Borrower, at any other time, which violations
and liabilities, in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
(b) The Properties and all operations of the Parent and the
Subsidiaries are in compliance, and, to the extent the Parent or the
Subsidiaries owned or operated such Properties in the past three years, in the
last three years (i) have been in compliance, with all Environmental Laws and
all Environmental Permits and (ii) all necessary Environmental Permits have been
obtained and are in effect, except to the extent that such non-compliance or
failure to obtain any necessary permits, in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect.
(c) During the time of the Parent's or the Subsidiaries' ownership
or operation of the Properties and, to the knowledge of Parent and the Borrower,
at any other time, there have been no Releases or threatened Releases at, from,
under or proximate to the Properties or otherwise in connection with the
operations of the Parent or the Subsidiaries, which Releases or threatened
Releases, in the aggregate, could reasonably be expected to result in a Material
Adverse Effect, and none of the Properties currently owned or operated by the
Borrower and the Subsidiaries are listed on the Federal National Priorities List
(under CERCLA and as defined pursuant to Environmental Law) except as such
listings could not reasonably be expected to have a Material Adverse Effect.
(d) Neither the Parent nor any of the Subsidiaries has received
written notice of any Environmental Claim in connection with the Properties or
the operations of the Parent or the Subsidiaries or with regard to any Person
whose liabilities for environmental matters the Parent or the Subsidiaries has
retained or assumed, in whole or in part, contractually, by operation of law or
otherwise, which, in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
(e) Hazardous Materials have not been transported from the
Properties by the Parent or the Subsidiaries or, to the knowledge of Parent and
the Borrower, any other Person, nor have Hazardous Materials been generated,
treated, stored or disposed of at, on or under any of the Properties in a manner
that could reasonably be expected to give rise to liability under any
Environmental Law that would constitute a Material Adverse Effect, nor have the
Parent or the Subsidiaries retained or assumed any liability, contractually, by
operation of law or otherwise, with respect to the generation, treatment,
storage or disposal of Hazardous Materials, which transportation, generation,
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55
treatment, storage or disposal, or retained or assumed liabilities, in the
aggregate, could reasonably be expected to result in a Material Adverse Effect.
SECTION 3.18. Insurance. Schedule 3.18 sets forth a true, complete
and correct description of all material insurance maintained by the Parent or by
the Parent for its Subsidiaries as of the Closing Date. As of such date, such
insurance is in full force and effect and all premiums have been duly paid. The
Parent and its Subsidiaries have insurance in such amounts and covering such
risks and liabilities as are in accordance with normal industry practice.
SECTION 3.19. Labor Matters. Except as set forth on Schedule 3.19,
as of the Closing Date, there are no strikes pending or, to the best knowledge
of the Parent and the Borrower, threatened against the Parent or any Subsidiary.
The hours worked and payment made to employees of the Parent and the
Subsidiaries have not been in violation in any material respect of the Fair
Labor Standards Act or any other applicable law dealing with such matters. All
payments due from the Parent or any Subsidiary, or for which any claim may be
made against the Parent or any Subsidiary, on account of wages and employee
health and welfare insurance and other benefits, have been paid or, to the
extent required under GAAP, accrued as a liability on the books of the Parent or
such Subsidiary, except to the extent that failure to make such payment or
accrual could not reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect.
SECTION 3.20. Capitalization. (a) As of the Closing Date and after
giving effect to the Transaction, the authorized capital stock of the Borrower
shall consist of 1,000 shares of Borrower Common Stock, of which 100 shares
shall be issued and outstanding. All outstanding shares of Borrower Common Stock
are and shall be (after giving effect to the Transaction) fully paid and
nonassessable. The Parent owns beneficially and of record all of the Borrower
Common Stock.
(b) As of the Closing Date and after giving effect to the
Transaction, the authorized capital stock of the Parent shall consist of 10,000
shares of Parent Common Stock, of which 9,000 shares shall be issued and
outstanding, and 10,000 shares of Parent Preferred Stock, 1,000 shares of which
shall be issued and outstanding. All outstanding shares of Parent Common Stock
and Parent Preferred Stock are and shall be (after giving effect to the
Transaction) fully paid and nonassessable. Set forth on Schedule 3.20 is a list
of every Person that, as of the Closing Date, shall own beneficially or of
record shares of any class of stock of the Parent, together with the number of
shares of such class so owned.
(c) Except as set forth on Schedule 3.20, as of the Closing Date
there will be no outstanding subscriptions, options, warrants, calls, rights
(including preemptive rights) or other agreements or commitments (including
pursuant to management or employee stock plan or similar plan) of any nature on
the part the Parent or the Borrower relating to any capital stock of the Parent
or any of its Subsidiaries.
SECTION 3.21. Security Documents. (a) The Pledge Agreement is
effective to create in favor of the Collateral Agent, for the ratable benefit of
the Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Pledge Agreement) and proceeds thereof and, when
<PAGE>
56
the Collateral is delivered to the Collateral Agent, the Pledge Agreement shall
constitute a fully perfected first priority Lien on, and security interest in,
all right, title and interest of the pledgors thereunder in such Collateral and
the proceeds thereof, in each case prior and superior in right to any other
Person.
(b) The Security Agreement is effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable security interest in the Collateral (as defined in the Security
Agreement) and proceeds thereof and, when financing statements in appropriate
form are filed in the offices specified on Schedule 3.21 or as required by
Section 5.11, the Security Agreement shall constitute a fully perfected Lien on,
and security interest in, all right, title and interest of the grantors
thereunder in such Collateral and the proceeds thereof as to which a security
interest may be perfected by filing, recording or registering a financing
statement or analogous document in the United States (or any political
subdivision thereof) and its territories and possessions pursuant to the Uniform
Commercial Code or other applicable law in such jurisdiction, in each case prior
and superior in right to any other Person, other than with respect to the rights
of Persons pursuant to Liens expressly permitted by Section 6.02.
(c) The Mortgages are effective to create in favor of the Collateral
Agent, for the ratable benefit of the Secured Parties, a legal, valid and
enforceable Lien on all of the Loan Parties' right, title and interest in and to
the Mortgaged Properties thereunder and the proceeds thereof, and when the
Mortgages are filed in the offices specified on Schedule 3.21, the Mortgages
shall constitute fully perfected Liens on, and security interests in, all right,
title and interest of the Loan Parties in such Mortgaged Property and the
proceeds thereof, in each case prior and superior in right to any other Person,
other than with respect to the rights of Persons pursuant to Liens expressly
permitted by Section 6.02.
(d) The Intellectual Property Security Agreement is effective to
create in favor of the Collateral Agent, for the ratable benefit of the Secured
Parties, a legal, valid and enforceable security interest in the Collateral (as
defined in the Intellectual Property Security Agreement) and the proceeds
thereof, and when the Intellectual Property Security Agreement is (or
appropriate assignments are) filed in the United States Patent and Trademark
Office and the United States Copyright Office and Uniform Commercial Code
Financing Statements are filed in the appropriate filing offices, the
Intellectual Property Security Agreement shall constitute a fully perfected Lien
on, and security interest in, all right, title and interest of the Loan Parties
in such Collateral and the proceeds thereof, in each case prior and superior in
right to any other Person, other than with respect to the rights of Persons
pursuant to Liens expressly permitted by Section 6.02.
SECTION 3.22. Location of Real Property and Leased Premises. (a)
Schedule 3.22(a) lists completely and correctly as of the Closing Date all real
property owned by the Parent and the Subsidiaries and the addresses thereof. The
Parent and the Subsidiaries own in fee all the real property set forth on
Schedule 3.22(a).
(b) Schedule 3.22(b) lists completely and correctly as of the
Closing Date all real property leased by the Parent and the Subsidiaries and the
addresses thereof. The Parent and the Subsidiaries have valid leases in all the
real property set forth on Schedule 3.22(b).
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SECTION 3.23. Employment and Management Agreements. Except as
disclosed on Schedule 3.23, as of the Closing Date there are no (a) employment
agreements covering management employees of the Parent or the Borrower or other
material agreements relating to the compensation of management employees
(including the issuance of securities of the Parent or the Borrower to
management employees), (b) agreements for management or consulting services to
which the Parent or any of its Subsidiaries is a party or by which any of them
is bound or (c) collective bargaining agreements or other labor agreements
covering any of the employees covering any of the employees of the Parent or any
of its Subsidiaries.
SECTION 3.24. Merger Documents and Senior Notes Documents. Each of
the Merger Documents and the Senior Notes Documents has been duly executed and
delivered by each party thereto and each of the material terms and provisions
thereof is in full force and effect. Neither the Parent nor the Borrower has
been notified nor are the Parent or the Borrower aware that any of the
representations and warranties of the Seller, the Parent, the Purchaser or
Vestar set forth in the Merger Agreement is not true and correct in all material
respects on and as of the date hereof. Each of the representations and
warranties relating to the Parent and the Borrower, as applicable, set forth in
the foregoing agreements is true and correct in all material respects on and as
of the date hereof.
ARTICLE IV. CONDITIONS OF LENDING
The obligations of the Lenders to make Loans and of the Issuing Bank
to issue Letters of Credit hereunder are subject to the satisfaction of the
following conditions:
SECTION 4.01. All Credit Events. On the date of each Borrowing
(other than any Revolving Credit Loan deemed made pursuant to Section 2.02(f))
and on the date of each issuance, renewal or extension of a Letter of Credit
(each such event, a "Credit Event"):
(a) The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.03 (or such notice shall have been
deemed given in accordance with the last paragraph of Section 2.03) or, in
the case of the issuance of a Letter of Credit, the Issuing Bank and the
Administrative Agent shall have received a notice requesting the issuance
of such Letter of Credit as required by Section 2.21(b).
(b) Each representation and warranty set forth in Article III shall
be true and correct in all material respects on and as of the date of such
Credit Event with the same effect as though made on and as of such date,
except to the extent such representation and warranty expressly relate to
an earlier date.
(c) At the time of and immediately after such Credit Event, no Event
of Default or Default shall have occurred and be continuing.
Each Credit Event, including the transactions occurring on the
Closing Date, shall be deemed to constitute a representation and warranty by the
Parent and the Borrower on the date of such Credit Event, as to the matters
specified in paragraphs (b) and (c) above. Continuations and conversions of
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outstanding Borrowings pursuant to Section 2.10 shall not be deemed to be
Borrowings for the purpose of this Section 4.01.
SECTION 4.02. First Credit Event. On the Closing Date:
(a) The Administrative Agent shall have received, on behalf of
itself, the Lenders and the Issuing Bank, a favorable written opinion of
(i) Kirkland & Ellis, counsel for the Parent and the Borrower,
substantially to the effect set forth in Exhibit I-1, and (ii) local
counsel in the states of South Carolina, North Carolina and Georgia,
substantially to the effect set forth in Exhibit I-2, in each case (A)
dated the Closing Date, (B) addressed to the Issuing Bank, the
Administrative Agent and the Lenders, and (C) covering such other matters
relating to the Transaction Documents and the Transaction as the
Administrative Agent shall reasonably request, and the Borrower hereby
instructs such counsel to deliver such opinions.
(b) All legal matters incident to this Agreement, the borrowings and
extensions of credit hereunder and the Transaction Documents shall be
satisfactory to the Lenders, to the Issuing Bank and to Simpson Thacher &
Bartlett, counsel for the Administrative Agent.
(c) The Administrative Agent shall have received (i) a copy of the
certificate or articles of incorporation, including all amendments
thereto, of each Loan Party, certified as of a recent date by the
Secretary of State of the state of its organization, and a certificate as
to the good standing of each Loan Party as of a recent date, from such
Secretary of State; (ii) a certificate of the Secretary or Assistant
Secretary of each Loan Party dated the Closing Date and certifying (A)
that attached thereto is a true and complete copy of the by-laws of such
Loan Party as in effect on the Closing Date and at all times since a date
prior to the date of the resolutions described in clause (B) below, (B)
that attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of such Loan Party authorizing the
execution, delivery and performance of the Transaction Documents to which
such Person is a party and, in the case of the Borrower, the Borrowings
hereunder, and that such resolutions have not been modified, rescinded or
amended and are in full force and effect, (C) that the certificate or
articles of incorporation of such Loan Party have not been amended since
the date of the last amendment thereto shown on the certificate of good
standing furnished pursuant to clause (i) above, and (D) as to the
incumbency and signature of each officer executing any Transaction
Document or any other document delivered in connection herewith on behalf
of such Loan Party; (iii) a certificate of another officer as to the
incumbency and specimen signature of the Secretary or Assistant Secretary
executing the certificate pursuant to (ii) above; and (iv) such other
documents as the Lenders, the Issuing Bank or Simpson Thacher & Bartlett,
counsel for the Administrative Agent, may reasonably request.
(d) The Administrative Agent shall have received a certificate,
dated the Closing Date and signed by a Financial Officer of the Borrower,
confirming compliance with the conditions precedent set forth in Sections
4.01(b) and 4.01(c).
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(e) The Administrative Agent shall have received all Fees and other
amounts due and payable on or prior to the Closing Date, including, to the
extent invoiced, reimbursement or payment of all reasonable out-of-pocket
expenses required to be reimbursed or paid by the Borrower hereunder or
under any other Loan Document.
(f) The Pledge Agreement shall have been duly executed by the
parties thereto and delivered to the Collateral Agent and shall be in full
force and effect. All the outstanding capital stock of each Domestic
Subsidiary (other than the Joint Ventures), 65% of the outstanding capital
stock of each Foreign Subsidiary (other than the Joint Ventures) that is
owned directly by the Parent or any Domestic Subsidiary shall have been
duly and validly pledged thereunder to the Collateral Agent for the
ratable benefit of the Secured Parties and certificates representing such
shares, accompanied by instruments of transfer and stock powers endorsed
in blank, shall be in the actual possession of the Collateral Agent.
(g) The Security Agreement and the Intellectual Property Security
Agreement shall have been duly executed by the Loan Parties party thereto
and shall have been delivered to the Collateral Agent and shall be in full
force and effect on such date and each document (including each Uniform
Commercial Code financing statement) required by law or reasonably
requested by the Administrative Agent to be filed, registered or recorded
in order to create in favor of the Collateral Agent for the benefit of the
Secured Parties a valid, legal and perfected first-priority security
interest in and lien on the Collateral (subject to any Lien expressly
permitted by Section 6.02) described in such agreement shall have been
delivered to the Collateral Agent.
(h) The Collateral Agent shall have received the results of a search
of the Uniform Commercial Code filings (or equivalent filings) made with
respect to the Loan Parties in the States (or other jurisdictions) in
which are located the chief executive offices of such Persons or any
offices of such Persons in which records have been kept relating to
Accounts and the other jurisdictions in which Uniform Commercial Code
filings (or equivalent filings) are to be made pursuant to the preceding
paragraph, together with copies of the financing statements (or similar
documents) disclosed by such search, and accompanied by evidence
satisfactory to the Administrative Agent that the Liens indicated in any
such financing statement (or similar document) would be permitted under
Section 6.02 or have been released.
(i) The Collateral Agent shall have received a Perfection
Certificate with respect to the Loan Parties dated the Closing Date and
duly executed by a Responsible Officer of the Borrower.
(j) (i) Each of the Security Documents, in form and substance
satisfactory to the Lenders, relating to each of the Mortgaged Properties
shall have been duly executed by the parties thereto and delivered to the
Collateral Agent and shall be in full force and effect, (ii) each of such
Mortgaged Properties shall not be subject to any Lien other than those
permitted under Section 6.02, (iii) each of such Security Documents shall
have been filed and recorded in the recording office as specified on
Schedule 3.22 (or a lender's title insurance commitment, in form and
substance reasonably acceptable to the Collateral Agent, insuring the lien
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of such Security Document as a first lien on such Mortgaged Property
(subject to any Lien listed on Schedule B of any related lender's title
insurance policy delivered to the Collateral Agent prior to the Closing
Date) shall have been received by the Collateral Agent) and, in connection
therewith, the Collateral Agent shall have received evidence reasonably
satisfactory to it of each such filing and recordation or title insurance
commitment and (iv) the Collateral Agent shall have received such other
documents, including a policy or policies of title insurance issued by a
nationally recognized title insurance company, together with such
endorsements, coinsurance and reinsurance as may be reasonably requested
by the Administrative Agent and the Lenders, insuring the Mortgages as
valid first liens on the Mortgaged Properties, free of Liens other than
those listed on Schedule B of any related lender's title insurance policy
or title commitment delivered to the Collateral Agent prior to the Closing
Date, together with such abstracts as may be reasonably requested by the
Administrative Agent or the Lenders.
(k) The Guarantee Agreement shall have been duly executed by each
existing Guarantor and the Collateral Agent, and shall be in full force
and effect.
(l) The Administrative Agent shall have received a copy of, or a
certificate as to coverage under, the insurance policies required by
Section 5.02 and the applicable provisions of the Security Documents from
the Borrower's insurance broker.
(m) The Lenders shall be reasonably satisfied (i) with the
capitalization, structure and equity ownership of the Parent and the
Subsidiaries after giving effect to the Transaction and (ii) that the
aggregate level of fees and expenses to be paid by the Parent and the
Borrower in connection with the Transaction, the financing therefor and
the other transactions contemplated hereby shall not exceed $12,000,000.
(n) The Lenders shall be reasonably satisfied in all respects with
the tax position and the contingent tax and other liabilities of the
Parent and the Borrower and the plans of the Parent and the Borrower with
respect thereto.
(o) After giving effect to the Transaction, the Parent and the
Subsidiaries shall have no outstanding Indebtedness other than (i) the
Loans, (ii) the Senior Notes (iii) the Indebtedness referred to in Section
6.01(a).
(p) The Lenders shall be reasonably satisfied as to the amount and
nature of any environmental and employee health and safety exposures to
which the Parent and the Subsidiaries may be subject and the plans of the
Borrower with respect thereto, and the Administrative Agent shall have
received from the Borrower copies of the Phase I environmental reports
prepared by Environmental Strategies Corporation on behalf of the
Borrower.
(q) The Transaction and the financing thereof shall be consistent in
all material respects with the "Sources and Uses of Funds" table set forth
on Schedule 4.02(q). The Lenders shall be reasonably satisfied with the
sufficiency of amounts available under the Revolving Credit Commitments to
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meet the ongoing working capital requirements of the Borrower and the
Subsidiaries following the Transaction.
(r) The Lenders shall be reasonably satisfied with the financial
statements referred to in Section 3.05.
(s) The Lenders shall be reasonably satisfied with all legal, tax
and accounting matters relating to the Transaction, the financing therefor
and all other transactions contemplated hereby.
(t) All requisite Governmental Authorities and third parties shall
have approved or consented to the Transaction to the extent required, all
applicable appeal periods shall have expired and there shall be no
governmental or judicial action, actual or, to the best knowledge of the
Parent and the Borrower, threatened, that has or would have a reasonable
likelihood of restraining, preventing or imposing burdensome conditions on
the transactions contemplated hereby.
(u) There shall be no litigation or administrative proceedings or
other legal or regulatory developments, actual or, to the best knowledge
of the Parent and the Borrower, threatened, that, in the reasonable
judgment of the Lenders, could reasonably be expected to have a Material
Adverse Effect.
(v) There shall have been no material adverse change in the
business, assets, operations, properties, financial condition, contingent
liabilities or material agreements of either the Parent and the
Subsidiaries or the Borrower and its Subsidiaries since December 30, 1995.
(w) (i) The Investors shall have contributed to the Parent a minimum
of $45,000,000 in cash (up to $850,000 of which shall be funded with the
proceeds of Loans) from the issuance and sale of the Parent's capital
stock to the Investors (of which a minimum of $9,000,000 shall have been
obtained from the Parent's issuance and sale of the Parent Common Stock
and $36,000,000 shall have been obtained from the Parent's issuance and
sale of the Parent Preferred Stock), (ii) the Lenders shall be reasonably
satisfied in all respects with the terms of such capital stock and (iii)
the Parent shall have contributed to the Borrower in cash the full amount
of the cash equity contributions made to the Parent by the Investors.
(x) Each of the conditions precedent to the consummation of the
Acquisition set forth in the Merger Documents shall have been satisfied,
or waived, all to the reasonable satisfaction of the Administrative Agent.
The Acquisition shall have been consummated or shall be consummated
simultaneously with the making of the initial Loans in accordance with the
Merger Documents and applicable law and on terms reasonably satisfactory
to the Lenders.
(y) The Borrower shall have received, or shall receive
simultaneously with the making of the initial Loans, $110,000,000 in gross
cash proceeds from the issuance and sale of the Senior Notes. The terms
and conditions of the Senior Notes (including terms and conditions
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relating to the interest rate, maturity, covenants, defaults, remedies and
payment of interest) shall be satisfactory in all respects to the Lenders.
(z) (i) The Borrower shall have made available to the Administrative
Agent true, correct and complete copies of all written real property
leases or subleases, easement agreements, option agreements and other
material agreements, instruments and documents (whether or not recorded)
that encumber or otherwise affect the real property listed on Schedules
3.22(a) and 3.22(b).
(ii) Each Lender shall have received complete certified copies (as
certified to by, as applicable, the Secretary of the Parent or the
Borrower) of the Merger Documents and the Senior Notes Documents,
including all exhibits, schedules and disclosure letters referred to
therein or delivered pursuant thereto (if any), and all amendments
thereto, waivers relating thereto and other side letters or agreements
affecting the terms thereof. None of such documents and agreements shall
have been amended, supplemented or otherwise modified in any respect nor
shall have any of the provisions thereof been waived, except pursuant to a
written agreement or instrument that has heretofore been consented to by
the Administrative Agent.
ARTICLE V. AFFIRMATIVE COVENANTS
Each of the Parent and the Borrower covenants and agrees with each
Lender that so long as this Agreement shall remain in effect and until the
Commitments have been terminated and the principal of and interest on each Loan,
all Fees and all other expenses or amounts payable under any Loan Document shall
have been paid in full and all Letters of Credit have been canceled or have
expired and all amounts drawn thereunder have been reimbursed in full, unless
the Required Lenders shall otherwise consent in writing, the Parent and the
Borrower will, and will cause each of the Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect its legal existence, except as otherwise expressly permitted under
Section 6.05.
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business, in each case subject to transactions
permitted by Section 6.05; maintain and operate such business in substantially
the manner in which it is currently conducted and operated, except as otherwise
permitted by Section 6.08; comply in all material respects with all material
applicable laws, rules, regulations and statutes (including any zoning,
building, Environmental Law, ordinance, code or approval or any building permits
or any restrictions of record or agreements affecting the Mortgaged Properties)
and decrees and orders of any Governmental Authority, whether now in effect or
hereafter enacted; and at all times maintain and preserve all property material
to the conduct of such business and keep such property in good repair, working
order and condition and from time to time make, or cause to be made, all needful
and proper repairs, renewals, additions, improvements and replacements thereto
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63
necessary in order that the business carried on in connection therewith may be
properly conducted at all times.
(c) Maintain all financial records in accordance with GAAP.
SECTION 5.02. Insurance. (a) Keep its insurable properties
adequately insured at all times by financially sound and reputable insurers;
maintain such other insurance, to such extent and against such risks, including
fire and other risks insured against by extended coverage, as is customary with
companies of established repute engaged in the same or similar businesses; and
maintain such other insurance as may be required by law.
(b) Cause all such casualty policies to be endorsed or otherwise
amended to include a "standard" or "New York" lender's loss payable endorsement
and cause all such liability policies to name the Agents, the Issuing Bank and
the Lenders as additional insurers, in each case in form and substance
satisfactory to the Administrative Agent and the Collateral Agent, which
endorsement shall provide that, from and after the Closing Date, (i) the
insurance carrier shall give the Administrative Agent or the Collateral Agent at
least 30 days' prior notice (or 10 days in the case of non-payment of premiums)
of termination of such policies and (ii) if the insurance carrier shall have
received written notice from the Administrative Agent or the Collateral Agent of
the occurrence of an Event of Default, the insurance carrier shall pay all
proceeds otherwise payable to the Borrower or the Loan Parties under such
policies directly to the Collateral Agent.
(c) If at any time the area in which the Premises (as defined in the
Mortgages) are located is designated a "flood hazard area" in any Flood
Insurance Rate Map published by the Federal Emergency Management Agency, obtain
flood insurance in such total amount as the Collateral Agent may from time to
time reasonably require to the extent available at reasonable rates, and
otherwise comply with the National Flood Insurance Program as set forth in said
Flood Disaster Protection Act of 1973, as it may be amended from time to time.
SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other
material obligations promptly and in accordance with their terms, except to the
extent that failure to so pay could not reasonably be expected to have a
Material Adverse Effect; and pay and discharge promptly when due all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property, before the same shall become
delinquent or in default, as well as all lawful claims for labor, materials and
supplies or otherwise that, if unpaid, might give rise to a Lien upon such
properties or any part thereof not permitted by Section 6.02; provided, however,
that such payment and discharge shall not be required with respect to any such
tax, assessment, charge, levy or claim so long as the validity or amount thereof
shall be contested in good faith by appropriate proceedings and the Parent or
the applicable Subsidiary shall have set aside on its books adequate reserves
with respect thereto in accordance with GAAP.
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SECTION 5.04. Financial Statements, Reports, etc. Furnish to the
Administrative Agent and each Lender:
(a) as soon as available, and in no event later than 105 days after
the end of each fiscal year, the consolidated (and, if any Joint Venture
is required to be consolidated with the Parent under GAAP, consolidating)
balance sheets and related statements of income, stockholders' equity and
cash flows showing the financial condition of the Parent and its
consolidated subsidiaries as of the close of such fiscal year and the
results of their respective operations and the operations of such
subsidiaries during such year, all audited by Arthur Andersen & Co. or
other independent public accountants of recognized national standing
reasonably acceptable to the Required Lenders and accompanied by an
opinion of such accountants (which shall not be qualified in any material
respect) to the effect that such consolidated financial statements fairly
present the financial condition and results of operations of the Parent on
a consolidated basis in accordance with GAAP consistently applied, except
for required accounting changes or changes with which such independent
public accountants concur;
(b) as soon as available, and in no event later than 45 days (or 60
days in the case of the first fiscal quarter ending following the Closing
Date) after the end of each of the first three fiscal quarters of each
fiscal year, the unaudited consolidated (and, if any Joint Venture is
required to be consolidated with the Parent under GAAP, consolidating)
balance sheets and related statements of income and cash flows showing the
financial condition of each of the Parent and its consolidated
subsidiaries as of the close of such fiscal quarter and the results of
their respective operations during such fiscal quarter and the then
elapsed portion (beginning, in the case of 1996 financial statements, on
the Closing Date) of the fiscal year, all certified by one of its
Financial Officers as fairly presenting the financial condition and
results of operations of the Parent on a consolidated basis in accordance
with GAAP, subject to normal year-end audit adjustments and the absence of
notes;
(c) within 45 days (or 60 days in the case of each of the first two
fiscal months following the Closing Date) after the end of each fiscal
month (other than the last month of any fiscal quarter) of each fiscal
year, the unaudited consolidated balance sheets and related statements of
income and cash flows showing the financial condition of the Parent and
its consolidated subsidiaries as of the close of such fiscal month and the
results of their respective operations during such fiscal month and the
then elapsed portion (beginning, in the case of 1996 financial statements,
on the Closing Date) of the fiscal year, all certified by one of its
Financial Officers as fairly presenting the financial condition and
results of operations of the Parent on a consolidated basis in accordance
with GAAP, subject to normal year-end audit adjustments and the absence of
notes;
(d) concurrently with any delivery of any such financial statements
pursuant to paragraph (a) or (b), a certificate of a Financial Officer
(and, in the case of any financial statements being delivered under clause
(a) above, a certificate of the opining accounting firm, which certificate
may be limited to accounting matters and disclaim responsibility for legal
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interpretations), (i) certifying that no Event of Default has occurred
under Sections 6.12 through 6.15, inclusive, or, if such an Event of
Default has occurred, specifying the nature and extent thereof and (ii)
setting forth computations (or, for such opining account firm, review of
such computations) in reasonable detail satisfactory to the Administrative
Agent demonstrating (A) compliance with the covenants contained in
Sections 6.12, 6.13, 6.14 and 6.15 and (B) the Applicable Percentage based
upon the Leverage Ratio;
(e) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
the Parent or any Subsidiary with the Securities and Exchange Commission,
or any Governmental Authority succeeding to any of or all the functions of
said Commission, or with any national securities exchange, or distributed
to its shareholders, as the case may be;
(f) promptly following the preparation thereof, copies of each
management letter prepared by the Parent's auditors for distribution to
the board of directors of the Parent (together with any response thereto
prepared by the Parent or the Borrower);
(g) as soon as available, and in any event no later than 95 days
after the end of each fiscal year thereafter, historical summary data for
the immediately preceding year and forecasted financial projections and
summary data through the end of the then-current fiscal year, in
substantially the same form and format as set forth in the Offering
Memorandum (including a specification of the material underlying
assumptions and management's discussion of historical results), all
certified by a Financial Officer of the Borrower to be a fair summary of
such entity's results and such entity's good faith estimate of the
forecasted financial projections and results of operations for the period
through the then-current fiscal year;
(h) upon the earlier of (i) 110 days after the end of each fiscal
year of the Borrower and (ii) the date on which the financial statements
with respect to such period are delivered pursuant to clause (a) above, a
certificate of a Financial Officer of the Borrower setting forth, in
detail reasonably satisfactory to the Administrative Agent, the
calculation and amount of Excess Cash Flow, if any, for such period;
(i) promptly, a copy of any amendment or waiver of any provision of
the Senior Notes Documents or the Merger Documents not requiring the
consent or approval of the Lenders, or any other amendment or waiver of
any provisions of any thereof to the extent that such amendment or waiver
is required hereunder to be furnished to the Lenders;
(j) promptly, a copy of any notice of a default received by the
Parent or the Borrower under the Senior Notes Document or the Merger
Documents;
(k) a copy of all notices (other than regarding any scheduled or
mandatory repayments), certificates, financial statements and reports, as
and when delivered by or on behalf of the Parent or the Borrower to the
holders of the Senior Notes (in their capacity as such);
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(l) a copy of all solicitations or requests for any proposed waiver
or amendment of any of the provisions of the Senior Notes Documents; and
(m) promptly, from time to time, such other information regarding
the operations, business affairs and financial condition of the Parent or
any Subsidiary, or compliance with the terms of any Loan Document, the
Administrative Agent or the Required Lenders may reasonably request.
SECTION 5.05. Litigation and Other Notices. Furnish to the
Administrative Agent and each Lender prompt (and, in any event, within five
Business Days after an officer of the Parent or the Borrower obtains knowledge
thereof), written notice of the occurrence of the following:
(a) any Event of Default or Default, specifying the nature and
extent thereof and the corrective action (if any) proposed to be taken
with respect thereto;
(b) the filing or commencement of, or any written threat or written
notice of intention of any Person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any Governmental
Authority, against the Borrower or any Affiliate thereof that, if
adversely determined, could reasonably be expected to result in a Material
Adverse Effect; and
(c) any development that has resulted in, or could reasonably be
expected to result in, a Material Adverse Effect.
SECTION 5.06. ERISA. (a) Comply with the applicable provisions of
ERISA and the Code and the regulations and published interpretations thereunder,
except where the failure to comply therewith could not reasonably be expected to
have a Material Adverse Effect, and (b) furnish to the Administrative Agent (i)
as soon as possible, and in any event within 30 days after any Responsible
Officer of the Parent or Borrower knows that any Reportable Event has occurred,
that alone or together with any other Reportable Event could reasonably be
expected to result in liability, of the Borrower, any Subsidiary or any ERISA
Affiliate to the PBGC, a statement of a Financial Officer of the Parent or
Borrower setting forth details as to such Reportable Event and the action
proposed to be taken with respect thereto, together with a copy of the notice,
if any, of such Reportable Event given to the PBGC, (ii) promptly after receipt
thereof, a copy of any notice the Parent, any Subsidiary or any ERISA Affiliate
receives from the PBGC relating to the intention of the PBGC to terminate any
Plan or Plans or to appoint a trustee to administer any Plan or Plans, (iii)
within 20 Business Days after the due date for filing with the PBGC pursuant to
Section 412(n) of the Code a notice of failure to make a required installment or
other payment with respect to a Plan, a statement of a Financial Officer of the
Borrower setting forth details as to such failure and the action proposed to be
taken with respect thereto, together with a copy of such notice given to the
PBGC and (iv) promptly and in any event within 30 days after receipt thereof by
the Parent, any Subsidiary or any ERISA Affiliate from the sponsor of a
Multiemployer Plan, a copy of each notice received by the Borrower, any
Subsidiary or any ERISA Affiliate concerning (A) the imposition of Withdrawal
Liability or (B) a determination that a Multiemployer Plan is, or is expected to
be, terminated or in reorganization, in each case within the meaning of Title IV
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of ERISA; provided, however, that no such notice will be required hereunder
unless the event, when aggregated with all other events occurring at the same
time, could be reasonably expected to result in liability in an amount that
would exceed $3,000,000.
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections. Maintain all financial records in accordance with GAAP and permit
any representatives designated by any Lender to visit and inspect the financial
records and the properties of the Parent or any Subsidiary at reasonable times
during normal business hours and upon reasonable notice and as often as
reasonably requested and to make extracts from and copies of such financial
records, and permit any representatives designated by any Lender to discuss the
affairs, finances, properties and accounts of the Parent or any Subsidiary with
the officers thereof and independent accountants therefor.
SECTION 5.08. Use of Proceeds. Use the proceeds of the Loans and
request the issuance of Letters of Credit only for the purposes set forth in the
preamble to this Agreement. The proceeds of all Term Loans shall be applied
immediately following receipt thereof by the Borrower in the manner required by
this Section 5.08.
SECTION 5.09. Compliance with Environmental Laws. (a) Except as
could not reasonably be expected to result in a Material Adverse Effect, comply,
and use its reasonable best efforts to cause all lessees and other Persons
occupying the Properties to comply, in all material respects with all
Environmental Laws and Environmental Permits applicable to its operations and
Properties; obtain and renew all material Environmental Permits necessary for
its operations and Properties; and conduct any Remedial Action required by any
Governmental Authority in accordance with Environmental Laws; provided, however,
that neither the Parent nor any of the Subsidiaries shall be required to
undertake any Remedial Action to the extent that its obligation to do so is
being contested in good faith and by proper proceedings and appropriate reserves
in accordance with GAAP are being maintained with respect to such circumstances.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions, required by any
Governmental Authorities under Environmental Laws and materially comply in a
timely manner with all lawful orders and directives of all Governmental
Authorities respecting Environmental Laws, except to the extent that the same
are being contested in good faith by appropriate proceedings and the pendency of
such proceedings would not have a Material Adverse Effect.
(c) Notify the Administrative Agent of any of the following that is
likely to have a Material Adverse Effect:
(i) any Environmental Claim that the Parent or the Borrower
receives, including one to take or pay for any remedial, removal, response
or cleanup or other action with respect to any Hazardous Material
contained on any of the Properties;
(ii) any written notice received by the Parent or the Borrower or
any other Subsidiary of any alleged violation of or knowledge by the
Parent or the Borrower of a condition that could reasonably be expected to
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result in a violation of any Environmental Law; and
(iii) any commencement of any judicial or administrative proceeding
or investigation known to the Parent or the Borrower alleging a violation
or potential violation of any requirement of Environmental Law by the
Parent or the Borrower or any other Subsidiary.
(d) Without limiting the generality of Section 9.05(b), indemnify
each Secured Creditor and each of their respective directors, officers,
employees, agents and Affiliates (each such Person being called an "Indemnitee")
against, and to hold each Indemnitee harmless from, any claims, demands,
penalties, fines, liabilities, settlements, damages, costs and expenses
(including reasonable counsel fees, charges and disbursements) of whatever kind
or nature arising out of, or in any way relating to, the violation of,
noncompliance with or liability under any Environmental Laws related to the
operations of the Parent or any of the Subsidiaries or to the Mortgaged
Properties, or otherwise resulting from a release of a Hazardous Material, or
any orders, requirements or demands of Governmental Authorities related thereto,
including, without limitation, reasonable attorney's and consultant's fees,
reasonable investigation and laboratory fees, response costs, court costs and
reasonable litigation expenses, except to the extent that any of the foregoing
are found by a final and nonappealable decision of a court of competent
jurisdiction to have resulted from the gross negligence or wilful misconduct of
the Indemnitee seeking indemnification therefor. This indemnity shall continue
in full force and effect regardless of the termination of this Agreement and the
other Loan Documents.
SECTION 5.10. Preparation of Environmental Reports. If a Default
caused by reason of a breach of Section 3.17 or 5.09 shall have occurred and be
continuing, at the request of the Required Lenders through the Administrative
Agent, provide to the Lenders within 60 days after such request, at the expense
of the Borrower, an environmental site assessment report for the Properties
(which are the subject of such default) prepared by an environmental consulting
firm reasonably acceptable to the Administrative Agent addressing the subject of
the breach and the estimated cost of any compliance or Remedial Action in
connection with such Properties.
SECTION 5.11. Further Assurances. Execute any and all further
documents, financing statements, agreements and instruments, and take all
further action (including filing Uniform Commercial Code and other financing
statements, mortgages and deeds of trust) that may be required under applicable
law, or which the Required Lenders, the Administrative Agent or the Collateral
Agent may reasonably request, in order to effectuate the transactions
contemplated by the Loan Documents and in order to grant, preserve, protect and
perfect the validity and first priority of the security interests created or
intended to be created by the Security Documents. In addition, the Parent will
cause any subsequently acquired or organized Domestic Subsidiary to execute a
Guarantee Agreement in favor of the Collateral Agent. In addition, from time to
time, the Parent and the Borrower will, at their cost and expense, promptly
secure the Obligations by pledging or creating, or causing to be pledged or
created, perfected security interests with respect to such of its assets and
properties as the Administrative Agent or the Required Lenders shall designate
(it being understood that it is the intent of the parties that the Obligations
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69
shall be secured by, among other things, (a) substantially all the assets of the
Parent and the Domestic Subsidiaries (including real and other properties
acquired subsequent to the Closing Date), other than the common stock of Foreign
Subsidiaries, and (b) by 65% of the common stock of each Foreign Subsidiary that
is owned directly by the Borrower or any Domestic Subsidiary); provided that the
assets of, and interests in, and proceeds, distributions and dividends from, any
Joint Venture shall not be required to be pledged pursuant to this Section 5.11.
The Lenders agree that cash and Permitted Investments permitted to be held by
the Parent in accordance with this Agreement shall not constitute Collateral and
that until an Event of Default shall have occurred and shall be occurring,
neither the Borrower nor any other Loan Party shall be required to enter into
any concentration account, blocked account, lockbox or similar arrangement for
the benefit of the Secured Parties with respect to any of their cash, Permitted
Investments, bank accounts or lockboxes. Such security interests and Liens will
be created under the Security Documents and other security agreements,
mortgages, deeds of trust and other instruments and documents in form and
substance satisfactory to the Collateral Agent, and the Borrower will deliver or
cause to be delivered to the Lenders all such instruments and documents
(including legal opinions, title insurance policies, surveys and lien searches)
as the Collateral Agent shall reasonably request to evidence compliance with
this Section 5.11. The Borrower agrees to provide such evidence as the
Collateral Agent shall reasonably request as to the perfection and priority
status of each such security interest and Lien.
