<PAGE>
As filed with the Securities and Exchange Commission on November 24, 1997
Registration No. 333-36491
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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CLARK-SCHWEBEL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 2222
(State or other 2262 13-3883016
jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or Classification Code Number) Identification Number)
organization)
2200 South Murray Avenue
(P.O. Box 2627)
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
(P.O. Box 2627)
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:
Jack M. Feder
Kirkland & Ellis
655 Fifteenth Street, N.W., Suite 1200
Washington, D.C. 20005
Telephone: (202) 879-5000
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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. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /
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<PAGE>
[cover page continued]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price Per Aggregate Offering Amount of
Registered Registered Debenture(1) Price(1) Registration Fee
- ----------------------- --------------- --------------------- --------------------- ------------------
<S> <C> <C> <C> <C>
Series B 12-1/2% Senior
Debentures due
2007................... $153,311,278(2) $1,000 principal $153,311,278 $46,458
amount
</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f).
(2) Includes up to $107,317,278 in aggregate principal amount of 121/2% Series
B Senior Debentures due 2007 which may, upon the occurrence of specified
events, be issued in lieu of cash.
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.
<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 or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION, DATED NOVEMBER 24, 1997
CLARK-SCHWEBEL HOLDINGS, INC.
Offer to Exchange its 121/2% Series B Senior Debentures due 2007 for
any and all of its outstanding 121/2% Series A Senior Debentures due 2007
The Exchange Offer will expire at 5:00 p.m., New York City time,
on December 30, 1997, unless extended
Clark-Schwebel Holdings, Inc., a Delaware corporation ("Holdings"),
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 12-1/2% Series B Senior Debentures due 2007 (the "New
Debentures"), 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
12-1/2% Series A Senior Debentures due 2007 (the "Old Debentures"), of which
$45,994,000 principal amount is outstanding on the date hereof. The form and
terms of the New Debentures are the same as the form and term of the Old
Debentures (which they replace) except that the New Debentures 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 Debentures in certain circumstances
relating to the timing of the Exchange Offer. The Old Debentures and the New
Debentures are sometimes referred to herein collectively as the "Debentures."
The New Debentures will evidence the same debt as the Old Debentures (which
they replace) and will be issued under and be entitled to the benefits of the
Indenture (the "Indenture") dated as of August 14, 1997 between Holdings and
State Street Bank and Trust Company, as trustee, governing the Debentures.
See "The Exchange Offer" and "Description of New Debentures."
Holdings does not have any current plans to issue any significant
indebtedness to which the New Debentures would rank senior or pari passu in
right of payment.
The New Debentures will bear interest at a rate of 12-1/2% per annum,
payable semi-annually on January 15 and July 15 of each year, commencing
January 15, 1998; provided however, that if on any interest payment date
Holdings' wholly owned subsidiary Clark-Schwebel, Inc. ("CSI") could not
dividend or distribute a sufficient amount of cash to Holdings under the
terms of the CSI Indenture (as defined) or the Credit Agreement (as defined)
in order to make such interest payment in cash, Holdings may make such
interest payment in the form of additional Debentures having an aggregate
principal amount equal to the amount of such interest. The New Debentures
will mature on July 15, 2007. On or after July 15, 2002, Holdings may redeem
the New Debentures at the redemption prices set forth herein, plus accrued
and unpaid interest and Liquidated Damages (as defined), if any, to the date
of redemption. Notwithstanding the foregoing, at any time after January 15,
1998, Holdings may redeem all or any portion of the principal amount of the
Debentures with the net proceeds of one or more Equity Offerings (as defined)
at a redemption price equal to 106% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
redemption. Additionally, notwithstanding the foregoing, at any time after
January 15, 1998, Holdings may redeem all or any portion of the principal
amount of the Debentures at a redemption price equal to 106% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages, if
any, to the date of redemption, in the event of a Change of Control (as
defined) or a Subsidiary Change of Control (as defined). Upon a Change of
Control, Holdings will be obligated to make an offer to repurchase all of the
outstanding Debentures 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 New Debentures."
<PAGE>
The New Debentures will be senior unsecured obligations of Holdings and
will rank pari passu in right of payment to all existing and future senior
indebtedness of Holdings and senior in right of payment to all subordinated
indebtedness of Holdings. The New Debentures will be effectively
subordinated to all existing and future secured indebtedness of Holdings,
including Holdings' guarantee of CSI's indebtedness under 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 CSI and the other subsidiaries of Holdings. As of
September 27, 1997, the aggregate principal amount of senior indebtedness,
including the Debentures and Holdings' guarantee of CSI's indebtedness under
the Credit Agreement, was approximately $156.0 million. The Indenture
governing the Debentures permits Holdings and its Restricted Subsidiaries (as
defined) to incur additional indebtedness, subject to certain limitations.
See "Description of New Debentures."
See "Risk Factors," beginning on page 19, for a discussion of certain
factors that should be considered by holders who tender their Old Debentures
in the Exchange Offer.
Holdings will accept for exchange any and all Old Debentures validly
tendered and not withdrawn prior to 5:00 p.m., New York City time, on
December 30, 1997, unless extended by Holdings in its sole discretion (the
"Expiration Date"). Tenders of Old Debentures 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 Debentures were issued on August 14,
1997 to the Initial Purchaser (as defined) in exchange for and in redemption
of all of Holdings' then outstanding shares of 12.5% Senior Exchangeable
Participating Preferred Stock (the "Preferred Stock") in a transaction not
registered under the Securities Act in reliance upon an exemption under the
Securities Act. The Initial Purchaser subsequently placed the Old Debentures
with qualified institutional buyers and to institutional accredited investors
in reliance upon Rule 144A under the Securities Act. Accordingly, the Old
Debentures 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 Debentures are being offered hereunder in order to
satisfy the obligations of Holdings under the Registration Rights Agreement
(as defined) entered into by Holdings in connection with the original
transfer of the Preferred Stock to the Initial Purchaser. See "The Exchange
Offer."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE 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 November 25, 1997.
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<PAGE>
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, Holdings believes
the New Debentures 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 Holdings 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
Debentures 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 Debentures. See
"The Exchange Offer -- Purpose and Effect of the Exchange Offer" and "The
Exchange Offer -- Resale of the New Debentures." Each broker-dealer (a
"Participating Broker-Dealer") that receives New Debentures 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 Debentures. 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
Debentures received in exchange for Old Debentures where such Old Debentures
were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities. Holdings 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 Debentures not tendered and accepted in the Exchange Offer
will continue to hold such Old Debentures 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.
Holdings 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 Debentures or
the New Debentures. Holdings does not intend to list the New Debentures 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 Debentures will develop. See "Risk Factors -- Lack of
Established Public Trading Market; Absence of Trading Market for Old
Debentures Not Validly Tendered." Moreover, to the extent that Old
Debentures are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Debentures could be
adversely affected.
The New Debentures will be available initially in book-entry form and
Holdings expects that the New Debentures issued pursuant to this Exchange
Offer will be issued in the form of a Global Debenture (as defined), which
will be deposited with, or on behalf of, The Depository Trust Company (the
"Depositary" or "DTC") and registered in its name or in the name of Cede &
Co., its nominee. Beneficial interests in the Global Debentures 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
Debentures, New Debentures in certificated form will be issued in exchange
for the Global Debentures only under the limited circumstances set forth in
the Indenture. See "Description of New Debentures -- Book-Entry, Delivery
and Form."
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<PAGE>
AVAILABLE INFORMATION
Holdings 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 Debentures 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 Holdings 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.
Additionally, the Commission maintains a web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission, including
the Company.
Kevlar-Registered Trademark- and Teflon-Registered Trademark- are registered
trademarks of E.I. du Pont de Nemours and Company ("DuPont").
Spectra-Registered Trademark- is a registered trademark of AlliedSignal, Inc.
("AlliedSignal").
The fiscal year for each of Holdings, CSI and Fort Mill A Inc., the
predecessor holder of all of the CSI's capital stock ("Fort Mill"), ends on
the Saturday closest to December 31. The fiscal years 1992, 1993, 1994, 1995
and 1996 ended on January 2, 1993, January 1, 1994, December 31, 1994,
December 30, 1995, and December 28, 1996, respectively. The results of
operations for the year ended December 28, 1996 represent the combined
results of the predecessor company, for the period of December 31, 1995
through April 17, 1996, and the successor company for the period of April 18,
1996 through December 28, 1996. The fiscal quarters for each of Holdings,
CSI and Fort Mill are thirteen weeks and are measured from the fiscal year
end of the applicable year. Accordingly, the third quarter for Holdings
ended on September 28, 1996 and September 27, 1997 for 1996 and 1997,
respectively. The results of operations for the nine months ended September
28, 1996 represents the combined results of the predecessor company for the
period of December 31, 1995 through April 17, 1996, and the successor Company
for the period of April 18, 1996 through September 28, 1996.
Disclosure Regarding Forward-Looking Statements
THIS PROSPECTUS INCLUDES FORWARD-LOOKING STATEMENTS. ALL STATEMENTS OTHER
THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS PROSPECTUS, INCLUDING
WITHOUT LIMITATION, CERTAIN STATEMENTS UNDER THE "PROSPECTUS SUMMARY,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," "BUSINESS" AND "THE TRANSACTIONS--ACQUISITIONS" AND LOCATED
ELSEWHERE HEREIN REGARDING THE COMPANY'S FINANCIAL POSITION AND BUSINESS
STRATEGY, MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY
BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS
ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO
HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS")
ARE DISCLOSED IN THIS PROSPECTUS, INCLUDING WITHOUT LIMITATION
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<PAGE>
IN CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
PROSPECTUS AND UNDER "RISK FACTORS." ALL SUBSEQUENT WRITTEN AND ORAL
FORWARD- LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON
ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY
STATEMENTS.
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<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data,
including the Financial Statements and notes thereto, included elsewhere in
this Prospectus. Financial Statements presented herein reflect the
consolidated financial statements of Fort Mill. Fort Mill's sole asset was,
and Holdings' sole asset is, all of the capital stock of CSI. References in
this Prospectus to the "Company" shall, except where the context otherwise
requires, refer to Clark-Schwebel Holdings, Inc. and its wholly owned
subsidiary CSI. 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 "CSI" are to Clark-Schwebel,
Inc. for periods prior to the Acquisition (as defined) and to Clark-S
Acquisition Corporation which, through a series of mergers, was merged into
Clark-Schwebel, Inc., for periods following the Acquisition.