SECTION 5.12. Surveys. Within 60 days after the Closing Date,
furnish the Collateral Agent with an as-built survey of each Mortgaged Property,
in form and substance satisfactory to the Collateral Agent.
SECTION 5.13. Fiscal Year. Cause its fiscal year to end on the
Saturday closest to December 31 of each year.
SECTION 5.14. Mergers. Cause each of the Fort Mill Merger and the CS
Finance Merger to be consummated on the Closing Date; cause the Post-Closing
Merger to be consummated on the first Business Day following the Closing Date;
and deliver to the Administrative Agent on the first Business Day following the
Closing Date evidence reasonably satisfactory to the Administrative Agent that
the Post-Closing Merger has been consummated.
ARTICLE VI. NEGATIVE COVENANTS
Each of the Parent and the Borrower covenants and agrees with each
Lender that, so long as this Agreement shall remain in effect and until the
Commitments have been terminated and the principal of and interest on each Loan,
all Fees and all other expenses or amounts payable under any Loan Document have
been paid in full and all Letters of Credit have been cancelled or have expired
and all amounts drawn thereunder have been reimbursed in full, unless the
Required Lenders shall otherwise consent in writing, neither the Parent nor the
Borrower will or will cause or permit any of the Subsidiaries to:
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SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist
any Indebtedness, except:
(a) Indebtedness existing on the Closing Date and set forth on
Schedule 6.01 (and any extensions, renewals or replacements of such
Indebtedness so long as the principal amount of such Indebtedness is not
increased and the maturity thereof is not shortened);
(b) Indebtedness created under any Loan Document;
(c) Indebtedness evidenced by the Senior Notes in an aggregate
principal amount not to exceed $110,000,000 (less any repayments or
prepayments of principal thereof) and Indebtedness of the Guarantors
arising from the guarantees thereof set forth in the Senior Notes
Documents;
(d) in the case of the Borrower and its Subsidiaries which are
Guarantors, Indebtedness consisting of purchase money Indebtedness
incurred in the ordinary course of business after the Closing Date to
finance Capital Expenditures permitted under Section 6.12; provided,
however, that the aggregate amount of Indebtedness under this paragraph
(d) and paragraph (e) below shall not exceed $10,000,000 outstanding at
any time;
(e) in the case of the Borrower and its Subsidiaries which are
Guarantors, Indebtedness in respect of Sale and Leaseback Transactions
permitted under Section 6.03, provided that the aggregate amount of
Indebtedness under this paragraph (e) and paragraph (d) above shall not
exceed $10,000,000 outstanding at any time;
(f) in the case of the Borrower and its Subsidiaries which are
Guarantors, Indebtedness in respect of Capital Lease Obligations permitted
under Section 6.11;
(g) in the case of the Borrower and its Subsidiaries which are
Guarantors, Indebtedness in respect of Rate Protection Agreements that are
entered into for the purpose of fixing or hedging interest rate risk with
respect to any floating rate Indebtedness permitted to be incurred by the
Borrower or any such Subsidiary;
(h) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary; provided, however,
that no Indebtedness under this clause (h) may be incurred by or issued to
any Subsidiary of the Borrower that is not a Guarantor;
(i) in the case of the Borrower and any Subsidiary that is a
Guarantor, other unsecured Indebtedness in a principal amount at any time
outstanding not in excess of $5,000,000 and guarantees in respect thereof;
(j) in the case of the Borrower and its Subsidiaries which are
Guarantors, Indebtedness in respect of Currency Protection Agreements
entered into to provide protection against fluctuations in currency values
in connection with the Borrower's and such Subsidiaries' operations as
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71
long as such transactions are bona fide hedging activities and not
speculative;
(k) Indebtedness of a corporation which becomes a Subsidiary after
the date hereof, provided that (i) such Indebtedness existed at the time
such corporation became a Subsidiary and was not created in anticipation
thereof and (ii) immediately after giving effect to the acquisition of
such corporation no Default or Event of Default shall have occurred and be
continuing (and any extensions, renewals or replacements of such
Indebtedness so long as the principal amount of such Indebtedness is not
increased and the maturity thereof is not shortened);
(l) Indebtedness permitted under Section 6.04;
(m) Indebtedness of any Joint Venture;
(n) in the case of the Parent, Indebtedness consisting of promissory
notes issued by the Parent to officers, directors and employees of the
Parent, the Borrower or any Subsidiary of the Borrower issued to purchase
or redeem shares of capital stock of the Parent pursuant to the terms of
any subscription agreement or option or similar agreement entered into in
the ordinary course of business by the Parent, provided that (i) such
promissory notes are subordinated to the prior payment of the obligations
of the Borrower under the Loan Documents on terms satisfactory to the
Administrative Agent, (ii) the aggregate principal amount of such
promissory notes does not exceed $5,000,000 outstanding at any time and
(iii) no principal of such promissory notes is payable prior to the date
that all obligations of the Borrower under the Loan Documents have been
paid in full and interest is payable no more frequently than semi-annually
(provided that no such interest shall be payable if an Event of Default
exists or would result therefrom);
(o) Indebtedness incurred by the Borrower or any of its Subsidiaries
that is a 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 Borrower or any such Subsidiary pursuant to such
agreements, in connection with the disposition of any business, assets or
Subsidiary of the Borrower (other than guarantees or similar credit
support by the Borrower or any of its Subsidiaries of Indebtedness
incurred by any Person acquiring all or any portion of such business,
assets or 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 Permitted Investments being valued at the fair market
value thereof as determined by the Board of Directors of the Borrower in
good faith) actually received by the Borrower or any of its Subsidiaries
that is a Guarantor in connection with such disposition; and
(p) Indebtedness secured by Liens permitted by Section 6.02(n) (and
any extensions, renewals or replacements of such Indebtedness as long as
the principal amount of such Indebtedness is not increased).
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SECTION 6.02. Liens. Create, incur, assume or permit to exist any
Lien on any property or assets (including stock or other securities of any
Person, including any Subsidiary) now owned or hereafter acquired by it or on
any income or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of the Parent and its Subsidiaries
existing on the Closing Date and set forth on Schedule 6.02 or on Schedule
B to any lender's title insurance policy delivered to the Collateral Agent
in accordance with Section 4.02(j) prior to the Closing Date (and any
extension, renewal or replacement of such Liens); provided, however, that
such Liens shall secure only those obligations that they secure on the
Closing Date;
(b) any Lien created under the Loan Documents;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary; provided, however,
that (i) such Lien is not created in contemplation of or in connection
with such acquisition, and (ii) such Lien does not apply to any other
property or assets of the Borrower or any Subsidiary;
(d) Liens for taxes, assessments or governmental charges not yet due
and payable or that are being contested in compliance with Section 5.03;
(e) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, landlord's or other like Liens arising in the ordinary course
of business and securing obligations that are not due and payable or, if a
portion thereof is due and payable, that are being contested in compliance
with Section 5.03;
(f) pledges or deposits made in the ordinary course of business in
compliance with workmen's compensation, unemployment insurance and other
social security laws or regulations;
(g) pledges or deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases (other than Capital Lease
Obligations), statutory obligations, surety and appeal bonds, government
contracts, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(h) purchase money security interests in real property, improvements
thereto or equipment or other property hereafter acquired (or, in the case
of improvements, constructed) by the Borrower or any Subsidiary; provided,
however, that (i) such security interests secure Indebtedness permitted by
Section 6.01, (ii) such security interests are incurred, and the
Indebtedness secured thereby is created, within 180 days after such
acquisition (or construction), (iii) the Indebtedness secured thereby does
not exceed 85% of the lesser of the cost or the fair market value of such
real property, improvements or equipment or other property at the time of
such acquisition (or construction) and (iv) such security interests do not
apply to any other property or assets of the Borrower or any Subsidiary;
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(i) Liens incurred in connection with Capital Lease Obligations
permitted under Section 6.11;
(j) Liens incurred in connection with any Sale and Leaseback
Transaction permitted under Section 6.03;
(k) zoning restrictions, easements, rights-of-way, restrictions on
use of real property, minor title defects and other similar encumbrances
that do not materially impair the current use or the value of the property
subject thereto;
(l) Liens on property of a Person existing at the time such Person
is merged into or consolidated with the Borrower or any Subsidiary;
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 Borrower;
(m) Liens on property of a Person existing at the time such Person
becomes a Subsidiary of the Borrower, provided that such Liens were in
existence prior to such Person's becoming a Subsidiary and do not extend
to any assets other than such property;
(n) Liens on property existing at the time of acquisition thereof by
the Borrower or any Subsidiary, provided that such Liens were in existence
prior to the contemplation of such acquisition;
(o) 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;
(p) any interest or title of a lessor in property subject to any
capital lease obligation or operating lease;
(q) Liens arising from precautionary filing of Uniform Commercial
Code financing statements regarding leases;
(r) Liens incurred by any Joint Venture; and
(s) judgement Liens relating to judgements not giving rise to an
Event of Default.
Notwithstanding the foregoing, the Parent and the Borrower will not (i) permit
any Lien to exist which secures the Senior Notes or any guarantee thereof or
(ii) permit any Lien to exist on their direct and indirect equity interests in
the Joint Ventures to secure any Indebtedness of the Parent or the Borrower or
any Subsidiary, except Liens in favor of the Collateral Agent.
SECTION 6.03. Sale and Leaseback Transactions. Enter into any
arrangement, directly or indirectly, with any Person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
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74
other property that it intends to use for substantially the same purpose or
purposes as the property being sold or transferred (a "Sale and Leaseback
Transaction"), except Sale and Leaseback Transactions entered into by the
Borrower to finance the acquisition of equipment and other property so long as
(a) the sum of (i) the outstanding Attributable Debt in respect of all such Sale
and Leaseback Transactions, (ii) the outstanding aggregate principal amount of
any purchase money Indebtedness incurred by the Borrower pursuant to Section
6.01(d) and (iii) the outstanding aggregate amount of all Capital Lease
Obligations incurred by the Borrower and the Subsidiaries in accordance with
Section 6.11 shall not exceed $10,000,000 at any time outstanding and (b) such
Sale and Leaseback Transaction occurs within 180 days after the acquisition of
such equipment or other property.
SECTION 6.04. Investments, Loans and Advances. Purchase, hold or
acquire any capital stock, evidences of Indebtedness or other securities of,
make or permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in, or give any Guarantee of Indebtedness of,
any other Person, except:
(a) investments by the Loan Parties existing on the Closing Date in
the capital stock of the Subsidiaries;
(b) investments (including loans, advances and convertible
debentures) existing on the Closing Date by the Loan Parties in the Joint
Ventures;
(c) cash and Permitted Investments;
(d) pledges and deposits permitted under Section 6.02(f) or (g);
(e) loans and advances to employees of the Borrower or any of its
subsidiaries for travel, entertainment, relocation expenses or other
similar business expenses in the ordinary course of business in an
aggregate principal amount outstanding at any one time not to exceed
$1,000,000;
(f) loans and advances by the Borrower to any Subsidiary that is a
Guarantor;
(g) Indebtedness permitted by Section 6.01;
(h) loans on the Closing Date by the Parent to the Management
Participants in an aggregate principal amount not to exceed $850,000 to
fund their purchases of Parent Common Stock; provided that such loans are
evidenced by promissory notes which are pledged pursuant to the Pledge
Agreement;
(i) additional loans by the Parent to the employees, directors and
officers of the Parent or any of its Subsidiaries in an aggregate
principal amount not to exceed $500,000 at any one time outstanding to
fund their purchases of Parent Common Stock; provided that such loans are
evidenced by promissory notes which shall be pledged pursuant to the
Pledge Agreement;
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(j) investments arising out of the receipt by the Borrower or any
Subsidiary of noncash consideration for the sale of assets permitted under
Section 6.05 provided that such consideration is pledged upon receipt
pursuant to the Pledge Agreement;
(k) (i) accounts receivable arising and trade credit granted in the
ordinary course of business and any securities received in satisfaction or
partial satisfaction thereof from financially troubled account debtors to
the extent reasonably necessary in order to prevent or limit loss and (ii)
prepayments and other credits to suppliers made in the ordinary course of
business consistent with past practices of the Borrower and its
Subsidiaries;
(l) transactions permitted by Section 6.05;
(m) investments (including by loans and advances) in Joint Ventures
after the Closing Date in an amount not to exceed to 80% of the Payables
Increase Amount (not to exceed $9,500,000);
(n) additional investments (including by loans and advances) in any
Joint Venture after the Closing Date provided that (i) no Default or Event
of Default has occurred and is continuing or would result therefrom, (ii)
all transactions related thereto shall be consummated in accordance in the
applicable law, (iii) none of the direct or indirect equity interests of
the Parent and the Borrower in such Joint Venture which has received the
proceeds of such investment made pursuant to this paragraph (n) are
subject to a Lien, provided, however, that as soon as such investment made
pursuant to this paragraph (n) in such Joint Venture has been repaid in
full (whether by distribution from any Joint Venture, contribution from
the Parent or by any other Person) then such restriction set forth in this
clause (iii) shall be immediately and automatically terminated, (iv) after
giving effect to such investment, the Parent or the Borrower or its
wholly-owned subsidiaries own a controlling interest in such Joint
Venture, (v) the Leverage Ratio (determined in a pro forma basis after
giving effect to such investment and the application of the proceeds
thereof) computed as at the last day of each of the two most recently
completed fiscal quarters of the Parent shall have been less than 4.5 to
1.0, and the Borrower shall have delivered to the Administrative Agent an
officers' certificate to such effect, (vi) the aggregate amount for all
investments pursuant to this paragraph (n) and paragraph (m) above shall
not exceed $15,000,000 and (vii) after any such investment is made in such
Joint Venture, all distributions and dividends paid by such Joint Venture
to the Parent or the Borrower or its Subsidiaries shall be used to repay
such investment until such investment made pursuant to this paragraph (n)
is repaid in full (whether by such distributions of dividends,
contributions from the Parent or by any other Person);
(o) investments (including by loans and advances) constituting the
purchase by the Borrower or its Subsidiaries of additional equity
interests in Joint Ventures provided that the consideration therefor is
capital stock of the Parent which is not mandatorily redeemable prior to
the date on which all obligations of the Loan Parties under the Loan
Documents have been paid in full;
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(p) additional investments (including by loans and advances) in
Joint Ventures after the Closing Date in an aggregate amount not to exceed
$3,000,000;
(q) investments (i) by the Borrower or any Subsidiary in any
wholly-owned Subsidiary that is a Guarantor (so long as such Guarantor
shall remain a wholly-owned Subsidiary), and (ii) by any Subsidiary in the
Borrower;
(r) additional investments (including by loans and advances) by any
Loan Party in any Joint Venture in an amount not to exceed the amount of
the proceeds from the issuances of capital stock (or options or warrants
therefor) by the Parent to the extent not required to be applied to repay
Term Loans pursuant to Section 2.12(c);
(s) additional investments (including by loans and advances) by any
Loan Party in any Joint Venture in an amount not to exceed the amount of
all distributions or dividends received (whether in cash, Permitted
Investments, property or otherwise (with the amount of all such non-cash
distributions determined by the fair market value thereof, as reasonably
determined by the Borrower)) by the Parent, the Borrower or any of their
respective Subsidiaries from a Joint Venture to the extent not further
distributed to the shareholders of the Parent; and
(t) the Parent, the Borrower and any Subsidiary may make capital
contributions to their respective subsidiaries.
SECTION 6.05. Mergers, Consolidations, Sales of Assets and
Acquisitions. Merge into or consolidate with any other Person, or permit any
other Person to merge into or consolidate with it, or sell, transfer, assign,
lease, sublease or otherwise dispose of (in one transaction or in a series of
transactions) all or any substantial part of its assets (whether now owned or
hereafter acquired) or any capital stock of any Subsidiary, or purchase, lease
or otherwise acquire (in one transaction or a series of transactions) all or any
substantial part of the assets of any other Person; provided, however, that the
foregoing shall not prohibit:
(a) sales of Permitted Investments for cash or other Permitted
Investments;
(b) sales, transfers and other dispositions of used or surplus
equipment, vehicles and other assets in an arm's length transaction (to
the extent that the Borrower shall have complied with the provisions of
Sections 2.09(c) and 2.12);
(c) Sale and Leaseback Transactions permitted by Section 6.03;
(d) sales of inventory in the ordinary course of business;
(e) sales, transfers and other dispositions by a Subsidiary to the
Borrower or to any other Subsidiary that is a party to the Guarantee
Agreement and all applicable Security Documents;
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(f) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with the
compromise or collection thereof in the ordinary course of business;
(g) the merger of any Subsidiary with the Borrower or any other
Subsidiary; provided, however, that (i) at the time of and immediately
after giving effect to any such merger no Default or Event of Default
shall have occurred, (ii) the Borrower shall be the surviving corporation
of any merger involving the Borrower, (iii) no Foreign Subsidiary may
merge with a Domestic Subsidiary unless the Domestic Subsidiary shall be
the surviving corporation in such merger and (iv) no Subsidiary may merge
with another Subsidiary unless the surviving corporation in such merger is
a Guarantor;
(h) operating leases in the ordinary course of business;
(i) Capital Expenditures permitted by Section 6.12, including
capital expenditures made with amounts excluded from the definition of
"Capital Expenditures";
(j) the Transaction;
(k) sales or transfers from the Borrower or any Subsidiary to the
Borrower or any wholly-owned Subsidiary that is a Guarantor;
(l) investments permitted by Section 6.04;
(m) the distribution, sale, lease, transfer or other disposition of
assets or property received from, or sales, mergers, leases, other
dispositions or transfers of any Joint Venture to any Person; and
(n) in addition to the investments permitted by Section 6.04, the
Borrower and its Subsidiaries may make additional investments (including
acquisitions); provided the aggregate value of all such investments does
not exceed $5,000,000 and provided that no Event of Default exists or
would exist after giving effect to any such investment.
SECTION 6.06. Dividends and Distributions. Declare or pay, directly
or indirectly, any dividend or make any other distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, with respect to any shares of its capital stock or directly or
indirectly redeem, purchase, retire or otherwise acquire for value (or permit
any Subsidiary to purchase or acquire) any shares of any class of its capital
stock or set aside any amount for any such purpose (collectively, "Restricted
Payments"); provided, however, that (a) the Borrower may declare and pay
dividends or make other distributions to the Parent to the extent of the
Parent's consolidated tax liability, (b) the Borrower may declare and pay
dividends or make other distributions to the Parent to pay expenses required to
be paid by the Parent in the ordinary course of business, provided that such
dividends and other distributions to the Parent pursuant to this clause (b) may
not exceed $500,000 in the aggregate in any fiscal year, (c) the Borrower may
declare and pay dividends or make other distributions to the Parent equal to
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amounts required to be paid by the Parent to repurchase or redeem shares of
Parent Common Stock pursuant to the terms of any subscription agreement or
option or similar agreement entered into in the ordinary course of business
between the Parent and any officer, director or employee of the Parent, the
Borrower or any Subsidiary of the Borrower who is no longer employed by the
Parent, the Borrower or any Subsidiary of the Borrower, so long as (i) the
aggregate amount of all such dividends paid shall not exceed $1,000,000 in any
fiscal year plus unused amounts from the later of the two consecutive preceding
fiscal years or the Closing Date and (ii) the aggregate amount of all such
dividends paid shall not exceed $3,000,000 in any fiscal year or $5,000,000 in
the aggregate, (d) the Parent may repurchase or redeem shares of Parent Common
Stock required to be repurchased or redeemed pursuant to the terms of any such
subscription agreement or option or similar agreement between the Parent and any
officer, director or employee of the Parent, the Borrower or any Subsidiary of
the Borrower who is no longer employed by the Parent, the Borrower or any
Subsidiary of the Borrower, so long as the aggregate amount of such repurchases
or redemptions shall not exceed the amount allowed to be dividend or distributed
to the Parent for such repurchases or redemptions pursuant to clause (c) above
or if the consideration therefor consists of subordinated promissory notes of
the Parent issued in accordance with Section 6.01(n), (e) the Borrower may pay
(i) a dividend to the Parent on the Closing Date of an amount of proceeds of the
Loans not to exceed $850,000 to be used by the Parent to make loans to the
Management Participants, the proceeds of which will be used by the Management
Participants on the Closing Date to purchase Parent Common Stock, and (ii)
dividends to the Parent after the Closing Date in amounts permitted to be used
by the Parent to make loans to employees, directors and officers of the Parent
and its Subsidiaries pursuant to Section 6.04(i), the proceeds of which will be
used by such employees, directors and officers to simultaneously purchase Parent
Common Stocks, (f) any Subsidiary of the Borrower may declare and pay dividends
or make other distributions to the Borrower, (g) the Joint Ventures or interests
in the Joint Ventures or an amount equal to any proceeds from the sale of, or an
amount equal to any distributions from, any of the Joint Ventures may be
distributed directly or indirectly to the shareholders of the Parent, (h) the
Borrower may pay dividends to the Parent in an amount sufficient to pay
directors' fees in an aggregate amount not to exceed $100,000 per year plus the
reasonable out-of-pocket expenses of its directors; (i) the Parent may redeem
the Parent Preferred Stock in an amount equal to the proceeds of a registered
initial public offering of its common stock and may make other Restricted
Payments in such amounts provided that, after giving effect thereto, (I) the
Term Loans and accrued interest thereon shall have been paid in full and (II)
the Leverage Ratio (determined on a pro forma basis after giving effect to such
issuance and the application of the proceeds thereof) at the end of the most
recent fiscal quarter is less than 3.0 to 1.0; (j) the Borrower may declare and
pay dividends to the Parent in an amount sufficient to pay all fees and expenses
pursuant to Section 6.07; (k) except as otherwise provided in clause (i), the
Parent may make Restricted Payments in an amount equal to the proceeds from the
issuances of its capital stock (and warrants and options therefor) to the extent
such proceeds are not required to be applied to repay Term Loans pursuant to
Section 2.12(c); and (l) the Borrower and any Subsidiary may make distributions
and declare and pay dividends to the Parent in an amount equal to the proceeds
from the sale of, or amount equal to any distributions from, any of the Joint
Ventures; provided, however, that (A) in the case of the Parent, (x) except in
the case of clauses (g), (i), (j), (k) and (l) above, the Parent shall pay each
obligation in respect of which a dividend is made to it no later than five
Business Days after the date on which such dividend is made and (y) each
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obligation in respect of which a dividend is made to it shall be due and payable
by the Parent no later than five Business Days after the date on which such
dividend is made and (B) no dividend or distribution may be made pursuant to
clauses (c), (e) and (g) of this Section 6.06 if at the time of such Restricted
Payment a Default or Event of Default has occurred and is continuing or would
result therefrom.
SECTION 6.07. Transactions with Affiliates. Sell or transfer any
property or assets to, or purchase or acquire any property or assets from, or
otherwise engage in any other transactions with, any of its Affiliates, except
that as long as no Default or Event of Default shall have occurred and be
continuing, the Borrower or any Subsidiary may engage in any of the foregoing
transactions in the ordinary course of business at prices and on terms and
conditions not less favorable to the Borrower or such Subsidiary than could be
obtained on an arm's-length basis from unrelated third parties; provided,
however, that this Section 6.07 shall not restrict (i) any transaction expressly
permitted by Section 6.04 or 6.06, (ii) the consummation of the Transaction,
(iii) the payment of fees and expenses (and indemnities) in connection with the
Transaction, including those to Vestar Capital, (iv) the Parent and the Borrower
may make payments under the Management Advisory Agreement (as in effect on the
Closing Date), (v) transactions among the Parent, the Borrower and their
wholly-owned Subsidiaries which are Guarantors, (vi) payment of reasonable
compensation to, and providing indemnities on behalf of, officers and directors
of the Parent and its Subsidiaries as determined in good faith by the Borrower's
Board of Directors or senior management and (vii) the sale of equity securities
by the Parent provided that the Net Cash Proceeds thereof are applied in
accordance with Section 2.12 to the extent required thereby.
SECTION 6.08. Business of Parent, Borrower and Subsidiaries. (a) In
the case of the Borrower and its Subsidiaries, engage at any time in any
business or business activity other than the business conducted by it as of the
Closing Date and business activities reasonably incidental thereto.
(b) In the case of the Parent, engage in any activities other than
(i) continuing to own all of the Borrower Common Stock and activities incidental
thereto or create or acquire any Subsidiary (other than the Borrower and its
Subsidiaries), (ii) performing its obligations under the Transaction Documents,
(iii) owning the interests in the Joint Ventures, (iv) the making of loans to
the extent permitted by Section 6.04 and the making of Restricted Payments to
the extent permitted by Section 6.06 and (v) owning cash, Permitted Investments,
dividends and distributions received from the Borrower, any Subsidiary or any
Joint Venture.
SECTION 6.09. Limitations on Certain Debt Payments and Interest
Payments. Optionally prepay, repurchase or redeem or otherwise defease or
segregate funds with respect to any Indebtedness under Senior Notes Documents;
provided that, if the Parent successfully completes an initial public offering
of Parent Common Stock and the Term Loans hereunder have been prepaid or are
prepaid from the proceeds of the offering, then the additional unused proceeds
of such offering may be used to prepay, repurchase, redeem or otherwise defease
or segregate funds with respect to any Indebtedness of the Parent or any
Subsidiary.
SECTION 6.10. Amendment of Certain Documents; Certain Agreements.
(a) Permit any termination of, or any amendment or modification that, in the
reasonable judgment of the Lenders, is adverse in any material respect to the
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Lenders and except as required in connection with transactions otherwise
permitted hereunder, to: (i) the Certificate of Incorporation of the Parent or
any Subsidiary, (ii) the By-laws of the Parent or any Subsidiary or (ii) any
Rate Protection Agreement.
(b) Permit any amendment, modification or waiver of any Senior Notes
Document or Merger Document that is adverse to the Lenders.
(c) Permit any Subsidiary to enter into any indenture, agreement or
other instrument that restricts the ability of such Subsidiary to pay dividends
or make distributions on its capital stock.
SECTION 6.11. Limitation on Capital Lease Obligations. Create or
suffer to exist any Capital Lease Obligation, except Capital Lease Obligations
incurred by the Borrower or Subsidiary that is a Guarantor to finance the
acquisition of equipment and other property, so long as the sum of (a) the
outstanding amount of all such Capital Lease Obligations, (b) the outstanding
aggregate principal amount of any purchase money Indebtedness incurred by the
Borrower in accordance with Section 6.01(d) and (c) the outstanding aggregate
Attributable Debt in respect of all Sale and Leaseback Transactions entered into
by the Borrower or any of its Subsidiaries in accordance with Section 6.03 shall
not exceed $10,000,000 at any time outstanding.
SECTION 6.12. Capital Expenditures. Make or permit to be made any
Capital Expenditures, except that the Borrower and its Subsidiaries may make
Capital Expenditures during each fiscal year not in excess of $9,000,000;
provided, however, that the amount of permitted Capital Expenditures in any
fiscal year shall be increased by the total amount of unused permitted Capital
Expenditures for the immediately preceding fiscal year (less an amount equal to
any unused Capital Expenditures carried forward to such preceding year).
SECTION 6.13. Fixed Charge Coverage Ratio. Permit the Fixed Charge
Coverage Ratio on the last day of each fiscal year indicated below to be less
than the ratio set forth opposite such fiscal year:
Fiscal Year: Ratio:
------------ ------
1996 1.05:1.00
1997 1.05:1.00
1998 1.05:1.00
1999 1.00:1.00
2000 1.00:1.00
2001 1.00:1.00
2002 1.00:1.00
SECTION 6.14. Interest Expense Coverage Ratio. Permit the Interest
Expense Coverage Ratio for any period of four consecutive fiscal quarters ending
on the last day of the fiscal quarter indicated below (or, if shorter, the
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81
period from and including April 1, 1996, to such last day) to be less than the
ratio set forth opposite such date:
Fiscal Quarter Ending: Ratio:
---------------------- ------
June 29, 1996 1.60:1.00
September 28, 1996 1.60:1.00
December 28, 1996 1.60:1.00
March 29, 1997 1.60:1.00
June 28, 1997 1.60:1.00
September 27, 1997 1.60:1.00
January 3, 1998 1.60:1.00
April 4, 1998 1.60:1.00
July 4, 1998 1.70:1.00
October 3, 1998 1.70:1.00
January 2, 1999 1.70:1.00
April 3, 1999 1.70:1.00
July 3, 1999 1.80:1.00
October 2, 1999 1.80:1.00
January 1, 2000 1.80:1.00
April 1, 2000 1.80:1.00
July 1, 2000 2.00:1.00
September 30, 2000 2.00:1.00
December 30, 2000 2.00:1.00
March 31, 2001 2.00:1.00
June 30, 2001 2.25:1.00
September 29, 2001 2.25:1.00
December 29, 2001 2.25:1.00
March 30, 2002 2.25:1.00
June 29, 2002 2.25:1.00
SECTION 6.15. Senior Debt Ratio. Permit the ratio on the last day of
the fiscal quarter indicated below of (i) senior secured Indebtedness of the
Parent and its Subsidiaries less cash and Permitted Investments held by the
Parent and its Subsidiaries to (ii) EBITDA for the period of four consecutive
fiscal quarters ended on such day, to be in excess of the ratio set forth
opposite such date:
Fiscal Quarter Ending: Ratio:
---------------------- ------
June 29, 1996 3.00:1.00
September 28, 1996 3.00:1.00
December 28, 1996 3.00:1.00
March 29, 1997 3.00:1.00
June 28, 1997 3.00:1.00
September 27, 1997 3.00:1.00
January 3, 1998 3.00:1.00
April 4, 1998 3.00:1.00
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July 4, 1998 2.75:1.00
October 3, 1998 2.75:1.00
January 2, 1999 2.75:1.00
April 3, 1999 2.75:1.00
July 3, 1999 2.50:1.00
October 2, 1999 2.50:1.00
January 1, 2000 2.50:1.00
April 1, 2000 2.50:1.00
July 1, 2000 2.50:1.00
September 30, 2000 2.50:1.00
December 30, 2000 2.50:1.00
March 31, 2001 2.50:1.00
June 30, 2001 2.25:1.00
September 29, 2001 2.25:1.00
December 29, 2001 2.25:1.00
March 30, 2002 2.00:1.00
June 29, 2002 2.00:1.00
ARTICLE VII. EVENTS OF DEFAULT
In case of the happening of any of the following events ("Events of
Default"):
(a) any representation or warranty made or deemed made by any Loan
Party in any Loan Document, or any representation, warranty, statement or
information provided by or on behalf of a Loan Party contained in any
report, certificate, financial statement or other instrument furnished
pursuant to any Loan Document, shall prove to have been false or
misleading in any material respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of any
Loan or reimbursement with respect to any L/C Disbursement when and as the
same shall become due and payable, whether at the due date thereof or at a
date fixed for payment thereof or by acceleration thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan
or L/C Disbursement or any Fee or any other amount (other than an amount
referred to in (b) above) due under any Loan Document, when and as the
same shall become due and payable, and such default shall continue
unremedied for a period of five Business Days;
(d) default shall be made in the due observance or performance by
the Parent or any Subsidiary of any covenant, condition or agreement
contained in Section 5.01(a), 5.05(a), 5.08 or 5.14 or in Article VI;
(e) default shall be made in the due observance or performance by
the Parent or any Subsidiary of any covenant, condition or agreement
contained in any Loan Document (other than those specified in clause (b),
(c) or (d) above) and such default shall continue unremedied for a period
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83
of 30 days after notice thereof from the Administrative Agent to the
Borrower;
(f) the Parent or any Subsidiary shall (i) fail to pay any principal
or interest, regardless of amount, due in respect of any Indebtedness in a
principal amount in excess of $5,000,000, when and as the same shall
become due and payable (after giving effect to any applicable grace
period), or (ii) fail to observe or perform any other term, covenant,
condition or agreement contained in any agreement or instrument evidencing
or governing any such Indebtedness if the effect of any failure referred
to in this clause (ii) is to cause, or to permit the holder or holders of
such Indebtedness or a trustee on its or their behalf (with or without the
giving of notice, the lapse of time or both) to cause, such Indebtedness
to become due prior to its stated maturity;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) relief in respect of the Parent or any
Subsidiary, or of a substantial part of the property or assets of the
Parent or a Subsidiary, under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other Federal or state
bankruptcy, insolvency, receivership or similar law, (ii) the appointment
of a receiver, trustee, custodian, sequestrator, conservator or similar
official for the Parent or any Subsidiary or for a substantial part of the
property or assets of the Parent or a Subsidiary or (iii) the winding-up
or liquidation of the Parent or any Subsidiary; and such proceeding or
petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered;
(h) the Parent or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended, or any other
Federal or state bankruptcy, insolvency, receivership or similar law, (ii)
consent to the institution of, or fail to contest in a timely and
appropriate manner (but within 60 days in any event), any proceeding or
the filing of any petition described in (g) above, (iii) apply for or
consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Parent or any
Subsidiary or for a substantial part of the property or assets of the
Parent or any Subsidiary, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v)
make a general assignment for the benefit of creditors, (vi) become
unable, admit in writing its inability or fail generally to pay its debts
as they become due or (vii) take any action for the purpose of effecting
any of the foregoing;
(i) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 (to the extent not covered by insurance)
shall be rendered against the Parent, any Subsidiary or any combination
thereof and the same shall remain undischarged for a period of 60
consecutive days from the entry thereof during which execution shall not
be effectively stayed;
(j) a Reportable Event or Reportable Events, or a failure to make a
required installment or other payment (within the meaning of Section
412(n)(l) of the Code), shall have occurred with respect to any Plan or
Plans that could reasonably be expected to result in liability of the
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84
Borrower to the PBGC or to a Plan and, within 30 days after the reporting
of any such Reportable Event to the Administrative Agent or after the
receipt by the Administrative Agent of the statement required pursuant to
Section 5.06(b)(iii), the Administrative Agent shall have notified the
Borrower in writing that (i) the Required Lenders have reasonably
determined that, on the basis of such Reportable Event or Reportable
Events or the failure to make a required payment, there are reasonable
grounds (A) for the termination of such Plan or Plans by the PBGC, (B) for
the appointment by the appropriate United States district court of a
trustee to administer such Plan or Plans or (C) for the imposition of a
lien in favor of a Plan and (ii) as a result thereof an Event of Default
exists hereunder; or a trustee shall be appointed by a United States
district court to administer any such Plan or Plans; or the PBGC shall
institute proceedings to terminate any Plan or Plans or give notice of its
intention to do so; and, in connection with any of the events set forth in
this clause (j), the liability that the Borrower, its Subsidiaries and its
ERISA Affiliates could be reasonably expected to incur would have a
Material Adverse Effect;
(k) (i) the Parent, any Subsidiary or any ERISA Affiliate shall have
been notified by the sponsor of a Multiemployer Plan (or otherwise shall
know or have a reasonable basis to believe) that it has incurred
Withdrawal Liability to such Multiemployer Plan, (ii) the Parent, such
Subsidiary or such ERISA Affiliate shall not have reasonable grounds for
contesting such Withdrawal Liability or shall not in fact contest such
Withdrawal Liability in a timely and appropriate manner and (iii) the
amount of the Withdrawal Liability specified in such notice, when
aggregated with all other amounts required to be paid to Multiemployer
Plans in connection with unsatisfied Withdrawal Liabilities (determined as
of the date or dates of such notification), could be reasonably expected
to have a Material Adverse Effect;
(l) the Parent, any Subsidiary or any ERISA Affiliate shall have
been notified by the sponsor of a Multiemployer Plan (or otherwise shall
know or have a reasonable basis to believe) that such Multiemployer Plan
is in reorganization or is being terminated, within the meaning of Title
IV of ERISA, if solely as a result of such reorganization or termination
the aggregate annual contributions of the Parent, the Subsidiaries and the
ERISA Affiliates to all Multiemployer Plans that are then in
reorganization or have been or are being terminated have been or will be
increased over the amounts required to be contributed to such
Multiemployer Plans for their most recently completed plan years by an
amount that could be reasonably expected to have a Material Adverse
Effect;
(m) there shall have occurred a Change in Control;
(n) any security interest purported to be created by any Security
Document shall cease to be, or shall be asserted by any Loan Party not to
be, a valid, perfected, first priority (except as otherwise expressly
provided in the Credit Agreement or such Security Document) security
interest in the securities, assets or properties covered thereby (other
than a security interest in securities, assets or properties having, in
the aggregate, a fair market value not in excess of $250,000), except to
the extent that any such loss of perfection or priority results from the
failure of the Collateral Agent to maintain possession of certificates
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85
representing securities pledged under the Pledge Agreement or to file UCC
continuation statements unless the Borrower or other applicable Loan Party
has been requested by the Collateral Agent in writing to file such
statements in a timely fashion and fails to do so;
(o) any Loan Document shall not be for any reason, or shall be
asserted by any Loan Party not to be, in full force and effect and
enforceable in all material respects in accordance with its terms; or
(p) any material provision of any Guarantee Agreement shall cease to
be in full force and effect and enforceable in accordance with its terms
for any reason whatsoever or any Guarantor shall contest or deny in
writing the validity or enforceability of any of its obligations under the
Guarantee Agreement, as applicable;
then, and in every such event (other than an event with respect to the Parent or
the Borrower described in paragraph (g) or (h) above), and at any time
thereafter during the continuance of such event, the Administrative Agent may,
and at the request of the Required Lenders shall, by notice to the Borrower,
take either or both of the following actions, at the same or different times:
(i) terminate forthwith the Commitments and (ii) declare the Loans then out-
standing to be forthwith due and payable in whole or in part, whereupon the
principal of the Loans so declared to be due and payable, together with accrued
interest thereon and any unpaid accrued Fees and all other liabilities of the
Borrower accrued hereunder and under any other Loan Document, shall become
forthwith due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived by the Borrower,
anything contained herein or in any other Loan Document to the contrary
notwithstanding; and in any event with respect to the Parent or the Borrower
described in paragraph (g) or (h) above, the Commitments shall automatically
terminate and the principal of the Loans then outstanding, together with accrued
interest thereon and any unpaid accrued Fees and all other liabilities of the
Borrower accrued hereunder and under any other Loan Document, shall
automatically become due and payable, without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived by the
Borrower, anything contained herein or in any other Loan Document to the
contrary notwithstanding.
ARTICLE VIII. THE AGENTS
In order to expedite the transactions contemplated by this
Agreement, Chemical Bank is hereby appointed to act as Administrative Agent,
Collateral Agent, Documentation Agent and Syndication Agent on behalf of the
Lenders and the Issuing Bank and BTCo., Fleet and NationsBank are hereby
appointed as Co-Agents on behalf of the Lenders (the Administrative Agent, the
Collateral Agent, the Documentation Agent, the Syndication Agent and the
Co-Agents are referred to collectively as the "Agents"). Each of the Lenders and
each assignee of any such Lender, hereby irrevocably authorizes the Agents to
take such actions on behalf of such Lender or assignee or the Issuing Bank and
to exercise such powers as are specifically delegated to the Agents by the terms
and provisions hereof and of the other Loan Documents, together with such
actions and powers as are reasonably incidental thereto. The Administrative
Agent is hereby expressly authorized by the Lenders and the Issuing Bank,
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86
without hereby limiting any implied authority, (a) to receive on behalf of the
Lenders and the Issuing Bank all payments of principal of and interest on the
Loans, all payments in respect of L/C Disbursements and all other amounts due to
the Lenders hereunder, and to distribute to each Lender or the Issuing Bank on
the due date therefor its proper share of each payment so received; (b) to give
notice on behalf of each of the Lenders to the Borrower of any Event of Default
specified in this Agreement of which the Administrative Agent has actual
knowledge acquired in connection with its agency hereunder; and (c) to
distribute promptly to each Lender copies of all notices, financial statements
and other materials delivered by the Parent or the Borrower pursuant to this
Agreement as received by the Administrative Agent. Without limiting the
generality of the foregoing, the Agents are hereby expressly authorized to
execute any and all documents (including releases) with respect to the
Collateral and the rights of the Secured Parties with respect thereto, as
contemplated by and in accordance with the provisions of this Agreement and the
Security Documents.
Neither the Agents nor any of their respective directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them except for its or his own gross negligence or wilful misconduct, or
be responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or observance by the
Borrower or any other Loan Party of any of the terms, conditions, covenants or
agreements contained in any Loan Document. The Agents shall not be responsible
to the Lenders for the due execution, genuineness, validity, enforceability or
effectiveness of this Agreement or any other Loan Documents or other instruments
or agreements. The Agents shall in all cases be fully protected in acting, or
refraining from acting, in accordance with written instructions signed by the
Required Lenders (or, in the case of any matter requiring the approval of all
the Lenders, in accordance with written instructions signed by all the Lenders)
and, except as otherwise specifically provided herein, such instructions and any
action or inaction pursuant thereto shall be binding on all the Lenders. Each
Agent shall, in the absence of knowledge to the contrary, be entitled to rely on
any instrument or document believed by it in good faith to be genuine and
correct and to have been signed or sent by the proper Person or Persons. Neither
the Agents nor any of their respective directors, officers, employees or agents
shall have any responsibility to the Borrower or any other Loan Party on account
of the failure of or delay in performance or breach by any Lender or the Issuing
Bank of any of its obligations hereunder or to any Lender or the Issuing Bank on
account of the failure of or delay in performance or breach by any other Lender
or the Issuing Bank or the Borrower or any other Loan Party of any of their
respective obligations hereunder or under any other Loan Document or in
connection herewith or therewith. Each of the Agents may execute any and all
duties hereunder by or through agents or employees and shall be entitled to rely
upon the advice of legal counsel selected by it with reasonable care with
respect to all matters arising hereunder and shall not be liable for any action
taken or suffered in good faith by it in accordance with the advice of such
counsel.
The Lenders hereby acknowledge that no Agent shall be under any duty
to take any discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement unless it shall be requested in writing to do so by
the Required Lenders.
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87
Subject to the appointment and acceptance of a successor Agent as
provided below, any Agent may resign at any time by notifying the Lenders and
the Borrower. Upon any such resignation, the Required Lenders shall have the
right to appoint a successor, which successor shall be reasonably acceptable to
the Borrower. If no successor shall have been so appointed by the Required
Lenders and shall have accepted such appointment within 60 days after the
retiring Agent gives notice of its resignation, then the retiring Agent may, on
behalf of the Lenders, appoint a successor Agent which shall be a bank with an
office in New York, New York, having a combined capital and surplus of at least
$500,000,000 or an Affiliate of any such bank and be reasonably acceptable to
the Borrower. Upon the acceptance of any appointment as Agent hereunder by a
successor bank, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent and the retiring
Agent shall be discharged from its duties and obligations hereunder. After the
Agent's resignation hereunder, the provisions of this Article and Section 9.05
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.
With respect to the Loans made by it hereunder, each Agent in its
individual capacity and not as Agent shall have the same rights and powers as
any other Lender and may exercise the same as though it were not an Agent, and
the Agents and their Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not an Agent.
Each Lender agrees (i) to reimburse the Agents, on demand, in the
amount of its pro rata share (based on its Commitments hereunder) of any
expenses incurred for the benefit of the Lenders by the Agents, including
counsel fees and compensation of agents paid for services rendered on behalf of
the Lenders, that shall not have been reimbursed by the Borrower and (ii) to
indemnify and hold harmless each Agent and any of its directors, officers,
employees or agents, on demand, in the amount of such pro rata share, from and
against any and all liabilities, taxes (other than income taxes), obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be imposed on, incurred
by or asserted against it in its capacity as Agent or any of them in any way
relating to or arising out of this Agreement or any other Loan Document or any
action taken or omitted by it or any of them under this Agreement or any other
Loan Document, to the extent the same shall not have been reimbursed by the
Borrower; provided, however, that no Lender shall be liable to an Agent for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the gross
negligence or wilful misconduct of such Agent or any of its directors, officers,
employees or agents.
Each Lender acknowledges that it has, independently and without
reliance upon the Agents or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agents or any other Lender and
based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement or any other Loan Document, any related
agreement or any document furnished hereunder or thereunder.
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ARTICLE IX. MISCELLANEOUS
SECTION 9.01. Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Parent, to it at 245 Park Avenue, New York, New York
10017, Attention of Sander Levy (Telecopy No. (212) 808-4922);
(b) if to the Borrower, to it at 2200 South Murray Avenue, Anderson,
South Carolina 29622, Attention of Don Burnette (Telecopy No. (864)
260-3377), with a copy to: Kirkland & Ellis, 665 Fifteenth Street N.W.,
Suite 1200, Washington, D.C. 2005, Attention of Jack Feder (Telecopy No.
(202) 879-5200);
(c) if to the Administrative Agent, to Chemical Bank Agency Services
Corporation, Grand Central Tower, 140 East 45th Street, New York, New York
10017, Attention of Chris Consomer (Telecopy No. (212) 622-0122), with a
copy to Chemical Bank, at 270 Park Avenue, New York 10017, Attention of
Peter Eckstein (Telecopy No. (212) 972-0009); and
(d) if to the Issuing Bank or a Lender, to it at its address (or
telecopy number) set forth on Schedule 2.01 or in the Assignment and
Acceptance pursuant to which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch, if mailed by
certified or registered mail, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 9.01 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Parent and the Borrower herein and in
the certificates or other instruments prepared or delivered in connection with
or pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and the Issuing Bank and shall survive the
making by the Lenders of the Loans and the issuance of Letters of Credit by the
Issuing Bank, regardless of any investigation made by the Lenders or the Issuing
Bank or on their behalf, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement or any other Loan Document is outstanding
and unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not been terminated.
SECTION 9.03. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Parent, the Borrower and the
Administrative Agent and when the Administrative Agent shall have received
counterparts hereof that, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
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benefit of the parties hereto and their respective permitted successors and
assigns.
SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the permitted successors and assigns of such party; and all covenants,
promises and agreements by or on behalf of the Borrower, the Administrative
Agent, the Issuing Bank or the Lenders that are contained in this Agreement
shall bind and inure to the benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion
of its interests, rights and obligations under this Agreement (including all or
a portion of its Commitments, the Loans and its L/C Exposure at the time owing
to it); provided, however, that (i) except in the case of an assignment to a
Lender or an Affiliate of a Lender, the Borrower and the Administrative Agent
(and, in the case of any assignment of a Revolving Credit Commitment and the
Issuing Bank) must give their prior written consent to such assignment (which
consent shall not be unreasonably withheld or delayed), (ii) except in the case
of an assignment to a Lender or an Affiliate of a Lender, the amount of the
Commitments of the assigning Lender subject to each such assignment (determined
as of the date the Assignment and Acceptance with respect to such assignment is
delivered to the Administrative Agent) shall not be less than $5,000,000 (or, if
less, the entire Commitment of the assigning Lender), (iii) the parties to each
such assignment shall execute and deliver to the Administrative Agent an
Assignment and Acceptance, together with a processing and recordation fee of
$3,500 (provided, however, that if such assignment is being effected pursuant to
Section 2.13(c), 2.14(c) or 2.19(g) or paragraph (j) below, such recordation fee
shall be paid to the Administrative Agent by the Borrower or the Issuing Bank,
as applicable), and (iv) the assignee, if it shall not be a Lender, shall
deliver to the Administrative Agent an Administrative Questionnaire and all tax
forms required by Section 2.19, if any. Assignments of Commitments need not be
pro rata. Upon acceptance and recording pursuant to paragraph (e) below, from
and after the effective date specified in each Assignment and Acceptance, which
effective date shall be at least five Business Days after the execution thereof,
(A) the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement and (B) the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.13, 2.15, 2.19 and 9.05, as well as to any interest and
Fees accrued for its account and not yet paid).
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Term Loan Commitment and Revolving Credit Commitment, the outstanding
balances of its Term Loans and Revolving Loans and its outstanding L/C Exposure,
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in each case without giving effect to assignments thereof which have not become
effective, are as set forth in such Assignment and Acceptance, (ii) except as
set forth in (i) above, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement, or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement, any other Loan Document or any other instrument or
document furnished pursuant hereto, or the financial condition of any Loan Party
or the performance or observance by any Loan Party of any of its obligations
under this Agreement, any other Loan Document or any other instrument or
document furnished pursuant hereto; (iii) such assignee represents and warrants
that it is legally authorized to enter into such Assignment and Acceptance; (iv)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the most recent financial statements, if any, delivered pursuant
to Section 5.04 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (v) such assignee will independently and without
reliance upon the Administrative Agent, the Collateral Agent, such assigning
Lender or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (vi) such assignee appoints
and authorizes the Administrative Agent and the Collateral Agent to take such
action as agent on its behalf and to exercise such powers under this Agreement
as are delegated to the Administrative Agent and the Collateral Agent,
respectively, by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
principal amount of the Loans owing to and L/C Exposure of, each Lender pursuant
to the terms hereof from time to time (the "Register"). The entries in the
Register shall be conclusive and the Borrower, the Administrative Agent, the
Issuing Bank, the Collateral Agent and the Lenders may treat each Person whose
name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrower, the
Issuing Bank, the Collateral Agent and any Lender, at any reasonable time and
from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee together with applicable tax forms required
by Section 2.19, if any (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b)
above to the extent required and, if required, the written consent of the
Borrower, the Issuing Bank and the Administrative Agent to such assignment, the
Administrative Agent shall (i) accept such Assignment and Acceptance, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Lenders and the Issuing Bank. No assignment shall be
effective unless it has been recorded in the Register as provided in this
paragraph (e).
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(f) Each Lender may without the consent of the Borrower, the Issuing
Bank or the Administrative Agent sell participations to one or more banks or
other entities in all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment, the Loans owing to it
and its L/C Exposure); provided, however, that (i) such Lender's obligations
under this Agreement shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) the participating banks or other entities shall be entitled
to the benefit of the cost protection provisions contained in Sections 2.13,
2.15 and 2.19 to the same extent as if they were Lenders and (iv) the Borrower,
the Administrative Agent, the Issuing Bank and the Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement, and such Lender shall retain the
sole right to enforce the obligations of the Borrower relating to the Loans or
L/C Disbursements and to approve any amendment, modification or waiver of any
provision of this Agreement (other than amendments, modifications or waivers
decreasing any fees payable to the Lenders hereunder or the amount of principal
of or the rate at which interest is payable on the Loans, extending any
scheduled final principal payment date or date fixed for the payment of interest
on the Loans, in each case to the extent the participant is participating
therein, and the actual release of all or substantially all the Collateral under
the Security Documents, provided that participants shall not be permitted to
vote on waivers of post-default interest rates or amendments or waivers that
affect financial definitions used in the definition of "Applicable Margin", it
being understood that a waiver of any Default or Event of Default or of a
mandatory reduction in the Total Revolving Credit Commitment or of a mandatory
prepayment shall not constitute a change in the terms of such participation, and
that an increase in any Commitment or Loan shall be permitted without the
consent of any participant if the participants' participation is not increased
as a result thereof).
(g) Any Lender or participant may, in connection with any assignment
or participation or proposed assignment or participation pursuant to this
Section 9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender by
or on behalf of the Borrower; provided, however, that, prior to any such
disclosure of information designated by the Borrower as confidential, each such
assignee or participant or proposed assignee or participant shall execute an
agreement whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of confidential information on terms
no less restrictive than those applicable to the Lenders pursuant to Section
9.17.
(h) Any Lender may at any time assign all or any portion of its
rights under this Agreement to a Federal Reserve Bank to secure extensions of
credit by such Federal Reserve Bank to such Lender; provided, however, that no
such assignment shall release a Lender from any of its obligations hereunder or
substitute any such Federal Reserve Bank for such Lender as a party hereto. In
order to facilitate such an assignment to a Federal Reserve Bank, the Borrower
shall, at the request of the assigning Lender, duly execute and deliver to the
assigning Lender a promissory note or notes evidencing the Loans made to the
Borrower by the assigning Lender hereunder.
(i) Neither the Parent nor the Borrower shall assign or delegate any
of its rights or duties hereunder without the prior written consent of the
Administrative Agent, the Issuing Bank and each Lender, and any attempted
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assignment without such consent shall be null and void.
(j) In the event that Standard & Poor's Ratings Group, Moody's
Investors Service, Inc., and Thompson's BankWatch (or InsuranceWatch Ratings
Service, in the case of Lenders that are insurance companies (or Best's
Insurance Reports, if such insurance company is not rated by Insurance Watch
Ratings Service)) shall, after the date that any Lender becomes a Lender,
downgrade the long-term certificate of deposit ratings (or long-term senior debt
ratings in the case of a Lender that is not a bank) of such Lender, and the
resulting ratings shall be below BBB-, Baa3 and C (or BB, in the case of a
Lender that is an insurance company (or B, in the case of an insurance company
not rated by InsuranceWatch Ratings Service)), respectively, then the Issuing
Bank shall have the right, but not the obligation, at its own expense, upon
notice to such Lender and the Administrative Agent, to replace (or to request
the Borrower, at Issuing Bank's expense, to use its reasonable efforts to
replace) such Lender with an assignee (in accordance with and subject to the
restrictions contained in paragraph (b) above), and such Lender hereby agrees to
transfer and assign without recourse (in accordance with and subject to the
restrictions contained in paragraph (b) above) all its interests, rights and
obligations in respect of its Revolving Credit Commitment to such assignee;
provided, however, that (i) such assignee shall be reasonably acceptable to the
Administrative Agent and the Borrower, (ii) no such assignment shall conflict
with any law, rule and regulation or order of any Governmental Authority and
(iii) the Issuing Bank or such assignee, as the case may be, shall pay to such
Lender in immediately available funds on the date of such assignment the
principal of and interest accrued to the date of payment on the Loans made by
such Lender hereunder and all other amounts accrued for such Lender's account or
owed to it hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay
all reasonable out-of-pocket expenses incurred by the Administrative Agent and
the Issuing Bank in connection with the preparation and administration of this
Agreement and the other Loan Documents or in connection with any amendments,
modifications or waivers of the provisions hereof or thereof (whether or not the
transactions hereby contemplated shall be consummated) or incurred by any Agent
or Lender or the Issuing Bank in connection with the enforcement or protection
of their rights in connection with this Agreement and the other Loan Documents
or in connection with the Loans made or Letters of Credit issued hereunder,
including the reasonable fees, charges and disbursements of Simpson Thacher &
Bartlett, counsel for the Administrative Agent, the Collateral Agent and the
Issuing Bank, and one local counsel in each applicable jurisdiction, and, in
connection with any such enforcement or protection, the fees, charges and
disbursements of any other counsel for any Agent or Lender or the Issuing Bank.
(b) The Borrower agrees to indemnify each Agent, each Lender and the
Issuing Bank, each Affiliate of any of the foregoing Persons and each of their
respective directors, officers, employees and agents (each such Person being
called an "Indemnitee") against, and to hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities and related reasonable expenses,
including reasonable counsel fees, charges and disbursements, incurred by or
asserted against any Indemnitee arising out of, in any way connected with, or as
a result of any claim, litigation, investigation or proceeding, whether or not
any Indemnitee is a party thereto, relating to (i) the execution or delivery of
this Agreement or any other Loan Document or any agreement or instrument
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contemplated thereby, the performance by the parties thereto of their respective
obligations thereunder or the consummation of the Transactions and the other
transactions contemplated thereby, or (ii) the use of the proceeds of the Loans
or issuance of Letters of Credit, or (iii) any actual or alleged presence or
Release of Hazardous Materials on any property owned or operated by the Borrower
or any of the Subsidiaries, or any Environmental Claim related in any way to the
Borrower or the Subsidiaries; provided, however, that such indemnity shall not,
as to any Indemnitee, be available to the extent that such losses, claims,
damages, liabilities or related expenses have resulted from the gross negligence
or wilful misconduct of such Indemnitee.
(c) The provisions of this Section 9.05 shall remain operative and
in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the expiration of the Commitments, the expiration
of any Letter of Credit, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any investigation
made by or on behalf of the Administrative Agent, the Collateral Agent, any
Lender or the Issuing Bank. All amounts due under this Section 9.05 shall be
payable within 30 days of written demand therefor.
SECTION 9.06. Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
(other than in respect of proceeds, distributions and dividends received form
any Joint Venture) at any time held and other indebtedness at any time owing by
such Lender to or for the credit or the account of the Parent or the Borrower
against any of and all the obligations of the Parent or the Borrower, as the
case may be, now or hereafter existing under this Agreement and other Loan
Documents held by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement or such other Loan Document and
although such obligations may be unmatured, and irrespective of whether such
Lender is otherwise fully secured. The rights of each Lender under this Section
are in addition to other rights and remedies (including other rights of setoff)
that such Lender may have.
SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN
DOCUMENTS) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT
GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay of any
Agent, any Lender or the Issuing Bank in exercising any power or right hereunder
or under any other Loan Document shall operate as a waiver thereof, nor shall
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any single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Agents, the Issuing Bank and the Lenders hereunder and under
the other Loan Documents are cumulative and are not exclusive of any rights or
remedies that they would otherwise have. No waiver of any provision of this
Agreement or any other Loan Document or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice or demand
on the Parent or the Borrower in any case shall entitle the Parent or the
Borrower to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Parent, the Borrower and the Required Lenders; provided,
however, that no such agreement (i) shall (A) decrease the principal amount of,
or extend the final scheduled principal payment date of, or date for the payment
of any interest on, any Loan, or any date for reimbursement of an L/C
Disbursement, or waive or excuse any such payment or any part thereof, or
decrease the rate of interest on any Loan or L/C Disbursement (except waivers of
a post-default increase in interest rate), without the prior written consent of
each Lender affected thereby, (B) increase or extend the Commitments or decrease
the Commitment Fees of any Lender without the prior written consent of such
Lender, or (C) amend or modify the provisions of Section 2.16, the provisions of
this Section 9.08, the definition of "Required Lenders" (it being understood
that, with the consent of the Required Lenders, additional extensions of credit
pursuant to this Agreement may be included in the determination of the Required
Lenders on substantially the same basis as the Term Loans and the Revolving
Credit Commitments are included on the Closing Date, amendments and waivers may
be approved that affect financial definitions used in the definition of
"Applicable Margin" and mandatory prepayments may be waived), release all or any
substantial part of the Collateral or release from its obligations under the
Guarantee Agreement any Guarantor that owns a substantial part of the assets of
the Borrower on a consolidated basis, in each case without the prior written
consent of each Lender directly affected thereby (it being understood that
waivers or modifications of conditions precedent, covenants, Defaults or Events
of Default or of a mandatory reduction in the Total Revolving Credit Commitment
shall not constitute an increase of the Commitment of any Lender, and that an
increase in the available portion of any Commitment of any Lender shall not
constitute an increase in the Commitment of such Lender), or (ii) shall amend,
modify or otherwise affect the rights or duties of any Agent, the Issuing Bank
hereunder or under any other Loan Document without the prior written consent of
such Agent or the Issuing Bank, as applicable.
SECTION 9.09. Interest Rate Limitation. Notwithstanding anything
herein to the contrary, if at any time the interest rate applicable to any Loan
or participation in any L/C Disbursement, together with all fees, charges and
other amounts that are treated as interest on such Loan or participation in such
L/C Disbursement under applicable law (collectively the "Charges"), shall exceed
the maximum lawful rate (the "Maximum Rate") that may be contracted for,
charged, taken, received or reserved by the Lender holding such Loan or
participation in accordance with applicable law, the rate of interest payable in
respect of such Loan or participation hereunder, together with all Charges
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payable in respect thereof, shall be limited to the Maximum Rate and, to the
extent lawful, the interest and Charges that would have been payable in respect
of such Loan or participation but were not payable as a result of the operation
of this Section shall be cumulated and the interest and Charges payable to such
Lender in respect of other Loans or participations or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
SECTION 9.10. Entire Agreement. This Agreement and the other Loan
Documents constitute the entire contract between the parties relative to the
subject matter hereof. Any previous agreement among the parties with respect to
the subject matter hereof is superseded by this Agreement and the other Loan
Documents. Nothing in this Agreement or in the other Loan Documents, expressed
or implied, is intended to confer upon any party other than the parties hereto
and thereto any rights, remedies, obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN
INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 9.11.
SECTION 9.12. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall endeavor
in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.
SECTION 9.13. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original but all of which when taken together shall
constitute a single contract, and shall become effective as provided in Section
9.03. Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.
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SECTION 9.14. Headings. Article and Section headings and the Table
of Contents used herein are for convenience of reference only, are not part of
this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) Each
of the Parent and the Borrower hereby irrevocably and unconditionally submits,
for itself and its property, to the nonexclusive jurisdiction of any New York
State court or Federal court of the United States of America sitting in New York
City, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to this Agreement or the other Loan Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in connection
herewith or therewith, in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that any Lender may otherwise
have to bring any action or proceeding relating to this Agreement or the other
Loan Documents against the Parent or the Borrower or its properties in the
courts of any jurisdiction.
(b) Each of the Parent and the Borrower hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement or
the other Loan Documents in any New York State or Federal court. Each of the
parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 9.16. Mortgaged Property Casualty and Condemnation. (a)
Notwithstanding any other provision of this Agreement or the Security Documents,
the Collateral Agent is authorized, at its option (for the benefit of the
Secured Parties), to collect and receive, to the extent payable to the Borrower
or any other Loan Party, all insurance proceeds, damages, claims and rights of
action under any insurance policies with respect to any casualty or other
insured damage ("Casualty") to any portion of any Mortgaged Property
(collectively, "Insurance Proceeds"), unless the amount of the related Insurance
Proceeds is less than $10,000,000 and an Event of Default shall not have
occurred and be continuing. The Borrower agrees to notify the Collateral Agent
and the Administrative Agent, in writing, promptly after the Borrower obtains
notice or knowledge of any Casualty in excess of $10,000,000 to a Mortgaged
Property, which notice shall set forth a description of such Casualty and the
Borrower's good faith estimate of the amount of related damages. The Borrower
agrees, subject to the foregoing limitations, to endorse and transfer or cause
to be endorsed or transferred any Insurance Proceeds received by it or any other
Loan Party to the Collateral Agent.
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(b) The Borrower will promptly notify the Collateral Agent and the
Administrative Agent upon obtaining knowledge of the institution of any action
or proceeding for the taking of any Mortgaged Property, or any part thereof or
interest therein, for public or quasi-public use under the power of eminent
domain, by reason of any public improvement or condemnation proceeding, or in
any other manner in excess of $10,000,000 (a "Condemnation"). No settlement or
compromise of any claim in connection with any such action or proceeding shall
be made without the consent of the Collateral Agent, which consent shall not be
unreasonably withheld. The Collateral Agent is authorized, at its option (for
the benefit of the Secured Parties), to collect and receive all proceeds of any
such Condemnation (in each case, the "Condemnation Proceeds"). The Borrower
agrees, subject to the foregoing limitations, to execute or cause to be executed
such further assignments of any Condemnation Proceeds as the Collateral Agent
may reasonably require.
(c) In the event of a Condemnation of all or substantially all of
any Mortgaged Property (which determination shall be made by the Collateral
Agent in its reasonable discretion), unless the Borrower shall have notified the
Collateral Agent in writing promptly after such Condemnation that it intends to
replace the related Mortgaged Property (and no Default or Event of Default shall
have occurred and be continuing at the time of such election), the Collateral
Agent may deem such event to be a Prepayment Event, and shall apply the
Condemnation Proceeds received as a result of such Condemnation (less the
reasonable costs, if any, incurred by the Collateral Agent or the Borrower or
other applicable Loan Party in the recovery of such Condemnation Proceeds,
including reasonable attorneys' fees, other charges and disbursements (the
Collateral Agent having agreed to reimburse the Borrower or other applicable
Loan Party from such Condemnation Proceeds such costs incurred by the Borrower
or other applicable Loan Party)) to prepay obligations outstanding under this
Agreement to the extent required under Section 2.12, with any remaining
Condemnation Proceeds being returned to the Borrower. If the Borrower shall
elect to replace a Mortgaged Property as contemplated above, (i) the replacement
property shall be of utility comparable to that of the replaced Mortgaged
Property and (ii) the insufficiency of any Condemnation Proceeds to defray the
entire expense of the related location, acquisition and replacement of such
replacement property shall in no way relieve the Borrower or other applicable
Loan Party of its obligation to complete the construction or acquisition of any
replacement property if the Borrower or such other Loan Party shall have made
such election and shall have acquired the related real property. Any
condemnation of substantially all of a Mortgaged Property is referred to herein
as a "`substantially all' Condemnation".
(d) In the event of any Condemnation of the Mortgaged Property, or
any part thereof (other than a Condemnation described in paragraph (c) above and
subject to the provisions of paragraph (f) below), the Collateral Agent shall
apply the Condemnation Proceeds (to the extent it receives such proceeds),
first, in the case of a partial Condemnation, to the repair or restoration of
any integrated structure subject to such Condemnation and, second, shall apply
the remainder of such Condemnation Proceeds (less the reasonable costs, if any,
incurred by the Collateral Agent and the Borrower or other applicable Loan Party
in the recovery of such Condemnation Proceeds, including reasonable attorneys'
fees (the Collateral Agent having agreed to reimburse the Borrower or other
applicable Loan Party from such Condemnation Proceeds such costs incurred by the
Borrower or such other Loan Party)) to prepay obligations outstanding under this
<PAGE>
98
Agreement to the extent required under Section 2.12, with any remaining
Condemnation Proceeds being returned to the Borrower.
(e) In the event of any Casualty of any Mortgaged Property and so
long as no Default or Event of Default has occurred and is continuing, the
Borrower shall have the option to either:
(i) restore the Mortgaged Property to a condition substantially
similar to its condition immediately prior to such Casualty and to invest
the balance, if any, of any Insurance Proceeds, in equipment, vehicles or
other assets used in the Borrower's principal lines of business within 360
days after the receipt thereof, or
(ii) direct the Collateral Agent to apply the related Insurance
Proceeds to prepay obligations outstanding under this Agreement to the
extent required under Section 2.12, with any remaining Insurance Proceeds
being returned to the Borrower.
It is understood that any excess Insurance Proceeds that are not reinvested in
the Borrower's principal lines of business as contemplated above will be applied
to prepay obligations outstanding under this Agreement to the extent required
under Section 2.12, with any remaining Insurance Proceeds being returned to the
Borrower.
If required to do so, the Borrower shall make the election
contemplated by the immediately preceding paragraph by notifying the Collateral
Agent promptly after the later to occur of (A) 30 days after the Borrower and
its insurance carrier reach a final determination of the amount of any Insurance
Proceeds and (B) 60 days after the occurrence of the Casualty. If the Borrower
shall be required or shall elect to restore the Mortgaged Property, the
insufficiency of any Insurance Proceeds or Condemnation Proceeds to defray the
entire expense of such restoration shall in no way relieve the Borrower of such
obligation to so restore if it is so required or once such election has been
made. In the event the Borrower shall be required to restore or shall notify the
Collateral Agent of its election to restore, the Borrower shall diligently and
continuously prosecute the restoration of the Mortgaged Property to completion.
In the circumstance where the Borrower shall be required to restore or shall so
elect to restore and no Event of Default has occurred and is continuing the
Borrower shall not be required to comply with the requirements of paragraph (f)
below in connection with such restoration (except as required by clauses
(f)(iii)(A) and (B)), so long as the cost of such restoration shall be less than
$1,000,000. In the event of a Casualty where the Borrower is required to make
the election set forth above and the Borrower either shall fail to notify the
Collateral Agent of its election within the period set forth above or shall
elect not to restore the Mortgaged Property, the Collateral Agent shall (after
being reimbursed for all reasonable costs of recovery of such Insurance Proceeds
including reasonable attorneys' fees and after reimbursing the Borrower or other
applicable Loan Party for all such reasonable costs incurred by the Borrower or
such other Loan Party) apply such Insurance Proceeds to prepay obligations
outstanding under this Agreement to the extent required under Section 2.12, with
any remaining Insurance Proceeds being returned to the Borrower. In addition,
upon such prepayment, the Borrower shall be obligated to place the remaining
portion, if any, of the Mortgaged Property in a safe condition that is otherwise
in compliance with the requirements of applicable Governmental Authorities and
the provisions of this Agreement and the applicable Mortgage.
<PAGE>
99
(f) Except as otherwise specifically provided in this Section 9.16,
all Insurance Proceeds and all Condemnation Proceeds recovered by the Collateral
Agent (i) are to be applied to the restoration of the applicable Mortgaged
Property (or, if permitted in the event of a total or "substantially all"
Condemnation as contemplated in paragraph (c) above, to the location,
acquisition and construction of a replacement for the applicable Mortgaged
Property) (less the reasonable cost, if any, to the Collateral Agent of such
recovery and of paying out such proceeds, including reasonable (x) attorneys'
fees, (y) other charges and (z) disbursements and costs allocable to inspecting
the Work (as defined below)), (ii) shall be applied by the Collateral Agent to
the payment of the cost of restoring or replacing the Mortgaged Property so
damaged, destroyed or taken or of the portion or portions of the Mortgaged
Property not so taken (the "Work") and (iii) shall be paid out from time to time
to the Borrower (as certified by the Borrower) as and to the extent the Work (or
the location and acquisition of any replacement of any Mortgaged Property)
progresses for the payment thereof, but subject to each of the following
conditions:
(A) the Borrower must promptly commence the restoration process or
the location, acquisition and replacement process (in the case of a total
or "substantially all" Condemnation) in connection with the Mortgaged
Property;
(B) upon completion thereof, the improvements shall (I) be in
compliance with all requirements of applicable Governmental Authorities
such that all representations or warranties of the Borrower and the other
applicable Loan Parties relating to the compliance of such Mortgaged
Property with applicable laws, rules or regulations in this Agreement or
the Security Documents will be correct in all material respects and (II)
be at least equal in value or general utility to the Borrower's business
to the improvements that were on such Mortgaged Property (or that were on
the Mortgaged Property that has been replaced, if applicable) prior to the
Casualty or Condemnation, and in the case of a Condemnation, subject to
the affect of such Condemnation;
(C) there shall be no Default or Event of Default that has occurred
and is continuing; and
(D) after commencing the Work, the Borrower shall continue to
perform or cause to be performed the Work diligently and in good faith to
completion.
Upon completion of the Work and payment in full therefor, the Collateral Agent
will disburse to the Borrower the amount of any Insurance Proceeds or
Condemnation Proceeds then or thereafter in the hands of the Collateral Agent on
account of the Casualty or Condemnation that necessitated such Work to be
applied (x) to prepay obligations outstanding under this Agreement to the extent
required under Section 2.12, with any excess being returned to the Borrower, or
(y) to be reinvested in the Borrower's principal lines of business within 360
days after the receipt thereof.
(g) Notwithstanding any other provisions of this Section 9.16, if
the Borrower shall have elected to replace a Mortgaged Property in connection
with a total or "substantially all" Condemnation as contemplated in paragraph
(c) above, all Condemnation Proceeds held by the Collateral Agent in connection
therewith shall be applied to prepay obligations outstanding under this
<PAGE>
100
Agreement to the extent required under Section 2.12 if (i) the Borrower notifies
the Collateral Agent and the Administrative Agent that it does not intend to
replace the related Mortgaged Property, (ii) an officer of the Borrower shall
not have notified the Administrative Agent and the Collateral Agent in writing
that the Borrower has acquired or has entered into a binding contract to acquire
land upon which it will construct the replacement property within one year after
the related Condemnation or (iii) the Borrower shall have not notified the
Administrative Agent and the Collateral Agent in writing that it has begun
construction of the replacement structures within one year after the related
Condemnation. Any funds not required to be applied in accordance with Section
2.12 shall be returned to the Borrower.
(h) Nothing in this Section 9.16 shall prevent the Collateral Agent
from applying at any time all or any part of the Insurance Proceeds or
Condemnation Proceeds to the curing of any Event of Default under this
Agreement.
SECTION 9.17. Confidentiality. Except as otherwise provided in
Section 9.04(g), each of the Agents, the Issuing Bank and each of the Lenders
agrees to keep confidential (and (i) to cause its respective officers, directors
and employees to keep confidential and (ii) to use its best efforts to cause its
respective agents and representatives to keep confidential) the Information and
all copies thereof, extracts therefrom and analyses or other materials based
thereon, except that the Agents, the Issuing Bank or any Lender shall be
permitted to disclose Information (a) to such of its respective officers,
directors, employees, affiliates, agents and representatives as need to know
such Information, (b) to the extent requested by any bank regulatory authority,
(c) to the extent otherwise required by applicable laws and regulations or by
any subpoena or similar legal process, (d) to prospective assignees (who agree
to be bound by this Section 9.17), (e) in any legal proceedings between the
Parent or the Borrower and any Lender or (f) to the extent such Information (i)
becomes publicly available other than as a result of a breach of this Agreement
or (ii) becomes available to the Agents, the Issuing Agent or any Lender on a
non-confidential basis from a source other than a Loan Party. For the purposes
of this Section 9.17, the term "Information" shall mean all financial
statements, certificates, reports, agreements and information (including all
analyses, compilations and studies prepared by the Agents, the Issuing Bank or
any Lender based on any of the foregoing) that are received by the Borrower and
relate to the Borrower, the Parent, any Subsidiary, any Joint Venture, any
shareholder of the Borrower, the Parent, any Subsidiary, any Joint Venture, or
any employee, customer or supplier of the Borrower, the Parent any Subsidiary,
any Joint Venture, other than any of the foregoing that were available to the
Agents, the Issuing Bank or any Lender on a nonconfidential basis prior to its
disclosure thereto by the Borrower or the Parent, and which are, in the case of
Information provided after the Closing Date, clearly identified at the time of
delivery as confidential. The provisions of this Section 9.17 shall remain
operative and in full force and effect regardless of the expiration and term of
this Agreement. Notwithstanding the foregoing, the parties hereto agree that the
filing of any of the Loan Documents (to the extent necessary in the reasonably
judgment of the Collateral Agent after consulting with the Borrower) properly to
ensure the validity or priority of the Collateral Agent's lien under any
Security Document or to the extent required by local counsel in order to render
an opinion in form and substance reasonably satisfactory to the Collateral Agent
in connection with such lien will not result in a violation of the foregoing
confidentiality provisions.
<PAGE>
101
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
CLARK-S ACQUISITION
CORPORATION
By:
------------------------------------
Name:
Title:
CLARK-SCHWEBEL HOLDINGS, INC.
By:
------------------------------------
Name:
Title:
CHEMICAL BANK, individually and as
Administrative Agent, Collateral Agent,
Documentation Agent and Syndication
Agent
By:
------------------------------------
Name:
Title:
CHEMICAL BANK DELAWARE, as
Issuing Bank
By:
------------------------------------
Name:
Title:
<PAGE>
102
BANKERS TRUST COMPANY,
individually and as Co-Agent
By:
------------------------------------
Name:
Title:
FLEET NATIONAL BANK, individually
and as Co-Agent
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
NATIONSBANK, N.A., individually and
as Co-Agent
By:
------------------------------------
Name:
Title:
BHF-BANK AKTIENGESELLSCHAFT,
as a Lender
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
<PAGE>
103
THE UNDERSIGNED HEREBY ACKNOWLEDGES THAT
IT IS THE SURVIVING CORPORATION OF THE
FORT-MILL MERGER AND HAS ASSUMED AS A
PRIMARY OBLIGOR ALL OF THE PAYMENT AND
PERFORMANCE OBLIGATIONS OF THE BORROWER
UNDER THE LOAN DOCUMENTS.
FORT MILL A INC.
By:
------------------------------------
Name:
Title:
THE UNDERSIGNED HEREBY ACKNOWLEDGES THAT
IT IS THE SURVIVING CORPORATION OF THE
POST-CLOSING MERGER AND HAS ASSUMED AS A
PRIMARY OBLIGOR ALL OF THE PAYMENT AND
PERFORMANCE OBLIGATIONS OF THE BORROWER
UNDER THE LOAN DOCUMENTS.
CLARK-SCHWEBEL, INC.
By:
------------------------------------
Name:
Title:
EXHIBIT 10.4
SECURITY AGREEMENT dated as of April __, 1996 among
CLARK-SCHWEBEL HOLDINGS, INC., a Delaware corporation (the
"Parent"), CLARK-S ACQUISITION CORPORATION, a Delaware
corporation (the "Purchaser"), FORT MILL A INC., a Delaware
corporation ("Fort Mill"), CLARK-SCHWEBEL, INC., a Delaware
corporation (the "Company"), and each Domestic Subsidiary of the
Borrower party hereto (including the Borrower referred to below,
collectively, the "Grantors") and CHEMICAL BANK, a New York
banking corporation, as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (as defined herein).
Reference is made to the Credit Agreement dated as of April __, 1996
(as amended or modified from time to time, the "Credit Agreement"), among the
Purchaser the Parent, the financial institutions party thereto, as lenders (the
"Lenders"), Chemical Bank, a New York banking corporation, as agent (in such
capacity, the "Administrative Agent"), as collateral agent (in such capacity,
the "Collateral Agent"), as documentation agent (in such capacity, the
"Documentation Agent") and as syndication agent (in such capacity, the
"Syndication Agent") for the Lenders, Chemical Bank Delaware, a Delaware
corporation, as issuing bank (in such capacity, the "Issuing Bank"), and Bankers
Trust Company, a New York banking corporation, Fleet National Bank, a national
banking association, and NationsBank, N.A., a national banking association, as
co-agents (in such capacity, each a "Co-Agent"). Capitalized terms used herein
but not defined herein shall have the meanings assigned to such terms in the
Credit Agreement.
The Lenders and the Issuing Bank, respectively, have agreed to make
Loans to the Borrower and to issue Letters of Credit for the account of the
Borrower pursuant to, and on the terms and subject to the conditions specified
in, the Credit Agreement.