THE COMPANY
The Company believes it has been a leading manufacturer and marketer of
industrial fabrics, including electronics fiber glass fabrics, composite
materials fiber glass fabric and high performance fabrics since its founding
in 1960. The Company believes it is the largest producer of fiber glass
fabrics for use in the growing electronics industry, with an estimated 50%
market share in the United States. Fiber glass fabrics are a critical
component used in the production of printed circuit boards, which are
integral to virtually all advanced electronic products, including computers,
telecommunications equipment, advanced cable television equipment, network
servers, televisions, automotive equipment and home appliances. The
Company's fiber glass fabrics are also used in composite materials to
strengthen, insulate and enhance the dimensional stability of hundreds of
products in a variety of markets, such as aerospace, coating and laminating,
marine and tooling, building insulation and sports equipment. The Company is
also a leading manufacturer of Kevlar-Registered Trademark-,
Spectra-Registered Trademark- and quartz fabrics. High performance fabrics
composed of Kevlar-Registered Trademark-, 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 1993 to 1996, the
Company's net sales, EBITDA (as defined), operating income and net income
grew at compounded annual growth rates of 10.5%, 30.6%, 52.6% and 94.8%,
respectively. During the same period, the Company's EBITDA margin increased
from 11.6% to 19.2% 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 1996, the
Company's net sales, EBITDA, operating income and net income were $220.9
million, $42.3 million, $32.1 million and $16.7 million, respectively.
The Company's principal executive offices are located at 2200 South
Murray Avenue, Anderson, South Carolina 29622, and its telephone number is
(864) 224-3506.
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<PAGE>
Electronics Fiber Glass Fabric
The Company believes it is a leading producer of electronics fiber glass
fabric in the United States. The Company sells fiber glass fabric to
manufacturers of high pressure laminates ("HPL") who, in turn, convert fiber
glass fabric into rigid and thin core laminates that are sold to
manufacturers of single-sided, double-sided and multilayered printed circuit
boards. Printed circuit boards require a highly engineered substrate material
on which to mount and interconnect semiconductor chips, passive electronic
devices and other electronic components. Due to its low cost, high strength,
dimensional stability, temperature resistance and electrical insulating
properties, fiber glass fabric has proven to be the most effective substrate
material used in the manufacture of printed circuit boards. In addition, the
Company believes that currently there is no cost-effective substitute
material which can satisfy the stringent quality and performance
specifications required of fiber glass fabric for HPLs in printed circuit
boards. Electronics fiber glass fabric represented 57.6%, 58.9% and 62.9% of
the Company's net sales in 1994, 1995 and 1996, respectively.
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.
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-Registered Trademark- coated conveyor belts, window shades, movie
screens, electrical insulation products, marine construction materials,
automotive tooling and roofing materials. Composite materials fiber glass
fabric represented 23.9%, 18.5% and 21.3% of the Company's net sales in 1994,
1995 and 1996, respectively.
The Company's fiber glass fabrics can be found on major airframe programs
at The Boeing Company, McDonnell Douglas Corporation and Airbus Industries.
The Company expects increases in commercial aircraft build rates over the
next several years. The growing global economy and governmental regulations
forcing the removal of older, louder, less fuel efficient aircraft are
expected to drive demand for new aircraft.
High Performance Fabrics
The Company believes it is a leading producer of high performance fabrics
used primarily to make ballistic protection products, such as vests and
helmets worn by state, local and private police forces and the military and
to reinforce composite materials for aircraft applications. The Company's
high performance fabrics possess physical properties such as durability, low
weight and high tensile strength. The Company's line of high performance
products are manufactured by arranging and finishing aramid and other
materials, such as Kevlar-Registered Trademark-, Spectra-Registered
Trademark- 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-Registered Trademark- 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
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<PAGE>
ballistic protection fabrics designed to capture low mass, high velocity
fragments. High performance fabrics represented 18.5%, 22.6% and 15.8% of the
Company's net sales in 1994, 1995, and 1996, respectively.
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.
THE TRANSACTIONS
The "Transactions" refer collectively to the redemption of the Preferred
Stock, the issuance of the Old Debentures, the repayment of the Term Loan
under the Credit Agreement and the related Credit Agreement Amendment (as
defined) and the repayment of the Management Loans. See "The Transactions --
Subsequent Events."
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<PAGE>
THE INITIAL OFFERING
Old Debentures The Old Debentures were issued by Holdings on August 14,
1997 (the "Issue Date") to Donaldson, Lufkin & Jenrette
Securities Corporation (the "Initial Purchaser") in
exchange for and in redemption of all of Holdings' then
outstanding shares of 12.5% Senior Exchangeable
Participating Preferred Stock (the "Preferred Stock").
The Initial Purchaser originally acquired the Preferred
Stock from Vestar/CS Holding pursuant to a Purchase
Agreement dated July 14, 1997, and upon issuance of the
Old Debentures in redemption of the Preferred Stock, sold
the Old Debentures to qualified institutional buyers
pursuant to Rule 144A under the Securities Act and to
institutional accredited investors.
Registration Pursuant to the Purchase Agreement, Holdings and the
Rights Agreement Initial Purchaser entered into a Registration Rights
Agreement dated July 14, 1997 (the "Registration Rights
Agreement"), which grants the holders of the Old
Debentures certain exchange and registration rights. The
Exchange Offer is intended to satisfy such exchange
rights which terminate upon the consummation of the
Exchange Offer.
THE EXCHANGE OFFER
Securities $45,994,000 aggregate principal amount of 121/2% Series B
Offered Senior Debentures due 2007 (the "New Debentures").
The Exchange $1,000 principal amount of the New Debentures in exchange
Offer for each $1,000 principal amount of Old Debentures. As of
the date hereof, $45,994,000 aggregate principal amount of
Old Debentures are outstanding. Holdings will issue the New
Debentures 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,
Holdings believes that New Debentures issued pursuant to
the Exchange Offer in exchange for Old Debentures may be
offered for resale, resold and otherwise transferred by
any holder thereof (other than any such holder which is
an "affiliate" of Holdings 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 Debentures 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 Debentures.
Any Participating Broker-Dealer that acquired Old
Debentures 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 Debentures for its
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own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with any resale of such New Debentures. 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
Debentures received in exchange for Old Debentures where
such Old Debentures were acquired by such Participating
Broker-Dealer as a result of market-making activities or
other trading activities.
Holdings 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 Debentures
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 December 30, 1997
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 Each New Debenture will bear interest from its issuance
on the New date. Holders of Old Debentures that are accepted for
Debentures and exchange will receive, in cash, accrued interest thereon
the Old Debentures to, but not including, the issuance date of the New
Debentures. Such interest will be paid with the first
interest payment on the New Debentures. Interest on the
Old Debentures accepted for exchange will cease to accrue
upon issuance of the New Debentures.
Conditions to the The Exchange Offer is subject to certain customary
Exchange Offer conditions, which may be waived by Holdings. See "The
Exchange Offer --Conditions."
Procedures for Each holder of Old Debentures wishing to accept the
Tendering Exchange Offer must complete, sign and date the
Old Debentures accompanying Letter of Transmittal, or a facsimile
thereof or transmit an Agent's Message
-10-
<PAGE>
(as defined) in connection with a book-entry transfer, in
accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile or such Agent's Message,
together with the Old Debentures and any other required
documentation to the Exchange Agent (as defined) at the
address set forth herein. By executing the Letter of
Transmittal or Agent's Message, each holder will
represent to Holdings that, among other things, the New
Debentures acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the
person receiving such New Debentures, 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 Debentures, (ii) is engaging or
intends to engage in the distribution of such New
Debentures or (iii) is an "affiliate," as defined under
Rule 405 of the Securities Act, of Holdings. See "The
Exchange Offer--Purpose and Effect of the Exchange Offer"
and "--Procedures for Tendering."
Untendered Following the consummation of the Exchange Offer, holders
Debentures of Old Debentures eligible to participate but who do not
tender their Old Debentures will not have any further
exchange rights and such Old Debentures will continue to
be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Old
Debentures could be adversely affected.
Consequences of The Old Debentures that are not exchanged pursuant to the
Failure to Exchange Offer will remain restricted securities.
Exchange Accordingly, such Debentures may be resold only (i) to
Holdings, (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 Debentures (other than any such
holder which is an "affiliate" of Holdings 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 Debentures to Holdings for use therein,
Holdings has agreed to register the Old Debentures 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. Holdings 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 Debentures held by any such holders.
-11-
<PAGE>
Special Procedures Any beneficial owner whose Old Debentures are registered
for Beneficial in the name of a broker, dealer, commercial bank, trust
Owners 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 Debentures, either make appropriate
arrangements to register ownership of the Old Debentures
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.
Holdings will keep the Exchange Offer open for not less
than twenty business days in order to provide for the
transfer of registered ownership.
Guaranteed Holders of Old Debentures who wish to tender their Old
Delivery Debentures and whose Old Debentures are not immediately
Procedures available or who cannot deliver their Old Debentures, 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 Debentures
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 Holdings will accept for exchange any and all Old
Debentures and Debentures which are properly tendered in the Exchange
Deliver of Offer prior to 5:00 p.m., New York City time, on the
New Debentures Expiration Date. The New Debentures issued pursuant to
the Exchange Offer will be delivered promptly following
the Expiration Date. See "The Exchange Offer -- Terms of
the Exchange."
Federal Income Tax The exchange pursuant to the Exchange Offer should not be
Consequences a taxable event for Federal income tax purposes. See
"Certain Federal Income Tax Consequences."
Use of Proceeds There will be no cash proceeds to the Company from the
exchange pursuant to the Exchange Offer.
Exchange Agent State Street Bank and Trust Company.
THE EXCHANGE DEBENTURES
General The form and terms of the New Debentures are the same as
the form and terms of the Old Debentures (which they
replace) except
-12-
<PAGE>
that (i) the New Debentures bear a Series
B designation, (ii) the New Debentures have been
registered under the Securities Act and, therefore, will
not bear legends restricting the transfer thereof, and
(iii) the holders of New Debentures 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 Debentures 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
Debentures will evidence the same debt as the Old
Debentures and will be entitled to the benefits of the
Indenture. See "Description of New Debentures." The Old
Debentures and the New Debentures are referred to herein
collectively as the "Debentures."
Securities Offered $45,994,000 aggregate principal amount of 12-1/2% Series B
Senior Debentures due 2007.
Maturity Date July 15, 2007.
Interest January 15 and July 15 of each year, commencing January
Payment Dates 15, 1998; provided however, that if on any interest
payment date Holdings' wholly owned subsidiary
Clark-Schwebel, Inc. ("CSI") could not dividend or
distribute a sufficient amount of cash to Holdings under
the terms of the CSI Indenture or the Credit Agreement
(as defined) in order to make such interest payment in
cash, Holdings may make such interest payment in the form
of additional Debentures having an aggregate principal
amount equal to the amount of such interest.
Option Redemption On or after July 15, 2002, Holdings may redeem the New
Debentures, at the redemption prices set forth herein,
plus accrued and unpaid interest and Liquidated Damages
(as defined), if any, to the date of redemption.
Notwithstanding the foregoing, at any time after January
15, 1998, Holdings may redeem all or any portion of the
outstanding principal amount of the Debentures with the
net proceeds of one or more Equity Offerings at a
redemption price equal to 106% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption.
Additionally, notwithstanding the foregoing, at any time
after January 15, 1998, Holdings may redeem all or any
portion of the principal amount of the Debentures at a
redemption price equal to 106% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of redemption, in the event
of a Change of Control (as defined) or a Subsidiary
Change of Control (as defined). See "Description of New
Debentures -- Optional Redemption."
Mandatory None.
Redemption
-13-
<PAGE>
Change of Control Upon a Change of Control, Holdings will be obligated to
make an offer to repurchase all of the outstanding
Debentures 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 New Debentures -- Change of Control."