On the Closing Date, the Purchaser will merge (the "Fort Mill Merger")
into Fort Mill, with Fort Mill as the surviving corporation and CS Finance will
merge into the Company, with the Company as the surviving corporation. On the
first Business Day
following the Closing Date, Fort Mill will merge (the "Post-Closing Merger")
into the Company, with the Company as the surviving corporation. As used in this
Agreement "Borrower" shall mean (i) initially, the Purchaser, (ii) upon
consummation of the Fort Mill Merger, Fort Mill, as the surviving corporation of
the Fort Mill Merger, and (iii) upon consummation of the Post-Closing Merger,
the Company, as the surviving corporation of the Post-Closing Merger
<PAGE>
2
The obligations of the Lenders to make Loans and of the Issuing Bank
to issue Letters of Credit under the Credit Agreement are conditioned upon,
among other things, the execution and delivery by the Grantors of a security
agreement in the form hereof to secure the due and punctual payment of, with
respect to each Grantor, its obligations as guarantor or obligor in respect of
(a) the principal of and premium, if any, and interest (including interest
accruing during the pendency of any bankruptcy, insolvency, receivership or
other similar proceeding, regardless of whether allowed or allowable in such
proceeding) on the Loans, when and as due, whether at maturity, by acceleration,
upon one or more dates set for prepayment or otherwise, (b) each payment
required to be made by the Borrower under the Credit Agreement in respect of any
Letter of Credit, when and as due, including payments in respect of
reimbursement of disbursements, interest thereon and obligations to provide cash
collateral, (c) all other monetary obligations, including fees, costs, expenses
and indemnities, whether primary, secondary, direct, contingent, fixed or
otherwise (including monetary obligations incurred during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding), of each Loan Party to the
Secured Parties under the Credit Agreement, this Agreement and the other Loan
Documents (as defined in the Credit Agreement) to which such Loan Party is or is
to be a party and (d) all obligations of the Borrower under each Rate Protection
Agreement and Currency Protection Agreement entered into with any Lender (all
the foregoing obligations being referred to collectively as the "Obligations").
Accordingly, the Grantors and the Collateral Agent, on behalf of
itself and each Secured Party (and each of their respective successors or
assigns), hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definition of Certain Terms Used Herein.
As used herein, the following terms shall have the following
meanings:
"Account Debtor" shall mean any person who is or who may become
obligated to the Grantors under, with respect to or on account of, an Account.
"Accounts" shall mean, with respect to the Grantors, any and all
right, title and interest of any Grantor to payment for goods and services sold
or leased (exclusive of any liabilities of the Grantors with respect thereto),
including any such right evidenced by chattel paper, whether due or to become
due, whether or not it has been earned by performance, and whether now or
hereafter acquired or arising in the future, including accounts receivable from
Affiliates of the Grantors and shall include all "accounts" as defined in
Section 9-106 of the Uniform Commercial Code in the State of New York as in
effect on the date hereof.
<PAGE>
3
"Accounts Receivable" shall mean, with respect to the Grantors, all
right, title and interest of any Grantor to Accounts and all of any Grantor's
right, title and interest in any returned goods, together with all rights,
titles, securities and guaranties with respect thereto, including any rights to
stoppage in transit, replevin, reclamation and resales, and all related security
interests, liens and pledges, whether voluntary or involuntary, in each case
whether due or to become due, whether now or hereafter arising.
"Chattel Paper" shall have the meaning specified in the Uniform
Commercial Code as in effect in the State of New York on the date hereof.
"Collateral" shall mean all (a) Accounts, (b) Accounts Receivable, (c)
Documents, (d) Equipment (including Fixtures), (e) General Intangibles, (f)
Inventory, (g) Proceeds, (h) Collection Deposit Accounts, (i) Prepayment
Accounts and all other cash and cash accounts, (j) Chattel Paper and (k)
Instruments. Notwithstanding any other provision of this Agreement to the
contrary, "Collateral" shall not include (i) cash and Permitted Investments (and
accounts holding such cash and Permitted Investments) owned by the Parent which
the Parent is permitted to hold in accordance with the Loan Documents or (ii)
any assets of, or interests in, or proceeds, distributions or dividends from,
any Joint Venture held by any Grantor.
"Collection Deposit Account" shall mean a lockbox account of any
Grantor maintained for the benefit of the Secured Parties with the Collateral
Agent pursuant to Article V.
"Documents" shall mean all instruments, files, records, ledger sheets
and documents whether now owned or hereafter acquired covering or relating to
any of the Collateral, including customer lists, credit files, computer
programs, printouts, and other computer materials and records, and shall include
each "document" as defined the Uniform Commercial Code as in effect in the State
of New York on the date hereof.
"Equipment" shall mean all equipment in all its forms, wherever
located, now or hereafter existing, and all parts thereof and accessions
thereto, that are now or hereafter owned by any Grantor. The term "Equipment"
shall include Fixtures. Equipment shall include all "equipment" as defined in
the Uniform Commercial Code as in effect in the State of New York on the date
hereof.
"Fixtures" shall mean all items of Equipment of any Grantor that
become so related to particular real estate that an interest in them arises
under any real estate law applicable thereto. Fixtures shall include all
"fixtures" as defined in the Uniform Commercial Code as in effect in the State
of New York on the date hereof.
<PAGE>
4
"General Intangibles" shall mean all choses in action and causes of
action and all other intangible personal property of any Grantor of every kind
and nature (other than Accounts Receivable) now owned or hereafter acquired by
any Grantor, including corporate or other business records, indemnification
claims, contract rights (including rights under leases, whether entered into as
lessor or lessee, Rate Protection Agreements, Currency Protection Agreements and
other agreements, but excluding rights under any agreement (other than the Rate
Protection Agreements and Currency Protection Agreements and other than as
permitted by the Uniform Commercial Code) as to which the granting of the
security interest granted hereby would constitute a breach of such agreement),
Intellectual Property, goodwill, registrations, franchises, tax refund claims
and any letter of credit, guarantee, claim, security interest or other security
held by or granted to any Grantor. General Intangibles shall include all
"general intangibles" as defined in Section 9-106 of the Uniform Commercial Code
as in effect in the State of New York on the date hereof.
"Intellectual Property" shall mean all intellectual and similar
property of any Grantor of every kind and nature now owned or hereafter acquired
by any Grantor, including inventions, designs, patents, patent applications,
copyrights, copyright registrations, applications to register copyrights,
Licenses, trademarks (including service marks), trademark or service mark
applications, secrets, confidential or proprietary technical and business
information, know-how, show-how or other data or information, software and
databases and all embodiments or fixations thereof and related documentation,
registrations and franchises, and all additions, improvements and accessions to,
and books and records describing or used in connection with, any of the
foregoing.
"Inventory" shall mean all goods of any Grantor, whether now owned or
hereafter acquired, held for sale or lease, or furnished or to be furnished by
any Grantor under contracts of service, or consumed in any Grantor's business,
including raw materials, intermediates, work in process, packaging materials,
finished goods, semi-finished inventory, scrap inventory, manufacturing supplies
and spare parts, and all such goods that have been returned to or repossessed by
or on behalf of any Grantor. Inventory shall include all "inventory" as defined
in the Uniform Commercial Code as in effect in the State of New York on the date
hereof.
"Instrument" shall have the meaning specified in the Uniform
Commercial Code as in effect in the State of New York on the date hereof.
"License" shall mean any patent license, copyright license or other
license or sublicense to which any Grantor is or becomes a party (other than
those license agreements which by their terms prohibit assignment or a grant of
a security interest by such Grantor as licensee thereunder).
<PAGE>
5
"Obligations" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Perfection Certificate" shall mean a Perfection Certificate,
substantially in the form of Annex 2 hereto, prepared by each of the Grantors.
"Prepayment Account" shall mean an account established by the Borrower
with the Administrative Agent and over which the Administrative Agent shall have
exclusive dominion and control, including the exclusive right of withdrawal for
application in accordance with Section 2.12(g) of the Credit Agreement.
"Proceeds" shall mean any consideration received from the sale,
exchange, license, lease or other disposition of any asset or property that
constitutes Collateral, any value received as a consequence of the possession of
any Collateral and any payment received from any insurer or other person or
entity as a result of the destruction, loss, theft, damage or other involuntary
conversion of whatever nature of any asset or property that constitutes
Collateral, and shall include (a) all cash and negotiable instruments received
or held on behalf of the Collateral Agent pursuant to any lockbox or similar
arrangement relating to the payment of Accounts Receivable and Inventory and (b)
any claim of any Grantor against any third party for (and the right to sue and
recover for and the rights to damages or profits due or accrued arising out of
or in connection with) (i) past, current or future infringement of any patent
now or hereafter owned by any Grantor or licensed under a patent license, (ii)
past, current or future breach of any License, (iii) past, current or future
infringement of any copyright now or hereafter owned by any Grantor or licensed
under a copyright license and (iv) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral. Proceeds
shall include all "proceeds" as defined in the Uniform Commercial Code as in
effect in the State of New York on the date hereof.
"Secured Parties" shall mean (a) the Lenders, (b) the Issuing Bank,
(c) the Administrative Agent, (d) the Co-Agents, (e) the Collateral Agent, (f)
the Documentation Agent, (g) the Syndication Agent and (h) the successors and
assigns of each of the foregoing.
"Security Interest" shall have the meaning assigned to such term in
Section 2.1.
SECTION 1.2. Rules of Interpretation. The rules of
interpretation specified in Section 1.02 of the Credit Agreement
shall be applicable to this Agreement.
<PAGE>
6
ARTICLE II
SECURITY INTEREST
SECTION 2.1. Security Interest. As security for the payment or
performance, as the case may be, of the Obligations, each Grantor hereby
bargains, sells, conveys, assigns, sets over, mortgages, pledges, hypothecates
and transfers to the Collateral Agent, its successors and its assigns, for the
ratable benefit of the Secured Parties, and hereby grants to the Collateral
Agent, its successors and assigns, for the ratable benefit of the Secured
Parties, a security interest in, all such Grantor's right, title and interest
in, to and under the Collateral (the "Security Interest"). Without limiting the
foregoing, the Collateral Agent is hereby authorized to file one or more
financing statements (including fixture filings), continuation statements,
filings with the United States Patent and Trademark Office or the United States
Copyright Office (or any successor office or any similar office in any other
country) or other documents for the purpose of perfecting, confirming,
continuing, enforcing or protecting the Security Interest granted by each
Grantor, without the signature of any Grantor, naming any Grantor or the
Grantors as debtors and the Collateral Agent as secured party.
Each Grantor agrees at all times to keep accurate and complete
accounting records with respect to the Collateral, including a record of all
payments and Proceeds received in respect thereof.
SECTION 2.2. No Assumption of Liability. The Security Interest is
granted as security only and shall not subject the Collateral Agent or any other
Secured Party to, or in any way alter or modify, any obligation or liability of
any Grantor with respect to or arising out of any of the Collateral.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Grantors jointly and severally represent and warrant to
and with the Collateral Agent and each other Secured Party that:
SECTION 3.1. Title and Authority. Each Grantor has good and valid
rights in and title to the Collateral with respect to which it has purported to
grant a Security Interest hereunder and has full power and authority to grant to
the Collateral Agent the Security Interest in such Collateral pursuant hereto
and to execute, deliver and perform its obligations in accordance with the terms
of this Agreement, without the consent or approval of any other person other
than any consent or approval that has been obtained.
<PAGE>
7
SECTION 3.2. Filings. The Perfection Certificate has been duly
prepared, completed and executed and the information set forth therein is
correct and complete as of the Closing Date. Fully executed Uniform Commercial
Code financing statements (including fixture filings, as applicable) or other
appropriate filings, recordings or registrations containing a description of the
Collateral have been delivered to the Collateral Agent for filing in each
governmental, municipal or other office specified in Schedule 6 to the
Perfection Certificate, which are all the filings, recordings and registrations
that are necessary to publish notice of and protect the validity of and to
establish a legal, valid and perfected security interest in favor of the
Collateral Agent (for the benefit of the Secured Parties) in respect of all
Collateral in which the Security Interest may be perfected by filing, recording
or registration in the United States (or any political subdivision thereof) and
its territories and possessions, and no further or subsequent filing, refiling,
recording, rerecording, registration or reregistration is necessary in any such
jurisdiction, except as provided under applicable law with respect to the filing
of continuation statements.
SECTION 3.3. Validity of Security Interest. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations and (b) subject to the
filings described in Section 3.2 above, a perfected security interest in all
Collateral in which a security interest may be perfected by filing, recording or
registering a financing statement or analogous document in the United States (or
any political subdivision thereof) and its territories and possessions pursuant
to the Uniform Commercial Code or other applicable law in such jurisdictions.
The Security Interest is and shall be prior to any other Lien on any of the
Collateral, other than Liens permitted to be prior by Section 6.02 of the Credit
Agreement.
SECTION 3.4. Absence of Other Liens. The Collateral is owned by the
Grantors free and clear of any Lien, except for Liens expressly permitted
pursuant to Section 6.02 of the Credit Agreement or pursuant to Section 3.06 of
the Intellectual Property Security Agreement. Other than as contemplated hereby,
by the Credit Agreement or by the Intellectual Property Security Agreement, no
Grantor has filed or consented to the filing of (a) any financing statement or
analogous document under the Uniform Commercial Code or any other applicable
laws covering any Collateral, (b) any assignment in which any Grantor assigns
any Collateral or any security agreement or similar instrument covering any
Collateral with the United States Patent and Trademark Office or the United
States Copyright Office nor (c) any assignment in which any Grantor assigns any
Collateral or any security agreement or similar instrument covering any
Collateral with any foreign governmental, municipal or other office.
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ARTICLE IV
COVENANTS
SECTION 4.1. Change of Name; Location of Collateral; Records; Place of
Business. (a) Each Grantor agrees promptly to notify the Collateral Agent of any
change (i) in its corporate name or in any trade name used to identify it in the
conduct of its business or in the ownership of its properties, (ii) in the
location of its chief executive office, its principal place of business, any
office in the United States in which it maintains books or records relating to
Collateral owned by it or any office or facility in the United States at which
Collateral owned by it is located (including the establishment of any such new
office or facility) or (iii) in its identity or corporate structure. Each
Grantor agrees not to effect or permit any change referred to in the preceding
sentence unless all filings have been made under the Uniform Commercial Code or
otherwise that are required in order for the Collateral Agent to continue at all
times following such change to have a valid, legal and perfected security
interest in all the Collateral (other than inventory in transit) in which a
security interest can be perfected by filing a financing statement in the United
States under the Uniform Commercial Code. Each Grantor agrees promptly to notify
the Collateral Agent, after it becomes aware, if any material portion of the
Collateral is damaged or destroyed.
(b) Each Grantor agrees to maintain, at its own cost and expense,
complete and accurate records with respect to the Collateral owned by it and, at
such reasonable time or times as the Collateral Agent may reasonably request,
promptly to prepare and deliver to the Collateral Agent a duly certified
schedule or schedules in form and detail satisfactory to the Collateral Agent
showing the identity, amount and location of any and all Collateral.
SECTION 4.2. Protection of Security. Each Grantor shall, at its own
cost and expense, take any and all actions reasonably necessary to (a) defend
title to the Collateral against all persons, (b) defend the Security Interest in
the Collateral against any Lien not expressly permitted under the Credit
Agreement or pursuant to Section 3.06 of the Intellectual Property Security
Agreement and (c) defend the priority of the Security Interest in the Collateral
against any Lien not expressly permitted under the Credit Agreement or pursuant
to Section 3.06 of the Intellectual Property Security Agreement.
SECTION 4.3. Further Assurances. Each Grantor agrees, at its own cost
and expense, to execute, acknowledge, deliver and cause to be duly filed all
such further instruments and documents and take all such actions as the
Collateral Agent or any of the other Secured Parties may from time to time
reasonably request to better assure, preserve, protect and perfect the Security
Interest and the rights and remedies created hereby, including the payment of
any fees and taxes required in connection with the execution and delivery of
this Agreement, the granting of the Security Interest and the filing of any
financing statements (including fixture filings) or other documents in
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9
connection herewith; provided however that until an Event of Default shall have
occurred and be continuing, no Grantor may enter into any concentration account,
blocked account, lockbox or similar arrangement for the benefit of any Secured
Party with respect to any Collateral constituting cash, Permitted Investments,
Collection Deposit Accounts, bank accounts or lockboxes. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any promissory note or other instrument, such note or instrument shall (to
the extent not previously pledged and delivered pursuant to the Pledge
Agreement) be immediately pledged and delivered to the Collateral Agent, duly
endorsed in a manner satisfactory to the Collateral Agent.
SECTION 4.4. Inspection and Verification. The Collateral Agent and
such other persons as the Collateral Agent may reasonably designate shall have
the right, at any reasonable time or times and at the Grantor's own cost and
expense, to inspect the Collateral, all records related thereto (and to make
extracts and copies from such records) and the premises upon which any of the
Collateral is located, to discuss any of the Grantors' affairs with the officers
of such Grantor and its independent accountants and to verify under reasonable
procedures the validity, amount, quantity, value, condition and status of or any
other matter relating to, the Collateral, including, in the case of Accounts or
Collateral in the possession of any third party (with, except after an Event of
Default shall have occurred and during the continuance thereof, the consent of
such Grantor, which consent shall not be unreasonably withheld), by contacting
Account Debtors or the third party possessing such Collateral for the purpose of
making such a verification. The Collateral Agent shall have the absolute right
to share any information it gains from such inspection or verification with any
other Secured Party.
SECTION 4.5. Taxes; Encumbrances. At its option, the Collateral Agent
may discharge past-due taxes, assessments, charges, fees, liens, security
interests or other encumbrances at any time levied or placed on the Collateral
and not permitted under the Loan Documents, and may pay for the maintenance and
preservation of the Collateral to the extent any Grantor fails to do so as
required by this Agreement or the other Loan Documents, and such Grantor agrees
to reimburse the Collateral Agent within 30 days of demand for any payment made
or any reasonable expense incurred by the Collateral Agent to the foregoing
authorization; provided, however, that nothing in this Section 4.5 shall be
interpreted as excusing any Grantor from the performance of, or imposing any
obligation on, the Collateral Agent or any other Secured Party to cure or
perform, any covenants or other promises of the Grantors with respect to taxes,
assessments, charges, fees, liens, security interests or other encumbrances and
maintenance as set forth herein or in the other Loan Documents.
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10
SECTION 4.6. Assignment of Security Interest. If at any time any
Grantor shall take and perfect a security interest in any property of an Account
Debtor or any other person to secure payment and performance of an Account, such
Grantor shall promptly assign such security interest to the Collateral Agent.
Such assignment need not be filed of public record unless such filing is
necessary to continue the perfected status of the security interest against
creditors or transferees from the Account Debtor or other person granting the
security interest.
SECTION 4.7. Continuing Obligations of the Grantors. The Grantors
shall remain liable, at their own cost and expense, duly and punctually, to
observe and perform all the material conditions and obligations to be observed
and performed by them under each contract, agreement or instrument relating to
the Collateral, all in accordance with the terms and conditions thereof, and
each Grantor agrees to indemnify and hold harmless the Collateral Agent and the
other Secured Parties from and against any and all liability for such
performance.
SECTION 4.8. Use and Disposition of Collateral. The Grantors may use
but not dispose of the Collateral in any lawful manner not inconsistent with the
provisions of this Agreement, the Credit Agreement or any other Loan Document
and the Grantors may dispose of Collateral to the extent expressly permitted by
provisions of the Loan Documents.
SECTION 4.9. Limitation on Modification of Accounts. No Grantor will,
without the Collateral Agent's prior written consent, grant any extension of the
time of payment of any of the Accounts Receivable, compromise, compound or
settle the same for less than the full amount thereof, release, wholly or
partly, any person liable for the payment thereof or allow any credit or
discount whatsoever thereon, other than extensions, credits, discounts,
compromises or settlements granted or made in the ordinary course of business.
After an Event of Default shall have occurred and during the continuance
thereof, the Collateral Agent may notify the Grantors not to grant or make any
such extension, credit, discount, compromise, or settlement under any
circumstances without the Collateral Agent's prior written consent.
ARTICLE V
COLLECTIONS
SECTION 5.1. Collections. (a) The Collateral Agent hereby authorizes
the Grantors to collect all payments with respect to the Accounts Receivable and
Inventory, provided that the Collateral Agent may control or terminate said
authority at any time after the occurrence and during the continuance of an
Event of Default. If required by the Collateral Agent at any time after the
occurrence and during the continuance of an Event of Default, all payments with
respect to the Accounts Receivable and Inventory, when collected by any Grantor,
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11
(i) shall be forthwith (and, in any event, within two Business Days) deposited
by such Grantor in the exact form received, duly endorsed by such Grantor to the
Collateral Agent if required, in a Collection Deposit Account maintained under
the sole dominion and control of the Collateral Agent and on terms and
conditions reasonably satisfactory to the Collateral Agent, subject to
withdrawal by the Collateral Agent for the ratable benefit of the Secured
Parties only as provided in Section 6.2, and (ii) until so turned over, held in
trust by such Grantor for the benefit of the Collateral Agent and the other
Secured Parties and shall be segregated from other funds of such Grantor,
subject to the Security Interest granted hereby.
(b) At the Collateral Agent's request after the occurrence and during
the continuance of an Event of Default, the Grantor shall deliver to the
Collateral Agent all original and other documents evidencing, and relating to,
the agreements and transactions that gave rise to the Accounts Receivable,
including, without limitation, all original orders, invoices and shipping
receipts.
SECTION 5.2. Power of Attorney. The Collateral Agent is hereby
appointed by each Grantor as the true and lawful agent and attorney-in-fact of
such Grantor, and in such capacity the Collateral Agent shall have the right,
with power of substitution for such Grantor and in such Grantor's name or
otherwise, for the use and benefit of the Collateral Agent and the other Secured
Parties, upon the occurrence and during the continuance of an Event of Default,
(a) to receive, endorse, assign and/or deliver such and all notes, acceptances,
checks, drafts, money orders or other evidences of payment relating to the
Collateral or any part thereof; (b) to demand, collect, receive payment of, give
receipt for and give discharges and releases of all or any of the Collateral;
(c) to sign the name of such Grantor on any invoice or bill of lading relating
to any of the Collateral; (d) to send verifications of Accounts Receivable to
any Account Debtor; (e) to commence and prosecute any and all suits, actions or
proceedings at law or in equity in any court of competent jurisdiction to
collect or otherwise realize on all or any of the Collateral or to enforce any
rights in respect of any Collateral; (f) to settle, compromise, compound, adjust
or defend any actions, suits or proceedings relating to all or any of the
Collateral; (g) to notify, or to require the Grantors to notify, Account Debtors
to make payment directly to the Collateral Agent; and (h) to use, sell, assign,
transfer, pledge, make any agreement with respect to or otherwise deal with all
or any of the Collateral, and to do all other acts and things necessary to carry
out the purposes of this Agreement, as fully and completely as though the
Collateral Agent were the absolute owner of the Collateral for all purposes;
provided, however, that nothing herein contained shall be construed as requiring
or obligating the Collateral Agent or any other Secured Party to make any
commitment or to make any inquiry as to the nature or sufficiency of any payment
received by the Collateral Agent or any other Secured Party, or to present or
file any claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect thereof or any
property covered thereby, and no action taken or omitted to be taken by the
Collateral Agent or any other Secured Party with respect to the Collateral or
any part thereof shall give rise to any defense, counterclaim or offset in favor
of any Grantor or to any claim or action against the Collateral Agent or any
other Secured Party. Upon the taking of possession of any Collateral hereunder
by the Collateral Agent or any Secured Party, as the case may be, such Person
shall deal with such Collateral in a commercially reasonable manner. It is
understood and agreed that the appointment of the Collateral Agent as the agent
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12
and attorney-in-fact of the Grantors for the purposes set forth above is coupled
with an interest and is irrevocable. The provisions of this Section 5.2 shall in
no event relieve any Grantor of any of its obligations hereunder or under the
other Loan Documents with respect to the Collateral or any part thereof or
impose any obligation on the Collateral Agent or any other Secured Party to
proceed in any particular manner with respect to the Collateral or any part
thereof, or in any way limit the exercise by the Collateral Agent or any other
Secured Party of any other or further right that it may have on the date of this
Agreement or hereafter, whether hereunder, under any other Loan Document, by law
or otherwise.
ARTICLE VI
REMEDIES
SECTION 6.1. Remedies upon Default. Upon the occurrence and during the
continuance of an Event of Default, each Grantor agrees to deliver each item of
Collateral to the Collateral Agent on demand, and it is agreed that the
Collateral Agent shall have the right (subject to applicable law) to take any of
or all the following actions at the same or different times: (a) with respect to
any Collateral consisting of Intellectual Property, on demand, to cause the
Security Interest to become an assignment, transfer and conveyance of any of or
all such Collateral by such Grantor to the Collateral Agent, or to license or,
to the extent permitted by applicable law, sublicense, whether general, special
or otherwise, and whether on an exclusive or nonexclusive basis, any such
Collateral throughout the world on such terms and conditions and in such manner
as the Collateral Agent shall determine (other than in violation of any
then--existing licensing arrangements to the extent that waivers cannot be
obtained), and (b) with or without legal process and with or without previous
notice or demand for performance, to take possession of the Collateral and
without liability for trespass, without breach of the peace to enter any
premises where the Collateral may be located for the purpose of taking
possession of or removing the Collateral and, generally, to exercise any and all
rights afforded to a secured party under the Uniform Commercial Code or other
applicable law. Without limiting the generality of the foregoing, each Grantor
agrees that the Collateral Agent shall have the right, subject to the mandatory
requirements of applicable law, to sell or otherwise dispose of all or any part
of the Collateral, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. The Collateral Agent shall be
authorized at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of any
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13
such sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of such Grantors, and each Grantor hereby waives (to
the fullest extent permitted by applicable law) all rights of redemption, stay
and appraisal that such Grantor now has or may at any time in the future have
under any rule of law or statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantors 10 days' written notice
(which each Grantor agrees is reasonable notice within the meaning of Section
9-504(3) of the Uniform Commercial Code as in effect in the State of New York or
its equivalent in other jurisdictions) of the Collateral Agent's intention to
make any sale of Collateral. Such notice, in the case of a public sale, shall
state the time and place for such sale and, in the case of a sale at a broker's
board or on a securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or portion thereof,
will first be offered for sale at such board or exchange. Any such public sale
shall be held at such time or times within ordinary business hours and at such
place or places as the Collateral Agent may fix and state in the notice (if any)
of such sale. At any such sale, the Collateral, or portion thereof, to be sold
may be sold in one lot as an entirety or in separate parcels, as the Collateral
Agent may (in its sole and absolute discretion) determine. The Collateral Agent
shall not be obligated to make any sale of any Collateral if it shall determine
not to do so, regardless of the fact that notice of sale of such Collateral
shall have been given. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice. At any public sale made pursuant to this Section 6.1, any Secured Party
may bid for or purchase, free (to the fullest extent permitted by applicable
law) from any right of redemption, stay, valuation or appraisal on the part of
any Grantor (all said rights being also hereby waived and released to the extent
permitted by law), the Collateral or any part thereof offered for sale and may
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14
make payment on account thereof by using any claim then due and payable to such
Secured Party from any Grantor as a credit against the purchase price, and such
Secured Party may, upon compliance with the terms of sale, hold, retain and
dispose of such property without further accountability to such Grantor
therefor. For purposes hereof, a written agreement to purchase the Collateral or
any portion thereof shall be treated as a sale thereof, the Collateral Agent
shall be free to carry out such sale pursuant to such agreement and no Grantor
shall be entitled to the return of the Collateral or any portion thereof subject
thereto, notwithstanding that after the Collateral Agent shall have entered into
such an agreement all Events of Default shall have been remedied and the
Obligations paid in full; provided, however, that in the event the Obligations
shall have been paid in full, the Grantors shall be entitled to the return of
the proceeds of the sale of any such Collateral to the extent not applied to
payment of the Obligations. As an alternative to exercising the power of sale
herein conferred upon it, the Collateral Agent may proceed by a suit or suits at
law or in equity to foreclose this Agreement and to sell the Collateral or any
portion thereof pursuant to a judgment or decree of a court or courts having
competent jurisdiction or pursuant to a proceeding by a court-appointed
receiver.
SECTION 6.2. Application of Proceeds. The Collateral
Agent shall apply the proceeds of any collection or sale of the
Collateral, as well as any Collateral consisting of cash, as
follows:
FIRST, to the payment of all reasonable costs and expenses incurred by
the Collateral Agent (in its capacity as such hereunder or under any other
Loan Document) in connection with such collection or sale or otherwise in
connection with this Agreement or any of the Obligations, including all
court costs and the reasonable fees, other reasonable charges and expenses
of its agents and legal counsel, the repayment of all advances made by the
Collateral Agent hereunder or under any other Loan Document on behalf of
the Grantors and any other reasonable costs or expenses incurred in
connection with the exercise of any right or remedy hereunder or under any
other Loan Document;
SECOND, to the Collateral Agent for distribution to the
Secured Parties for the satisfaction of the Obligations owed
to the Secured Parties; and
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15
THIRD, to the Grantors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof
SECTION 6.3. Grant of License To Use Intellectual Property. For the
purpose of enabling the Collateral Agent to exercise rights and remedies under
Section 6.1 at such time as the Collateral Agent shall be lawfully entitled to
exercise such rights and remedies, each Grantor hereby grants to the Collateral
Agent an irrevocable, nonexclusive and nontransferable license to use
(exercisable without payment of royalty or other compensation to such Grantor)
any of the Collateral consisting of Intellectual Property now owned or hereafter
acquired by such Grantor, to the extent of the interest of such Grantor therein
at such time, and wherever the same may be located, during the continuance of
any Event of Default, for the sole and limited purpose of selling or otherwise
disposing of all products bearing, containing or using any of the Intellectual
Property of such Grantor. The Collateral Agent agrees to apply the net proceeds
received from any such use, license or sublicense towards payment of the
Obligations as set forth in Section 6.2.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given (i) in
the case of communications and notices to the Parent, the Borrower, the
Collateral Agent or any Lender, as provided in the Credit Agreement and (ii) in
the case of communications and notices to any other Grantor, as provided in the
Guarantee Agreement.
SECTION 7.2. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the Security Interest and all obligations of the Grantors
hereunder shall be absolute and unconditional irrespective of (a) any lack of
validity or enforceability of any Loan Document, any agreement with respect to
any of the Obligations or any other agreement or instrument to any of the
foregoing, (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations or any other amendment or waiver of
or any consent to any departure from any Loan Document or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on other
Collateral, or any release or amendment or waiver of or consent under or
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16
departure from any guarantee, securing or guaranteeing all or any of the
Obligations or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, any Grantor in respect of the
Obligations or in respect of this Agreement (other than the payment in full of
all the Obligations).
SECTION 7.3. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Secured Parties and shall survive the making by the
Lenders of the Loans and the issuance by the Issuing Bank of any Letter of
Credit, regardless of any investigation made by the Secured Parties or on their
behalf, and shall continue in full force and effect as long as any Obligation is
outstanding and unpaid and so long as the Commitments and the Letters of Credit
have not been terminated.
SECTION 7.4. Binding Effect; Assignments. This Agreement shall become
effective as to any Grantor when a counterpart hereof executed on behalf of such
Grantor shall have been delivered to the Collateral Agent and a counterpart
hereof shall have been executed on behalf of the Collateral Agent, and
thereafter shall be binding upon such Grantor and the Collateral Agent and their
respective successors and assigns, and shall inure to the benefit of such
Grantor, the Collateral Agent and the other Secured Parties and their respective
successors and assigns, except that no Grantor shall have the right to assign
its rights hereunder or any interest herein or in the Collateral (and any such
attempted assignment shall be void) except as expressly contemplated by this
Agreement or the other Loan Documents.
SECTION 7.5. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party, and all covenants, promises and agreements
by or on behalf of any Grantor or the Collateral Agent that are contained in
this Agreement shall bind and inure to the benefit of their respective
successors and assigns.
SECTION 7.6. Collateral Agent's Fees and Expenses; Indemnification.
(a) Each Grantor jointly and severally agrees to pay within 30 days of demand to
the Collateral Agent the amount of any and all reasonable expenses, including
the reasonable fees and expenses of its counsel and of any experts or agents,
that the Collateral Agent may incur in connection with (i) the administration of
this Agreement (including the customary fees of the Collateral Agent for any
audits conducted by it with respect to the Accounts Receivable or Inventory),
(ii) the custody or preservation of, or the sale of, collection from or other
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realization upon, any of the Collateral, (iii) the exercise, enforcement or
protection of any of the rights of the Collateral Agent hereunder or (iv) the
failure of the Grantors to perform or observe any of the provisions hereof. If
any Grantor shall fail to do any act or thing that it has covenanted to do
hereunder or any representation or warranty of any Grantor hereunder shall be
breached, the Collateral Agent may (but shall not be obligated to) do the same
or cause it to be done or remedy any such breach and there shall be added to the
Obligations the cost or expense incurred by the Collateral Agent in so doing.
(b) Without limitation of its indemnification obligations under the
other Loan Documents, each Grantor jointly and severally agrees to indemnify the
Collateral Agent and the other Secured Parties against, and hold each of them
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel fees and expenses, incurred by or against
any of them arising out of, in any way connected with, or as a result of, the
execution, delivery or performance of this Agreement or any claim, litigation,
investigation or proceeding relating hereto or to the Collateral, whether or not
any Secured Party is a party thereto, provided that such indemnity shall not, as
to any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Secured Party.
(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 7.6 shall remain operative and in full force and effect
regardless of the termination of this Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the Obligations, the
invalidity or unenforceability of any other term or provision of this Agreement
or any other Loan Document or any investigation made by or on behalf of the
Collateral Agent or any other Secured Party.
SECTION 7.7. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
SECTION 7.8. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent or any other Secured Party in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Collateral Agent hereunder and of the other Secured Parties under the other
Loan Documents are cumulative and are not exclusive of any rights or remedies
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that they would otherwise have. No waiver of any provisions of this Agreement or
any other Loan Document or consent to any departure by the Grantors therefrom
shall in any event be effective unless the same shall be permitted by paragraph
(b) below, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice or demand on
any Grantor in any case shall entitle such Grantor or any other Grantor to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into by the
Grantors and the Collateral Agent, with the prior written consent of the
Required Lenders or the Lenders to the extent provided in the Credit Agreement.
SECTION 7.9. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 7.9.
SECTION 7.10. Severability. In the event any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby (it being understood that the invalidity of a particular
provision in a particular jurisdiction shall not in and of itself affect the
validity of such provision in any other jurisdiction). The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions, the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 7.11. Jurisdiction; Consent to Service of Process. (a) Each
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
<PAGE>
19
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Collateral Agent or any other Secured Party may otherwise have to bring any
action or proceeding relating to this Agreement or the other Loan Documents
against any Grantor or its properties in the courts of any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 7.1. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 7.12. Termination or Release. (a) This Agreement and the
Security Interest shall terminate when all the Obligations have been paid in
full and the Lenders have no further commitment to lend under the Credit
Agreement, no Letters of Credit are outstanding and the Issuing Bank has no
further obligation to issue Letters of Credit under the Credit Agreement.
(b) Upon (i) any sale by any Grantor of any Collateral that is
permitted under the Credit Agreement and, if required, the application of the
Net Cash Proceeds of such sale in accordance with Section 2.12 of the Credit
Agreement or (ii) the effectiveness of any written consent to the release of the
Security Interest in any Collateral pursuant to Section 9.08 of the Credit
Agreement, the Security Interest in such Collateral shall be automatically
released.
(c) In connection with any termination or release pursuant to
preceding paragraph (a) or (b), the Collateral Agent shall execute and deliver
to such Grantor, at such Grantor's own cost and expense, all Uniform Commercial
Code termination statements and similar documents that such Grantor shall
reasonably request to evidence such termination or release. Any execution and
delivery of termination statements or documents pursuant to this Section 7.12
shall be without recourse to or warranty by the Collateral Agent.
<PAGE>
20
SECTION 7.13. Headings. Article and Section headings used herein are
for convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 7.14. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract, and shall become
effective as provided in Section 7.4.
SECTION 7.15. Agreement May Constitute Financing Statement. Each
Grantor consents to the filing of this Agreement or a photocopy thereof as a
financing statement under the Uniform Commercial Code as in effect in any
jurisdiction in which the Collateral Agent may determine such filing to be
necessary or desirable.
SECTION 7.16. Additional Grantors. Pursuant to Section 5.11 of the
Credit Agreement, each Domestic Subsidiary that was not in existence or not a
Domestic Subsidiary on the date thereof is required to enter into this Agreement
as a Grantor upon becoming a Domestic Subsidiary (other than any Joint Venture).
Upon execution and delivery, after the date hereof, by the Collateral Agent and
a Domestic Subsidiary of an instrument in the form of Annex 1, such Domestic
Subsidiary shall become a Grantor hereunder with the same force and effect as if
originally named as a Grantor hereunder. The execution and delivery of any such
instrument shall not require the consent of any Grantor hereunder. The rights
and obligations of each Grantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Grantor as a party to this Agreement.
<PAGE>
21
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
CLARK-SCHWEBEL HOLDINGS, INC.,
by
---------------------------------
Name:
Title:
CLARK-S ACQUISITION CORPORATION,
by
---------------------------------
Name:
Title:
FORT MILL A INC.,
by
---------------------------------
Name:
Title:
CLARK-SCHWEBEL, INC.,
by
---------------------------------
Name:
Title:
CHEMICAL BANK, as Collateral Agent,
by
---------------------------------
Name:
Title:
<PAGE>
Annex 1 to
the Security Agreement
SUPPLEMENT NO. dated as of [
], to the Security Agreement dated as of
April __, 1996 (the "Security Agreement"), among CLARK-SCHWEBEL,
INC., a Delaware corporation (the "Borrower"), Clark-Schwebel
Holdings, Inc., a Delaware corporation (the "Parent"), each
Domestic Subsidiary of the Borrower party thereto (collectively,
the "Subsidiary Grantors" and, together with the Parent and the
Borrower, the "Grantors") and CHEMICAL BANK, a New York banking
corporation ("Chemical Bank"), as collateral agent (in such
capacity, the "Collateral Agent") for the Secured Parties (as
defined in the Credit Agreement referred to below).
A. Reference is made to the Credit Agreement dated as of April __,
1996 (as amended or modified from time to time, the "Credit Agreement"), among
the Borrower, the Parent, the financial institutions party thereto, as lenders
(the "Lenders"), Chemical Bank, a New York banking corporation, as agent (in
such capacity, the "Administrative Agent"), as collateral agent (in such
capacity, the "Collateral Agent"), as documentation agent (in such capacity, the
"Documentation Agent") and as syndication agent (in such capacity, the
"Syndication Agent") for the Lenders, Chemical Bank Delaware, a Delaware banking
corporation, as issuing bank (in such capacity, the "Issuing Bank"), and Bankers
Trust Company, a New York banking corporation, Fleet National Bank, a national
banking association, and NationsBank, N.A., a national banking association, as
co-agents (in such capacity, each a "Co-Agent").
B. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Security Agreement and the
Credit Agreement.
C. Certain Domestic Subsidiaries have entered into the Security
Agreement in order to induce the Lenders to make Loans to the Borrower and to
induce the Issuing Bank to issue Letters of Credit for the account of the
Borrower pursuant to, and upon the terms and subject to the conditions specified
in, the Credit Agreement. Pursuant to Section 5.11 of the Credit Agreement, each
Domestic Subsidiary that was not in existence or not a Domestic Subsidiary on
the date thereof is required to enter into the Security Agreement as a Grantor
upon becoming a Domestic Subsidiary (other than a Joint Venture). Section 7.16
of the Security Agreement provides that additional Domestic Subsidiaries may
become Grantors under the Security Agreement by execution and delivery of an
instrument in the form of this Supplement. The undersigned (the "New Grantor")
is a Domestic Subsidiary and is executing this Supplement in accordance with the
requirements of the Credit Agreement to become a Grantor under the Security
<PAGE>
22
Agreement in order to induce the Lenders to make additional Loans and the
Issuing Bank to issue additional Letters of Credit and as consideration for
Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Grantor agree as
follows:
SECTION 1. In accordance with Section 7.16 of the Security Agreement,
the New Grantor by its signature below becomes a Grantor under the Security
Agreement with the same force and effect as if originally named therein as a
Grantor and the New Grantor hereby agrees to all the terms and provisions of the
Security Agreement applicable to it as a Grantor thereunder. Each reference to a
"Grantor" in the Security Agreement shall be deemed to include the New Grantor.