Ranking
The New Debentures will be senior unsecured obligations
of Holdings and will rank pari passu in right of payment
to all existing and future senior indebtedness of
Holdings and senior in right of payment to all
subordinated indebtedness of Holdings. The New
Debentures will be effectively subordinated to all
existing and future secured indebtedness of Holdings,
including indebtedness pursuant to Holdings' guarantee of
CSI's indebtedness under 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 CSI and the
other subsidiaries of Holdings. See "Description of New
Debentures."
Certain Covenants The Indenture contains certain covenants which, among
other things, limits the ability of Holdings 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 values; (vi)
enter into certain transactions with affiliates; (vii)
enter into sale and lease-back 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
Holdings. In addition, under certain circumstances,
Holdings will be required to make an offer to repurchase
the Debentures 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). See
"Description of New Debentures -- Certain Covenants." In
addition, Holdings' interests in certain joint ventures
are not subject to the covenants of the Indenture or the
Credit Agreement. See "The Business -- Joint Ventures."
RISK FACTORS
See "Risk Factors" for a discussion of certain material factors that should
be considered in connection with the Exchange Offer.
-14-
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN MILLIONS)
Set forth below are summary historical financial data of Fort Mill, the
predecessor company, derived from the historical consolidated financial
statements for the fiscal years ended 1992 through 1995. Fort Mill's sole asset
was all of the capital stock of CSI. Fort Mill had no operations and held no
investments other than its investment in CSI. 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. The historical balance
sheets for 1995 and the historical income statements for 1994 and 1995 were
audited by Deloitte & Touche LLP. The selected historical consolidated balance
sheet data for 1992 and 1993 and the income statement data for 1992 were derived
from unaudited historical financial statements of Fort Mill. The 1996 selected
historical and other financial data represents the results of operations of Fort
Mill, the predecessor company, through April 17, 1996, and Holdings, the
successor company, for the period of April 18, 1996 through December 28, 1996.
Holdings' sole asset is all of the common stock of CSI, its operating company.
The 1996 selected historical financial data were derived from the 1996
consolidated financial statements which were audited by Arthur Andersen, LLP.
Also set forth below are selected historical and other financial data for the
first nine months of 1996 and 1997. These results are unaudited, but include all
normal recurring adjustments necessary for a fair presentation of the financial
data for such periods. This analysis compares the results of operations of the
successor Company, for the nine months ended September 27, 1997 to the nine
months ended September 28, 1996. The results of operations for the nine months
ended September 28, 1996 represents the combined results of the predecessor
company, for the period of December 31, 1995 through April 17, 1996, and the
successor Company for the period of April 18, 1996 through September 28, 1996,
in order to establish comparative periods. The following summary pro forma
financial data represents those of Holdings. The pro forma income statement data
for 1996 and for the first nine months of 1997 give effect to the Transactions
as if they had occurred on December 31, 1995. 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 Prospectus.
-15-
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR
---------------------------------------------------------
1992(2) 1993 1994 1995
(HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income Statement Data:
Net sales......................................... $158.8 $163.7 $189.4 $231.3
Gross profit...................................... 19.9 24.5 28.7 39.3
Selling, general and administrative expenses...... 16.3 15.5 14.4 17.8
Idle equipment write-off (1)...................... -- -- 1.8 --
Operating income.................................. 3.6 9.0 12.5 21.6
Interest expense.................................. 0.5 0.4 0.4 0.4
Income (loss) from equity investees, net.......... (5.4) (3.4) 1.2 2.6
Income from continuing operations................. (3.8) 1.6 8.3 15.3
Accrued dividends on preferred stock.............. -- -- -- --
Income from continuing operations applicable to
common shares................................... (3.8) 1.6 8.3 15.3
Other Data:
EBITDA(3)......................................... $ 13.0 $ 19.0 $ 22.5 $ 32.7
<CAPTION>
1996 1996 COMBINED
(3.5 MONTHS) (8.5 MONTHS) 1996
(PREDECESSOR) (SUCCESSOR) (12 MONTHS) 1996
(HISTORICAL) (HISTORICAL) (HISTORICAL) PRO FORMA
------------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
Income Statement Data:
Net sales......................................... $68.9 $152.0 $220.9 $220.9
Gross profit...................................... 13.9 33.4 47.3 47.3
Selling, general and administrative expenses...... 4.8 10.4 15.2 15.2
Idle equipment write-off (1)...................... -- -- -- --
Operating income.................................. 9.1 23.0 32.1 32.1
Interest expense.................................. 0.1 10.1 10.2 16.5
Income (loss) from equity investees, net.......... 1.2 2.6 3.8 3.8
Income from continuing operations................. 6.6 10.1 16.7 12.9
Accrued dividends on preferred stock.............. -- 3.1 3.1 --
Income from continuing operations applicable to
common shares................................... 6.6 7.0 13.6 12.9
Other Data:
EBITDA(3)......................................... $12.7 $ 29.6 $ 42.3 $ 42.3
<CAPTION>
NINE MONTHS ENDED
------------------------------------------------------------------------
1996 1996 COMBINED
(3.5 MONTHS) (5.5 MONTHS) 1996
(PREDECESSOR) (SUCCESSOR) (9 MONTHS) 1997 1997
(HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL) (PRO FORMA)
------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Net sales......................................... $68.9 $ 95.3 $164.2 $180.4 180.4
Gross profit...................................... 13.9 19.5 33.5 40.6 40.6
Selling, general and administrative expenses...... 4.8 6.5 11.3 11.9 11.9
Idle equipment write-off (1)...................... -- -- -- -- --
Operating income.................................. 9.1 13.1 22.2 28.8 28.8
Interest expense.................................. 0.1 6.7 6.8 10.1 14.0
Income (loss) from equity investees, net.......... 1.2 1.7 2.9 2.8 2.8
Income from continuing operations................. 6.6 5.4 12.0 13.7 11.4
Accrued dividends on preferred stock.............. -- 2.0 2.0 2.9 --
Income from continuing operations applicable to
common shares................................... 6.6 3.4 10.0 10.9 11.4
Other Data:
EBITDA(3)......................................... 12.7 17.3 29.9 35.6 35.6
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR
---------------------------------------------------------
1992(2) 1993 1994 1995
(HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
EBITDA, as adjusted (3)........................... 13.0 19.0 24.3 34.1
Depreciation and amortization..................... 9.4 10.0 10.0 11.1
Capital expenditures.............................. 4.3 8.8 11.5 8.4
Gross profit as a percentage of net sales......... 12.5% 15.0% 15.1% 17.0%
EBITDA, as a percentage of gross sales............ 8.2% 11.6% 11.9% 14.1%
EBITDA, as adjusted as a percentage of gross
sales........................................... 8.2% 11.6% 12.8% 14.7%
Net cash provided by (used in) (4):
Operating Activities.............................. (1.4) 17.3 16.2 18.0
Investing Activities.............................. (4.3) (8.7) 7.6 (8.4)
Financing Activities.............................. 5.7 (8.7) (23.8) (9.1)
Ratio of earnings to fixed charges................ 4.3x 15.0x 23.2x 45.7x
Other Pro Forma Data:
Cash interest expense (5)......................... -- -- -- --
Ratio of EBITDA to cash interest expense.......... -- -- -- --
Ratio of EBITDA, as adjusted to cash interest
expense......................................... -- -- -- --
Ratio of net debt to EBITDA (6)................... -- -- -- --
Ratio of net debt to EBITDA, as adjusted (6)...... -- -- -- --
<CAPTION>
1996 1996 COMBINED
(3.5 MONTHS) (8.5 MONTHS) 1996
(PREDECESSOR) (SUCCESSOR) (12 MONTHS) 1996
(HISTORICAL) (HISTORICAL) (HISTORICAL) PRO FORMA
------------- ------------ ----------- ---------
<S> <C> <C> <C> <C>
EBITDA, as adjusted (3)........................... 12.7 29.6 42.3 42.3
Depreciation and amortization..................... 3.5 7.3 10.8 10.8
Capital expenditures.............................. 1.6 2.0 3.6 3.6
Gross profit as a percentage of net sales......... 20.2% 22.0% 21.4% 21.4%
EBITDA, as a percentage of gross sales............ 18.4% 19.5% 19.1% 19.1%
EBITDA, as adjusted as a percentage of gross
sales........................................... 18.4% 19.5% 19.1% 19.1%
Net cash provided by (used in) (4):
Operating Activities.............................. 8.0 41.1 49.1 N/A
Investing Activities.............................. (1.6) (194.9) (196.5) N/A
Financing Activities.............................. (6.5) 157.4 150.9 N/A
Ratio of earnings to fixed charges................ 47.5x 2.0x 2.5x 2.5x
Other Pro Forma Data:
Cash interest expense (5)......................... -- -- -- $ 15.4
Ratio of EBITDA to cash interest expense.......... -- -- -- 2.7x
Ratio of EBITDA, as adjusted to cash interest
expense......................................... -- -- -- 2.7x
Ratio of net debt to EBITDA (6)................... -- -- -- 4.1x
Ratio of net debt to EBITDA, as adjusted (6)...... -- -- -- 4.1x
<CAPTION>
NINE MONTHS ENDED
------------------------------------------------------------------------
1996 1996 COMBINED
(3.5 MONTHS) (5.5 MONTHS) 1996
(PREDECESSOR) (SUCCESSOR) (9 MONTHS) 1997 1997
(HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL) (PRO FORMA)
------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
EBITDA, as adjusted (3)........................... 12.7 17.3 29.9 35.6 35.6
Depreciation and amortization..................... 3.5 4.6 8.1 7.5 7.5
Capital expenditures.............................. 1.6 1.2 2.8 5.9 5.9
Gross profit as a percentage of net sales......... 20.2% 20.5% 20.4% 22.5% 22.5%
EBITDA, as a percentage of gross sales............ 18.4% 18.1% 18.2% 19.7% 19.7%
EBITDA, as adjusted as a percentage of gross
sales........................................... 18.4% 18.1% 18.2% 19.7% 19.7%
Net cash provided by (used in) (4):
Operating Activities.............................. 8.0 36.5 44.5 24.3 N/A
Investing Activities.............................. (1.6) (194.1) (195.7) (4.4) N/A
Financing Activities.............................. (6.5) 158.2 151.7 (16.1) N/A
Ratio of earnings to fixed charges................ 47.5x 1.8x 2.6x 2.4x 2.3x
Other Pro Forma Data:
Cash interest expense (5)......................... -- -- -- -- $13.8
Ratio of EBITDA to cash interest expense.......... -- -- -- -- 2.6x
Ratio of EBITDA, as adjusted to cash interest
expense......................................... -- -- -- -- 2.6x
Ratio of net debt to EBITDA (6)................... -- -- -- -- 4.3x
Ratio of net debt to EBITDA, as adjusted (6)...... -- -- -- -- 4.3x
=====
</TABLE>
-16-
<PAGE>
SEPTEMBER 27, 1997
ACTUAL
-------------------
Balance Sheet Data:
Working Capital......................................... $ 23.7
Total assets............................................ 241.3
Total long-term debt (including current portion)........ 156.0
Total stockholders' equity.............................. 13.8
(1) During 1994, the Company recorded a $1.8 million charge against operating
income related to the write-off of certain idle manufacturing
equipment.