The Security Agreement is hereby incorporated herein by reference.
SECTION 2. The New Grantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or
other similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding at law or in equity).
SECTION 3. This Supplement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument. This Supplement shall
become effective when the Collateral Agent shall have received counterparts of
this Supplement that, when taken together, bear the signatures of the New
Grantor and the Collateral Agent.
SECTION 4. Except as expressly supplemented hereby, the Security
Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Security Agreement shall not in any way be affected or
impaired. The parties hereto shall endeavor in good-faith negotiations to
<PAGE>
23
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 7. All communications and notices to the Collateral Agent
hereunder shall be in writing and given as provided in the Credit Agreement. All
communications and notices hereunder to the New Grantor shall be in writing and
given as provided in the Guarantee Agreement.
<PAGE>
SECTION 8. The New Grantor agrees to reimburse the Collateral Agent
for its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursement of counsel for the
Collateral Agent.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Supplement to the Security Agreement as of the day and year first above written.
[NAME OF NEW GRANTOR],
by
---------------------------------
Name:
Title:
CHEMICAL BANK, as Collateral Agent,
by
---------------------------------
Name:
Title:
EXHIBIT 10.5
PLEDGE AGREEMENT dated as of April __, 1996, among CLARK-SCHWEBEL HOLDINGS,
INC., a Delaware corporation (the "Parent"), CLARK-S ACQUISITION CORPORATION, a
Delaware corporation (the "Purchaser"), FORT MILL A INC., a Delaware corporation
("Fort Mill"), CLARK-SCHWEBEL, INC., a Delaware corporation (the "Company"),
each Domestic Subsidiary of the Borrower party hereto (the "Subsidiary Pledgors"
and, together with the Purchaser, the Parent, Fort Mill, the Company and the
Borrower hereinafter referred to, the "Pledgors"), and CHEMICAL BANK, a New York
banking corporation, as collateral agent (in such capacity, the "Collateral
Agent") for the Secured Parties (as defined herein).
Reference is made to the Credit Agreement dated as of April __, 1996 (as
amended or modified from time to time, the "Credit Agreement"), among the
Purchaser, the Parent, the financial institutions party thereto, as lenders (the
"Lenders"), Chemical Bank, a New York banking corporation, or agent (in such
capacity, the "Administrative Agent"), as collateral agent (in such capacity,
the "Collateral Agent"), as documentation agent (in such capacity, the
"Documentation Agent") and as syndication agent (in such capacity, the
"Syndication Agent") for the Lenders, Chemical Bank Delaware, a Delaware banking
corporation, as issuing bank (in such capacity, the "Issuing Bank"), and Bankers
Trust Company, a New York banking corporation, Fleet National Bank. a national
banking association, and NationsBank, N.A., a national banking association, as
co-agents (in such capacity, each a "Co-Agent"), Capitalized terms used herein
but not defined herein shall have the meanings assigned to such terms in the
Credit Agreement.
The Lenders and the Issuing Bank, respectively, have agreed to make Loans
to the Borrower and to issue Letters of Credit for the account of the Borrower
pursuant to, and on the terms and subject to the conditions specified in, the
Credit Agreement.
On the Closing Date, the Purchaser will merge (the "Fort Mill Merger") into
Fort Mill, with Fort Mill as the surviving corporation and CS Finance of
Delaware will merge into the Company, with the Company as the surviving
corporation. On the first Business Day following the Closing Date, Fort Mill
will merge (the "Post-Closing Merger") into the Company, with the Company as the
surviving corporation. As used in this Agreement "Borrower" shall mean (i)
initially, the Purchaser, (ii) upon consummation of the Fort Mill Merger, Fort
Mill, as the surviving corporation of the Fort Mill Merger, and (iii) upon
consummation of the Post-Closing Merger, the Company, as the surviving
corporation of the Post-Closing Merger.
<PAGE>
2
The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit under the Credit Agreement are conditioned upon, among
other things, the execution and delivery by the Pledgors of a pledge agreement
in the form hereof to secure the due and punctual payment of, with respect to
each Pledgor, its obligations as obligor or guarantor in respect of (a) the
principal of and premium, if any, and interest (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loans, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, (b) each payment required to be made
by the Borrower under the Credit Agreement in respect of any Letter of Credit,
when and as due, including payments in respect of reimbursement of
disbursements, interest thereon and obligations to provide cash collateral, (c)
all other monetary obligations, including fees, costs, expenses and indemnities,
whether primary, secondary, direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of each Loan Party to the Secured Parties under
the Credit Agreement, this Agreement and the other Loan Documents to which such
Loan Party is or is to be a party and (d) all obligations of each Loan Party
under each Rate Protection Agreement and Currency Protection Agreement entered
into with any Lender (all the foregoing obligations being referred to
collectively as the "Obligations").
Accordingly, the Pledgors and the Collateral Agent, on behalf of itself and
each other Secured Party (and each of their successors or assigns), hereby agree
as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Definition of Certain Terms Used Herein. As used herein, the
following terms shall have the following meanings:
"Collateral" shall have the meaning assigned to such term in Section 2.01.
"Federal Securities Laws" shall have the meaning assigned to such term in
Section 4.03.
"Obligations" shall have the meaning assigned to such term in the
preliminary statement of this Agreement.
"Pledged Debt Securities" shall have the meaning assigned to such term in
Section 2.01.
<PAGE>
3
"Pledged Securities" shall mean the Pledged Stock, the Pledged Debt
Securities, all other shares of capital stock, debt securities and other
securities (including warrants, options and similar rights to acquire
securities) now or hereafter included in the Collateral and all stock
certificates, promissory notes and other instruments evidencing any such
securities.
"Pledged Stock" shall have the meaning assigned to such term in Section
2.01.
"Secured Parties" shall mean (a) the Lenders, (b) the Issuing Bank, (c) the
Administrative Agent, (d) the Co-Agents, (e) the Collateral Agent, (f) the
Documentation Agent, (g) the Syndication Agent and (h) the successors and
permitted assigns of each the foregoing.
SECTION 1.02. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
ARTICLE II. PLEDGE
SECTION 2.01. Pledge. As security for the payment or performance, as the
case may be, in full of its obligations in respect of the Obligations, each
Pledgor hereby bargains, sells, conveys, assigns, sets over, mortgages, pledges,
hypothecates and transfers to the Collateral Agent, its successors and its
assigns, for the ratable benefit of the Secured Parties, and hereby grants to
the Collateral Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a security interest in (a) the shares of capital stock listed
on Schedule I hereto and all shares of the capital stock of any Domestic
Subsidiary (or, in the case of any Foreign Subsidiary that is a direct
subsidiary of the Parent, the Borrower or any Domestic Subsidiary, 65% of the
shares of the capital stock of such Foreign Subsidiary) hereafter acquired by
the Parent, the Borrower or any of their respective Subsidiaries and the
certificates representing or evidencing such shares, (b) all of any other equity
interest of any Pledgor in the Borrower or any other Domestic Subsidiary (or, in
the case of any Foreign Subsidiary that is a direct subsidiary of the Parent,
the Borrower or any Domestic Subsidiary, 65% of the shares of the capital stock
of such Foreign Subsidiary) of the Parent or the Borrower, including, if such
entity is a corporation, all shares, certificates or the like evidencing the
Pledgor's ownership therein (collectively, the "Pledged Stock"), (c) the debt
securities listed on Schedule I hereto and the instruments representing or
evidencing such securities and any debt securities hereafter obtained in the
future that are payable to the Borrower or any other Pledgor and the instruments
representing or evidencing such securities (the "Pledged Debt Securities"),
provided that (i) promissory notes issued by foreign issuers shall not be
required to be pledged to the extent that doing so would result in adverse tax
consequences to the Parent or the Borrwer and (ii) no debt securities issued by
any Joint Venture shall be required to be pledged hereunder, (d) all other
property that may be delivered to and held by the Collateral Agent pursuant to
the terms hereof, (e) subject to Section 2.04 and the limitations in clauses
(a), (b) and (c), all payments of principal or interest, dividends, cash,
instruments, shares of stock resulting from stock splits, warrants, options,
<PAGE>
4
non-cash dividends and other property from time to time received, receivable or
otherwise distributed, in respect of, in exchange for or upon the conversion of
the securities and instruments referred to in clauses (a), (b), (c) and (d)
above and (f) all proceeds of any of the foregoing; provided however, in no
event shall any stock or other equity interests in, or any debt securities
issued by, any Joint Venture be pledged hereunder (the items referred to in
clauses (a) through (f) collectively, the "Collateral").
TO HAVE AND TO HOLD the Collateral, together with all right, title,
interest, powers, privileges and preferences pertaining or incidental thereto,
unto the Collateral Agent, its successors and its assigns, for the ratable
benefit of the Secured Parties, forever, subject, however, to the terms,
covenants and conditions hereinafter set forth.
SECTION 2.02. Delivery of the Collateral. (a) Each Pledgor agrees to
promptly deliver or cause to be delivered to the Collateral Agent any and all
Pledged Securities, and any and all certificates or other instruments or
documents representing any Collateral.
(b) Upon delivery to the Collateral Agent, (i) the Pledged Securities shall
be accompanied by stock powers duly executed in blank or other instruments of
transfer satisfactory to the Collateral Agent and by such other instruments and
documents as the Collateral Agent may reasonably request and (ii) all other
property comprising part of the Collateral, including uncertificated Pledged
Securities, shall be accompanied by proper instruments of assignment duly
executed by the applicable Pledgor and such other instruments or documents as
the Collateral Agent may reasonably request. Each delivery of Pledged Securities
shall be accompanied by a schedule describing the securities theretofore and
being pledged hereunder, which schedule shall be attached hereto as Schedule I
and made a part hereof. Each schedule so delivered shall supersede any prior
schedules so delivered.
SECTION 2.03. Registration in Nominee Name; Denominations. The Collateral
Agent shall have the right (in its sole and absolute discretion) to hold the
Pledged Securities in its own name as pledgee, the name of its nominee or the
name of the applicable Pledgor, endorsed or assigned in blank or in favor of the
Collateral Agent. Each Pledgor will promptly give to the Collateral Agent copies
of any notices or other communications received by it with respect to Pledged
Securities registered in the name of such Pledgor. The Collateral Agent will
promptly give to the Pledgor that shall have pledged such Pledged Securities
copies of any notices or other communication received by it with respect to
Pledged Securities registered in the name of the Collateral Agent or its
<PAGE>
5
nominee. The Collateral Agent shall at all times have the right to exchange the
certificates representing Pledged Securities for certificates of smaller or
larger denominations for any purpose consistent with this Agreement.
SECTION 2.04. Voting Rights; Dividends and Interest, etc. (a) Unless and
until an Event of Default shall have occurred and be continuing:
(i) Each Pledgor shall be entitled to exercise any and all voting and/or
other consensual rights and powers accruing to an owner of Pledged Securities or
any part thereof for any purpose consistent with the terms of this Agreement and
the other Loan Documents; provided, however, that (other than mergers of
Subsidiaries permitted by the Credit Agreement in which, after giving effect
thereto, the capital stock of the surviving corporation is pledged as Collateral
under this Agreement) no such action shall be permitted (regardless of whether
an Event of Default has occurred and is continuing under the Credit Agreement)
if such action would materially and adversely affect the rights inuring to a
holder of the Pledged Securities or the rights and remedies of the Collateral
Agent or the other Secured Parties under this Agreement or any other Loan
Document or the ability of the Collateral Agent or the other Secured Parties to
exercise the same.
(ii) The Collateral Agent shall execute and deliver to each Pledgor, or
cause to be executed and delivered to such Pledgor, all such proxies, powers of
attorney and other instruments as such Pledgor may reasonably request for the
purpose of enabling such Pledgor to exercise the voting and/or consensual rights
and powers that it is entitled to exercise pursuant to subparagraph (i) above.
(iii) Each Pledgor shall be entitled to receive and retain any and all
dividends, interest and principal paid in cash on the Pledged Securities pledged
by it to the extent and only to the extent that such cash dividends, interest
and principal are permitted by, and otherwise paid in accordance with, the terms
and conditions of the Loan Documents and applicable laws. Other than pursuant to
the first sentence of this subparagraph (iii), all principal, all noncash
dividends, interest and principal, and all dividends, interest and principal
paid or payable in cash or otherwise in connection with a partial or total
liquidation or dissolution, return of capital, capital surplus or paid-in
surplus, and all other distributions made on or in respect of Pledged
Securities, whether paid or payable in cash or otherwise, whether resulting from
a subdivision, combination or reclassification of the outstanding capital stock
of the issuer of any Pledged Securities or received in exchange for Pledged
Securities or any part thereof, or in redemption thereof, or as a result of any
merger, consolidation, acquisition or other exchange of assets to which such
issuer may be a party or otherwise, shall be and become part of the Collateral,
<PAGE>
6
and, if received by a Pledgor, shall not be commingled by such Pledgor with any
of its other funds or property but shall be held separate and apart therefrom,
shall be held in trust for the benefit of the Collateral Agent and shall be
forthwith delivered to the Collateral Agent in the same form as so received
(with any necessary endorsement).
(b) Upon the occurrence and during the continuance of an Event of Default,
all rights of any Pledgor to dividends, interest and principal payments that
such Pledgor is authorized to receive pursuant to paragraph (a)(iii) above shall
cease, and all such rights shall thereupon become vested in the Collateral
Agent, which shall have the sole and exclusive right and authority to receive
and retain such dividend, interest and principal payments. All dividends,
interest and principal that are received by any Pledgor contrary to the
provisions of this Section 2.04 shall be received in trust for the benefit of
the Collateral Agent, shall be segregated from other property or funds of such
Pledgor and shall be forthwith delivered to the Collateral Agent in the same
form as so received (with any necessary endorsement). Any and all money and
other property paid over to or received by the Collateral Agent pursuant to the
provisions of this paragraph (b) shall be retained by the Collateral Agent in an
account to be established by the Collateral Agent upon receipt of such money or
other property and shall be applied in accordance with the provisions of Section
4.02. After all Events of Default under the Credit Agreement have been cured or
waived, the Collateral Agent shall, within two Business Days after all such
Events of Default have been cured or waived, repay to the Pledgors all cash
dividends, interest or principal that such Pledgors would otherwise be permitted
to retain pursuant to the terms of paragraph (a)(iii) above, but only to the
extent such cash dividends, interest or principal remain in such account.
(c) Upon the occurrence and during the continuance of an Event of Default,
all rights of the Pledgors to exercise the voting and consensual rights and
powers that they are entitled to exercise pursuant to paragraph (a)(i) of this
Section 2.04, and the obligations of the Collateral Agent under paragraph
(a)(ii) of this Section 2.04, shall cease, and all such rights shall thereupon
become vested in the Collateral Agent, which shall have the sole and exclusive
right and authority to exercise such voting and consensual rights and powers.
ARTICLE III. REPRESENTATIONS, WARRANTIES AND COVENANTS
The Pledgors jointly and severally represent, warrant and covenant to and
with the Collateral Agent and each other Secured Party that:
(a) the Pledged Stock set forth in Schedule I hereto represents all the
outstanding capital stock of each Domestic Subsidiary of the Borrower and 65% of
the outstanding capital stock of each Foreign Subsidiary of the Borrower (the
Pledgors and the Administrative Agent agreeing to update Schedule I from time to
time as necessary to accurately reflect the results of transactions permitted by
the Credit Agreement);
<PAGE>
7
(b) the Pledged Securities issued by the Borrower or any of its
Subsidiaries have been, and the Pledged Securities issued by any other person
have, to the best of the Pledgors' knowledge, been, duly and validly authorized
and issued by the issuers thereof and (i) in the case of Pledged Stock, are
fully paid and nonassessable and (ii) in the case of Pledged Debt Securities,
are legal, valid and binding obligations of the issuers thereof.
(c) except for the security interest granted hereunder, each Pledgor (i) is
and will at all times continue to be the direct owner, beneficially and of
record, of the Pledged Securities indicated on Schedule I to be owned by such
Pledgor, (ii) holds the same free and clear of all Liens other than Liens
permitted under the Credit Agreement or pursuant to Section 3.06 of the
Intellectual Property Security Agreement, (iii) will make no assignment, pledge,
hypothecation or transfer of, or create any security interest in, the
Collateral, other than pursuant hereto and (iv) subject to Section 2.04, will
cause any and all Collateral, whether for value paid by any Pledgor or
otherwise, to be forthwith deposited with the Collateral Agent and pledged or
assigned hereunder;
(d) except for restrictions and limitations imposed by securities laws
generally, the Collateral pledged hereunder is and will be freely transferable
and assignable, and no portion of such Collateral is or will be subject to any
option, right of first refusal, shareholders agreement, charter or by-law
provision or contractual restriction of any nature that might prohibit, impair,
delay or otherwise affect the pledge of such Collateral hereunder, the sale or
disposition of the Collateral pursuant hereto after the occurrence of an Event
of Default or the exercise by the Collateral Agent of its rights and remedies
hereunder;
(e) each Pledgor (i) has the power and authority to pledge the Collateral
pledged by it hereunder in the manner hereby done or contemplated and (ii) will
defend its and the Collateral Agent's title or interest thereto or therein (and
in the proceeds thereof) against any and all Liens (other than the Lien of this
Agreement and other than Liens permitted under the Credit Agreement or pursuant
to Section 3.06 of the Intellectual Property Security Agreement), however
arising, of all persons whomsoever;
(f) no consent or approval of any Governmental Authority or any securities
exchange was or is necessary to the validity of the pledge effected hereby;
(g) by virtue of the execution and delivery by the Pledgors of this
Agreement, except in the case of uncertificated securities, when the Pledged
Securities, certificates, instruments or other documents representing or
evidencing the Pledged Securities are delivered to the Collateral Agent in
<PAGE>
8
accordance with this Agreement together with appropriate instruments of
transfer, the Collateral Agent will obtain a legal, valid and perfected first
priority security interest in the Pledged Securities and the proceeds thereof,
as security for the payment and performance of the Obligations; and
(h) the pledge effected hereby is effective to vest in the Collateral
Agent, on behalf of the Secured Parties, the rights of the Collateral Agent in
the Collateral as set forth herein.
ARTICLE IV. REMEDIES
SECTION 4.01. Remedies upon Default. If an Event of Default shall have
occurred and be continuing, the Collateral Agent may exercise, to the extent
permitted by law, all the rights of a secured party under the Uniform Commercial
Code of the State of New York (whether or not the Code is in effect in the
jurisdiction where such rights are exercised) and, in addition, the Collateral
Agent may, without being required to give any notice, except as herein provided
or as may be required by mandatory provisions of law, sell the Collateral, or
any part thereof, at public or private sale or at any broker's board or on any
securities exchange, for cash, upon credit or for future delivery as the
Collateral Agent shall deem appropriate. The Collateral Agent shall be
authorized at any such sale (if it deems it advisable to do so) to restrict the
prospective bidders or purchasers to persons who will represent and agree that
they are purchasing the Collateral for their own account for investment and not
with a view to the distribution or sale thereof, and upon consummation of any
such sale the Collateral Agent shall have the right to assign, transfer and
deliver to the purchaser or purchasers thereof the Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely free from any
claim or right on the part of any Pledgor, and each Pledgor hereby waives (to
the extent permitted by law) all rights of redemption, stay, valuation and
appraisal that such Pledgor now has or may at any time in the future have under
any rule of law or statute now existing or hereafter enacted.
The Collateral Agent shall give each Pledgor at least 10 days' prior
written notice (which each Pledgor agrees is reasonable notice within the
meaning of Section 9-504(3) of the Uniform Commercial Code as in effect in the
State of New York or its equivalent in other jurisdictions) of the Collateral
Agent's intention to make any sale of Collateral owned by such Pledgor. Such
notice, in the case of a public sale, shall state the time and place for such
sale and, in the case of a sale at a broker's board or on a securities exchange,
shall state the board or exchange at which such sale is to be made and the day
on which the Collateral, or portion thereof, will first be offered for sale at
such board or exchange and, in the case of a private sale, shall state the time
after which any such sale is to be made. Any such public sale shall be held at
<PAGE>
9
such time or times within ordinary hours and at such place or places as the
Collateral Agent may fix and state in the notice of such sale. At any such sale,
the Collateral, or portion thereof, to be sold may be sold in one lot as an
entirety or in separate parcels, as the Collateral Agent may (in its sole and
absolute discretion) determine. The Collateral Agent shall not be obligated to
make any sale of any Collateral if it shall determine not to do so, regardless
of the fact that notice of sale of such Collateral shall have been given. The
Collateral Agent may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for sale, and such sale may, without further notice,
be made at the time and place to which the same was so adjourned. In case any
sale of all or any part of the Collateral is made on credit or for future
delivery, the Collateral so sold may be retained by the Collateral Agent until
the sale price is paid in full by the purchaser or purchasers thereof, but the
Collateral Agent shall not incur any liability in case any such purchaser or
purchasers shall fail to take up and pay for the Collateral so sold and, in case
of any such failure, such Collateral may be sold again upon like notice. At any
public sale made pursuant to this Section 4.01, any Secured Party may bid for or
purchase, free (to the extent permitted by law) from any right of redemption,
stay, valuation or appraisal on the part of any Pledgor (all said rights being
also hereby waived and released to the extent permitted by law), the Collateral
or any part thereof offered for sale and may make payment on account thereof by
using any claim then due and payable to it from any Pledgor as a credit against
the purchase price, and the Collateral Agent may, upon compliance with the terms
of sale, hold, retain and dispose of such property without further
accountability to any Pledgor therefor. For purposes hereof, a written agreement
to purchase the Collateral or any portion thereof shall be treated as a sale
thereof; the Collateral Agent shall be free to carry out such sale pursuant to
such agreement, and none of the Pledgors shall be entitled to the return of the
Collateral or any portion thereof subject thereto, notwithstanding the fact that
after the Collateral Agent shall have entered into such an agreement all Events
of Default shall have been remedied and the Obligations paid in full; provided,
however, that in the event the Obligations shall have been paid in full, the
Pledgors shall be entitled to the return of the proceeds of the sale of any such
Collateral to the extent not applied to payment of the Obligations. As an
alternative to exercising the power of sale herein conferred upon it, the
Collateral Agent may proceed by a suit or suits at law or in equity to foreclose
this Agreement and to sell the Collateral or any portion thereof pursuant to a
judgment or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver.
SECTION 4.02. Application of Proceeds of Sale. The Collateral Agent shall
apply the proceeds of any collection or sale of the Collateral, as well as any
Collateral consisting of cash, as follows:
<PAGE>
10
FIRST, to the payment of all reasonable costs and expenses incurred by the
Collateral Agent (in its capacity as such hereunder or under any other Loan
Document) in connection with such sale or otherwise in connection with this
Agreement, any other Loan Document or any of the Obligations, including all
court costs and the reasonable fees, other charges and expenses of its agents
and legal counsel, the repayment of all advances made by the Collateral Agent
hereunder or under any other Loan Document on behalf of the Pledgors and any
other reasonable costs or expenses incurred in connection with the exercise of
any right or remedy hereunder or under any other Loan Document;
SECOND, to the Collateral Agent for distribution to the Secured Parties for
the satisfaction of the Obligations owed to the Secured Parties; and
THIRD, to the Pledgors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over the Collateral Agent or
such officer or be answerable in any way for the misapplication thereof.
SECTION 4.03. Securities Act, etc. In view of the position of the Pledgors
in relation to the Pledged Securities, or because of other current or future
circumstances, a question may arise under the Securities Act of 1933, as now or
hereafter in effect, or any similar statute hereafter enacted analogous in
purpose or effect (such Act and any such similar statute as from time to time in
effect being called the "Federal Securities Laws") with respect to any
disposition of the Pledged Securities permitted hereunder. The Pledgors
understand that compliance with the Federal Securities Laws might very strictly
limit the course of conduct of the Collateral Agent if the Collateral Agent were
to attempt to dispose of all or any part of the Pledged Securities, and might
also limit the extent to which or the manner in which any subsequent transferee
of any Pledged Securities could dispose of the same. Similarly, there may be
other legal restrictions or limitations affecting the Collateral Agent in any
attempt to dispose of all or part of the Pledged Securities under applicable
Blue Sky or other state securities laws or similar laws analogous in purpose or
effect. The Pledgors recognize that in light of the foregoing restrictions and
limitations the Collateral Agent may, with respect to any sale of Pledged
Securities, limit the purchasers to those who will agree, among other things, to
acquire Pledged Securities for their own account, for investment, and not with a
view to the distribution or resale thereof. The Pledgors acknowledge and agree
that, in light of the foregoing restrictions and limitations, the Collateral
Agent, in its sole and absolute discretion, (a) may proceed to make such a sale
whether or not a registration statement for the purpose of registering the
Pledged Securities or part thereof shall have been filed under the Federal
<PAGE>
11
Securities Laws and (b) may approach and negotiate with a single possible
purchaser to effect such sale. The Pledgors acknowledge and agree that any such
sale might result in prices and other terms less favorable to the seller than if
such sale were a public sale without such restrictions. In the event of any such
sale, the Collateral Agent shall incur no responsibility or liability for
selling all or any part of the Pledged Securities at a price that the Collateral
Agent, in its sole and absolute discretion, may in good faith deem reasonable
under the circumstances, notwithstanding the possibility that a substantially
higher price might have been realized if the sale were deferred until after
registration as aforesaid or if more than a single purchaser were approached.
The provisions of this Section 4.03 will apply notwithstanding the existence of
a public or private market upon which the quotations or sale prices may exceed
substantially the price at which the Collateral Agent sells.
SECTION 4.04. Registration, etc. Each Pledgor agrees that, upon the
occurrence and during the continuance of an Event of Default, if for any reason
the Collateral Agent desires to sell any of the Pledged Securities at a public
sale, it will, at any time and from time to time, upon the written request of
the Collateral Agent, take or cause the issuer of such Pledged Securities to
take such action and prepare, distribute and/or file such documents, as are
required or advisable in the reasonable opinion of counsel for the Collateral
Agent, to permit the public sale of such Pledged Securities. Each Pledgor
jointly and severally agrees to (a) indemnify, defend and hold harmless the
Collateral Agent, the other Secured Parties and their respective officers,
directors, affiliates and controlling persons from and against all losses,
liabilities, expenses, costs (including the reasonable fees and expenses of
legal counsel to the Collateral Agent) and claims (including the costs of
investigation) that they may incur insofar as any such loss, liability, expense,
cost or claim arises out of or is based upon any alleged untrue statement of a
material fact contained in any prospectus, offering circular or similar document
(or any amendment or supplement thereto), or arises out of or is based upon any
alleged omission to state a material fact required to be stated therein or
necessary to make the statements in any thereof not misleading, except insofar
as the same may have been caused by any untrue statement or omission based upon
information furnished in writing to any Pledgor or the issuer of such Pledged
Securities by the Collateral Agent or any other Secured Party expressly for use
therein, and (b) enter into an indemnification agreement with any underwriter of
or placement agent for any Pledged Securities, on its standard form, to
substantially the same effect. Each Pledgor further agrees to use all reasonable
efforts to qualify, file or register, or cause the issuer of such Pledged
Securities to qualify, file or register, any of the Pledged Securities under the
Blue Sky or other securities laws of such states as may be reasonably requested
by the Collateral Agent and keep effective, or cause to be kept effective, all
such qualifications, filings or registrations provided that the Collateral Agent
and the Secured Parties shall furnish to such Pledgor such information regarding
the Collateral Agent and such Secured Party as such Pledgor shall reasonably
request and as shall be required in connection with any such registration,
<PAGE>
12
qualification or filing. The Pledgors will jointly and severally bear all costs
and expenses of carrying out their obligations under this Section 4.04. The
Pledgors acknowledge that there is no adequate remedy at law for failure by them
to comply with the provisions of this Section 4.04 and that such failure would
not be adequately compensable in damages, and therefore agree, to the fullest
extent permitted under applicable law, that their agreements contained in this
Section 4.04 may be specifically enforced.
ARTICLE V. MISCELLANEOUS
SECTION 5.01. Notices. All communications and notices hereunder shall
(except as otherwise expressly permitted herein) be in writing and given (i) in
the case of communications and notices to the Parent, the Borrower, the
Collateral Agent, or any Lender, as provided in the Credit Agreement and (ii) in
the case of communications and notices to any Subsidiary Pledgor, as provided in
the Guarantee Agreement.
SECTION 5.02. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the security interests granted hereunder and all obligations of
the Pledgors hereunder shall be absolute and unconditional irrespective of (a)
any lack of validity or enforceability of any Loan Document, any agreement with
respect to any of the Obligations or any other agreement or instrument relating
to any of the foregoing, (b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from any Loan Document or
any other agreement or instrument, (c) any exchange, release or non-perfection
of any Lien on other collateral, or any release or amendment or waiver of or
consent under or departure from any guarantee, securing or guaranteeing all or
any of the Obligations or (d) any other circumstance that might otherwise
constitute a defense available to, or a discharge of, any Pledgor in respect of
the Obligations or in respect of this Agreement (other than the payment in full
of all the Obligations and the termination of the Commitments and the Letters of
Credit).
SECTION 5.03. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Pledgor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
<PAGE>
13
have been relied upon by the Secured Parties and shall survive the making by the
Lenders of the Loans and the issuance by the Issuing Bank of any Letter of
Credit, regardless of any investigation made by the Secured Parties or on their
behalf, and shall continue in full force and effect as long as any Obligation is
outstanding and unpaid and so long as the Commitments and the Letters of Credit
have not been terminated.
SECTION 5.04. Binding Effect; Assignments. This Agreement shall become
effective as to any Pledgor when a counterpart hereof executed on behalf of such
Pledgor shall have been delivered to the Collateral Agent and a counterpart
hereof shall have been executed on behalf of the Collateral Agent, and
thereafter shall be binding upon such Pledgor and the Collateral Agent and their
respective successors and assigns, and shall inure to the benefit of the parties
hereto, and their respective successors and assigns, except that the Pledgors
shall not have the right to assign their rights hereunder or any interest herein
or in the Collateral, or any part thereof (and any such attempted assignment
shall be void), or otherwise pledge, encumber or grant any option with respect
to the Collateral, or any part thereof, or any cash or property held by the
Collateral Agent as Collateral under this Agreement except as expressly
contemplated by this Agreement or the other Loan Documents.
SECTION 5.05. Successors and Assigns. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and permitted assigns of such party, and all covenants, promises and
agreements by or on behalf of any Pledgor or the Collateral Agent that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and permitted assigns.
SECTION 5.06. Power of Attorney. The Collateral Agent is hereby appointed
by the Pledgors as the true and lawful agent and attorney-in-fact of each
Pledgor, and in such capacity the Collateral Agent shall have the right, with
power of substitution for the Pledgors and in each Pledgor's name or otherwise,
for the use and benefit of the Collateral Agent and the other Secured Parties,
upon the occurrence and during the continuance of an Event of Default, (a) to
receive, endorse, assign and/or deliver any and all notes, acceptances, checks,
drafts, money orders or other evidences of payment representing any interest or
dividend or other distribution payable in respect of the Collateral or any part
thereof; (b) to demand, collect, receive payment of, give receipt for and give
discharges and releases of all or any of the Collateral; (c) to commence and
prosecute any and all suits, actions or proceedings at law or in equity in any
court of competent jurisdiction to collect or otherwise realize on all or any of
the Collateral or to enforce any rights in respect of any Collateral; (d) to
settle, compromise, compound, adjust or defend any actions, suits or proceedings
relating to all or any of the Collateral; (e) to use, sell, assign, transfer,
pledge, make any agreement with respect to or otherwise deal with all or any of
the Collateral, and to do all other acts and things necessary to carry out the
purposes of this Agreement, as fully and completely as though the Collateral
Agent were the absolute owner of the Collateral for all purposes; provided,
<PAGE>
14
however, that nothing herein contained shall be construed as requiring or
obligating the Collateral Agent or any other Secured Party to make any
commitment or to make any inquiry as to the nature or sufficiency of any payment
received by the Collateral Agent or any other Secured Party, or to present or
file any claim or notice, or to take any action with respect to the Collateral
or any part thereof or the moneys due or to become due in respect thereof or any
property covered thereby, and no action taken or omitted to be taken by the
Collateral Agent or any other Secured Party with respect to the Collateral or
any part thereof shall give rise to any defense, counterclaim or offset in favor
of any Pledgor or to any claim or action against the Collateral Agent or any
other Secured Party.
SECTION 5.07. Collateral Agent's Fees and Expenses; Indemnification. (a)
Each Pledgor jointly and severally agrees to pay within 30 days of demand to the
Collateral Agent the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel and of any experts or agents, that
the Collateral Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from
or other realization upon, any of the Collateral, (iii) the exercise,
enforcement or protection of any of the rights of the Collateral Agent hereunder
or (iv) the failure of the Pledgors to perform or observe any of the provisions
hereof. If the Pledgors shall fail to do any act or thing that they have
covenanted to do hereunder or any representation or warranty of the Pledgors
hereunder shall be breached, the Collateral Agent may (but shall not be
obligated to) do the same or cause it to be done or remedy any such breach and
there shall be added to the Obligations the cost or expense incurred by the
Collateral Agent in so doing.
(b) Without limitation of their indemnification obligations under the other
Loan Documents, each Pledgor jointly and severally agrees to indemnify the
Collateral Agent and the other Secured Parties against, and hold each of them
harmless from, any and all losses, claims, damages, liabilities and related
reasonable expenses, including reasonable counsel fees and expenses, incurred by
or asserted against any of them arising out of, in any way connected with, or as
a result of, the execution, delivery or performance of this Agreement or any
claim, litigation, investigation or proceeding relating hereto or to the
Collateral, whether or not any Secured Party is a party thereto, provided that
such indemnity shall not, as to any Secured Party, be available to the extent
that such losses, claims, damages, liabilities or related expenses have resulted
from the gross negligence or wilful misconduct of such Secured Party.
<PAGE>
15
(c) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 5.07 shall remain operative and in full force and effect
regardless of the termination of this Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the Obligations, the
invalidity or unenforceability of any other term or provision of this Agreement
or any other Loan Document or any investigation made by or on behalf of the
Collateral Agent or any other Secured Party.
SECTION 5.08. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 5.09. Waivers; Amendment. (a) No failure or delay of the Collateral
Agent or any other Secured Party in exercising any power or right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of the Collateral
Agent hereunder and of the other Secured Parties under the other Loan Documents
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provisions of this Agreement or any other Loan
Document or consent to any departure by any Pledgor therefrom shall in any event
be effective unless the same shall be permitted by paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on any Pledgor in any case
shall entitle such Pledgor or the other Pledgor to any other or further notice
or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to a written agreement entered into among the
Pledgors and the Collateral Agent, with the prior written consent of the
Required Lenders or, to the extent provided in the Credit Agreement, the
Lenders.
SECTION 5.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 5.10.
<PAGE>
16
SECTION 5.11. Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 5.12. Jurisdiction; Consent to Service of Process. (a) Each Pledgor
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or Federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the other Loan Documents, or for recognition or enforcement of any
judgment, and each of the parties hereto hereby irrevocably and unconditionally
agrees that all claims in respect of any such action or proceeding may be heard
and determined in such New York State or, to the extent permitted by law, in
such Federal court. Each of the parties hereto agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that the Collateral Agent or
any other Secured Party may otherwise have to bring any action or proceeding
relating to this Agreement or the other Loan Documents against any Pledgor or
its properties in the courts of any jurisdiction.
(b) Each Pledgor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 5.01. Nothing in this Agreement
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.
SECTION 5.13. Termination; Release. (a) This Agreement and the security
interests granted hereby shall terminate when all the Obligations have been paid
in full and the Lenders have no further commitment to lend under the Credit
Agreement, no Letters of Credit are outstanding and the Issuing Bank has no
further obligation to issue Letters of Credit under the Credit Agreement.
<PAGE>
17
(b) Upon (i) any sale by any Pledgor of any Collateral that is permitted
under the Credit Agreement and, if required, the application of the Net Cash
Proceeds of such sale in accordance with Section 2.12 of the Credit Agreement or
(ii) the effectiveness of any written consent to the release of the security
interest granted hereby in any Collateral pursuant to Section 9.08 of the Credit
Agreement, such security interest in such Collateral shall be automatically
released.
(c) In connection with any termination or release pursuant to preceding
paragraphs (a) or (b), the Collateral Agent shall execute and deliver to any
Pledgor, at such Pledgor's own cost and expense, all documents that such Pledgor
shall reasonably request to evidence such termination or release. Any execution
and delivery of documents pursuant to this Section 5.13 shall be without
recourse to or warranty by the Collateral Agent.
SECTION 5.14. Headings. Article and Section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 5.15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract, and shall become effective as
provided in Section 5.04.
SECTION 5.16. Agreement May Constitute Financing Statement. Each Pledgor
consents to the filing of this Agreement or a photocopy thereof as a financing
statement under the Uniform Commercial Code as in effect in any jurisdiction in
which the Collateral Agent may determine such filing to be necessary or
desirable.
SECTION 5.17. Additional Pledgors. Pursuant to Section 5.11 of the Credit
Agreement, each Domestic Subsidiary that was not in existence or not a
Subsidiary on the date thereof is required to enter into this Agreement as a
Pledgor upon becoming a Domestic Subsidiary (other than any Joint Venture). Upon
execution and delivery, after the date hereof, by the Collateral Agent and a
Domestic Subsidiary of an instrument in the form of Annex 1, such Subsidiary
<PAGE>
18
shall become a Pledgor hereunder with the same force and effect as if originally
named as a Pledgor hereunder. The execution and delivery of any such instrument
shall not require the consent of any Pledgor hereunder. The rights and
obligations of each Pledgor hereunder shall remain in full force and effect
notwithstanding the addition of any new Pledgor as a party to this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
CLARK-SCHWEBEL HOLDINGS, INC.
By:
--------------------------------------
Name:
Title:
CLARK-S ACQUISITION CORPORATION
--------------------------------------
Name:
Title:
FORT MILL A INC.
--------------------------------------
Name:
Title:
CLARK-SCHWEBEL, INC.
--------------------------------------
Name:
Title:
CHEMICAL BANK, as Collateral Agent
--------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A TO
PLEDGE AGREEMENT
ACKNOWLEDGEMENT AND CONSENT
Each of the undersigned hereby acknowledges receipt of a copy of the Pledge
Agreement dated as of April __, 1996 (as the same may be amended, supplemented
or otherwise modified from time to time, the "Pledge Agreement"), made by
Clark-Schwebel Holdings, Inc., a Delaware corporation (the "Parent"), Clark-S
Acquisition Corporation, a Delaware corporation to be ultimately merged into
Clark-Schwebel Inc. (the "Purchaser"), Clark-Schwebel, Inc., a Delaware
corporation (the "Company"), Fort Mill A Inc., a Delaware corporation, and the
Domestic Subsidiaries (such term and each other capitalized term used but not
defined herein, having the meaning given in the Pledge Agreement, and if not
defined therein, having the meaning given in the Credit Agreement referred to
below) in favor of CHEMICAL BANK, a New York banking corporation, as collateral
agent (in such capacity, the "Collateral Agent") for the Secured Parties from
time to time parties to the Credit Agreement, dated as of April __, 1996 (as the
same may be amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among the Parent, the Purchaser, and the Secured Parties.
Each of the undersigned, as issuer of Pledged Securities, agrees for the benefit
of the Secured Parties as follows:
1. Each of the undersigned will be bound by the terms of the Pledge
Agreement and will comply with such terms insofar as such terms are applicable
to the undersigned.
2. Each of the undersigned will notify the Collateral Agent promptly in
writing of the occurrence of any of the events described in paragraph (i) of
Article III of the Pledge Agreement.
3. The terms of subsection 4.04 of the Pledge Agreement shall apply to it,
mutatis mutandis, with respect to all actions that may be required of it under
or pursuant to or arising out of Section 4.04 of the Pledge Agreement.
CLARK-S ACQUISITION CORPORATION
By:
------------------------------
Name:
Title:
FORT MILL A INC.
By:
------------------------------
Name:
Title:
CS FINANCE CORPORATION
By:
------------------------------
Name:
Title:
CLARK-SCHWEBEL, INC.
By:
------------------------------
Name:
Title:
<PAGE>
Annex 1 to
the Pledge Agreement
SUPPLEMENT NO. dated as of [ ], to the Pledge Agreement
dated as of April __, 1996 (the "Pledge Agreement"), among
CLARK-SCHWEBEL, INC., a Delaware corporation (as successor by
merger to Clark-S Acquistion Corporation and Fort Mill A Inc.,
the "Borrower"), Clark-Schwebel Holdings, Inc., a Delaware
corporation (the "Parent"), each Domestic Subsidiary (as defined
in the Credit Agreement referred to below) of the Borrower party
thereto (collectively, the "Subsidiary Grantors" and, together
with the Parent and the Borrower, the "Grantors") and CHEMICAL
BANK, a New York banking corporation ("Chemical Bank"), as
collateral agent (in such capacity, the "Collateral Agent") for
the Secured Parties (as defined in the Credit Agreement referred
to below).
A. Reference is made to the Credit Agreement dated as of April __, 1996 (as
amended or modified from time to time, the "Credit Agreement"), among the
Borrower, the Parent, the financial institutions party thereto, as lenders (the
"Lenders"), Chemical Bank, a New York banking corporation, as agent (in such
capacity, the "Administrative Agent"), as collateral agent (in such capacity,
the "Collateral Agent"), as documentation agent (in such capacity, the
"Documentation Agent") and as syndication agent (in such capacity, the
"Syndication Agent") for the Lenders, Chemical Bank Delaware, a Delaware banking
corporation, as issuing bank (in such capacity, the "Issuing Bank"), and Bankers
Trust Company, a New York banking corporation, Fleet National Bank, a national
banking association, and NationsBank, N.A., a national banking association, as
co-agents (in such capacity, each a "Co-Agent").
B. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Pledge Agreement and the Credit
Agreement.
C. Certain Domestic Subsidiaries have entered into the Pledge Agreement in
order to induce the Lenders to make Loans to the Borrower and to induce the
Issuing Bank to issue Letters of Credit for the account of the Borrower pursuant
to, and upon the terms and subject to the conditions specified in, the Credit
Agreement. Pursuant to Section 5.11 of the Credit Agreement, each Domestic
Subsidiary that was not in existence or not a Domestic Subsidiary on the date
thereof is required to enter into the Pledge Agreement as a Pledgor upon
becoming a Domestic Subsidiary (other than any Joint Venture). Section 5.17 of
the Pledge Agreement provides that additional Domestic Subsidiaries may become
Pledgors under the Pledge Agreement by execution and delivery of an instrument
in the form of this Supplement. The undersigned (the "New Pledgor") is a
Domestic Subsidiary and is executing this Supplement in accordance with the
<PAGE>
23
requirements of the Credit Agreement to become a Pledgor under the Pledge
Agreement in order to induce the Lenders to make additional Loans and the
Issuing Bank to issue additional Letters of Credit and as consideration for
Loans previously made and Letters of Credit previously issued.
Accordingly, the Collateral Agent and the New Pledgor agree as follows:
SECTION 1. In accordance with Section 5.17 of the Pledge Agreement, the New
Pledgor by its signature below becomes a Grantor under the Pledge Agreement with
the same force and effect as if originally named therein as a Pledgor and the
New Pledgor hereby agrees to all the terms and provisions of the Pledge
Agreement applicable to it as a Grantor thereunder. Each reference to a
"Pledgor" in the Pledge Agreement shall be deemed to include the New Pledgor.
The Pledge Agreement is hereby incorporated herein by reference.
SECTION 2. The New Pledgor represents and warrants to the Collateral Agent
and the other Secured Parties that this Supplement has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other
similar laws affecting creditors' rights generally and by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
at law or in equity).
SECTION 3. This Supplement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument. This Supplement shall become
effective when the Collateral Agent shall have received counterparts of this
Supplement that, when taken together, bear the signatures of the New Pledgor and
the Collateral Agent.
SECTION 4. Except as expressly supplemented hereby, the Pledge Agreement
shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Pledge Agreement shall not in any way be affected or impaired.
The parties hereto shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions, the economic
<PAGE>
24
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 7. All communications and notices to the Collateral Agent hereunder
shall be in writing and given as provided in the Credit Agreement. All
communications and notices hereunder to the New Pledgor shall be in writing and
given as provided in the Pledge Agreement.
<PAGE>
25
SECTION 8. The New Pledgor agrees to reimburse the Collateral Agent for its
reasonable out-of-pocket expenses in connection with this Supplement, including
the reasonable fees, other charges and disbursement of counsel for the
Collateral Agent.
SECTION 9. Upon the execution and delivery of this Supplement by the New
Pledgor, the New Pledgor and the Administrative Agent shall agree on updated
Schedules to be attached to the Pledge Agreement which schedules shall be
updated merely to reflect the relevant information for the New Pledgor.
IN WITNESS WHEREOF, the parties hereto have duly executed this Supplement
to the Pledge Agreement as of the day and year first above written.
[NAME OF NEW PLEDGOR],
by
----------------------------------
Name:
Title:
CHEMICAL BANK, as Collateral Agent,
by
----------------------------------
Name:
Title:
EXHIBIT 10.6
GUARANTEE AGREEMENT dated as of April __, 1996 by
CLARK-SCHWEBEL HOLDINGS, INC., a Delaware corporation (the
"Parent"), CS FINANCE CORPORATION OF DELAWARE, a Delaware
corporation ("CS Finance"), FORT MILL A INC., a Delaware
corporation ("Fort Mill"), CLARK-SCHWEBEL, INC., a Delaware
corporation (the "Company"), and each other Domestic Subsidiary
of the Borrower (each of the Parent, CS Finance and such Domestic
Subsidiaries, a "Guarantor"), and CHEMICAL BANK, a New York
banking corporation, as collateral agent (in such capacity, the
"Collateral Agent") for the Secured Parties (as defined in the
Credit Agreement referred to below).
Reference is made to the Credit Agreement dated as of April __, 1996
(as amended or modified from time to time, the "Credit Agreement"), among
Clark-S Acquisition Corporation, a Delaware corporation (the "Purchaser"), the
Parent, the financial institutions party thereto, as lenders (the "Lenders"),
Chemical Bank, a New York banking corporation, as agent (in such capacity, the
"Administrative Agent"), as collateral agent (in such capacity, the "Collateral
Agent"), as documentation agent (in such capacity, the "Documentation Agent")
and as syndication agent (in such capacity, the "Syndication Agent") for the
Lenders, Chemical Bank Delaware, a Delaware banking corporation, as issuing bank
(in such capacity, the "Issuing Bank"), and Bankers Trust Company, a New York
banking corporation, Fleet National Bank, a national banking association, and
NationsBank, N.A., a national banking association, as co-agents (in such
capacity, each a "Co-Agent").
On the Closing Date, the Purchaser will merge (the "Fort Mill Merger")
into Fort Mill A Inc. ("Fort Mill"), with Fort Mill as the surviving corporation
and CS Finance will merge into the Company, with the Company as the surviving
corporation. On the first Business Day following the Closing Date, Fort Mill
will merge (the "Post-Closing Merger") into the Company, with the Company as the
surviving corporation. As used in this Agreement "Borrower" shall mean (i)
initially, the Purchaser, (ii) upon consummation of the Fort Mill Merger, Fort
Mill, as the surviving corporation of the Fort Mill Merger, and (iii) upon
consummation of the Post-Closing Merger, the Company, as the surviving
corporation of the Post-Closing Merger.
The Lenders and the Issuing Bank, respectively, have agreed to make
Loans to the Borrower and to issue Letters of Credit for the account of the
Borrower pursuant to, and on the terms and subject to the conditions specified
in, the Credit Agreement.
The obligations of the Lenders to make Loans and of the Issuing Bank
to issue Letters of Credit under the Credit Agreement are conditioned upon,
among other things, the execution and delivery by each Guarantor of a guarantee
agreement in the form hereof. In order to induce the Lenders to make Loans and
the Issuing Bank to issue Letters of Credit, each Guarantor is willing to
execute and deliver this Agreement.
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Accordingly, the Guarantors and the Collateral Agent, on behalf of
itself and each other Secured Party (and each of their successors and assigns),
hereby agree as follows:
SECTION 1. Definition of Terms Used Herein. All capitalized terms used
but not defined herein shall have the meanings set forth in the Credit Agreement
and the other Loan Documents (as defined in the Credit Agreement).
SECTION 2. Guarantee. Each Guarantor absolutely and unconditionally
guarantees, as a primary obligor and not merely as a surety, the due and
punctual payment by the Borrower of (a) the principal of and premium, if any,
and interest (including interest accruing during the pendency of any bankruptcy,
insolvency, receivership or other similar proceeding, regardless of whether
allowed or allowable in such proceeding) on the Loans, when and as due, whether
at maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (b) each payment required to be made by the Borrower under the Credit
Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral, (c) all other monetary obligations,
including fees, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), of
each Loan Party to the Secured Parties under the Credit Agreement, this
Guarantee Agreement and the other Loan Documents to which such Loan Party is or
is to be a party and (d) all obligations of each Loan Party under each Rate
Protection Agreement and Currency Protection Agreement entered into with any
Lender (all the foregoing obligations being referred to collectively as the
"Obligations"). Each Guarantor further agrees that the Obligations may be
extended or renewed, in whole or in part, without notice to or further assent
from it, and that it will remain bound upon its guarantee notwithstanding any
extension or renewal of any Obligation.
Anything contained in this Agreement and the other Loan Documents to
the contrary notwithstanding, the obligations of each Domestic Subsidiary of the
Borrower hereunder and under the other Loan Documents shall be limited to a
maximum aggregate amount equal to the largest amount that would not render its
obligations hereunder subject to avoidance as a fraudulent transfer or
conveyance under Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state or foreign law (collectively, the
"Fraudulent Transfer Laws"), in each case after giving effect to all other
liabilities of such Guarantor, contingent or otherwise, that are relevant under
the Fraudulent Transfer Laws (specifically excluding, however, any liabilities
of such Guarantor in respect of intercompany indebtedness to the Borrower or
Affiliates of the Borrower to the extent that such indebtedness would be
discharged in an amount equal to the amount paid by such Guarantor hereunder)
and after giving effect as assets to the value (as determined under the
applicable provisions of the Fraudulent Transfer Laws) of any rights to
subrogation, contribution, reimbursement, indemnity or similar rights of such
Guarantor pursuant to (a) applicable law or (b) any agreement providing for an
equitable allocation among such Guarantor and other Affiliates of the Borrower
of obligations arising under guarantees by such parties.
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<PAGE>
SECTION 3. Obligations Not Waived. Each Guarantor waives presentment
to, demand of payment from and protest to the Borrower of any of the
Obligations, and also waives notice of acceptance of its guarantee and notice of
protest for nonpayment and any other notices. The obligations of each Guarantor
hereunder shall not be affected by (a) the failure of the Collateral Agent or
any other Secured Party to assert any claim or demand or to enforce any right or
remedy against any other Loan Party under the provisions of any Loan Document or
otherwise; (b) any rescission, waiver, amendment or modification of, or any
release from any of the terms or provisions of, any Loan Document, any guarantee
or any other agreement; (c) the release of any security held by the Collateral
Agent or any other Secured Party for the Obligations or any of them; or (d) the
failure of the Collateral Agent or any other Secured Party to exercise any right
or remedy against any other guarantor of the Obligations.
SECTION 4. Security. Each Guarantor authorizes the Collateral Agent
and each of the other Secured Parties, in accordance with the terms and subject
to the conditions set forth in the Security Documents to which such Guarantor is
a party, if any, to (a) take and hold security for the payment of this guarantee
or the Obligations and exchange, enforce, waive and release any such security,
(b) apply such security and direct the order or manner of sale thereof as set
forth in the Security Documents or, if not set forth therein, as they in their
sole discretion determine and (c) release or substitute any one or more
endorsees, other guarantors or other obligors.
SECTION 5. Guarantee of Payment. Each Guarantor further agrees that
its guarantee hereunder constitutes a guarantee of payment when due and not of
collection, and waives any right to require that any resort be had by the
Collateral Agent or any other Secured Party to the Collateral or any other
security held for payment of the Obligations or to any balance of any deposit
account or credit on the books of the Collateral Agent or any other Secured
Party in favor of the Borrower or any other person.
SECTION 6. No Discharge or Diminishment of Guarantee. The obligations
of the Guarantors hereunder shall be absolute and unconditional and shall not be
subject to any reduction, limitation, impairment or termination for any reason,
including, without limitation, any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any setoff, counterclaim,
deduction, diminution, abatement, suspension, deferment, reduction, recoupment,
termination or defense (other than full satisfaction of the Obligations)
whatsoever by reason of the invalidity, illegality or unenforceability of the
Obligations or otherwise. Without limiting the generality of the foregoing, the
obligations of each Guarantor hereunder shall not be released, discharged or
impaired or otherwise affected by any circumstance or condition whatsoever
(whether or not the Borrower, such Guarantor, the Collateral Agent or any other
Secured Party has knowledge thereof) that may or might in any manner or to any
extent vary the risk of such Guarantor or otherwise operate as a discharge of
such Guarantor as a matter of law or equity (other than the payment in full of
all the Obligations, the termination of the Commitments thereunder and the
termination of the Letters of Credit), including, without limitation:
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<PAGE>
(a) any termination, amendment, modification, addition, deletion or
supplement to or other change to any of the terms of any Loan Document or
any other instrument or agreement applicable to any of the parties hereto
or thereto, or any assignment or transfer of any thereof, or any furnishing
or acceptance of security, or any release of any security, for any
Obligations of the Borrower or any Guarantor hereunder or thereunder, or
the failure of any security or the failure of any person to perfect any
interest in the Collateral or any other collateral;
(b) any failure, forbearance, omission or delay on the part of the
Borrower or the Guarantor or the Collateral Agent or any other Secured
Party to conform or comply with any term of any Loan Document or any other
instrument or agreement, or any failure to give notice to the Borrower or
any Guarantor of the occurrence of an Event of Default or any Default
occurring under the Credit Agreement or any default under any other Loan
Document;
(c) any waiver of the payment, performance or observance of any of the
obligations, conditions, covenants or agreements contained in any Loan
Document, or any other waiver, consent, extension, renewal, indulgence,
compromise, release, settlement, refunding or other action or inaction
under or in respect of any Loan Document or any other instrument or
agreement, or under or in respect of any obligation or liability of the
Borrower or any Guarantor or the Collateral Agent or any other Secured
Party or any exercise or non-exercise of any right, remedy, power or
privilege under or in respect of any Loan Document or such instrument or
agreement or any such obligation or liability;
(d) any extension of the time for payment of the principal of or
interest on any Obligation, or of the time for performance of any other
obligation, covenant or agreement under or arising out of any Loan
Document, or the extension or the renewal of any thereof;
(e) the exchange, surrender, substitution or modification of, or the
furnishing of any additional, collateral security for the Obligations;
(f) any failure, omission or delay on the part of the Collateral Agent
or any other Secured Party to enforce, assert or exercise any right, power
or remedy conferred on it in any Loan Document, or any such failure,
omission or delay on the part of the Collateral Agent or any other Secured
Party in connection with any Loan Document or any other action or inaction
on the part of the Collateral Agent or any other Secured Party;
(g) to the extent permitted by applicable law, any voluntary or
involuntary bankruptcy, insolvency, reorganization, moratorium,
arrangement, adjustment, readjustment, composition, assignment for the
benefit of creditors, receivership, conservatorship, custodianship,
liquidation, marshalling of assets and liabilities or similar proceedings
with respect to the Borrower or any Guarantor or any other person or any of
their respective properties or creditors, or any action taken by any
15
<PAGE>
trustee or receiver or by any court in any such proceeding (including,
without limitation, any automatic stay incident to any such proceeding);
(h) any limitation on the liability or obligations of the Borrower or
any Guarantor under any Loan Document or any other instrument or agreement,
that may now or hereafter be imposed by any statute, regulation, rule of
law or otherwise, or any discharge, termination, cancellation, frustration,
irregularity, invalidity or unenforceability, in whole or in part, of any
thereof;
(i) any merger, consolidation or amalgamation of the Borrower or any
Guarantor into or with any other person, or any sale, lease or transfer of
any of the assets of the Borrower or such Guarantor to any other person;
(j) any change in the ownership of any shares of capital stock of the
Borrower or any Guarantor;
(k) to the extent permitted by applicable law, any release or
discharge, by operation of law, of the Borrower or any Guarantor from the
performance or observance of any obligation, covenant or agreement
contained in any Loan Document; or
(l) any other occurrence, circumstance, happening or event whatsoever,
whether similar or dissimilar to the foregoing, whether foreseen or
unforeseen and any other circumstance that might otherwise constitute a
legal or equitable defense, release or discharge (including the release or
discharge of the liabilities of a guarantor or surety) or that might
otherwise limit recourse against the Borrower or any Guarantor, whether or
not such Borrower or the Guarantor shall have notice or knowledge of the
foregoing.
SECTION 7. Continued Effectiveness. Each Guarantor further agrees that
its guarantee shall continue to be effective or be reinstated, as the case may
be, if at any time payment, or any part thereof, of any Obligation is rescinded,
invalidated, declared to be fraudulent or preferential, or must otherwise be
returned, refunded, repaid or restored by the Collateral Agent or any other
Secured Party for any reason whatsoever, including, without limitation, upon the
bankruptcy or reorganization of the Borrower, any Guarantor (in the case of such
Guarantor, to the extent permitted under applicable law) or otherwise.
SECTION 8. Subrogation. In furtherance of the foregoing and not in
limitation of any other right that the Collateral Agent or any other Secured
Party has at law or in equity against any Guarantor by virtue hereof, upon the
failure of the Borrower or such Guarantor to pay any Obligation when and as the
same shall become due, whether at maturity, by acceleration, after notice of
prepayment or otherwise, each Guarantor hereby promises to and will, upon
receipt of written demand by the Collateral Agent or any other Secured Party,
forthwith pay, to the Collateral Agent for distribution to the Secured Parties
in accordance with the Credit Agreement in cash the amount of such unpaid
Obligation. Notwithstanding any provision of this Agreement to the contrary, all
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rights of each Guarantor for subrogation under applicable law or otherwise shall
be fully subordinated to the payment in full of the Obligations and may not be
exercised or asserted until payment in full of the Obligations, termination of
the Commitments and termination of the Letters of Credit.
Each Guarantor agrees that, as between such Guarantor, on the one
hand, and the Collateral Agent and the other Secured Parties, on the other hand,
(a) the maturity of the Obligations guaranteed hereby may be accelerated as
provided in the Credit Agreement for the purposes of such Guarantor's guarantee
herein, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the Obligations guaranteed hereby and (b) in the
event of any declaration of acceleration of such Obligations as provided in the
Credit Agreement, such Obligations (whether or not due and payable) shall
forthwith become due and payable in full by such Guarantor for purposes of this
Agreement.
SECTION 9. Information. Each Guarantor assumes all responsibility for
being and keeping itself informed of the Borrower's financial condition and
assets, and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks that such
Guarantor assumes and incurs hereunder, and agrees that none of the Collateral
Agent and the other Secured Parties will have any duty to advise any of the
Guarantors of information known to it or any of them regarding such
circumstances or risks.
SECTION 10. Representations and Warranties. Each Guarantor represents
and warrants to and with the Collateral Agent and each other Secured Party that
all representations and warranties contained in the Loan Documents that relate
to such Guarantor are true and correct in all material respects.
SECTION 11. Notices. All communications and notices to the Borrower,
the Collateral Agent or any Lender hereunder shall be in writing and given as
provided in the Credit Agreement. Notices and other communications to any
Guarantor hereunder shall be in writing and shall be delivered by hand or
overnight courier service, mailed by certified or registered mail or sent by
telecopy, to it at its address (or telecopy number) set forth in Schedule I
hereto. All notices and other communications given to any Guarantor hereunder in
accordance with the foregoing sentence shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such Guarantor as provided in this Section 11 or in accordance
with the latest unrevoked direction from such Guarantor given in accordance with
this Section 11.
SECTION 12. Survival of Agreement. All covenants, agreements,
representations, warranties and guarantees made by each Guarantor hereunder and
in any certificates or other instruments prepared or delivered in connection
with or pursuant to this Agreement or any other Loan Document shall be
considered to have been relied upon by the Secured Parties and shall survive the
making by the Lenders of the Loans and the issuance by the Issuing Bank of any
Letter of Credit, regardless of any investigation made by the Secured Parties or
on their behalf, and shall continue in full force and effect as long as any of
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the Obligations is outstanding and unpaid, and the Commitments and the Letters
of Credit have not been terminated; provided, however, that upon the sale of all
the capital stock of any Guarantor (or the sale of all of the capital stock of
any corporation that owns all of the capital stock of any Guarantor) in a manner
that is permitted by the Credit Agreement, the guarantee hereunder of such
Guarantor made hereunder shall automatically terminate upon such sale.
SECTION 13. Binding Effect; Assignments. This Agreement shall become
effective as to each Guarantor when a counterpart hereof executed on behalf of
such Guarantor shall have been delivered to the Collateral Agent and a
counterpart hereof shall have been executed on behalf of the Collateral Agent,
and thereafter shall be binding upon such Guarantor and the Collateral Agent and
their respective successors and assigns, and shall inure to the benefit of each
Guarantor, the Collateral Agent and the other Secured Parties and their
respective successors and assigns, except that no Guarantor shall have the right
to assign its rights hereunder or any interest herein or in the Collateral (and
any such attempted assignment shall be void) except as expressly contemplated by
this Agreement or the other Loan Documents.
SECTION 14. Successors and Assigns. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and permitted assigns of such party, and all covenants, promises and
agreements by or on behalf of any Guarantor or the Collateral Agent that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.
SECTION 15. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK.
SECTION 16. Waivers; Amendment. (a) No failure or delay of the
Collateral Agent or any other Secured Party in exercising any power or right
hereunder or under any other Loan Document and no course of dealing between the
parties hereto or thereto shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Collateral Agent hereunder and of the other Secured Parties
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of
any provisions of this Agreement or any other Loan Document or consent to any
departure by any Guarantor therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given. No notice or demand on any Guarantor in any case shall entitle such
Guarantor to any other or further notice or demand in similar or other
circumstances.
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(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to a written agreement entered into between
any Guarantor and the Collateral Agent, with the prior written consent of the
Required Lenders.
SECTION 17. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 17.
SECTION 18. Severability. In case any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect with respect to any Guarantor,
the validity, legality and enforceability of the remaining provisions contained
herein and therein shall not in any way be affected or impaired thereby. The
parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions, the economic effect
of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 19. Right of Setoff. If an Event of Default shall have
occurred and be continuing under the Credit Agreement, each Secured Party is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Secured Party to or for the credit or the account of each
Guarantor against any and all the obligations of such Guarantor now or hereafter
existing under this Agreement irrespective of whether or not such Secured Party
shall have made any demand under this Agreement and although such obligations
may be unmatured. The rights of each Secured Party under this Section 19 are in
addition to any other rights and remedies (including other rights of setoff)
that such Secured Party may have.
SECTION 20. Jurisdiction; Consent to Service of Process. (a) Each
Guarantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
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permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Collateral Agent or any other Secured Party may otherwise have to bring any
action or proceeding relating to this Agreement or the other Loan Documents
against any Guarantor or its properties in the courts of any jurisdiction.
(b) Each Guarantor hereby irrevocably and unconditionally waives, to
the fullest extent it may legally and effectively do so, any objection that it
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 11. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 21. Termination. This Agreement and the guarantee made
hereunder shall terminate when all the Obligations have been paid in full and
the Lenders have no further commitment to lend under the Credit Agreement, no
Letters of Credit are outstanding and the Issuing Bank has no further obligation
to issue Letters of Credit under the Credit Agreement. Upon (a) the termination
of this Agreement and the guarantee made hereunder in accordance with the
preceding sentence and (b) the request of any Guarantor, the Collateral Agent
shall execute and deliver to such Guarantor, at such Guarantor's own cost and
expense, an acknowledgement of such termination reasonably satisfactory to such
Guarantor.
SECTION 22. Headings. Article and Section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 23. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument.
SECTION 24. Additional Guarantors. Pursuant to Section 5.11 of the
Credit Agreement, each Domestic Subsidiary that was not in existence or not a
Subsidiary on the date thereof is required to enter into this Agreement as a
Guarantor upon becoming a Domestic Subsidiary (other than any Joint Venture).
Upon execution and delivery, after the date hereof, by the Collateral Agent and
a Domestic Subsidiary of an instrument in the form of Annex 1, such Domestic
Subsidiary shall become a Guarantor hereunder with the same force and effect as
if originally named as a Guarantor hereunder. The execution and delivery of any
such instrument shall not require the consent of any Guarantor hereunder. The
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<PAGE>
rights and obligations of each Guarantor hereunder shall remain in full force
and effect notwithstanding the addition of any new Guarantor as a party to this
Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
CLARK-SCHWEBEL HOLDINGS, INC.,
by
Name:
Title:
FORT MILL A INC.,
by
-----------------------------------
Name:
Title:
CS FINANCE CORPORATION OF DELAWARE,
by
-----------------------------------
Name:
Title:
CLARK-SCHWEBEL, INC.
by
---------------------------------
Name:
Title:
CHEMICAL BANK, as Collateral Agent,
by
Name:
Title:
<PAGE>
Annex 1 to
the Guarantee Agreement
SUPPLEMENT NO. dated as of [ ], to the Guarantee Agreement
dated as of April __, 1996 (the "Guarantee Agreement"), by
CLARK-SCHWEBEL HOLDINGS, INC. (the "Parent'), certain other
guarantors and each of the Domestic Subsidiaries (as defined in
the Credit Agreement) party thereto (the Parent, such other
guarantors and the Domestic Subsidiaries collectively, the
"Guarantors") and CHEMICAL BANK, a New York banking corporation
("Chemical Bank"), as collateral agent (the "Collateral Agent")
for the Secured Parties (as defined in the Credit Agreement
referred to below).
A. Reference is made to the Credit Agreement dated as of April __,
1996 (as amended or modified from time to time, the "Credit Agreement"), among
Clark-Schwebel, Inc., as ultimate successor by merger to Clark-S Acquisition
Corporation (the "Borrower"), the Parent, the financial institutions party
thereto, as lenders, (the "Lenders"), Chemical Bank, a New York banking
corporation, as agent (in such capacity, the "Administrative Agent"), as
collateral agent (in such capacity, the "Collateral Agent") for the Lenders, as
documentation agent (in such capacity, the "Documentation Agent") and as
syndication agent (in such capacity, the "Syndication Agent"), Chemical Bank
Delaware, a Delaware banking corporation, as issuing bank (in such capacity, the
"Issuing Bank"), and Bankers Trust Company, a New York banking corporation,
Fleet National Bank, a national banking association, and NationsBank, N.A., a
national banking association, as co-agents (in such capacity, each a
"Co-Agent").
B. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Guarantee Agreement and
the Credit Agreement.
C. Certain Domestic Subsidiaries have entered into the Guarantee
Agreement in order to induce the Lenders to make Loans to the Borrower and to
induce the Issuing Bank to issue Letters of Credit for the account of the
Borrower pursuant to, and upon the terms and subject to the conditions specified
in, the Credit Agreement. Pursuant to Section 5.11 of the Credit Agreement, each
Domestic Subsidiary that was not in existence or not a Domestic Subsidiary on
the date thereof is required to enter into the Guarantee Agreement as a
Guarantor upon becoming a Domestic Subsidiary (other than the Joint Ventures).
Section 24 of the Guarantee Agreement provides that additional Domestic
Subsidiaries may become Guarantors under the Guarantee Agreement by execution
and delivery of an instrument in the form of this Supplement. The undersigned
(the "New Guarantor") is a Domestic Subsidiary and is executing this Supplement
in accordance with the requirements of the Credit Agreement to become a
21
<PAGE>
Guarantor under the Guarantee Agreement in order to induce the Lenders to make
additional Loans and the Issuing Bank to issue additional Letters of Credit and
as consideration for Loans previously made and Letters of Credit previously
issued.
Accordingly, the Collateral Agent and the New Guarantor agree as
follows:
SECTION 1. In accordance with Section 24 of the Guarantee Agreement,
the New Guarantor by its signature below becomes a Guarantor under the Guarantee
Agreement with the same force and effect as if originally named therein as a
Guarantor and the New Guarantor hereby agrees to all the terms and provisions of
the Guarantee Agreement applicable to it as a Guarantor thereunder. Each
reference to a "Guarantor" in the Guarantee Agreement shall be deemed to include
the New Guarantor. The Guarantee Agreement is hereby incorporated herein by
reference.
SECTION 2. The New Guarantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or
other similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding at law or in equity).
SECTION 3. This Supplement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument. This Supplement shall
become effective when the Collateral Agent shall have received counterparts of
this Supplement that, when taken together, bear the signatures of the New
Guarantor and the Collateral Agent.
SECTION 4. Except as expressly supplemented hereby, the Guarantee
Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
validity, legality and enforceability of the remaining provisions contained
herein and in the Guarantee Agreement shall not in any way be affected or
impaired. The parties hereto shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 7. All communications and notices to the Borrower, the
Collateral Agent or any Lender hereunder shall be in writing and given as
provided in the Credit Agreement. All communications and notices hereunder to
22
<PAGE>
the New Guarantor shall be in writing and given to it at the address set forth
under its signature, which supplements Schedule I to the Guarantee Agreement,
with a copy to the Borrower.
SECTION 8. The New Guarantor agrees to reimburse the Collateral Agent
for its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursement of counsel for the
Collateral Agent.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Supplement to the Guarantee Agreement as of the day and year first above
written.
[NAME OF NEW GUARANTOR],
by
Name:
Title:
Address:
CHEMICAL BANK, as Collateral Agent,
by
Name:
Title:
EXHIBT 10.8
MANAGEMENT AGREEMENT
This Management Agreement (this "Agreement") is made as of the __th
day of April, 1996 among Clark-Schwebel Holdings, Inc., a Delaware corporation
("Holdings"), Clark-Schwebel, Inc., a Delaware corporation ("CSI", and together
with Holdings and any subsidiary hereinafter formed by any of them, the
"Companies"), and Vestar Capital Partners, a New York general partnership
("Vestar" or "Consultant").
WHEREAS, Vestar, by and through its officers, employees, agents,
representatives and affiliates, has expertise in the areas of corporate
management, finance, investment, acquisitions and other matters relating to the
business of the Companies; and
WHEREAS, the Companies desire to avail themselves, for the term of
this Agreement, of the expertise of the Consultant in the aforesaid areas (in
which it acknowledges the expertise of the Consultant) in the manner set forth
herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants and conditions herein set forth, the parties hereto agree as follows:
1. Consulting Arrangement with Vestar.
1.1 Appointment. The Companies hereby appoint Vestar to render the
advisory and consulting services described in Paragraph 1.2 hereof for the term
of this Agreement.
1.2 Services of Vestar. Vestar hereby agrees that during the term of
this Agreement it shall render to the Companies by and through such of its
officers, employees, agents, representatives and affiliates as Vestar, in its
sole discretion, shall designate from time to time, advisory and consulting
services in relation to the affairs of the Companies in connection with
strategic financial planning, and other services not referred to in the next
sentence, including, without limitation, advisory and consulting services
relating to the selection, supervision and retention of independent auditors,
the selection, retention and supervision of outside legal counsel, and the
selection, retention and supervision of investment bankers or other financial
advisors or consultants. It is expressly agreed that the services to be
performed under this paragraph 1.2 shall not include investment banking or other
financial advisory services rendered by Vestar to the Companies in connection
with acquisitions and divestitures by any of the Companies, refinancings,
initial public offerings, sales of stock by any of the Companies or a
transaction that constitutes a Sale of the Company under that certain
Securityholders Agreement of even date herewith by and among Holdings, Vestar/CS
Holding Company, L.L.C. and certain other parties (the "Securityholders
Agreement"), for which services Vestar shall be entitled to receive additional
compensation.
<PAGE>
1.3 Management and Consulting Fees. In consideration of the services
contemplated by Paragraph 1.2, the Companies and their successors agree to pay
to Vestar an aggregate per annum fee (the "Fee") equal to the greater of (i)
$350,000 and (ii) 1.0% of EBITDA (as defined below) of the Companies on a
consolidated basis for each fiscal year during the term of this Agreement,
commencing on the date hereof, which Fee shall be payable semi-annually in
advance; provided that such semi-annual Fee payments shall be calculated using
the greater of (a) Fee payments of $350,000 per year and (b) 1.0% of EBITDA of
the Companies on a consolidated basis for the prior fiscal year, and shall be
subject to an adjustment (the "Adjustment") upwards or downwards, as the case
may be, to reflect the difference between EBITDA during the then current fiscal
year and EBITDA for the prior fiscal year upon which the calculation of such
semi-annual Fee payments was based, provided that in no event shall the annual
Fee be less than $350,000. Each Adjustment, if any, shall be payable on the
earlier of (i) the date of the next semi-annual Fee payment after such
Adjustment is determined and (ii) the termination of this Agreement.
Notwithstanding the foregoing, the first two semi-annual payments shall be based
on a per annum Fee of $350,000. For purposes of this Agreement, "EBITDA" means,
with reference to any period, net income of the Companies on a consolidated
basis for such period before interest, taxes and non-cash charges, including
depreciation and amortization. In addition, the Companies shall pay to Vestar on
the date of this Agreement a fee in the amount of $1,500,000.
1.4 Reimbursements. In addition to the Fee, the Companies shall, at
the direction of the Consultant, pay directly or reimburse the Consultant for
its reasonable Out-of-Pocket Expenses incurred in connection with the services
provided for in Paragraph 1.2 hereof. For the purposes of this Agreement, the
term "Out-of-Pocket Expenses" means the amounts paid by the Consultant in
connection with the services provided for in Paragraph 1.2 hereof, including
reasonable (i) fees and disbursements of any independent professionals and
organizations, including independent auditors and outside legal counsel,
investment bankers or other financial advisors or consultants, (ii) costs of any
outside services or independent contractors such as financial printers,
couriers, business publication or similar services and (iii) transportation, per
diem, telephone calls, word processing expenses or any similar expense not
associated with its ordinary operations. All reimbursements for Out-of-Pocket
Expenses shall be made promptly upon or as soon as practicable after
presentation by Vestar to a Company of the statement in connection therewith.
1.5 Indemnification. The Companies will defend, indemnify and hold
harmless the Consultant and its officers, employees, agents, representatives and
affiliates (each being an "Indemnified Party") from and against any and all
losses, claims, damages and liabilities, joint or several, to which such
Indemnified Party may become subject under any applicable federal or state law,
or any claim made by any third party, or otherwise, to the extent they relate to
or arise out of the advisory and consulting services contemplated by this
Agreement, the engagement of the Consultant pursuant to this Agreement or any
act or omission by the Consultant in connection with the performance of the
services contemplated by this Agreement. The Companies will reimburse any
Indemnified Party for all reasonable costs and expenses (including reasonable
attorneys' fees and expenses) as they are incurred in connection with the
investigation of, preparation for or defense of any pending or threatened claim
for which the Indemnified Party would be entitled to indemnification under the
2
<PAGE>
terms of the previous sentence, or any action or proceeding arising therefrom,
whether or not such Indemnified Party is a party hereto. The Companies will not
be liable under the foregoing indemnification provision to the extent that any
loss, claim, damage, liability, cost or expense is determined by a court in a
final judgment from which no further appeal may be taken, to have resulted
primarily from the gross negligence or willful misconduct of the Consultant.
1.6 Liability. Neither the Consultant nor any of its officers,
employees, agents, representatives or affiliates shall be liable to any Company
for any loss, claim, damage or liability to the extent such loss, claim, damage
or liability relates to or arises out of the advisory and consulting services
contemplated by this Agreement, the engagement of the Consultant pursuant to
this Agreement or any act or omission by the Consultant in connection with the
performance of services contemplated by this Agreement, unless such loss, claim,
damage or liability is determined by a court in a final judgment from which no
further appeal may be taken, to have resulted primarily from the gross
negligence or willful misconduct of the Consultant.
2. Term. This Agreement shall be in effect on the date hereof and
continue until the tenth anniversary of the date hereof, provided that the
Agreement may be terminated with respect to the rights, duties and obligations
of the Consultant at any time at the election of Vestar and that Vestar may
elect to waive or reduce the fees due to it under Paragraph 1.3 hereof. The
provisions of Paragraphs 1.4, 1.5, 1.6, 3 and 4 and otherwise as the context so
requires shall survive the termination of this Agreement.
3. Permitted Activities. Subject to all applicable provisions of New
York law that impose fiduciary duties upon Vestar or its partners, officers,
employees or affiliates, nothing herein shall in any way preclude Vestar or its
partners, officers, employees or affiliates from engaging in any business
activities or from performing services for their own respective accounts or for
the account of others, including for companies that may be in competition with a
business conducted by the Companies.
4. General. (a) No amendment or waiver of any provision of this
Agreement, or consent to any departure by either party from any such provision,
shall in any event be effective unless the same shall be in writing and signed
by the parties to this Agreement and then such amendment, waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
(b) Any and all notices hereunder shall, in the absence of
receipted hand delivery, be deemed duly given when mailed, if the same shall be
sent by registered or certified mail, return receipt requested, and the mailing
date shall be deemed the date from which all time periods pertaining to a date
of notice shall run. Notices shall be addressed to the parties at the following
addresses:
3
<PAGE>
If to Holdings: Clark Schwebel Holdings, Inc.
c/o Vestar Equity Partners, L.P.
245 Park Avenue, 41st Floor
New York, New York 10167
Attention: Sander M. Levy
If to CSI: Clark-Schwebel, Inc.
2200 South Murray Avenue
P.O. Box 2627
Anderson, SC 29622
Attention: William D. Bennison
Vestar Equity Partners, L.P.
245 Park Avenue, 41st Floor
New York, New York 10167
Attention: Sander M. Levy
If to Vestar: Vestar Capital Partners
245 Park Avenue, 41st Floor
New York, New York 10167
Attention: Sander M. Levy
In any case,
with copies to: Kirkland & Ellis
655 15th Street, N.W.