(2) In 1992, CSI's European operations were conducted through two wholly
owned subsidiaries (the "European Subsidiaries"). On March 25, 1993, CSI
contributed its two European Subsidiaries and $8.8 million in cash to
CS-Interglas AG, in consideration for a DM20 million convertible
subordinated note and a minority equity interest in CS-Interglas AG. At
the end of 1996, the DM20.0 million convertible note had a carrying value
of $13.0 million. The value assigned to CSI's minority interest at the
time of the Acquisition was $14.1 million. Beginning in 1993, CSI
accounted for this investment using the equity method of accounting. In
order to show comparable financial data, the results of the European
Subsidiaries for 1992 have been restated using the equity method of
accounting. The financial results of Fort Mill on a consolidated basis
for 1992 are reflected below (in millions).
FISCAL YEAR
1992
-----------
Income Statement Data:
Net Sales........................................... $ 200.5
Operating loss...................................... (4.3)
Net loss............................................ (4.0)
(3) EBITDA is defined herein as operating income plus depreciation and
amortization. EBITDA, as adjusted, is defined herein as operating income
plus depreciation, amortization, the write-off of certain idle equipment
($1.8 million in 1994) and the provision for a customer bad debt ($1.4
million in 1995) related to a receivable retained by Springs Industries.
EBITDA and EBITDA, as adjusted, do not include any income (loss) from
equity investees, net. EBITDA is not a defined term under generally
accepted accounting principles ("GAAP") and should not be construed as an
alternative to operating income, net income or cash flows from operating
activities as determined by GAAP and should not be construed as an
indication of the Company's operating performance or as a measure of
liquidity. EBITDA and EBITDA, as adjusted, do not represent available or
discretionary funds of the Company.
(4) This cash flow information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results
of Operations."
(5) Pro forma cash interest expense represents total interest expense less
amortization of deferred financing costs of $0.6 million for fiscal year
1996 and $0.6 million for the first nine months of 1997.
-17-
<PAGE>
(6) Net debt represents total debt plus accrued interest less cash and was
calculated based on pro forma net debt of $172.8 million as of December
28, 1996 and actual net debt of $153.9 million as of September 27, 1997,
respectively. EBITDA for the latest twelve months ended September 27,
1997 of $48.0 million was used for the purpose of this calculation. The
ratio of net debt to EBITDA is a key ratio used by the financial
community to evaluate an entity's ability to service its debt.
-18-
<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 Debentures in exchange for the New Debentures. The risk factors set forth
below are generally applicable to the Old Debentures as well as the New
Debentures.
SIGNIFICANT LEVERAGE
The Company is highly leveraged and has indebtedness that is substantial in
relation to stockholders' equity. As of September 27, 1997, the Company had an
aggregate of $156.0 million of outstanding indebtedness and stockholders' equity
of $13.8 million. In addition, subject to the restrictions in the Credit
Agreement, the CSI Indenture and the Indenture, the Company and its subsidiaries
may incur additional indebtedness. For the nine months ended September 27, 1997,
on a pro forma basis, after giving effect to the Transactions as if they had
occurred on December 29, 1996, the Company's ratio of earnings to fixed charges
would have been 2.3x.
The Company's high degree of leverage could have important consequences to
holders of the New Debentures, 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 is
secured by substantially all of the assets of the Company and matures prior to
the maturity of the New Debentures; (v) the indebtedness outstanding under the
Senior Notes is secured by guarantees of Holdings and the subsidiaries of CSI
and matures prior to the maturity of the New Debentures; (vi) the Company may be
substantially more leveraged than certain of its competitors, which may place
the Company at a competitive disadvantage; and (vii) 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.
Holdings' ability to pay principal and interest on the New Debentures and to
satisfy its other obligations will depend on the financial and operating
performance of CSI and its subsidiaries, which in turn are subject to prevailing
economic conditions and to certain financial, business and other factors beyond
its control. Holdings anticipates that CSI's operating cash flow will be
sufficient to meet its operating expenses, to provide funds for distribution to
Holdings to allow Holdings to service the Debentures and to satisfy its other
obligations. However, if CSI cannot generate sufficient cash flow from
operations to meet its obligations, then the Company 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. In addition, even if CSI is able to generate
sufficient cash flow from operations to meet its obligations, there is no
assurance that such cash flow will be sufficient to permit distributions to
Holdings. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
STRUCTURAL SUBORDINATION
The Indenture permits the Company to incur certain indebtedness, including
indebtedness under the Credit Agreement, which is secured by a lien on
substantially all of the assets of CSI, and indebtedness under the Senior Notes,
which has been guaranteed by Holdings and the subsidiaries of CSI. The New
Debentures are unsecured and will be effectively subordinated to all
indebtedness incurred by CSI (including the
-19-
<PAGE>
indebtedness under the Credit Agreement and the Senior Notes). 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 Debentures. In
addition, once the indebtedness under the Credit Agreement has been repaid,
the holders of the Senior Notes, upon an event of default under the CSI
Indenture, will have the right to be repaid from the assets of the Company to
the exclusion of the holders of the New Debentures. Thus, upon such events,
such assets would first be used to repay in full amounts outstanding under
the Credit Agreement and, thereafter, the Senior Notes and any other holder
of unsecured indebtedness of CSI, resulting in all or a portion of the
Company's assets being unavailable to satisfy the claims of the holders of
New Debentures.
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, and the CSI Indenture restricts the
ability of CSI 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
Debentures--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 Certain Indebtedness."
The Company's ability to comply with the covenants contained in the
Indenture, the CSI 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 Indentures and/or the Credit Agreement which would permit
the secured lenders, the holders of the Senior Notes or the holders of the
Debentures, 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 CSI.
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 four 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 1996, sales to two of the Company's customers, Allied-Signal Laminate
System and Park Electrochemical, 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 be concentrated. If,
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<PAGE>
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 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 fiber glass fabrics market and Hexcel Corporation in the
high performance fabrics market. 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 continued
through mid-1996, 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 increased in 1996 at a higher than historical rate.
During the latter part of 1996, fiber glass yarn supply became sufficient to
meet the Company's requirements. The supply of fiber glass yarn has remained
adequate in 1997 and should be adequate for the foreseeable future. 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
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<PAGE>
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 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
Vestar/CS Holding holds 82% of the fully diluted common stock of Holdings.
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 Holdings' common stock,
including adopting certain amendments to Holdings' certificate of incorporation.
See "Management--Directors and Executive Officers of the Registrant" 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 DEBENTURES UPON A CHANGE OF CONTROL
Upon a Change of Control, the Company is required to offer to repurchase all
outstanding Debentures 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. In addition, upon the occurrence of substantially all of the events
that would constitute a Change of Control for purposes of the Indenture, CSI is
required to offer to repurchase all outstanding Senior Notes pursuant to the CSI
Indenture. 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 Debentures and to repay debt under the Credit Agreement and the Senior Notes.
See "Description of New Debentures--Repurchase at the Option of Holders" and
"Description of Certain Indebtedness."
FRAUDULENT CONVEYANCE CONSIDERATIONS
In connection with the Transactions, Holdings incurred substantial
indebtedness under the Debentures. 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 Holdings, a court were to find that, at the time the
Debentures were issued, (i) Holdings issued the Debentures, with the intent
of hindering, delaying or defrauding current or future creditors or (ii)(a)
Holdings received less than reasonably equivalent value or fair consideration
for issuing the Debentures and (B) Holdings (1) was
-22-
<PAGE>
insolvent or was insolvent by reason of 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 money damages docketed against it (if, in
either case, after final judgment, the judgment is unsatisfied), such court
could avoid or subordinate the Debentures to presently existing and future
indebtedness of Holdings and take other action detrimental to the holders of
the Debentures including, under certain circumstances, invalidating the
Debentures.
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, Holdings would be considered insolvent if, at
the time it incurs the indebtedness constituting the Debentures, 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 probably
liability on contingent liabilities) as they become absolute and matured or (ii)
it is incurring debts beyond its ability to pay as such debts as they mature.
Holdings' Board of Directors and management believe that at the time of its
issuance of the Debentures Holdings (i)(a) was or will be neither insolvent nor
rendered insolvent thereby, (b) had or will have sufficient capital to operate
their respective businesses effectively and (C) was or will be incurring debts
within its ability to pay as the same mature or become due and (ii) had or will
have sufficient resources to satisfy any probable money judgment against it in
any pending action. In reaching the foregoing conclusions, the Company has
relied upon its 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
Debentures Not Validly Tendered
The Old Debentures were issued to, and Holdings 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 Debentures. The Old Debentures
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 Debentures by holders who are entitled to participate in this Exchange
Offer. The holders of Old Debentures (other than any such holder that is an
"affiliate" of Holdings 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 Holdings is required to file a Shelf
Registration Statement with respect to such Old Debentures. The New Debentures
will constitute a new issue of securities with no established trading market.
Holdings does not intend to list the New Debentures on any national securities
exchange or seek the admission thereof to trading in the National Association of
Securities Dealers Automated Quotation System. The Initial Purchaser advised
Holdings that it currently intends to make a market in the New Debentures, but
it is 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 Debentures or as to the liquidity of the trading market
for the New Debentures. If a trading market does not develop or is not
maintained, holders of the New Debentures may experience difficulty in reselling
the New Debentures or may be unable to sell them at all. If a market for the New
Debentures develops, any such market may be discontinued at any time.
If a public trading market develops for the New Debentures, 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
-23-
<PAGE>
similar securities and other factors, including the financial condition of
the Company, the New Debentures may trade at a discount from their principal
amount.
Issuance of the New Debentures in exchange for the Old Debentures
pursuant to the Exchange Offer will be made only after a timely receipt by
Holdings of such Old Debentures, a properly completed and duly executed
Letter of Transmittal or transmission of an Agent's Message and all other
required documents. Therefore, holders of the Old Debentures desiring to
tender such Old Debentures in exchange for New Debentures should allow
sufficient time to ensure timely delivery. Holdings is under no duty to give
notification of defects or irregularities with respect to the tenders of Old
Debentures for exchange. Old Debentures 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 Debentures who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Debentures 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 Debentures for its own account in exchange for Old Debentures, where such
Old Debentures 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
Debentures. See "Plan of Distribution." To the extent that Old Debentures are
tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Old Debentures could be adversely
affected. See "The Exchange Offer."
-24-
<PAGE>
THE TRANSACTIONS
THE ACQUISITION
Holdings, 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 all incorporated in Delaware by Vestar
Equity Partners, L.P. ("Vestar") in 1996 to effect the acquisition (the
"Acquisition") of Fort Mill A Inc. ("Fort Mill") and Clark-Schwebel, Inc., 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 Company, L.L.C. ("Vestar/CS Holding"), Clark-S Acquisition, Springs
Industries, Inc. ("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 Clark-Schwebel,
Inc. with Clark-Schwebel, Inc. as the surviving corporation. On the day
following the closing of the Acquisition, Fort Mill merged (the "Merger") into
Clark-Schwebel, Inc., and immediately following such Merger, Holdings' primary
asset was and continues to be the capital stock of Clark-Schwebel, Inc.
Clark-Schwebel, Inc. was incorporated as a Delaware corporation in 1994.
The consideration for the Acquisition was $192.9 million in cash. 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") made an equity contribution of $45.0
million in exchange for all of the capital stock of Holdings (including without
limitation the Preferred Stock); (ii) Clark-S Acquisition consummated an
offering of $110.0 million in Senior Notes (the "Senior Notes") which are
governed by an Indenture dated as of April 17, 1996 (the "CSI Indenture"); and
(iii) Clark-S Acquisition entered into a Credit Agreement (as amended through
the date of this Prospectus, the "Credit Agreement") originally 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. Holdings guaranteed the
indebtedness under the Senior Notes and the Credit Agreement. As a result of
these transactions, the obligations of Clark-S Acquisition with respect to the
Senior Notes and the Credit Agreement were assumed by the Company. On August 5,
1996, the Company consummated the exchange of $110 million principal amount of
Senior Notes registered under the Securities Act of 1933, as amended, for the
$110 million principal amount of Senior Notes issued in connection with the
Acquisition.
SUBSEQUENT EVENTS
On July 14, 1997, Holdings amended the terms of its outstanding Preferred
Stock by amending and restating its certificate of incorporation (the
"Certificate") to allow Holdings to redeem such Preferred Stock using one of the
following alternatives: (i) on or after August 14, 1997 for 12.5% Series A
Senior Debentures due 2007 of Holdings and up to $5 million in cash (on the
terms and subject to the conditions set forth in the Certificate); (ii) on or
after August 14, 1997 but prior to July 15, 2002 for cash in an amount equal to
112.5% of the sum of the liquidation value of the Preferred Stock and all
accumulated dividends thereon; (iii) after July 15, 2002 for cash in an amount
equal to a percentage of the sum of the liquidation value of the Preferred Stock
and all accumulated dividends thereon (106.25% for redemptions in the year
beginning on July 15, 2002; 104.167% for redemptions in the year beginning on
July 15, 2003; 102.083% for redemptions in the year beginning on July 15, 2004;
and 100% for redemptions in the year beginning on July 15, 2005 and thereafter);
and (iv) upon the consummation of a change of control transaction or a public or
private equity offering for cash in an amount equal to 106% of the liquidation
value of the Preferred Stock and all accumulated dividends thereon. All accrued
but unpaid dividends on the Preferred Stock to the date of redemption and
certain consideration (either cash, Old Debentures and/or shares of Holdings'
Common Stock) for the participation feature of the Preferred Stock would be
payable on the date of any such redemption.
25
<PAGE>
Additionally, on July 14, 1997, the Company prepaid all of its outstanding
indebtedness under the Term Loan and amended the Credit Agreement to allow,
among other things, the Company subject to certain conditions, to pay cash
dividends on the Preferred Stock, pay up to $5 million in cash and issue the Old
Debentures in a redemption of the Preferred Stock, and make semi-annual interest
payments in cash on the Senior Debentures. The Revolving Credit Facility under
the Credit Agreement was also amended on July 14, 1997 (the "Credit Agreement
Amendment") to increase the aggregate amount of commitments thereunder to $65
million.
Vestar/CS-Holding sold the Preferred Stock on July 14, 1997 to the Initial
Purchaser and simultaneously purchased 10% of the outstanding Holdings Common
Stock from the Management Investors on a pro rata basis. Upon the consummation
of that transaction, all of the Management Loans were repaid in full.
On August 14, 1997, Holdings issued the Old Debentures to the Initial
Purchaser and paid $5 million in cash to the Initial Purchaser in exchange for
and redemption of the Preferred Stock. As used in this Prospectus, the
"Transactions" refer to the transactions described under this caption
"--Subsequent Events."
OTHER MATTERS
The following chart depicts the present organizational structure and fully
diluted common stock ownership of Holdings and CSI.
[CHART]
26
<PAGE>
SOURCES AND USES OF FUNDS
The estimated sources and uses of funds in connection with the redemption of
the Preferred Stock are set forth below (in millions):
<TABLE>
<S> <C>
Sources of funds:
Old Debentures....................................................... $ 46.0
Available cash....................................................... 5.5
---------
Total sources.................................................... $ 51.5
---------
---------
Uses of funds:
Redeem Preferred Stock at par........................................ $ 35.0
Redeem Participation Feature of Preferred Stock (1).................. 10.0
Pay accrued Preferred Stock dividends................................ 6.0
Estimated fees and expenses.......................................... 0.5
---------
Total uses....................................................... $ 51.5
---------
---------
</TABLE>
- ------------------------
(1) The Preferred Stock had a participating common equity component (the
"Participation Feature") for which Vestar/CS Holding paid $1.0 million at
the time of the Acquisition. On August 14, 1997, when the Preferred Stock
was redeemed, the Participation Feature was purchased for $10.0 million.
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 21
management buyouts and recapitalizations with an aggregate value exceeding $2.5
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 Holdings' obligations
under the Purchase Agreement and the Registration Rights Agreement. Holdings'
did not receive any cash proceeds from the issuance of the Old Debentures and
will not receive any cash proceeds from the issuance of the New Debentures
offered hereby. In consideration for issuing the New Debentures contemplated in
this Prospectus, Holdings will receive Old Debentures in like principal amount,
the form and terms of which are the same as the form and terms of the New
Debentures (which they replace), except as otherwise described herein. The Old
Debentures surrendered in exchange for New Debentures will be retired and
canceled and cannot be reissued. Accordingly, issuance of the New Debentures
will not result in any increase or decrease in the indebtedness of Holdings.
27
<PAGE>
CAPITALIZATION
(DOLLARS IN MILLIONS)
The following table sets forth the cash and consolidated capitalization of
Holdings at September 27, 1997. This table should be read in conjunction with
the "Unaudited Consolidated Financial Statements" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AT SEPTEMBER
27, 1997
ACTUAL
-------------
<S> <C>
Cash............................................................................ $ 7.9
------
------
Long-term debt (including current portion):
Term Loan..................................................................... --
Revolving Credit Facility..................................................... --
Notes......................................................................... 110.0
Senior Debentures............................................................. 46.0
------
TOTAL LONG-TERM DEBT........................................................ $ 156.0
------
------
Stockholders' equity:
Participating Preferred Stock (0 shares issued and outstanding)............... --
Common Stock (9,000 shares issued and outstanding)............................ 9.0
Retained Earnings............................................................. 8.9
Cumulative translation adjustment............................................. (4.1)
------
TOTAL STOCKHOLDERS' EQUITY.................................................. 13.8
------
TOTAL CAPITALIZATION............................................................ 169.8
------
------
</TABLE>
28
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN MILLIONS)
Set forth below are selected historical and other financial data of Fort
Mill, the predecessor company, for the fiscal years ended 1992 through 1995.
Fort Mill had no other operations other than Clark-Schwebel, Inc. and its sole
asset was all of the capital stock of Clark-Schwebel, Inc. 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. The
historical balance sheets for 1995 and the historical income statements for 1994
and 1995 were audited by Deloitte & Touche LLP. The selected historical
consolidated balance sheet data for 1992 and 1993 and the income statement data
for 1992 were derived from unaudited historical financial statements of Fort
Mill. The 1996 selected historical and other financial data represents the
results of operations of Fort Mill, the predecessor company, through April 17,
1996, and Holdings, the successor company, for the period of April 18, 1996
through December 28, 1996. Holdings' sole asset is all of the common stock of
Clark-Schwebel, Inc., its operating company. The 1996 selected historical
financial data were derived from 1996 consolidated financial statements which
were audited by Arthur Andersen, LLP. Also set forth below are selected
historical and other financial data for the first nine months of 1996 and 1997.
These results are unaudited, but include all normal recurring adjustments
necessary for a fair presentation of the financial data for such periods. This
analysis compares the results of operations of Holdings, the successor company,
for the nine months ended September 27, 1997 to the nine months ended September
28, 1996. The results of operations for the nine months ended September 28, 1996
represents the combined results of Fort Mill, the predecessor company, for the
period of December 31, 1995 through April 17, 1996, and the successor Company
for the period of April 18, 1996 through September 28, 1996. 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 Prospectus.