Washington, D.C. 20005
Attention: Jack M. Feder, Esq.
(c) This Agreement shall constitute the entire Agreement between
the parties with respect to the subject matter hereof, and shall supersede all
previous oral and written (and all contemporaneous oral) negotiations,
commitments, agreements and understandings relating hereto.
(d) THIS AGREEMENT SHALL BE GOVERNED BY, AND ENFORCED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (EXCLUDING THE CHOICE OF LAW
PRINCIPLES THEREOF). THE PARTIES TO THIS AGREEMENT HEREBY AGREE TO SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED IN THE STATE OF
NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT. This Agreement shall inure to the benefit of, and be binding upon,
each of the Companies and the Consultant and their respective successors and
assigns; provided that this Agreement may not be assigned by Vestar except to an
affiliate of Vestar.
4
<PAGE>
(e) This Agreement may be executed in separate counterparts, and
by different parties on separate counterparts, each set of counterparts showing
execution by all parties shall be deemed an original, but all of which shall
constitute one and the same instrument.
(f) Holdings and CSI shall cause their respective subsidiaries
hereinafter formed or acquired to execute a counterpart to this Agreement,
thereby assuming the rights and obligations of a Company under this Agreement;
provided that the obligations of a subsidiary hereunder shall terminate at the
time such subsidiary is no longer a subsidiary of any Company.
(g) The waiver by any party of any breach of this Agreement shall
not operate as or be construed to be a waiver by such party of any subsequent
breach.
[END OF PAGE]
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Management
Agreement to be executed and delivered as of the date first written above.
VESTAR CAPITAL PARTNERS
By: Vestar Management Corporation I, its
General Partner
By:__________________________________
Name:
Title:
CLARK-SCHWEBEL HOLDINGS, INC.
By:__________________________________
Name:
Title:
CLARK-SCHWEBEL, INC.
By:__________________________________
Name:
Title:
EXHIBIT 10.9
INTELLECTUAL PROPERTY SECURITY AGREEMENT dated as of April
__, 1996, among CLARK-SCHWEBEL HOLDINGS, INC., a Delaware
corporation (the "Parent"), FORT MILL A INC., a Delaware
corporation ("Fort Mill"), CLARK-S ACQUISITION CORPORATION, a
Delaware corporation (the "Purchaser"), CLARK-SCHWEBEL, INC., a
Delaware corporation (the "Company"), each Domestic Subsidiary of
the Borrower party hereto (the "Subsidiary Grantors" and,
together with the Parent, Fort Mill, the Purchaser, the Company
and the Borrower referred to below, the "Grantors") and CHEMICAL
BANK, a New York banking corporation, as collateral agent (in
such capacity, the "Collateral Agent") for the Secured Parties
(as defined herein).
Reference is made to the Credit Agreement dated as of April __, 1996 (as
amended or modified from time to time, the "Credit Agreement"), among the
Purchaser, the Parent, the financial institutions party thereto, as lenders (the
"Lenders"), Chemical Bank, a New York banking corporation, as agent (in such
capacity, the "Administrative Agent"), as collateral agent (in such capacity,
the "Collateral Agent"), as documentation agent (in such capacity, the
"Documentation Agent")and as syndication agent (in such capacity, the
"Syndication Agent") for the Lenders, Chemical Bank Delaware, a Delaware banking
corporation, as issuing bank (in such capacity, the "Issuing Bank"), Bankers
Trust Company, a New York banking corporation, Fleet National Bank, a national
banking association, and NationsBank, N.A., a national banking association, as
co-agents (in such capacity, each a "Co-Agent"). Capitalized terms used herein
but not defined herein shall have the meanings assigned to such terms in the
Credit Agreement.
The Lenders and the Issuing Bank, respectively, have agreed to make Loans
to the Borrower and to issue Letters of Credit for the account of the Borrower,
pursuant to, and on the terms and subject to the conditions specified in, the
Credit Agreement.
On the Closing Date, the Purchaser will merge (the "Fort Mill Merger") into
Fort Mill, with Fort Mill as the surviving corporation and CS Finance
Corporation of Delaware will merge with the Company, with the Company as the
surviving corporation. On the first Business Day following the Closing Date,
Fort Mill will merge (the "Post-Closing Merger") into the Company, with the
Company as the surviving corporation. As used in this Agreement "Borrower" shall
mean (i) initially, the Purchaser, (ii) upon consummation of the Fort Mill
Merger, Fort Mill, as the surviving corporation of the Fort Mill Merger, and
(iii) upon consummation of the Post-Closing Merger, the Company, as the
surviving corporation of the Post-Closing Merger.
<PAGE>
2
The obligations of the Lenders to make Loans and of the Issuing Bank to
issue Letters of Credit under the Credit Agreement are conditioned upon, among
other things, the execution and delivery by the Grantors of an intellectual
property security agreement in the form hereof to secure the due and punctual
payment of, with respect to each Grantor, its obligations as obligor or
guarantor in respect of (a) the principal of, premium, if any, and interest
(including interest accruing during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding) on the Loans, when and as due, whether at
maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (b) each payment required to be made by the Borrower under the Credit
Agreement in respect of any Letter of Credit, when and as due, including
payments in respect of reimbursement of disbursements, interest thereon and
obligations to provide cash collateral, (c) all other monetary obligations,
including fees, costs, expenses and indemnities, whether primary, secondary,
direct, contingent, fixed or otherwise (including monetary obligations incurred
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding), of
each Loan Party to the Secured Parties under the Credit Agreement, this
Intellectual Property Security Agreement and the other Loan Documents (as
defined in the Credit Agreement) to which such Loan Party is or is to be a party
and (d) all obligations of the Borrower under each Rate Protection Agreement and
Currency Protection Agreement entered into with any Lender (all the foregoing
obligations being referred to collectively as the "Obligations").
Accordingly, the Grantors and the Collateral Agent, on behalf of itself and
each other Secured Party (and each of their successors and assigns), hereby
agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Definition of Certain Terms Used Herein. As used herein, the
following terms shall have the following meanings:
"Collateral" shall mean all of the following, whether now owned or
hereafter acquired by the Grantors: (a) Patents, including all granted Patents,
recordings and pending applications, including those listed on Schedule I
attached hereto, (b) Trademarks, including all registered Trademarks,
registrations, recordings, and pending applications, including those listed on
Schedule II attached hereto, (c) Copyrights, including all registered
Copyrights, registrations, recordings, supplemental registrations and pending
applications, including those listed on Schedule III attached hereto, (d)
Licenses, including those listed on Schedule IV hereto, (e) General Intangibles,
and (f) all products and Proceeds (including insurance proceeds) of, and
additions, improvements and accessions to, and books and records describing or
used in connection with, any and all the property described above.
Notwithstanding any other provision of this Agreement to the contrary,
<PAGE>
3
"Collateral" shall not include (i) cash and Permitted Investments (and accounts
holding such cash and Permitted Investments) owned by the Parent which the
Parent is permitted to hold in accordance with the Loan Documents or (ii) any
assets of, interests in, or proceeds, distributions or dividends from, any Joint
Venture held by any Grantor.
"Copyrights" shall mean all of the following in which any Grantor now or
hereafter has any right, title or interest: (i) all copyright rights in any work
subject to the copyright laws of the United States or any other country, whether
as author, assignee, transferee or otherwise, and (ii) all registrations and
applications for registration of any such copyright in the United States or any
other country, including registrations, recordings, supplemental registrations
and pending applications for registration in the United States Copyright Office.
"Copyright License" shall mean any agreement, now or hereafter in effect,
granting any right to any third party under any Copyright now or hereafter owned
by any Grantor or which such Grantor now or hereafter otherwise has the right to
license, or granting any right to such Grantor now or hereafter under any
Copyright now or hereafter owned by any third party, and all rights of such
Grantor under any such agreement.
"General Intangibles" shall mean all intangible, intellectual or other
similar property of the Grantors of any kind or nature now owned or hereafter
acquired by any Grantor, including inventions, designs, Patents, Copyrights,
Licenses, Trademarks, trade secrets, confidential or proprietary technical and
business information, know-how, show-how or other data or information, software
and databases and all embodiments or fixations thereof and related
documentation, registrations, franchises, and all other intellectual or other
similar property rights not otherwise described above.
"License" shall mean any Patent License, Trademark License, Copyright
License or other license or sublicense as to which any Grantor is a party (other
than those license agreements in existence as of the date hereof and listed on
Schedule IV hereto and those license agreements entered into after the date
hereof, which by their terms prohibit assignment or a grant of a security
interest by such Grantor as licensee thereunder).
"Patent License" shall mean any agreement, now or hereafter in effect,
granting to any third party any right to make, use or sell any invention on
which a Patent, now or hereafter owned by any Grantor or which such Grantor now
or hereafter otherwise has the right to license, is in existence, or granting to
such Grantor any right to make, use or sell any invention on which a Patent, now
or hereafter owned by any third party, is in existence, and all rights of such
Grantor under any such agreement.
<PAGE>
4
"Patents" shall mean all the following in which any Grantor now or
hereafter has any right, title or interest: (a) all letters patent of the United
States or any other country, including patents, design patents or utility
models, all registrations and recordings thereof, and all applications for
letters patent of the United States or any other country, including
registrations, recordings and pending applications in the United States Patent
and Trademark Office or any similar offices in any other country, and (b) all
reissues, continuations, divisions, continuations-in-part, renewals or
extensions thereof, and the inventions disclosed or claimed therein, including
the right to make, use and/or sell the inventions disclosed or claimed therein.
"Proceeds" shall mean any consideration received from the sale, exchange,
license, lease or other disposition of any asset or property that constitutes
Collateral, any value received as a consequence of the possession of any
Collateral and any payment received from any insurer or other person or entity
as a result of the destruction, loss, theft or other involuntary conversion of
whatever nature of any asset or property that constitutes Collateral, any claim
of any Grantor against third parties for (and the right to sue and recover for
and the rights to damages or profits due or accrued arising out of or in
connection with) (a) past, present or future infringement of any Patent now or
hereafter owned by any Grantor or licensed under a Patent License, (b) past,
present or future infringement or dilution of any Trademark now or hereafter
owned by any Grantor or licensed under a Trademark License or injury to the
goodwill associated with or symbolized by any Trademark now or hereafter owned
by any Grantor, (c) past, present or future breach of any License, (d) past,
present or future infringement of any Copyright now or hereafter owned by any
Grantor or licensed under a Copyright License, and (e) any and all other amounts
from time to time paid or payable under or in connection with any of the
Collateral. "Proceeds" shall include all "proceeds" as defined in the Uniform
Commercial Code as in effect in the State of New York on April 17, 1996.
"Trademark License" shall mean any agreement, now or hereafter in effect,
granting to any third party any right to use any Trademark now or hereafter
owned by any Grantor or that such Grantor now or hereafter otherwise has the
right to license, or granting to such Grantor any right to use any Trademark now
or hereafter owned by any third party, and all rights of such Grantor under any
such agreement.
"Trademarks" shall mean all of the following in which any Grantor now or
hereafter has any right, title or interest: (a) all trademarks, service marks,
trade names, corporate names, company names, business names, fictitious business
<PAGE>
5
names, trade styles, trade dress, logos, other source or business identifiers,
prints and labels on which any of the foregoing have appeared or appear, and all
designs and general intangibles of like nature, now existing or hereafter
adopted or acquired, all registrations and recordings thereof, and all
registration and recording applications filed in connection therewith, including
registrations, recordings and applications in the United States Patent and
Trademark Office, any State of the United States or any similar offices in any
other country or any political subdivision thereof, and all extensions, or
renewals thereof, (b) all goodwill associated therewith or symbolized thereby,
and (c) all other assets, rights and interests that uniquely reflect or embody
such goodwill.
SECTION 1.02. Rules of Interpretation. The rules of interpretation
specified in Section 1.02 of the Credit Agreement shall be applicable to this
Agreement.
ARTICLE II. SECURITY INTEREST
SECTION 2.01. Security Interest. As security for the payment or
performance, as the case may be, of the Obligations, each Grantor hereby
creates, bargains, sells, conveys, assigns, sets over, mortgages, pledges,
hypothecates and transfers to the Collateral Agent, its successors and assigns,
for the ratable benefit of the Secured Parties, and hereby grants to the
Collateral Agent, its successors and assigns, for the ratable benefit of the
Secured Parties, a continuing first priority security interest in all such
Grantor's right, title and interest in, to and under the Collateral (the
"Security Interest"). Without limiting the foregoing, the Collateral Agent is
hereby authorized to file one or more financing statements, continuation
statements, filings with the United States Patent and Trademark Office or United
States Copyright Office (or similar office in any other country), or other
documents for the purpose of perfecting, confirming, continuing, enforcing or
protecting the Security Interest granted by each Grantor, without the signature
of any Grantor, naming any Grantor as debtor and the Collateral Agent as secured
party.
Each Grantor agrees at all times to keep accurate and complete accounting
records with respect to the Collateral, including a record of all payments and
Proceeds received in respect thereof.
SECTION 2.02. Further Assurance. Each Grantor agrees, at its own cost and
expense, promptly to execute, acknowledge, deliver and cause to be duly filed
all such further instruments and documents and take all such actions as the
Collateral Agent or any of the Secured Parties may from time to time reasonably
request for better assuring, preserving and perfecting the Security Interest and
the rights and remedies created hereby, including the payment of any fees and
taxes required in connection with the execution and delivery of this Agreement,
<PAGE>
6
the granting of the Security Interest created hereby, the filing of any
financing statement or other documents (including filings with the United States
Patent and Trademark Office and the United States Copyright Office or similar
offices in any other country) in connection herewith, and the execution and
delivery of any document required to supplement this Agreement with respect to
any Patents, Trademarks and/or Copyrights applied for, acquired, registered (or
for which registration applications are filed) or issued after the date hereof;
provided however that until an Event of Default shall have occurred and be
continuing, no Grantor may enter into any concentration account, blocked
account, lockbox or similar arrangement for the benefit of any Secured Party
with respect to any Collateral constituting cash, Permitted Investments,
Collection Deposit Accounts, bank accounts or lockboxes. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any promissory note or other instrument, such note or instrument shall (to
the extent not previously pledged and delivered pursuant to the Pledge
Agreement) be immediately pledged and delivered to the Collateral Agent, duly
endorsed in a manner satisfactory to the Collateral Agent. Each Grantor agrees
promptly to notify the Collateral Agent of any change (a) in its corporate name,
(b) in the location of its chief executive office and (c) in its chief place of
business. Each Grantor agrees promptly to notify the Collateral Agent, after it
becomes aware, if any material portion of the Collateral (taken as a whole with
all Collateral under the other Loan Documents) is canceled or overturned,
opposed, misappropriated, injured, infringed, lost (other than due to expiration
of any issued Patent or any Copyright) or, if applicable, diluted.
SECTION 2.03. Inspection and Verification. Without limiting the scope of
Section 5.07 of the Credit Agreement, the Collateral Agent and such
representatives as the Collateral Agent may reasonably designate shall have the
right to inspect, at any reasonable time or times, the Collateral, all records
related thereto (and to make extracts and copies from such records) and the
premises upon which any of the Collateral is located, to discuss any Grantor's
affairs with the officers of such Grantor and its independent accountants and to
verify under reasonable procedures the validity, amount, quantity, value,
conditions and status of, or any other matter relating to, such Collateral,
including, in the case of Collateral in the possession of any third party (with,
except after an Event of Default shall have occurred and during the continuance
thereof, the consent of such Grantor, which consent shall not be unreasonably
withheld), by contacting such person possessing such Collateral for the purpose
of making such a verification. The Collateral Agent shall have the absolute
right to share any information it gains from such inspection or verification
with any or all of the Secured Parties.
SECTION 2.04. Taxes; Encumbrances. At its option, the Collateral Agent may
discharge past due taxes, assessments, charges, fees, liens, security interests
<PAGE>
7
or other encumbrances at any time levied or placed on the Collateral and not
permitted under this Agreement or other Loan Documents, and may pay for the
maintenance and preservation of the Collateral to the extent any Grantor fails
to do so as required by this Agreement or the other Loan Documents, and such
Grantor agrees to reimburse the Collateral Agent within 30 days of demand for
any reasonable payment made or any reasonable expense incurred by the Collateral
Agent pursuant to the foregoing authorization; provided, however, that nothing
in this Section 2.04 shall be interpreted as excusing any Grantor for the
performance of, or imposing any obligation on the Collateral Agent or any other
Secured Party to cure or perform, any covenants or other promises of any Grantor
with respect to taxes, assessments, charges, fees, liens, security interests or
other encumbrances and maintenance as set forth herein or in the other Loan
Documents.
SECTION 2.05. Amendment of Schedules. Each Grantor hereby authorizes the
Collateral Agent, with prompt notice thereof to the Grantors, to modify this
Agreement by amending Schedules I, II, III, or, IV hereto or to add additional
schedules hereto to include any asset or item that may be Copyrights, Patents,
Trademarks, or any other type of Collateral, as the case may be, under this
Agreement; provided, however, that any Grantor shall have the right to advise
the Collateral Agent in writing of such Collateral's deviation from or failure
to meet the representations and warranties made by such Grantor hereunder. Each
Grantor covenants and agrees with the Collateral Agent that such Grantor will
use its best efforts to make such representations and warranties true and
correct with respect to such Collateral within 30 days after the date it has
been notified by the Collateral Agent of the addition of such Collateral to a
Schedule hereto.
SECTION 2.06. Security Agreement. Each Grantor and the Collateral Agent
acknowledge and agree that, contemporaneously with the execution and delivery of
this Agreement, they are executing and delivering the Security Agreement,
pursuant to which each Grantor unconditionally grants to the Collateral Agent
and its successors and assigns, for the benefit of the Secured Parties and their
successors and assigns, a continuing security interest in all property, assets,
rights and interests of each Grantor (including the Collateral). This Agreement
is supplemental to the Security Agreement, and the Security Agreement, and all
rights and interests of the Collateral Agent in and to the Collateral
thereunder, are hereby ratified, confirmed and approved. Any and all rights and
interests of the Collateral Agent in and to the Collateral hereunder, and any
and all obligations of the Grantors with respect to the Collateral hereunder,
shall only supplement and be cumulative to the rights and interests of the
Collateral Agent, and the obligations of the Grantors, in, to or with respect to
the Collateral as provided in or arising under the Security Agreement. In the
event of any conflict between this Agreement and the Security Agreement, the
Security Agreement shall control.
<PAGE>
8
SECTION 2.07. No Assumption of Liability. The Security Interest is granted
as security only and shall not subject the Collateral Agent or any other Secured
Party to, or in any way alter or modify, any obligation or liability of any
Grantor with respect to or arising out of any of the Collateral.
ARTICLE III. REPRESENTATIONS AND WARRANTIES
Representations and Warranties. The Grantors jointly and severally
represent and warrant to the Collateral Agent that:
SECTION 3.01. Validity of Patents, Trademarks and Copyrights. Each of the
Patents, Trademarks and Copyrights material to the conduct of the Borrower's
business on a consolidated basis are subsisting, as of the date hereof, and have
not been adjudged invalid or unenforceable, in whole or in material part.
SECTION 3.02. Title and Authority. Each Grantor has good and valid rights
in and/or title to the Collateral with respect to which it has purported to
grant a Security Interest hereunder and has full power and authority to grant to
the Collateral Agent the Security Interest in such Collateral pursuant hereto
and to execute, deliver and perform its obligations in accordance with the terms
of this Agreement, without the consent or approval of any other person other
than any consent or approval that has been obtained.
SECTION 3.03. Filings. (a) Fully executed financing statements containing a
description of the Collateral have been delivered to the Collateral Agent for
filing in each governmental, municipal or other office in each jurisdiction
located within the United States as are necessary to publish notice of and
protect the validity of and to establish a valid and perfected security interest
in favor of the Collateral Agent (for the benefit of the Secured Parties) in
respect of the Collateral in which a security interest may be perfected by
filing a financing statement or analogous document in the United States and its
political subdivisions pursuant to the Uniform Commercial Code or other
applicable law in such jurisdictions, and no further or subsequent filing,
refiling, recording, rerecording, registration or reregistration is necessary in
any such jurisdiction, except as provided under applicable law with respect to
the filing of continuation statements or other documents of similar effect.
(b) Each Grantor shall ensure and warrant that fully executed security
agreements in the form hereof and containing a description of the Collateral
will be received and recorded within three months after the execution of this
Agreement with respect to United States Patents and United States registered
Trademarks (and Trademarks for which United States registration applications are
pending) and within one month after the execution of this Agreement with respect
<PAGE>
9
to United States registered Copyrights by the United States Patent and Trademark
Office and the United States Copyright Office pursuant to 35 U.S.C. Sec. 261, 15
U.S.C. Sec. 1060 or 17 U.S.C. Sec, 205 and the regulations thereunder, as
applicable, to protect the validity and first priority of and to perfect a valid
first priority security interest in favor of the Collateral Agent (for the
benefit of the Secured Parties) in respect of the Collateral in which a security
interest may be perfected by filing in such offices and no further or subsequent
filing, refiling, recording, rerecording, registration or reregistration is
necessary in any such jurisdiction, except as provided under applicable law with
respect to the filing of continuation statements (other than such actions as are
necessary to perfect the Collateral Agent's first priority security interest
with respect to any Collateral (or registration or application for registration
thereof) acquired or developed after the date hereof).
SECTION 3.04. Validity of Security Interests. The Security Interest
constitutes (a) a legal and valid security interest in all the Collateral
securing the payment and performance of the Obligations and (b) upon filing the
financing statements and making the filings with the United States Copyright
Office, United States Patent and Trademark Office and appropriate state offices
with respect to state registered trademarks, in each case as referred to in
Section 3.03 above, a perfected security interest in all such Collateral in
which a security interest may be perfected by filing in the United States and
its territories and possessions. The Security Interest is and shall be prior to
any other Lien on any of the Collateral, other than Liens expressly permitted
pursuant to Section 3.06 of this Agreement and other Liens expressly permitted
to be prior pursuant to the other Loan Documents.
SECTION 3.05. Information Regarding Names and Locations. Each Grantor
has disclosed in writing to the Collateral Agent on Schedule V any material
trade names used to identify it in its business or in the ownership of its
properties during the five years prior to the Closing Date.
SECTION 3.06. Absence of Other Liens. The Collateral is owned by the
Grantors free and clear of any Lien of any nature whatsoever (except for Liens
expressly permitted by Section 6.02 of the Credit Agreement or hereby and any
liens or licenses listed on Schedule VI or as permitted under the other Loan
Documents). Other than as contemplated hereby or by the Security Agreement, the
Grantors have not filed (a) any financing statement or analogous document under
the Uniform Commercial Code, (b) any assignment in which any Grantor assigns the
Collateral, any security agreement or any similar instrument covering any
Collateral with the United States Patent and Trademark Office, the United States
Copyright Office or any similar office in any other country or political
subdivision thereof and (c) any assignment in which any Grantor assigns the
Collateral or any security agreement or similar instrument covering any
Collateral with any foreign governmental, municipal or other office.
<PAGE>
10
SECTION 3.07. Licenses. To each Grantor's best knowledge, on the date
hereof, there is no material default by any Licensee under any material License,
including those listed on Schedule IV hereto.
ARTICLE IV. COVENANTS
SECTION 4.01. Covenants Regarding Patent, Trademark and Copyright
Collateral. (a) Each Grantor (either itself or through licensees) will, for each
Patent, not do any act, or omit to do any act, whereby any Patent that is
material to the conduct of the business of the Borrower and the Subsidiaries
taken as a whole shall become invalidated or dedicated to the public, and shall
continue to mark any products covered by any such Patent with the relevant
patent number as necessary and sufficient to establish and preserve such
Grantor's maximum rights under applicable patent laws.
(b) Each Grantor (either itself or through licensees) will, for each
Trademark material to the conduct of the business of the Borrower and the
Subsidiaries taken as a whole, (i) maintain such Trademark in full force free
from any claim of abandonment or invalidity for non-use, (ii) maintain the
quality of products and services offered under such Trademark, (iii) display
such Trademark with notice of federal or foreign registration to the extent
necessary and sufficient to establish and preserve such Grantor's maximum rights
under applicable law and (iv) not knowingly use or knowingly permit the use of
such Trademark in violation of any third party rights.
(c) Each Grantor (either itself or through licensees) will, for each
work covered by a Copyright material to the conduct of the business of the
Borrower and its Subsidiaries taken as a whole, continue to publish, reproduce,
display, adopt and distribute the work with appropriate copyright notice as
necessary and sufficient to establish and preserve such Grantor's maximum rights
under applicable copyright laws.
(d) Each Grantor will notify the Collateral Agent promptly if it knows
that any Patent, Trademark or Copyright material to the conduct of the business
of the Borrower and the Subsidiaries taken as a whole may become abandoned, lost
or dedicated to the public, or of any adverse determination or development
(including the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office, United States
Copyright Office or any court or similar office of any country) regarding such
Grantor's ownership of any Patent, Trademark or Copyright, its right to register
the same, or to keep and maintain the same.
<PAGE>
11
(e) In no event shall any Grantor, either itself or through any agent,
employee, licensee or designee, file an application for any Patent, Trademark or
Copyright (or for the registration of any Trademark or Copyright) with the
United States Patent and Trademark Office, United States Copyright Office or any
office or agency in any political subdivision of the United States, unless it
promptly informs the Collateral Agent, and, upon request of the Collateral
Agent, executes and delivers any and all agreements, instruments, documents and
papers as the Collateral Agent may request to evidence (and, in the case of
applications for Patents with the United States Patent and Trademark Office,
perfect) the Collateral Agent's security interest in such Patent, Trademark or
Copyright of any Grantor and the goodwill and general intangibles of such
Grantor relating thereto or represented thereby, and such Grantor hereby
appoints the Collateral Agent its attorney-in-fact to execute and file such
writings for the foregoing purposes after and during the continuance of an Event
of Default, all acts of such attorney being hereby ratified and confirmed; such
power, being coupled with an interest, is irrevocable until the Obligations are
paid in full and the Commitments and the Letters of Credit are terminated.
(f) Each Grantor will take all reasonably necessary steps that are
consistent with customary practice in any proceeding before the United States
Patent and Trademark Office, United States Copyright Office or any office or
agency in any political subdivision of the United States or in any other country
or any political subdivision thereof, to maintain and pursue each material
application relating to the Patents, Trademarks and/or Copyrights (and to obtain
the relevant grant or registration) and to maintain each issued Patent and each
registration of the Trademarks and Copyrights that is material to the conduct of
the business of the Borrower and the Subsidiaries taken as a whole, including
timely filings of applications for renewal, affidavits of use, affidavits of
incontestability and payment of maintenance fees, and, if consistent with good
business judgment, to initiate opposition, interference and cancellation
proceedings against third parties.
(g) In the event that any Collateral consisting of a Patent, Trademark
or Copyright material to the conduct of the business of the Borrower and the
Subsidiaries taken as a whole is believed by such Grantor to have been
infringed, misappropriated or diluted by a third party, the Grantor that shall
have granted a security interest therein hereunder promptly will promptly notify
the Collateral Agent and shall, if consistent with good business judgment,
promptly sue for infringement, misappropriation, or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and take
such other actions as are appropriate under the circumstances to protect such
Collateral.
SECTION 4.02. Protection of Security. Each Grantor will, at its own
cost and expense, take any and all reasonable actions necessary to defend title
to the Collateral against all persons, properly to maintain, protect and
preserve the Collateral and to defend the Security Interest of the Collateral
Agent in the Collateral and the priority thereof against any Lien not permitted
hereunder or under the Credit Agreement.
<PAGE>
12
SECTION 4.03. Continuing Obligations of the Grantors. Each Grantor
shall remain liable to observe and perform all the conditions and obligations to
be observed and performed by it under each License, contract, agreement,
interest or obligation relating to the Collateral, all in accordance with the
terms and conditions thereof, and shall indemnify and hold harmless the
Collateral Agent and the other Secured Parties and each of them severally, from
any and all liabilities arising from the failure of any Grantor to observe and
perform all the conditions and obligations to be observed and performed by it
under each License, contract, agreement, interest or obligation relating to the
Collateral. Without limiting the foregoing, the Collateral Agent shall have no
obligation or liability under any License by reason of or arising out of this
Agreement or the granting or the assignment to the Collateral Agent of the
Security Interest or the receipt by the Collateral Agent of any payment related
to any License pursuant hereto, nor shall the Collateral Agent be required or
obligated in any manner to perform or fulfill any of the obligations of any
Grantor under or pursuant to any License, or to make any payment, or to make any
inquiry as to the nature or the sufficiency of any payment received by it or the
sufficiency of any performance by any party under any License, or to present or
file any claim, or to take any action to collect or enforce any performance of
the payment of any amounts that may have been assigned to it or to which it may
be entitled at any time or times.
SECTION 4.04. Use and Disposition of Collateral. None of the Grantors
shall make or permit to be made any assignment for security, pledge or
hypothecation of the Collateral owned by it, or grant any other security
interest in such Collateral except to the extent permitted hereunder or under
Section 6.02 of the Credit Agreement. None of the Grantors shall make or permit
to be made any transfer of the Collateral owned by it, and each Grantor shall
remain at all times in possession thereof other than transfers to the Collateral
Agent pursuant to the provisions hereof or of the Security Agreement, except as
expressly permitted under the Credit Agreement and except that so long as no
Event of Default shall have occurred and be continuing and the Collateral Agent
shall have notified the Borrower to the contrary, each Grantor may use or
license the Collateral owned by it in any lawful manner that is in the ordinary
course of its business and is not inconsistent with the provisions of this
Agreement, the Security Agreement and the Credit Agreement.
SECTION 4.05. Place of Business. Each Grantor agrees not to change, or
permit to be changed, the location of its chief executive office or the name or
names used to identify it in its business or in the ownership of its properties
unless all filings under the Uniform Commercial Code or under other applicable
United States laws that are required to be made with respect to the Collateral
have been made and the Collateral Agent has a valid, legal and perfected
security interest in the Collateral, subject to no liens, other than Liens
permitted by Section 3.06 of this Agreement or permitted by the other Loan
<PAGE>
13
Documents and any liens or licenses listed on Schedule VI, and prior notice
thereof has been given to the Collateral Agent along with copies of all such
filings to be made.
SECTION 4.06. Future Rights. (a) If any Grantor shall obtain rights to
any asset or item that may be considered Collateral, the provisions of Section
2.01 shall automatically apply thereto and each Grantor will give to the
Collateral Agent prompt notice thereof in writing.
(b) With respect to any such asset or item that may be considered
Collateral as set forth in paragraph (a) above, each Grantor will follow the
procedures set forth in Section 3.03, as applicable, to ensure that the
Collateral Agent's security interest therein is perfected.
SECTION 4.07 Assignment of Licenses. Upon and during the continuance
of an Event of Default, each Grantor will use its best efforts to obtain all
requisite consents or approvals by the licensor of each Copyright License,
Patent License or Trademark License to effect the assignment of all of the
Grantors' rights, title and interest thereunder to the Collateral Agent or its
designee.
SECTION 4.08 Liabilities and Indemnification. (a) Notwithstanding
anything to the contrary provided herein, the Collateral Agent assumes no
liabilities with respect to any claims regarding any Grantor's ownership (or
purported ownership) of, or rights or obligations (or purported rights or
obligations) arising from, the Collateral or any use (or actual or alleged
misuse), license or sublicense thereof by any Grantor or any licensee of such
Grantor, whether arising out of any past, current or future event, circumstance,
act or omission or otherwise, or any claim, suit, loss, damage, expense or
liability of any kind or nature arising out of or in connection with the
Collateral or the production, marketing, delivery, sale or provision of goods or
services under or in connection with any of the Collateral. All such liabilities
shall be borne exclusively by the Grantors.
(b) The Grantors jointly and severally agree to indemnify and hold
harmless the Collateral Agent from and against, and within 30 days of demand
shall pay to the Collateral Agent the amount of, any and all claims, actions,
suits, judgments, penalties, losses, damages, costs, disbursements, reasonable
expenses, obligations or liabilities of any kind or nature (except those
resulting from the Collateral Agent's gross negligence or willful misconduct)
specified in Sections 4.03 and 4.08(a), or arising in any way out of or in
connection with this Agreement, the Collateral, custody, preservation, use or
operation of the Collateral, any actual or alleged infringement or
<PAGE>
14
misappropriation of the rights or property of any third party, the production,
marketing, delivery, sale and provision of goods or services under or in
connection with the Collateral, the sale, transfer or other disposition of or
collection from or other realization upon any of the Collateral, the exercise or
enforcement by the Collateral Agent of any right or remedy granted to it
hereunder, any action taken or omitted to be taken by the Collateral Agent
hereunder, the failure of any Grantor to perform or observe any of the
provisions hereof, or matters relating to any of the foregoing.
ARTICLE V. REMEDIES
SECTION 5.01. Collections. Upon the occurrence and during the
continuance of any Event of Default, the Collateral Agent shall have the right,
as the true and lawful agent of the Grantors, with the power of substitution for
the Grantors and in the Grantors' names, the Collateral Agent's name or
otherwise, for the use and benefit of the Collateral Agent and the Secured
Parties (a) upon notice from the Collateral Agent, to receive, endorse, assign
and/or deliver any and all notes, acceptances, checks, drafts, money orders or
other evidences of payment relating to the Collateral or any part thereof; (b)
to demand, collect, receive payment of, give receipt for and give discharges and
releases of all or any of the Collateral; (c) to sign the name of any Grantor on
any invoice relating to any of the Collateral; (d) to commence and prosecute any
and all suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect or otherwise realize on all or any of the
Collateral or to enforce any rights in respect of any Collateral; (e) to settle,
compromise, compound, adjust or defend any actions, suits or proceedings
relating to or pertaining to all or any of the Collateral; (f) to license or, to
the extent permitted by any applicable law, sublicense, whether general, special
or otherwise, and whether on an exclusive or non-exclusive basis, any of the
Collateral throughout the world for such term or terms, on such conditions, and
in such manner, as the Collateral Agent shall determine (other than in violation
of any then existing licensing arrangements to the extent that waivers or other
adequate provision cannot be secured therefor); and (g) generally to use, sell,
assign, transfer, pledge, make any agreement with respect to or otherwise deal
with all or any of the Collateral, and to do all other acts and things necessary
to carry out the purposes of this Agreement, as fully and completely as though
the Collateral Agent were the absolute owner of the Collateral for all purposes;
provided, however, that except as provided for by law or the Uniform Commercial
Code as in effect in the State of New York or its equivalent in other
jurisdictions, nothing herein contained shall be construed as requiring or
obligating the Collateral Agent to make any commitment or to make any inquiry as
to the nature or sufficiency of any payment received by the Collateral Agent, or
to present or file any claim or notice, or to take any action with respect to
the Collateral Agent, or to present or file any claim or notice, or to take any
action with respect to the Collateral or any part thereof or the money due or to
become due in respect thereof or any property covered thereby, and no action
taken by the Collateral Agent or omitted to be taken with respect to the
Collateral or any part thereof shall give rise to any defense, counterclaim or
offset in favor of any Grantor or to any claim or action against the Collateral
Agent. It is understood and agreed that the appointment of the Collateral Agent
as the agent of the Grantors for the purposes set forth above in this Section
<PAGE>
15
5.01 is coupled with an interest and is irrevocable. The provisions of this
Section 5.01 shall in no event relieve the Grantors of any of their obligations
hereunder or under the Credit Agreement or any other Loan Document with respect
to the Collateral or any part thereof or impose any obligation on the Collateral
Agent or the Secured Parties to proceed in any particular manner with respect to
the Collateral or any part thereof, or in any way limit the exercise by the
Collateral Agent or any Secured Party of any other or further right that it may
have on the date of this Agreement or hereafter, whether hereunder or by law or
by the Security Agreement, or otherwise.
SECTION 5.02 Other Remedies Upon Default. Upon the occurrence and
during the continuance of an Event of Default, each Grantor expressly agrees
that, to the fullest extent permitted under applicable law, (a) the Security
Interest on demand shall become an assignment, transfer and conveyance of the
Collateral by such Grantor to the Collateral Agent and (b) the Collateral Agent
on demand shall have the right to take any or all of the following actions at
the same or different times: with or without legal process and with or without
previous notice or demand for performance, to take possession of all tangible
manifestations or embodiments of the Collateral and documentation relating
thereto and all business records, documents, files, prints and labels with
respect to the Collateral, and without liability for trespass and without breach
of the peace, to enter any premises where such tangible manifestations or
embodiments, business records, documents, files, prints and labels with respect
to the Collateral may be located for the purpose of taking possession of or
removing such tangible manifestations or embodiments, business records,
documents, files, prints and labels with respect to the Collateral, and,
generally, to exercise any and all rights afforded to a secured party under the
Uniform Commercial Code or other law applicable to any part of the Collateral.
Subject to and without limiting the generality of the foregoing, each Grantor
agrees that the Collateral Agent shall have the immediate right, with or without
legal process and with or without previous notice or demand for performance, all
of which are hereby expressly waived, subject to the mandatory requirements of
applicable law, to sell or otherwise dispose of all or any part of the
Collateral, at public or private sale, for cash, upon credit or for future
delivery as the Collateral Agent shall deem appropriate. The Collateral Agent
shall be authorized at any such sale (if it deems it advisable to do so) to
restrict the prospective bidders or purchasers to persons who will represent and
agree that they are purchasing the Collateral for their own account for
investment and not with a view to the distribution or sale thereof where the
<PAGE>
16
failure to obtain such a representation and agreement could result in a
violation of any applicable securities laws, and upon consummation of any such
sale the Collateral Agent shall have the right to assign, transfer and deliver
to the purchaser or purchasers thereof the Collateral so sold. Each such
purchaser at any such sale shall hold the property sold absolutely, free from
any claim or right on the part of any Grantor, and each Grantor hereby waives
(to the extent permitted by law) all rights of redemption, stay and appraisal
that such Grantor now has or may at any time in the future have under any rule
of law or statute now existing or hereafter enacted.
The Collateral Agent shall give the Grantors at least 10 days' written
notice (which each Grantor agrees is reasonable notice within the meaning of
Section 9-504(3) of the Uniform Commercial Code as in effect in the State of New
York or its equivalent in other jurisdictions) of the Collateral Agent's
intention to make any sale of Collateral. Such notice, in the case of a public
sale, shall state the time and place for such sale. Any such public sale shall
be held at such time or times within ordinary business hours and at such place
or places as the Collateral Agent may fix and state in the notice (if any) of
such sale. At any such sale, the Collateral, or portion thereof, to be sold may
be sold in one lot as an entirety or in separate parcels, as the Collateral
Agent may (in its sole and absolute discretion) determine. The Collateral Agent
shall not be obligated to make any sale of any Collateral if it shall determine
not to do so, regardless of the fact that notice of sale of such Collateral
shall have been given. The Collateral Agent may, without notice or publication,
adjourn any public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Collateral Agent until the sale price is paid by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any such
purchaser or purchasers shall fail to take up and pay for the Collateral so sold
and, in case of any such failure, such Collateral may be sold again upon like
notice to the Grantors. At any public sale made pursuant to this Section 5.02,
the Collateral Agent or any Secured Party may bid for or purchase, free from any
right of redemption, stay, valuation or appraisal on the part of any Grantor
(all said rights being also hereby waived and released to the extent permitted
by law), the Collateral or any part thereof offered for sale and may make
payment on account thereof by using any claim then due and payable to the
Collateral Agent or such Secured Party from any Grantor as a credit against the
purchase price, and the Collateral Agent or such Secured Party may, upon
compliance with the terms of sale, hold, retain and dispose of such property
without further accountability to such Grantor therefor. For purposes hereof, a
written agreement to purchase the Collateral or any portion thereof shall be
treated as a sale thereof; the Collateral Agent shall be free to carry out such
<PAGE>
17
sale pursuant to such agreement, and no Grantor shall be entitled to the return
of the Collateral or any portion thereof subject thereto, notwithstanding that
after the Collateral Agent shall have entered into such an agreement all Events
of Default shall have been remedied and the Obligations paid in full; provided,
however, that in the event the Obligations shall have been paid in full, the
Grantors shall be entitled to the return of the proceeds of the sale of any such
Collateral to the extent not applied to payment of the Obligations. As an
alternative to exercising the power of sale herein conferred upon it, the
Collateral Agent may proceed by a suit or suits at law or in equity to foreclose
this Agreement and to sell the Collateral or any portion thereof pursuant to a
judgement or decree of a court or courts having competent jurisdiction or
pursuant to a proceeding by a court-appointed receiver.