29
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------------------------------------------------------
1996 1996
(3.5 MONTHS) (8.5 MONTHS) COMBINED 1996
1992(2) 1993 1994 1995 (PREDECESSOR) (SUCCESSOR) (12 MONTHS)
------- ------ ------ ------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... $158.8 $163.7 $189.4 $231.3 $68.9 $152.0 $220.9
Cost of sales................. 138.9 139.2 160.7 192.0 55.0 118.6 173.6
------- ------ ------ ------ ----- ------ ------
Gross profit.................. 19.9 24.5 28.7 39.3 13.9 33.4 47.3
Selling, general and
administrative expenses..... 16.3 15.5 14.4 17.8 4.8 10.4 15.2
Idle equipment write-off
(1)......................... -- -- 1.8 -- -- -- --
------- ------ ------ ------ ----- ------ ------
Operating income.............. 3.6 9.0 12.5 21.6 9.1 23.0 32.1
Interest expense.............. 0.5 0.4 0.4 0.4 0.1 10.1 10.2
Other, net.................... 0.1 -- -- -- -- -- 0.1
------- ------ ------ ------ ----- ------ ------
Income before income taxes.... 3.2 8.6 12.0 21.2 9.0 13.0 22.0
Provision for income taxes.... 1.6 3.6 4.9 8.4 3.6 5.5 9.1
Income (loss) from equity
investees, net (2).......... (5.4) (3.4) 1.2 2.6 1.2 2.6 3.8
------- ------ ------ ------ ----- ------ ------
Income (loss) from continuing
operations.................. (3.8) 1.6 8.3 15.3 6.6 10.1 16.7
Discounted operations (3)..... (0.2) 0.7 3.0 0.1 -- -- --
------- ------ ------ ------ ----- ------ ------
<CAPTION>
FIRST NINE MONTHS
--------------------------------------------------
1996 1996 COMBINED
(3.5 MONTHS) (5.5 MONTHS) 1996
(PREDECESSOR) (SUCCESSOR) (9 MONTHS) 1997
------------- ------------ ---------- ------
<S> <C> <C> <C> <C>
Net sales..................... $68.9 $ 95.3 $164.2 $180.4
Cost of sales................. 55.0 75.8 130.7 139.8
----- ------ ---------- ------
Gross profit.................. 13.9 19.5 33.5 40.6
Selling, general and
administrative expenses..... 4.8 6.5 11.3 11.9
Idle equipment write-off
(1)......................... -- -- -- --
----- ------ ---------- ------
Operating income.............. 9.1 13.1 22.2 28.8
Interest expense.............. 0.1 6.7 6.8 10.1
Other, net.................... -- 0.1 -- --
----- ------ ---------- ------
Income before income taxes.... 9.0 6.4 15.4 18.6
Provision for income taxes.... 3.6 2.8 6.4 7.7
Income (loss) from equity
investees, net (2).......... 1.2 1.7 2.9 2.8
----- ------ ---------- ------
Income (loss) from continuing
operations.................. 6.6 5.4 12.0 13.7
Discounted operations (3)..... -- -- -- --
----- ------ ---------- ------
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------------------------------------------------------
1996 1996
(3.5 MONTHS) (8.5 MONTHS) COMBINED 1996
1992(2) 1993 1994 1995 (PREDECESSOR) (SUCCESSOR) (12 MONTHS)
------- ------ ------ ------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net income (loss)............. (4.0) 2.3 11.3 15.4 6.6 10.1 16.7
Accrued dividends on preferred
stock....................... -- -- -- -- -- 3.1 3.1
------- ------ ------ ------ ----- ------ ------
Net income (loss) applicable
to common shares............ $ (4.0) $ 2.3 $ 11.3 $ 15.4 $ 6.6 $ 7.0 $ 13.6
------- ------ ------ ------ ----- ------ ------
------- ------ ------ ------ ----- ------ ------
Other Data:
EBITDA (4).................. $ 13.0 $ 19.0 $ 22.5 $ 32.7 $12.7 $ 29.6 $ 42.3
EBITDA, as adjusted (4)..... 13.0 19.0 24.3 34.1 12.7 29.6 42.3
Depreciation &
amortization.............. 9.4 10.0 10.0 11.1 3.5 7.3 10.8
Capital expenditures........ 4.3 8.8 11.5 8.4 1.6 2.0 3.6
Gross profit as a percentage
of net sales.............. 12.5% 15.0% 15.1% 17.0% 20.2% 22.0% 21.4%
EBITDA, as a percentage of net
sales....................... 8.2% 11.6% 11.9% 14.1% 18.4% 19.5% 19.1%
EBITDA, as adjusted as a
percentage of net sales... 8.2% 11.6% 12.8% 14.7% 18.4% 19.5% 19.1%
Ratio of earnings to fixed
charges (5)................. 4.3x 15.0x 23.2x 45.7x 47.5x 2.0x 2.5x
Net cash provided by (used in)
(6):
Operating activities........ $ (1.4) $ 17.3 $ 16.2 $ 18.0 $ 8.0 $ 41.1 $ 49.1
Investing activities........ (4.3) (8.7) 7.6 (8.4) (1.6) (194.9) (196.5)
Financing activities........ 5.7 (8.7) (23.8) (9.1) (6.5) 157.4 150.9
<CAPTION>
FIRST NINE MONTHS
--------------------------------------------------
1996 1996 COMBINED
(3.5 MONTHS) (5.5 MONTHS) 1996
(PREDECESSOR) (SUCCESSOR) (9 MONTHS) 1997
------------- ------------ ---------- ------
<S> <C> <C> <C> <C>
Net income (loss)............. 6.6 5.4 12.0 13.7
Accrued dividends on preferred
stock....................... -- 2.0 2.0 2.9
----- ------ ---------- ------
Net income (loss) applicable
to common shares............ $ 6.6 $ 3.4 $ 10.0 $ 10.9
----- ------ ---------- ------
----- ------ ---------- ------
Other Data:
EBITDA (4).................. $12.7 $ 17.3 $ 29.9 $ 35.6
EBITDA, as adjusted (4)..... 12.7 17.3 29.9 35.6
Depreciation &
amortization.............. 3.5 4.6 8.1 7.5
Capital expenditures........ 1.6 1.2 2.8 5.9
Gross profit as a percentage
of net sales.............. 20.2% 20.5% 20.4% 22.5%
EBITDA, as a percentage of net
sales....................... 18.4% 18.1% 18.2% 19.7%
EBITDA, as adjusted as a
percentage of net sales... 18.4% 18.1% 18.2% 19.7%
Ratio of earnings to fixed
charges (5)................. 47.5x 1.8x 2.6x 2.4x
Net cash provided by (used in)
(6):
Operating activities........ $ 8.0 36.5 44.5 24.3
Investing activities........ (1.6) (194.1) (195.7) (4.4)
Financing activities........ (6.5) 158.2 151.7 (16.1)
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
NINE
FISCAL YEAR MONTHS
----------------------------------------------------------- ----------------------
1992(2) 1993 1994 1995 1996 1996 1997
----------- --------- --------- --------- ------------- --------- ---------
(PREDECESSOR) (SUCCESSOR)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data (at end of period):
Working Capital............................ $ 37.9 $ 38.1 $ 41.2 $ 46.3 $ 25.2 $ 20.9 $ 23.7
Total assets............................... 184.8 186.2 179.6 188.7 240.7 237.8 241.3
Total long-term debt (including
current portion)......................... 5.9 5.9 6.1 6.0 123.5 124.5 156.0
Total stockholders' equity............... 148.7 147.6 137.5 144.0 49.8 47.1 13.8
</TABLE>
- ------------------------
(1) During 1994, the Company recorded a $1.8 million charge against operating
income related to the write-off of certain idle manufacturing equipment.
(2) In 1992, CSI's European operations were conducted through the European
Subsidiaries. On March 25, 1993, CSI contributed its two European
Subsidiaries and $8.8 million in cash to CS-Interglas AG, in consideration
for a DM20 million convertible subordinated note and a minority equity
interest in CS-Interglas AG. At the end of 1996, the DM20.0 million
convertible note had a carrying value of $13.0 million. The value assigned
to CSI's minority interest at the time of the Acquisition was $14.1 million.
Beginning in 1993, CSI accounted for this investment using the equity method
of accounting. In order to show comparable financial data, the results of
the European Subsidiaries for 1992 have been restated in the "Selected
Historical Financial Data" chart using the equity method of accounting. The
financial results of Fort Mill on a consolidated basis for 1992 are
reflected below (in millions).
<TABLE>
<CAPTION>
FISCAL YEAR
1992
-----------
<S> <C>
Income Statement Data:
Net Sales......................................................................... $ 200.5
Operating loss.................................................................... (4.3)
Net loss.......................................................................... (4.0)
</TABLE>
(3) In 1994, the Company sold substantially all of the assets of a subsidiary
engaged in a separate line of business. In January 1996, the Company sold
its equity investment in a company engaged in a separate line of business.
For further discussion, see Note 15 to the Audited Financial Statements.
(4) EBITDA is defined herein as operating income plus depreciation and
amortization. EBITDA, as adjusted, is defined herein as operating income
plus depreciation, amortization, the non-recurring asset write-off ($1.8
million in 1994) and the provision for a customer bad debt ($1.4 million in
1995) related to a receivable retained by Springs Industries. EBITDA and
EBITDA, as adjusted, do not include any income (loss) from equity investees,
net. EBITDA is a widely accepted financial indicator of a company's ability
to service debt. However, EBITDA is not a defined term under generally
accepted accounting principles ("GAAP") and should not be construed as an
alternative to operating income, net income or cash flows from operating
activities as determined by GAAP and should not be construed as an
indication of the Company's operating performance or as a measure of
liquidity. EBITDA and EBITDA, as adjusted, do not represent available or
discretionary funds of the Company.
31
<PAGE>
(5) For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of income before taxes, earnings (loss) from a 50% owned
equity investment, distributed income from the less than 50% owned equity
investments and fixed charges. Fixed charges include interest expense,
including the interest portion of lease expense, and amortization of bond
issue costs.
(6) This cash flow information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
32
<PAGE>
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited consolidated pro forma financial statements (the
"Unaudited Pro Forma Financial Statements") of Clark-Schwebel Holdings, Inc.
have been derived by the application of pro forma adjustments to historical
consolidated financial statements, included elsewhere in this Prospectus. The
unaudited pro forma income statements for the year ended December 28, 1996 and
the nine months ended September 27, 1997 give effect to the Transactions as if
such transactions were consummated as of December 31, 1995. 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 redemption of the Preferred Stock, the issuance of the Old Debentures,
the repayment of the Term Loan under the Credit Agreement and the related Credit
Agreement Amendment, and the repayment of the Management Loans are referred to
in the Unaudited Pro Forma Financial Statements as the "Transactions."
-33-
<PAGE>
UNAUDITED PRO FORMA INCOME STATEMENT
For the Year Ended December 28, 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER
31, COMBINED
1995-- APRIL 18-- 1996
APRIL 17, DECEMBER HISTORICAL PRO FORMA
1996 28, 1996 (1) ADJUSTMENTS PRO FORMA
-------------- ------------------ ------------ ---------------------- -----------
(PREDECESSOR (SUCCESSOR
BASIS) BASIS)
<S> <C> <C> <C> <C> <C>
Net sales................. $ 68,911 $ 152,003 $ 220,914 $ -- $ 220,914
Cost of goods sold........ 54,958 118,605 173,563 -- 173,563
------- -------- ------------ -------- -----------
Gross profit.............. 13,953 33,398 47,351 -- 47,351
Selling, general and
administrative
expenses................ 4,812 10,418 15,230 -- 15,230
------- -------- ------------ -------- -----------
Operating income.......... 9,141 22,980 32,121 -- 32,121
Other income (expense):
Interest expense........ (148) (10,061) (10,209) (6,249)(2) (16,458)
Other, net.............. (5) 50 45 -- 45
------- -------- ------------ -------- -----------
Income before income
taxes................... 8,988 12,969 21,957 (6,249) 15,708
Provision for income
tax..................... (3,595) (5,460) (9,055) 2,450(3) (6,605)
Income from equity
investees, net.......... 1,174 2,633 3,807 -- 3,807
------- -------- ------------ -------- -----------
Net income................ $ 6,567 10,142 16,709 (3,799) 12,910
------- -------- ------------ -------- -----------
------- -------- ------------ -------- -----------
Accrued dividends on
preferred
stock..................... (3,137) (3,137) 3,137(4) 0
-------- ------------ -------- -----------
Net income applicable to
common shares........... $ 7,005 $ 13,572 $ (662) $ 12,910
-------- ------------ -------- -----------
-------- ------------ -------- -----------
</TABLE>
See notes to unaudited pro forma income statement.
-34-
<PAGE>
NOTES TO UNAUDITED PRO FORMA INCOME STATEMENT
For the Year Ended December 28, 1996
(Dollars in thousands)
The pro forma financial data have been derived by the application of pro
forma adjustments to the historical financial statements for the period noted.
(1) This historical income statement includes the results of
operations of Fort Mill A, Inc. (predecessor company) for the period of
December 31, 1995 to April 17, 1996, and the results of operations of
Clark-Schwebel Holdings, Inc. (successor company) for the period April
18, 1996 to December 28, 1996.
(2) The pro forma adjustment to interest expense under the new capital
structure represents the annual interest cost of the Old Debentures
calculated as 12.5% of the principal amount of $45,994 plus the charge
related to estimated financing costs.
(3) The pro forma adjustment to the provision for income taxes
represents the reduction to income tax expense for the additional
interest deduction and charge for financing costs using a combined
federal and state statutory income tax rate of 39.2%.
(4) The pro forma adjustment to accrued dividends on preferred stock
represents the elimination of the dividend requirement as a result of
the redemption of the preferred stock.
-35-
<PAGE>
UNAUDITED PRO FORMA INCOME STATEMENT
For the Nine Months Ended September 27,1997
(Dollars in thousands)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.................................................................. $180,406 -- $ 180,406
Cost of goods sold......................................................... 139,792 -- 139,792
-------- ----------- ---------
Gross profit............................................................... 40,614 -- 40,614
Selling, general and administrative expenses............................... 11,851 -- 11,851
-------- ----------- ---------
Operating income......................................................... 28,763 -- 28,763
Other income (expense):....................................................
Interest expense......................................................... (10,124) (3,828)(1) (13,952)
Other, net............................................................... (1) -- (1)
-------- ----------- ---------
Income before income taxes................................................. 18,638 (3,828) 14,810
Provision for income tax................................................... (7,695) 1,501(2) (6,194)
Income from equity investees, net.......................................... 2,785 -- 2,785
-------- ----------- ---------
Net income................................................................. 13,728 (2,327) 11,401
Accrued dividends on preferred stock....................................... (2,857) 2,857(3) 0
-------- ----------- ---------
Net income applicable to common shares................................... $10,871 $ 530 $ 11,401
-------- ----------- ---------
-------- ----------- ---------
</TABLE>
See notes to unaudited pro forma income statement.
-36-
<PAGE>
NOTES TO UNAUDITED PRO FORMA INCOME STATEMENT
For the Nine Months Ended September 27, 1997
(Dollars in thousands)
The pro forma financial data have been derived by the application of pro
forma adjustments to the historical financial statements for the period noted.
(1) The pro forma adjustment to interest expense under the new capital
structure represents the interest cost of the Old Debentures calculated
as 12.5% of the principal amount of $45,994 less the amount already
accrued in the historical financial statements, plus the estimated charge
related to the remaining financing costs.
(2) The pro forma adjustment to the provision for income taxes
represents the reduction to income tax expense for the additional
interest deduction and charge for financing costs using a combined
federal and state statutory income tax rate of 39.2%.
(3) The pro forma adjustment to accrued dividends on preferred stock
represents the elimination of the dividend requirement as a result of
the redemption of the Preferred Stock.
-37-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following information should be read in conjunction with "Selected
Financial Data" and the Financial Statements and the notes thereto included
elsewhere in this Prospectus.
GENERAL
The Company believes it is the largest United States manufacturer of fiber
glass fabrics 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 growth due to: (i) expanded
applications for computer systems; (ii) technological advancements; and (iii)
new product introductions. 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. 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 1994 to 1996, the Company's gross profit margin increased from 15.1% to
21.4% due to management's initiatives to increase weekly production schedules
from five days to seven days and improve productivity on selected equipment,
thereby enabling 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 7.6% in 1994 to 6.9% in 1996. Consequently, during the same
period, EBITDA as a percentage of net sales increased from 11.9% to 19.1%,
operating income as a percentage of net sales increased from 6.6% to 14.5%, and
net income as a percentage of net sales increased from 6.0% to 7.6%.
The Company's financial results have historically been affected by
general economic conditions and by conditions affecting the electronics
industry in particular. However, the Company believes the impact of the
economic recession occurring 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 piles of fiber glass fabric) were less prevalent than
today. The domestic economy's stable growth from 1992 to 1996 have positively
impacted the Company's operations and financial condition. Although there
have been downturns in demand for electronics fiber glass fabric during this
period, they have been temporary in nature. The Company experienced softening
demand for electronics fiber glass fabric in the third quarter of 1996, but
shipments returned to pre-correction levels in
-38-
<PAGE>
the fourth quarter of 1996. Likewise, electronics fiber glass fabric volume
moderated in the latter part of the second quarter of 1997 from levels
experienced earlier in 1997. The Company expected this slowdown to be
temporary in nature and, by mid-third quarter, the Company began to see
improving demand for electronics fiber glass fabric. Technology advancements
as well as cost reductions for personal computers and cellular telephones
continue to drive the proliferation of electronic devices and growth in
wireless telecommunications. These factors increase demand for the Company's
fiber glass fabric products, which in turn fuels growth in the Company's
operations and improves the Company's financial condition.
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. Beginning 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 supply to the Company
and other purchasers of fiber glass yarn. However, since mid-1996, fiber glass
yarn supply has been sufficient to meet demand because of capacity increases by
the Company's suppliers coupled with periodic softness in electronics fiber
glass fabric requirements as mentioned above. Yarn prices increased in 1996 at a
higher than historical rate due in part to the yarn shortage. The Company
generally has been able to pass through such price increases to its customers.
The accompanying analysis compares the results of operations of Holdings,
the successor company, for the three months ended September 27, 1997 to the
three months ended September 28, 1996. The accompanying analysis also compares
the results of operations of the Company for the nine months ended September 27,
1997 to the nine months ended September 28, 1996. The results of operations for
the nine months ended September 28, 1996 represents the combined results of
the Predecessor Company for the period of December 31, 1995 through April 17,
1996, and the successor Company for the period of April 18, 1996 through
September 28, 1996.
The accompanying analysis also compares the results of operations of
Holdings, the successor company, on a consolidated basis, for the year ended
December 28, 1996 to the results of operations of Fort Mill, the predecessor
company, for the year ended December 30, 1995, and the results of operations of
the predecessor company for the 1995 fiscal year to those for the 1994 fiscal
year. The results of operations for the year ended December 28, 1996 represent
the combined results of the Predecessor Company, for the period of December 31,
1995 through April 17, 1996, and the successor company for the period of April
18, 1996 through December 28, 1996, in order to establish comparative periods.
No pro forma adjustments were made to the financial statements for purposes
of these analyses due to the insignificance of the adjustments on operating
income. Interest expense for the periods is not comparable and the impact of
interest expense on the successor company is discussed below.
-39-
<PAGE>
Results of Operations
Third Quarter 1997 Compared to Third Quarter 1996
NET SALES. Net sales for the third quarter of 1997 increased $9.1
million, or 19.1%, to $57.1 million from $48.0 million in 1996. Overall fiber
glass sales were up by $7.4 million, or 17.8%, while high performance sales
were up by $1.7 million, or 27.8%. Sales of electronic fiber glass increased
by 31.1% while sales of composite material fiber glass decreased by 12.5%,
when compared to 1996. Electronic fiber glass sales, while at expected levels
for the third quarter of 1997, were much higher than a year ago when demand
declined due to a temporary inventory correction in the industry supply
chain. Composite material fiber glass sales declined primarily due to a
reduction in sales volume related to coating and laminating and filtration
products. High performance sales in the third quarter of 1997 improved
significantly from third quarter 1996 as a result of higher sales to the
military ballistics market.
GROSS PROFIT. Gross profit for the third quarter of 1997 increased $3.2
million, or 32.7%, to $13.2 million from $9.9 million in 1996. Gross profit
as a percentage of net sales improved to 23.1% in 1997 from 20.7% in 1996.
The improvement in gross profit resulted primarily from higher sales in 1997
compared to 1996, a shift in sales mix weighted more towards higher margin
fiber glass fabrics, and the favorable impact of improved manufacturing
efficiencies.
SG&A. Selling, general, and administrative expenses for the third quarter
of 1997 increased $0.7 million, or 20.3%, to $4.1 million from $3.4 million
in 1996. However, as a percentage of net sales, SG&A expenses remained flat
at 7.2% for both the third quarters of 1997 and 1996. The increase in SG&A
expenses in the third quarter of 1997 compared to 1996 is primarily
attributable to fees and expenses related to the transaction in which the
Company's preferred stock was redeemed and exchanged for senior debentures,
as well as increases in variable SG&A expenses related to increased sales
volume.
OPERATING INCOME. Operating income increased $2.5 million to $9.0
million in the third quarter of 1997 from $6.5 million in the same period a
year ago. As a percentage of net sales, operating income was 15.8%, up from
13.5% in 1996. The increases in sales and gross profit led to the increase in
operating income.
INTEREST EXPENSE. Interest expense incurred by the Company increased to
$3.7 million for the third quarter of 1997 compared to $3.5 million in 1996.
This increase is primarily attributable to the additional $46.0 million of
indebtedness incurred on August 14, 1997 related to the issuance of senior
debentures.
Income From Equity Investees, Net. Income from equity investees, net,
increased by $0.4 million to $1.2 million from $0.8 million in the third
quarter of 1996. Increases in the operating results reported by
Asahi-Schwebel and CS-Interglas caused the increase in equity income.
CS-Interglas reported stronger demand relative to the third quarter a year
ago, while sales volume reported by Asahi-Schwebel continued strong and was
also higher than a year ago. Results for CS-Tech Fab were flat compared to
last year.
The equity investment balance as of September 27, 1997 decreased by $2.0
million from the December 28, 1996 balance sheet. The decline resulted from a
strengthening U.S. dollar relative to the German mark (the functional
currency for CS-Interglas) and the Japanese yen (the functional currency for
Asahi-Schwebel), net of additional equity income recorded in 1997. In
addition, in July 1997, the Company received a dividend distribution from
Asahi-Schwebel in the amount of $1.6 million. Neither the change in the
equity investment balance related to the strengthening dollar nor the receipt
of the dividend had any impact on results of operations in the third quarter
or the first nine months of 1997.
NET INCOME. The $2.5 million increase in operating income reported in
the third quarter of 1997 led to a $0.9 million increase in the provision for
taxes. After considering the $0.4 million increase in income
-40-
<PAGE>
from equity investees and the small increase in interest expense, the overall
net effect was a $1.9 million increase in third quarter net income when
compared to the same period last year.
-41-
<PAGE>
First Nine Months of 1997 Compared to the First Nine Months of 1996
Results of Operations
The following table sets forth for the Company selected income statement
data for the periods indicated.