SECTION 5.03. Application of Proceeds of Sale. The Collateral Agent
shall apply the proceeds of any sale of the Collateral, as well as any
Collateral consisting of cash, as follows:
FIRST, to the payment of all reasonable costs and expenses incurred by
the Collateral Agent (in its capacity as such hereunder or under any other
Loan Document) in connection with such collection or sale or otherwise in
connection with this Agreement or any of the Obligations, including all
court costs and reasonable fees, other reasonable charges and expenses of
its agents and legal counsel, the repayment of all advances made by the
Collateral Agent hereunder or under any other Loan Document on behalf of
the Grantors and any other reasonable costs or expenses incurred in
connection with the exercise of any right or remedy hereunder or under any
other Loan Document;
SECOND, to the Collateral Agent for distribution to the
Secured Parties for the satisfaction of the Obligations owed
to the Secured Parties; and
THIRD, to the Grantors, their successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
The Collateral Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with this
Agreement. Upon any sale of the Collateral by the Collateral Agent (including
pursuant to a power of sale granted by statute or under a judicial proceeding),
the receipt of the Collateral Agent or of the officer making the sale shall be a
sufficient discharge to the purchaser or purchasers of the Collateral so sold
and such purchaser or purchasers shall not be obligated to see to the
application of any part of the purchase money paid over to the Collateral Agent
or such officer or be answerable in any way for the misapplication thereof.
<PAGE>
18
SECTION 5.04. Grant of License to Use Patent, Trademark and Copyright
Collateral. For the purpose of enabling the Collateral Agent to exercise its
rights and remedies under Article V hereof at such time as the Collateral Agent
shall be lawfully entitled to exercise such rights and remedies, each Grantor
hereby grants to the Collateral Agent an irrevocable, non-exclusive license
(exercisable without payment of royalty or other compensation to such Grantor)
to use, license or sublicense (under the same terms and conditions as the
underlying license) any of the Collateral now owned or hereafter acquired by
such Grantor, and wherever the same may be located, and including in such
license reasonable access to all media in which any of the licensed items may be
recorded or stored. The use of such license by the Collateral Agent may be
exercised, at the option of the Collateral Agent, only upon the occurrence and
during the continuance of an Event of Default; provided, however, that any
license, sublicense or other transaction entered into by the Collateral Agent in
accordance herewith shall be binding upon such Grantor notwithstanding any
subsequent cure of an Event of Default. The Collateral Agent agrees to apply the
net proceeds received from any license as provided in Section 5.03.
ARTICLE VI. MISCELLANEOUS
Section 6.01. The Collateral Agent Appointed Attorney-in-Fact.
Except as otherwise provided herein, each Grantor hereby
appoints the Collateral Agent the attorney-in-fact of such
Grantor, effective upon the occurrence and during the continuance
of an Event of Default, for the purposes of carrying out the
provisions of this Agreement, taking any action and executing any
instrument that the Collateral Agent may deem necessary or
advisable to accomplish the purposes hereof, and doing all other
acts that such Grantor is obligated to do hereunder. Such
appointment is in each case irrevocable and coupled with an
interest. Each Grantor hereby ratifies all that such attorney
shall lawfully do or cause to be done by virtue hereof.
SECTION 6.02. Collateral Agent's Fees and Expenses; Indemnification.
(a) The Grantors jointly and severally agree to pay within 30 days of demand to
the Collateral Agent the amount of any and all reasonable expenses, including
the reasonable fees and expenses of its counsel and of any experts or agents,
that the Collateral Agent may incur in connection with (i) the administration of
this Agreement, (ii) the custody or preservation of, or the sale of, collection
from or other realization upon any of the Collateral, (iii) the exercise,
enforcement or protection of any of the rights of the Collateral Agent hereunder
or (iv) the failure of any Grantor to perform or observe any of the provisions
hereof. If the Grantors shall fail to do any act or thing that they have
covenanted to do hereunder or any representation or warranty of the Grantors
hereunder shall be breached, the Collateral Agent may (but shall not be
obligated to) do the same or cause it to be done or remedy any such breach and
there shall be added to the Obligations the cost or expense incurred by the
Collateral Agent in so doing.
<PAGE>
19
(b) Any amounts payable as provided hereunder shall be additional
Obligations secured hereby and by the other Security Documents. The provisions
of this Section 6.02 shall remain operative and in full force and effect
regardless of the termination of this Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the Obligations, the
invalidity or unenforceability of any term or provision of this Agreement or any
other Loan Document or any investigation made by or on behalf of the Collateral
Agent or any other Secured Party.
SECTION 6.03. Notices. Notices and other communications provided for
herein shall be in writing and given (i) in the case of communications and
notices to the Borrower, the Collateral Agent or any Lender, as provided in the
Credit Agreement and (ii) in the case of communications and notices to any other
Grantor, as provided in the Guarantee Agreement.
SECTION 6.04. Successors and Assigns. (a) Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and permitted assigns of such party, and all covenants,
promises and agreements by or on behalf of the Grantors or the Collateral Agent
or that are contained in this Agreement shall bind and inure to the benefit of
their respective successors and permitted assigns referred to above.
(b) No Grantor shall assign or delegate any of its rights and duties
hereunder, except as permitted by the Loan Documents.
(c) The covenants, promises and agreements by the Grantors shall inure to
the benefit of each Secured Party and each assignee of any Secured Party
permitted under Section 9.04 of the Credit Agreement.
SECTION 6.05. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE
EXTENT THAT FEDERAL LAW OR LAWS OF ANOTHER STATE OR FOREIGN JURISDICTION MAY
APPLY TO PATENTS, TRADEMARKS, COPYRIGHTS OR REMEDIES.
SECTION 6.06. Waivers, Amendment. (a) No failure or delay of the
Collateral Agent in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other right or power. The rights and remedies of the
Collateral Agent hereunder and of other Secured Parties under the Loan Documents
are cumulative and are not exclusive of any rights or remedies that they would
otherwise have. No waiver of any provisions of this Agreement or any other Loan
Document or consent to any departure by any Grantor therefrom shall in any event
be effective unless the same shall be permitted by paragraph (b) below, and then
<PAGE>
20
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice to or demand on any Grantor in any case
shall entitle such Grantor to any other or further notice or demand in similar
or other circumstances.
(b) Neither this Agreement nor any provisions hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into between any Grantor and the Collateral Agent, with the prior written
consent of the Required Lenders; provided, however, that except as provided
herein or in the other Loan Document, no such agreement shall amend, modify,
waive or otherwise affect the rights or duties of the Collateral Agent hereunder
without the prior written consent of the Collateral Agent.
SECTION 6.07. Security Interest Absolute. All rights of the Collateral
Agent hereunder, the security interests granted hereunder and all obligations of
the Grantors hereunder shall be absolute and unconditional irrespective of (a)
any lack of validity or enforceability of the Credit Agreement or any other Loan
Documents, any agreement with respect to any of the Obligations or any other
agreement or instrument relating to any of the foregoing, (b) any change in the
time, manner or place of payment of, or in any term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Credit Agreement, any other Loan Document or any other agreement or
instrument, (c) any exchange, release or non-perfection of any Lien on other
Collateral, or any release or amendment or waiver of or consent under or
departure from any guarantee, securing or guaranteeing all or any of the
Obligations or (d) any other circumstance that might otherwise constitute a
defense available to, or a discharge of, any Grantor in respect of the
Obligations or this Agreement (other than the payment in full of all the
Obligations and the termination of the Commitments and the Letters of Credit).
SECTION 6.08. Survival of Agreement. All covenants, agreements,
representations and warranties made by any Grantor herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Secured Parties and the Collateral Agent and shall
survive the making by the Lenders of the Loans and the issuance by the Issuing
Bank of any Letter of Credit regardless of any investigation made by the Secured
Parties or the Collateral Agent or on their behalf, and shall continue in full
force and effect as long as any of the Obligations is outstanding and unpaid and
any Commitment or Letter of Credit has not been terminated.
<PAGE>
21
SECTION 6.09. Binding Effect; Assignments. This Agreement shall become
effective as to any Grantor when a counterpart hereof executed on behalf of such
Grantor shall have been delivered to the Collateral Agent and a counterpart
hereof shall have been executed on behalf of the Collateral Agent, and
thereafter shall be binding upon such Grantor and the Collateral Agent and their
respective successors and assigns, and shall inure to the benefit of such
Grantor, the Collateral Agent and the other Secured Parties and their respective
successors and assigns, except that no Grantor shall have the right to assign
its rights hereunder or any interest herein or in the Collateral (and any such
attempted assignment shall be void) except as expressly contemplated by this
Agreement or the other Loan Documents.
SECTION 6.10. Termination; Release. (a) This Agreement and the
security interests granted hereby shall terminate when all the Obligations have
been paid in full and the Commitments and the Letters of Credit have been
terminated.
(b) Upon (i) any sale by any Grantor of any Collateral that is permitted
under the Credit Agreement and, if required, the application of the Net Cash
Proceeds of such sale in accordance with Section 2.12 of the Credit Agreement or
(ii) the effectiveness of any written consent to the release of the Security
Interest in any Collateral pursuant to Section 9.08 of the Credit Agreement, the
Security Interest in such Collateral shall be automatically released.
(c) In connection with any termination or release pursuant to preceding
paragraph (a) or (b) above, the Collateral Agent shall execute and deliver to
such Grantor, at such Grantor's expense, all Uniform Commercial Code termination
statements and other documents in order to terminate any United States Patent
and Trademark Office filings and similar documents that such Grantor shall
reasonably request to evidence such termination or release. Any execution and
delivery of termination statements or documents pursuant to this Section 6.10
shall be without recourse to or warranty by the Collateral Agent.
SECTION 6.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE,
ADMINISTRATIVE AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 6.11.
<PAGE>
22
SECTION 6.12. Severability. In the event of any one or more of the
provisions contained in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 6.13. Jurisdiction; Consent to Service of Process. (a) Each
Grantor hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Collateral Agent or any other Secured Party may otherwise have to bring any
action or proceeding relating to this Agreement or the other Loan Documents
against any Grantor or its properties in the courts of any jurisdiction.
(b) Each Grantor hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or thereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereby irrevocably waives,
to the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of process
in the manner provided for notices in Section 6.03. Nothing in this Agreement
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.
SECTION 6.14. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original, but all of which,
when taken together shall constitute but one instrument, and shall become
effective as provided in Section 6.9.
<PAGE>
23
SECTION 6.15. Headings. Article and Section headings used herein are
for convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
SECTION 6.16. Additional Grantors. Pursuant to Section 5.11 of the
Credit Agreement, each Domestic Subsidiary that was not in existence or not a
Domestic Subsidiary on the date thereof is required to enter into this Agreement
as a Grantor upon becoming a Domestic Subsidiary (other than any Joint Venture).
Upon execution and delivery, after the date hereof, by the Collateral Agent and
a Domestic Subsidiary of an instrument in the form of Annex 1, such Domestic
Subsidiary shall become a Grantor hereunder with the same force and effect as if
originally named as a Grantor hereunder. The execution and delivery of any such
instrument shall not require the consent of any Grantor hereunder. The rights
and obligations of each Grantor hereunder shall remain in full force and effect
notwithstanding the addition of any new Grantor as a party to this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
CLARK-SCHWEBEL HOLDINGS, INC.
By:
------------------------------
Name:
Title:
CLARK-S ACQUISITION CORPORATION
By:
------------------------------
Name:
Title:
FORT MILL A INC.
By:
------------------------------
Name:
Title:
CLARK-SCHWEBEL, INC.
By:
------------------------------
Name:
Title:
CHEMICAL BANK, as Collateral Agent
By:
------------------------------
Name:
Title:
<PAGE>
Annex 1 to
the Intellectual Property
Security Agreement
SUPPLEMENT NO. dated as of [
], to the Intellectual Property Security Agreement dated
as of April __, 1996 (the "Intellectual Property Security
Agreement"), among CLARK-SCHWEBEL, INC., a Delaware corporation
(the "Borrower"), Clark-Schwebel Holdings, Inc., a Delaware
corporation (the "Parent"), each Domestic Subsidiary of the
Borrower party thereto (collectively, the "Subsidiary Grantors"
and, together with the Parent and the Borrower, the "Grantors")
and CHEMICAL BANK, a New York banking corporation ("Chemical
Bank"), as collateral agent (in such capacity, the "Collateral
Agent") for the Secured Parties (as defined in the Credit
Agreement referred to below).
A. Reference is made to the Credit Agreement dated as of April __,
1996 (as amended or modified from time to time, the "Credit Agreement"), among
the Borrower, the Parent, the financial institutions party thereto, as lenders
(the "Lenders"), Chemical Bank, a New York banking corporation, as agent (in
such capacity, the "Administrative Agent"), as collateral agent (in such
capacity, the "Collateral Agent"), as documentation agent (in such capacity, the
"Documentation Agent") and as syndication agent (in such capacity, the
"Syndication Agent") for the Lenders, Chemical Bank Delaware, a Delaware banking
corporation, as issuing bank (in such capacity, the "Issuing Bank"), and Bankers
Trust Company, a New York banking corporation, Fleet National Bank, a national
banking association, and NationsBank, N.A., a national banking association, as
co-agents (in such capacity, each a "Co-Agent").
B. Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in the Intellectual Property
Security Agreement and the Credit Agreement.
C. Certain Domestic Subsidiaries have entered into the Intellectual
Property Security Agreement in order to induce the Lenders to make Loans to the
Borrower and to induce the Issuing Bank to issue Letters of Credit for the
account of the Borrower pursuant to, and upon the terms and subject to the
conditions specified in, the Credit Agreement. Pursuant to Section 5.11 of the
Credit Agreement, each Domestic Subsidiary that was not in existence or not a
Domestic Subsidiary on the date thereof is required to enter into the
Intellectual Property Security Agreement as a Grantor upon becoming a Domestic
Subsidiary (other than any Joint Venture). Section 6.16 of the Intellectual
Property Security Agreement provides that additional Domestic Subsidiaries may
become Grantors under the Intellectual Property Security Agreement by execution
and delivery of an instrument in the form of this Supplement. The undersigned
<PAGE>
26
(the "New Grantor") is a Domestic Subsidiary and is executing this Supplement in
accordance with the requirements of the Credit Agreement to become a Grantor
under the Intellectual Property Security Agreement in order to induce the
Lenders to make additional Loans and the Issuing Bank to issue additional
Letters of Credit and as consideration for Loans previously made and Letters of
Credit previously issued.
Accordingly, the Collateral Agent and the New Grantor agree as
follows:
SECTION 1. In accordance with Section 6.16 of the Intellectual
Property Security Agreement, the New Grantor by its signature below becomes a
Grantor under the Intellectual Property Security Agreement with the same force
and effect as if originally named therein as a Grantor and the New Grantor
hereby agrees to all the terms and provisions of the Intellectual Property
Security Agreement applicable to it as a Grantor thereunder. Each reference to a
"Grantor" in the Intellectual Property Security Agreement shall be deemed to
include the New Grantor. The Intellectual Property Security Agreement is hereby
incorporated herein by reference.
SECTION 2. The New Grantor represents and warrants to the Collateral
Agent and the other Secured Parties that this Supplement has been duly
authorized, executed and delivered by it and constitutes its legal, valid and
binding obligation, enforceable against it in accordance with its terms, subject
to bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or
other similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding at law or in equity).
SECTION 3. This Supplement may be executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument. This Supplement shall
become effective when the Collateral Agent shall have received counterparts of
this Supplement that, when taken together, bear the signatures of the New
Grantor and the Collateral Agent.
SECTION 4. Except as expressly supplemented hereby, the Intellectual
Property Security Agreement shall remain in full force and effect.
SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 6. In case any one or more of the provisions contained in this
Supplement should be held invalid, illegal or unenforceable in any respect,
neither party hereto shall be required to comply with such provision for so long
as such provision is held to be invalid, illegal or unenforceable, but the
<PAGE>
27
validity, legality and enforceability of the remaining provisions contained
herein and in the Intellectual Property Security Agreement shall not in any way
be affected or impaired. The parties hereto shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 7. All communications and notices to the Collateral Agent
hereunder shall be in writing and given as provided in the Credit Agreement. All
communications and notices hereunder to the New Grantor shall be in writing and
given as provided in the Guarantee Agreement.
<PAGE>
28
SECTION 8. The New Grantor agrees to reimburse the Collateral Agent
for its reasonable out-of-pocket expenses in connection with this Supplement,
including the reasonable fees, other charges and disbursement of counsel for the
Collateral Agent.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Supplement to the Intellectual Property Security Agreement as of the day and
year first above written.
[NAME OF NEW GRANTOR],
by
-----------------------------------
Name:
Title:
CHEMICAL BANK, as Collateral Agent,
by
-----------------------------------
Name:
Title:
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 this
Registration Statement.
\s\ Arthur Andersen LLP
Charlotte, North Carolina,
May 24, 1996
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement 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
May 24, 1996
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10 1/2% SERIES A SENIOR NOTES DUE 2006
OF
CLARK-SCHWEBEL, INC.
PURSUANT TO THE PROSPECTUS DATED , 1996
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , 1996 UNLESS EXTENDED (THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal should be
completed, signed, and submitted to the Exchange Agent:
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 Confirm by Telephone:
Hartford, CT 06115 --------------------
Attention: Patricia Williams (860) 986-1271
Attention: Patricia Williams
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY ADDITIONAL
INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT (860) 986-7908,
OR BY FACSIMILE AT (860) 986-1271.
The undersigned hereby acknowledges receipt of the Prospectus dated ,
1996 (the "Prospectus") of Clark-Schwebel, Inc., a Delaware corporation (the
"Company"), and this Letter of Transmittal (the "Letter of Transmittal"), that
together constitute the Company's offer (the "Exchange Offer") to exchange
$1,000 in principal amount of its 10 1/2% Series B Senior Notes due 2006 (the
"New Notes"), which have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a Registration Statement, for each
$1,000 in principal amount of its outstanding 10 1/2% Series A Senior Notes due
2006 (the "Notes"), of which $110,000,000 aggregate principal amount is
outstanding. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
The undersigned hereby tenders the Notes described in Box 1 below (the
"Tendered Notes") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the registered
owner of all the Tendered Notes and the undersigned represents that it has
received from each beneficial owner of the Tendered Notes ("Beneficial Owners")
a duly completed and executed form of "Instruction to Registered Holder and/or
Book-Entry Transfer Facility Participant from Beneficial Owner" accompanying
this Letter of Transmittal, instructing the undersigned to take the action
described in this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns and transfers to, or upon the
order of, the Company, all right, title, and interest in, to and under the
Tendered Notes.
Please issue the New Notes exchanged for Tendered Notes in the name(s) of
the undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions" below (Box 3), please send or cause to be sent the certificates
for the New Notes (and accompanying documents, as appropriate) to the
undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned with
respect to the Tendered Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver the Tendered Notes to the Company or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Company, on the books of
the registrar for the Notes and deliver all accompanying evidences of transfer
and authenticity to, or upon the order of, the Company upon receipt by the
Exchange Agent, as the undersigned's agent, of the New Notes to which the
undersigned is entitled upon acceptance by the Company of the Tendered Notes
pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Tendered Notes, all in
accordance with the terms of the Exchange Offer.
<PAGE>
The undersigned understands that tenders of Notes pursuant to the procedures
described under the caption "The Exchange Offer" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Exchange
Offer, subject only to withdrawal of such tenders on the terms set forth in the
Prospectus under the caption "The Exchange Offer-- Withdrawal of Tenders." All
authority herein conferred or agreed to be conferred shall survive the death or
incapacity of the undersigned and any Beneficial Owner(s), and every obligation
of the undersigned or any Beneficial Owner(s) hereunder shall be binding upon
the heirs, representatives, successors, and assigns of the undersigned and such
Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, assign, and transfer the Tendered Notes
and that the Company will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges, encumbrances, and adverse claims when
the Tendered Notes are acquired by the Company as contemplated herein. The
undersigned and each Beneficial Owner will, upon request, execute and deliver
any additional documents reasonably requested by the Company or the Exchange
Agent as necessary or desirable to complete and give effect to the transactions
contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the New Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired by
the undersigned and any Beneficial Owner(s) in the ordinary course of business
of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the New Notes, (iii) except as otherwise disclosed in writing
herewith, neither the undersigned nor any Beneficial Owner is an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company, and (iv) the
undersigned and each Beneficial Owner acknowledge and agree that any person
participating in the Exchange Offer with the intention or for the purpose of
distributing the New Notes must comply with the registration and prospectus
delivery requirements of the Securities Act of 1933, as amended (together with
the rules and regulations promulgated thereunder, the "Securities Act"), in
connection with a secondary resale of the New Notes acquired by such person and
cannot rely on the position of the Staff of the Securities and Exchange
Commission (the "Commission") set forth in the no-action letters that are
discussed in the section of the Prospectus entitled "The Exchange Offer." In
addition, by accepting the Exchange Offer, the undersigned hereby (i) represents
and warrants that, if the undersigned or any Beneficial Owner of the Notes is a
Participating Broker-Dealer, such Participating Broker-Dealer acquired the Notes
for its own account as a result of market-making activities or other trading
activities and 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 (ii) acknowledges that, by receiving New Notes for its own account in
exchange for Notes, where such Notes were acquired as a result of market-making
activities or other trading activities, such Participating Broker-Dealer will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes.
/ / CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
/ / CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
"Use of Guaranteed Delivery" BELOW (Box 4).
/ / CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE
TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE "Use of Book-Entry Transfer" BELOW (Box 5).
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
<TABLE>
<CAPTION>
BOX 1
DESCRIPTION OF NOTES TENDERED
(ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
<S> <C> <C> <C>
NAME(S) AND ADDRESS(ES) OF REGISTERED NOTE HOLDER(S), AGGREGATE PRINCIPAL
EXACTLY AS CERTIFICATE AMOUNT AGGREGATE
NAME(S) APPEAR(S) ON NOTE CERTIFICATE(S) NUMBER(S) OF REPRESENTED BY PRINCIPAL AMOUNT
(PLEASE FILL IN, IF BLANK) NOTES* CERTIFICATE(S) TENDERED**
TOTAL
</TABLE>
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Notes. All
other tenders must be in integral multiples of $1,000 of principal amount.
Unless otherwise indicated in this column, the principal amount of all Note
Certificates identified in this Box 1 or delivered to the Exchange Agent
herewith shall be deemed tendered. See Instruction 4.
<TABLE>
BOX 2
BENEFICIAL OWNER(S)
<S> <C>
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED NOTES
BENEFICIAL OWNER OF TENDERED NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER
</TABLE>
<PAGE>
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF NEW NOTES EXCHANGED FOR NOTES AND UNTENDERED NOTES ARE
TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE UNDERSIGNED AT AN
ADDRESS OTHER THAN THAT SHOWN ABOVE.
MAIL NEW NOTE(S) AND ANY UNTENDERED NOTES TO:
NAME(S):
________________________________________________________________________________
(PLEASE PRINT)
ADDRESS:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
TAX IDENTIFICATION OR
SOCIAL SECURITY NO.:
<PAGE>
BOX 4
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
________________________________________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ____________________________
Name of Institution which Guaranteed Delivery: _________________________________
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY
TRANSFER.
Name of Tendering Institution: _________________________________________________
Account Number: ________________________________________________________________
Transaction Code Number: _______________________________________________________
<PAGE>
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
X ____________________________________ Signature Guarantee
(If required by Instruction 5)
X ____________________________________
Authorized Signature
(Signature of Registered Holder(s) or
Authorized Signatory) X _________________________________
NOTE: The above lines must be Name: _____________________________
signed by the registered holder(s) (Please print)
of Notes as their name(s) appear(s)
on the Notes or by persons(s)
authorized to become registered Title: ____________________________
holder(s) (evidence of such
authorization must be transmitted Name of Firm: _____________________
with this Letter of Transmittal). (Must be an Eligible
If signature is by a trustee, Institution as
executor, administrator, guardian, defined in
attorney-in-fact, officer, or other Instruction 2)
person acting in a fiduciary or
representative capacity, such Address: __________________________
person must set forth his or her
full title below. See Instruction __________________________
5.
__________________________
Name(s): __________________________ (include Zip Code)
___________________________________
Area Code and Telephone Number:
Capacity: _________________________
__________________________
Dated:
___________________________________ __________________________
Street Address: ___________________
___________________
(include Zip Code)
Area Code and Telephone Number:
___________________
Tax Identification or Social
Security Number:
___________________
<PAGE>
BOX 7
BROKER-DEALER STATUS
/ / Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes
for its own account as a result of market-making activities or other
trading activities
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
PAYOR'S NAME: CLARK-SCHWEBEL, INC.
Name (if joint names, list first and circle the name of the person or entity
whose number you enter in Part 1 below. See instructions if your name has
changed.)
Address
City, State and ZIP Code
List account number(s) here (optional)
PART 1--PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION Social Security
NUMBER ("TIN") IN THE BOX AT RIGHT AND CERTIFY BY Number
SIGNING AND DATING BELOW or TIN
PART 2--Check the box if you are NOT subject to backup withholding under the
provisions of section 3406(a)(1)(C) of the Internal Revenue Code because (1)
you have not been notified that you are subject to backup withholding as a
result of failure to report all interest or dividends or (2) the Internal
Revenue Service has notified you that you are no longer subject to backup
withholding. / /
SUBSTITUTE
FORM W-9
DEPARTMENT OF THE
TREASURY
INTERNAL REVENUE SERVICE
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I PART 3--
CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM IS Awaiting TIN / /
TRUE, CORRECT AND COMPLETE.
SIGNATURE DATE
---------------------------------- ----
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
CLARK-SCHWEBEL, INC.
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES. A properly completed
and duly executed copy of this Letter of Transmittal, including Substitute Form
W-9, and any other documents required by this Letter of Transmittal must be
received by the Exchange Agent at its address set forth herein, and either
certificates for Tendered Notes must be received by the Exchange Agent at its
address set forth herein or such Tendered Notes must be transferred pursuant to
the procedures for book-entry transfer described in the Prospectus under the
caption "Exchange Offer--Procedures for Tendering" (and a confirmation of such
transfer received by the Exchange Agent), in each case prior to 5:00 p.m., New
York City time, on the Expiration Date. The method of delivery of certificates
for Tendered Notes, this Letter of Transmittal and all other required documents
to the Exchange Agent is at the election and risk of the tendering holder and
the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. Instead of delivery by mail, it is recommended
that the Holder use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure timely delivery. No Letter of
Transmittal or Notes should be sent to the Company. Neither the Company nor the
registrar is under any obligation to notify any tendering holder of the
Company's acceptance of Tendered Notes prior to the closing of the Exchange
Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available, and who cannot deliver their
Notes, this Letter of Transmittal or any other documents required hereby to the
Exchange Agent prior to the Expiration Date must tender their Notes according to
the guaranteed delivery procedures set forth below, including completion of Box
4. Pursuant to such procedures: (i) such tender must be made by or through a
firm which is a member of a recognized Medallion Program approved by the
Securities Transfer Association Inc. (an "Eligible Institution") and the Notice
of Guaranteed Delivery must be signed by the holder; (ii) prior to the
Expiration Date, the Exchange Agent must have received from the holder and the
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by mail, hand delivery or facsimile transmission) setting forth the
name and address of the holder, the certificate number(s) of the Tendered Notes
and the principal amount of Tendered Notes, stating that the tender is being
made thereby and guaranteeing that, within five New York Stock Exchange trading
days after the Expiration Date, this Letter of Transmittal together with the
certificate(s) representing the Notes and any other required documents will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) such
properly completed and executed Letter of Transmittal, as well as all other
documents required by this Letter of Transmittal and the certificate(s)
representing all Tendered Notes in proper form for transfer, must be received by
the Exchange Agent within five New York Stock Exchange trading days after the
Expiration Date. Any holder who wishes to tender Notes pursuant to the
guaranteed delivery procedures described above must ensure that the Exchange
Agent receives the Notice of Guaranteed Delivery relating to such Notes prior to
5:00 p.m., New York City time, on the Expiration Date. Failure to complete the
guaranteed delivery procedures outlined above will not, of itself, affect the
validity or effect a revocation of any Letter of Transmittal form properly
completed and executed by an Eligible Holder who attempted to use the guaranteed
delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name Tendered Notes are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered holder) may execute
and deliver this Letter of Transmittal. Any Beneficial Owner of Tendered Notes
who is not the registered holder must arrange promptly with the registered
holder to execute and deliver this Letter of Transmittal on his or her behalf
through the execution and delivery to the registered holder of the Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner form accompanying this Letter of Transmittal.
4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes held by the holder is tendered, the tendering holder should fill
in the principal amount tendered in the column labeled "Aggregate Principal
Amount Tendered" of the box entitled "Description of Notes Tendered" (Box 1)
above. The entire principal amount of Notes delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated. If the entire
principal amount of all Notes held by the holder is not tendered, then Notes for
the principal amount of Notes not tendered and New Notes issued in exchange for
any Notes tendered and accepted will be sent to the Holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, as soon as practicable following the
Expiration Date.
<PAGE>
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and New Notes issued in exchange therefor are to be issued (and
any untendered principal amount of Notes is to be reissued) in the name of the
registered holder(s), then such registered holder(s) need not and should not
endorse any Tendered Notes, nor provide a separate bond power. In any other
case, such registered holder(s) must either properly endorse the Tendered Notes
or transmit a properly completed separate bond power with this Letter of
Transmittal, with the signature(s) on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be endorsed
or accompanied by appropriate bond powers, in each case, signed as the name(s)
of the registered holder(s) appear(s) on the Tendered Notes, with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with this Letter of Transmittal.
Endorsements on Tendered Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Tendered Notes are tendered (i) by a registered holder
who has not completed the box set forth herein entitled "Special Delivery
Instructions" (Box 3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the
applicable box (Box 3), the name and address to which the New Notes and/or
substitute Notes for principal amounts not tendered or not accepted for exchange
are to be sent, if different from the name and address of the person signing
this Letter of Transmittal. In the case of issuance in a different name, the
taxpayer identification or social security number of the person named must also
be indicated.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Tendered Notes pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the transfer and
exchange of Tendered Notes pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with this
Letter of Transmittal, the amount of such transfer taxes will be billed directly
to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter of
Transmittal.
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide the
Company (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual, is his or her social
security number. If the Company is not provided with the correct TIN, the Holder
may be subject to backup withholding and a $50 penalty imposed by the Internal
Revenue Service. (If withholding results in an over-payment of taxes, a refund
may be obtained.) Certain holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
<PAGE>
To prevent backup withholding, each holder of Tendered Notes must provide
such holder's correct TIN by completing the Substitute Form W-9 set forth
herein, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN), and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue Service
has notified the holder that such holder is no longer subject to backup
withholding. If the Tendered Notes are registered in more than one name or are
not in the name of the actual owner, consult the "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for information on
which TIN to report.
The Company reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Company's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of Tendered Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any and all Notes
not validly tendered or any Notes the Company's acceptance of which would, in
the opinion of the Company or its counsel, be unlawful. The Company also
reserves the right to waive any conditions of the Exchange Offer or defects or
irregularities in tenders of Notes as to any ineligibility of any holder who
seeks to tender Notes in the Exchange Offer. The interpretation of the terms and
conditions of the Exchange Offer (including this Letter of Transmittal and the
instructions hereto) by the Company shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of Notes
must be cured within such time as the Company shall determine. Neither the
Company, the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Notes, nor
shall any of them incur any liability for failure to give such notification.
Tenders of Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any 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 this Letter of
Transmittal, as soon as practicable following the Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive or modify any of the conditions in the Exchange Offer in the case of any
Tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Notes or transmittal of this Letter of Transmittal will be
accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering Holder whose
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated herein for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address indicated
herein. Holders may also contact their broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Exchange Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Company
will accept for exchange all validly tendered Notes as soon as practicable after
the Expiration Date and will issue New Notes therefor as soon as practicable
thereafter. For purposes of the Exchange Offer, the Company shall be deemed to
have accepted tendered Notes when, as and if the Company has given written or
oral notice (immediately followed in writing) thereof to the Exchange Agent. If
any Tendered Notes are not exchanged pursuant to the Exchange Offer for any
reason, such unexchanged Notes will be returned, without expense, to the
undersigned at the address shown in Box 1 or at a different address as may be
indicated herein under "Special Delivery Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures set
forth in the Prospectus under the caption "The Exchange Offer."
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
10 1/2% SERIES A SENIOR NOTES DUE 2006
OF
CLARK-SCHWEBEL, INC.
PURSUANT TO THE PROSPECTUS DATED , 1996
This form must be used by a holder of 10 1/2% Series A Senior Notes due 2006
(the "Notes") of Clark-Schwebel, Inc., a Delaware corporation (the "Company"),
who wishes to tender Notes to the Exchange Agent pursuant to the guaranteed
delivery procedures described in "The Exchange Offer-- Guaranteed Delivery
Procedures" of the Company's Prospectus, dated , 1996 (the "Prospectus")
and in Instruction 2 to the related Letter of Transmittal. Any holder who wishes
to tender Notes pursuant to such guaranteed delivery procedures must ensure that
the Exchange Agent receives this Notice of Guaranteed Delivery prior to the
Expiration Date of the Exchange Offer. Capitalized terms used but not defined
herein have the meanings ascribed to them in the Prospectus or the Letter of
Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1996 UNLESS EXTENDED (THE "EXPIRATION DATE").
FLEET NATIONAL BANK
(the "Exchange Agent")
By Mail: Overnight Courier:
-------- ------------------
Fleet National Bank Fleet National Bank
Corporate Trust Operations, Corporate Trust Operations,
CTMO 0224 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 (800) 986-1271
Corporate Trust Operations,
CTMO 0224
777 Main Street
Hartford, CT 06115
Attention: Patricia Williams
Confirm by Telephone:
---------------------
(800) 986-7908
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the related Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL AGGREGATE
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES OR AMOUNT PRINCIPAL
ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY REPRESENTED AMOUNT TENDERED
<S> <C> <C>
</TABLE>
2
<PAGE>
PLEASE SIGN AND COMPLETE
Signatures of Registered Holder(s) or
Authorized Signatory: Date: , 1996
----------------- -----------------------
- --------------------------------------
Address:
- -------------------------------------- -------------------------
Name(s) of Registered Holder(s): Area Code and Telephone No.
------ ------
- --------------------------------------
- --------------------------------------
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Notes or on a security position
listing as the owner of Notes, or by person(s) authorized to become Holder(s)
by endorsements and documents transmitted with this Notice of Guaranteed
Delivery. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s): _______________________________________________________________________
________________________________________________________________________________
Capacity: ______________________________________________________________________
Address(es): ___________________________________________________________________
________________________________________________________________________________
3
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities Exchange
Act of 1934, as amended, guarantees deposit with the Exchange Agent of the
Letter of Transmittal (or facsimile thereof), together with the Notes tendered
hereby in proper form for transfer (or confirmation of the book-entry transfer
of such Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility described in the prospectus under the caption "The Exchange
Offer--Guaranteed Delivery Procedures" and in the Letter of Transmittal) and
any other required documents, all by 5:00 p.m., New York City time, on the
fifth New York Stock Exchange trading day following the Expiration Date.
<TABLE>
<S> <C>
Name of firm:
-------------------------- ----------------------------------
(AUTHORIZED SIGNATURE)
Address: Name:
-------------------------------- -----------------------------
(PLEASE PRINT)
TITLE:
- ---------------------------------------- ----------------------------
(INCLUDE ZIP CODE)
Area Code and Tel. No. Dated: , 1996
------------------ ----------------------
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES MUST
BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
4
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other documents
required by this Notice of Guaranteed Delivery must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. The method
of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holders may wish to consider using an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
related Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes referred
to herein, the signature must correspond with the name(s) written on the face of
the Notes without alteration, enlargement, or any change whatsoever. If this
Notice of Guaranteed Delivery is signed by a participant of the Book-Entry
Transfer Facility whose name appears on a security position listing as the owner
of the Notes, the signature must correspond with the name shown on the security
position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Notes or signed as the name of the participant shown on the Book-Entry
Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be directed
to the Exchange Agent at the address specified in the Prospectus. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
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EXHIBIT 99.3
INSTRUCTIONS
TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
CLARK-SCHWEBEL, INC.
10 1/2% SERIES A SENIOR NOTES DUE 2006
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated ,
1996 (the "Prospectus") of Clark-Schwebel, Inc., a Delaware corporation (the
"Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the 10 1/2% Series A Senior Notes due 2006 (the "Notes")
held by you for the account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (fill in amount):
$ of the 10 1/2% Series A Senior Notes due 2006
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
/ / TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY): $
/ / NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instruct you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that the
undersigned's principal residence is in the state of (FILL IN STATE), (i) the
undersigned is acquiring the New Notes in the ordinary course of business of the
undersigned, (ii) the undersigned is not participating, does not participate,
and has no arrangement or understanding with any person to participate in the
distribution of the New Notes, (iii) the undersigned acknowledges that any
person participating in the Exchange Offer for the purpose of distributing the
New Notes must comply with the registration and prospectus delivery requirements
of the Securities Act of 1933, as amended (the "Act"), in connection with a
secondary resale transaction of the New Notes acquired by such person and cannot
rely on the position of the Staff of the Securities and Exchange Commission set
forth in no-action letters that are discussed in the section of the Prospectus
entitled "The Exchange Offer--Resale of the New Notes," and the undersigned is
not an "affiliate," as defined in Rule 405 under the Act, of the Company; to
agree, on behalf of the undersigned, as set forth in the Letter of Transmittal;
and to take such other action as necessary under the Prospectus or the Letter of
Transmittal to effect the valid tender of such Notes.
/ /
Check this box if the Beneficial Owner of the Notes is a Participating
Broker-Dealer and such Participating Broker-Dealer acquired the Notes for
its own account as a result of market-making activities or other trading
activities
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SIGN HERE
Name of beneficial owner(s): __________________________________________________
Signature(s): _________________________________________________________________
Name (please print): __________________________________________________________
Address: ______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Telephone number: _____________________________________________________________
Taxpayer Identification or Social Security Number: ____________________________
Date: _________________________________________________________________________