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM COMBINED NINE- NINE-MONTH PERIOD FROM
DECEMBER 31, 1995 APRIL 18 TO MONTH PERIOD FROM DECEMBER 29, 1996
TO APRIL 17, 1996 SEPTEMBER 28, 1996 DECEMBER 31, 1995 TO TO SEPTEMBER 27, 1997
(PREDECESSOR BASIS) (SUCCESSOR BASIS) SEPTEMBER 28, 1996 (SUCCESSOR BASIS)
------------------ --------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Net Sales............ $ 68,911 $ 95,289 $ 164,200 $ 180,406
Cost of goods sold... 54,958 75,782 130,740 139,792
---------- --------- ----------- ----------
Gross profit......... 13,953 19,507 33,460 40,614
Selling, general and
administrative
expenses........... 4,812 6,450 11,262 11,851
---------- --------- ----------- ----------
Operating income..... 9,141 13,057 22,198 28,763
Interest expense..... (148) (6,682) (6,830) (10,124)
Other income
(expense), net..... (5) 53 48 (1)
Provision for income
tax................ (3,595) (2,779) (6,374) (7,695)
Income from equity
investees, net..... 1,174 1,748 2,922 2,785
---------- --------- ----------- ----------
Net income........... $ 6,567 $ 5,397 $ 11,964 $ 13,728
---------- --------- ----------- ----------
---------- --------- ----------- ----------
PERCENTAGE OF NET
SALES
Net sales............ 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold... 79.7 79.5 79.6 77.5
---------- --------- ----------- ----------
Gross profit......... 20.3 20.5 20.4 22.5
Selling, general
administrative
expenses........... 7.0 6.8 6.9 6.6
---------- --------- ----------- ----------
Operating income..... 13.3 13.7 13.5 15.9
Interest expense..... (0.2) (7.0) (4.1) (5.6)
Other income
(expense), net..... -- 0.1 -- --
---------- --------- ----------- ----------
---------- --------- ----------- ----------
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM COMBINED NINE- NINE-MONTH PERIOD FROM
DECEMBER 31, 1995 APRIL 18 TO MONTH PERIOD FROM DECEMBER 29, 1996
TO APRIL 17, 1996 SEPTEMBER 28, 1996 DECEMBER 31, 1995 TO TO SEPTEMBER 27, 1997
(PREDECESSOR BASIS) (SUCCESSOR BASIS) SEPTEMBER 28, 1996 (SUCCESSOR BASIS)
------------------ --------------------- ---------------------- ------------------------
<S> <C> <C> <C> <C>
Provision for
income tax......... (5.2) (2.9) (3.9) (4.2)
Income (loss) from
equity investees,
net................. 1.7 1.8 1.8 1.5
---------- --------- ----------- ----------
Net income........... 9.6% 5.7% 7.3% 7.6%
---------- --------- ----------- ----------
---------- --------- ----------- ----------
</TABLE>
NET SALES. Net sales for the nine months ended September 27, 1997
increased $16.2 million, or 9.9%, to $180.4 million from $164.2 million in
1996. Overall fiber glass sales were up by $13.5 million, or 9.8%, while high
performance sales were up by $2.7 million, or 10.3%. Sales of electronic
fiber glass increased 12.3%, while sales of composite material fiber glass
increased by 2.3% when compared to the first nine months in 1996. Electronic
fiber glass sales increased compared to 1996 due to the decline in demand
experienced in the third quarter of 1996 resulting from a temporary inventory
correction in the industry supply chain. Higher demand for light weight fiber
glass fabric accounted for most of the increased sales of electronic fiber
glass.
-42-
<PAGE>
GROSS PROFIT. Gross profit for the first nine months of 1997 increased
$7.1 million, or 21.4%, to $40.6 million from $33.5 million in 1996. Gross
profit as a percentage of net sales improved to 22.5% in 1997 from 20.4% in
1996. The improvement in gross profit resulted primarily from higher sales in
1997 compared to 1996, a shift in sales mix weighted more towards higher
margin fiber glass fabrics, and the favorable impact of improved
manufacturing efficiencies.
SG&A. Selling, general, and administrative expenses for the first nine
months of 1997 increased $0.6 million, or 5.2%, to $11.9 million from $11.3
million in 1996. This increase is attributable to the increase in SG&A
expenses incurred in the third quarter of 1997, as previously noted. However,
as a percentage of net sales, SG&A expenses decreased to 6.6% in 1997 from
6.9% in 1996.
OPERATING INCOME. As a result of the above factors, operating income for
the first nine months of 1997 increased by $6.5 million, or 29.6%, to $28.7
million from $22.2 million in 1996. As a percentage of net sales, operating
income increased to 15.9% in the first nine months of 1997 from 13.5% in 1996.
INTEREST EXPENSE. Interest expense is not fully comparable to the prior
period because of the financing related to the Acquisition of the Company
from Springs. Interest expense incurred by the Company in the first nine
months of 1997 was $10.1 million, attributable primarily to interest expense
related to the Senior Notes.
Income From Equity Investees, Net. Income from equity investees, net,
decreased by $0.1 million to $2.8 million in the first nine months of 1997
from $2.9 million in 1996. A decrease in the operating results reported by
CS-Interglas primarily caused the decrease in equity income. Despite improved
operating results in the third quarter of 1997, weaker demand relative to a
year ago (particularly in the first quarter of 1997) in Europe for electronic
fiber glass fabric led to the decrease in operating results reported by
CS-Interglas. Results reported by Asahi-Schwebel were slightly higher and
results for CS-Tech Fab were slightly lower than last year's comparable
results.
NET INCOME. The significant improvement in operating income ($6.5
million) was partially offset by the increase in interest expense ($3.3
million), higher income tax expense ($1.3 million), and lower income from
equity investees, net ($0.1 million), as net income for the first nine months
of 1997 increased by $1.7 million to $13.7 million from $12.0 million in the
first nine months of 1996.
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<PAGE>
Results Of Operations
1996 Compared To 1995
<TABLE>
<CAPTION>
12-MONTH PERIOD PERIOD FROM PERIOD FROM
FROM JAN. 1- DEC. 31, 1995 TO APRIL 18- COMBINED 12-
DEC. 30, 1995 APRIL 17, 1996 DEC. 28, 1996 MONTH PERIOD
(PREDECESSOR (PREDECESSOR (SUCCESSOR FROM DEC. 31, 1995
BASIS) BASIS) BASIS) TO DEC. 28, 1996
--------------- --------------- --------------- ------------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
Net sales................................... $231,306 $68,911 $152,003 $220,914
Cost of goods sold.......................... 191,978 54,958 118,605 173,563
------------ ------ ------------ ------------
Gross profit................................ 39,328 13,953 33,398 47,351
Selling, general and administrative
expenses.................................. 17,750 4,812 10,418 15,230
------------ ------ ------------ ------------
Operating income............................ 21,578 9,141 22,980 32,121
Interest expense............................ (401) (148) (10,061) (10,209)
Other income (expense), net................. 12 (5) 50 45
Provision for income tax.................... (8,444) (3,595) (5,460) (9,055)
Income from equity investees, net........... 2,553 1,174 2,633 3,807
------------ ------ ------------ ------------
Income from continuing operations........... $ 15,298 $ 6,567 $ 10,142 $ 16,709
------------ ------ ------------ ------------
------------ ------ ------------ ------------
PERCENTAGE OF NET SALES
Net sales................................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold.......................... 83.0 79.7 78.0 78.6
------------ ------ ------------ ------------
Gross profit................................ 17.0 20.3 22.0 21.4
Selling, general and administrative
expenses.................................. 7.7 7.0 6.9 6.9
------------ ------ ------------ ------------
Operating income............................ 9.3 13.3 15.1 14.5
Interest expense............................ (0.2) (0.2) (6.6) (4.6)
Other income (expense), net................. -- -- -- --
Provision for income tax.................... (3.6) (5.2) (3.6) (4.1)
Income (loss) from equity investees, net.... 1.1 1.7 1.7 1.7
------------ ------ ------------ ------------
Income from continuing operations........... 6.6% 9.6% 6.7% 7.5%
------------ ------ ------------ ------------
------------ ------ ------------ ------------
</TABLE>
NET SALES. Net sales for 1996 decreased by $10.4 million, or 4.5%, to
$220.9 million from $231.3 million in 1995. Despite reduced demand for
electronics fiber glass fabric in the third quarter due to an inventory
correction in the supply chain, sales of electronics fiber glass in 1996
increased modestly by 2.0% in 1996 over 1995. Composite material fiber glass
sales increased 10.2% in the same period. Higher sales to the aerospace and
coating & laminating markets accounted for this increase. While overall fiber
glass sales were up $7.1 million, or 3.9%, the increase was more than offset
by a $17.5 million, or 33.4%, decline in high performance fabric sales. After
a strong first quarter in high performance fabric sales, there was a
significant
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<PAGE>
reduction in the number of contract quotes requested by the government for
military ballistic fabrics. Management's decision to exit the automotive
airbag fabric business also contributed to the decline in high performance
sales.
GROSS PROFIT. Gross profit for 1996 increased $8.0 million or 20.4% to
$47.4 million from $39.3 million in 1995. Gross profit as a percentage of
sales improved to 21.4% in 1996 from 17.0% in 1995. The significant
improvement in both gross profit dollars and gross profit percentage resulted
from several factors including a shift in sales mix weighted more towards
fiberglass fabrics which generate higher margins than high performance
fabric, improved operating efficiencies which allow management the
flexibility to run extended workweeks at electronic fiber glass plants and to
adjust running schedules to customer demand when necessary, and improved
pricing.
SG&A. SG&A for 1996 decreased by $2.5 million, or 14.2%, to $15.2
million. As a percentage of net sales, SG&A decreased to 6.9% in 1996 from
7.7% in 1995. This decrease resulted from lower bad debt expense and lower
stand alone expenses in 1996 compared to parent company allocations in 1995,
offset somewhat by higher goodwill amortization and the payout to certain
executives of compensation under Springs Industries' executive compensation
plans which vested and were paid on the Closing of the Acquisition.
OPERATING INCOME. Operating income increased by 48.8% in 1996 to $32.1
million from $21.6 million in 1995. As a percentage of sales, operating
income increased to 14.5% in 1996 from 9.5% in 1995 due to all the factors
mentioned above.
INTEREST EXPENSE. Interest expense is not comparable to prior periods as
a result of the financing related to the Acquisition. Interest expense for
the successor company was $10.2 million, for the period of April 18,1996 to
December 28,1996.
Income From Equity Investees, Net. Income from equity investees, net,
improved by $1.3 million to $3.8 million in 1996. This improvement resulted
from higher net income reported by Asahi-Schwebel. Asahi-Schwebel's results
were favorably impacted primarily by the strength of sales in Japan, driven
by improved pricing and a stronger dollar, and, to a lesser degree, by the
inclusion of the financial results of its newly acquired 51% owned
subsidiary, Asahi-Schwebel (Taiwan) Co., Ltd. The results of operations of
Taiwan were included with the results of Asahi-Schwebel effective with the
acquisition on April 1, 1996. CS-Interglas results were flat when compared to
last year. Demand for electronic fiber glass fabric in the last quarter of
1996 moderated somewhat in Europe from earlier demand levels. CS-Tech Fab
results in 1996 were slightly lower than those experienced in 1995.
INCOME FROM CONTINUING OPERATIONS. The significant improvements in
operating results and income from equity investees were more than enough to
offset the increase in interest expense, as income from continuing operations
for 1996 was 9.2% higher than in 1995.
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 25.0%,
with volume increases accounting for the majority of this increase. Net sales of
composite materials fiber glass fabric in 1995 decreased 5.8% 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 due to
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<PAGE>
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 compared to $2.4 million in 1994. The Company
exited this business in the first half of 1996.
GROSS PROFIT. Gross profit for 1995 increased to $39.3 million, or by
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 primarily to improved capacity
utilization resulting from the volume increases and management's initiatives
to improve productivity at its manufacturing facilities.
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 related 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 was transferred to Springs
Industries prior to the Closing of the Acquisition. As a percentage of net
sales, SG&A increased to 7.7% in 1995 from 7.6% in 1994.
OPERATING INCOME. Operating income for 1995 increased $9.1 million to
$21.6 million from $12.5 million in 1994. As a percentage of net sales,
operating income for 1995 increased to 9.3% from 6.6% in 1994. During 1994,
the Company took a $1.8 million charge against operating earnings related to
the write-off of certain idle manufacturing equipment. Operating income for
1994 excluding the write-off of certain idle equipment was $14.3 million or
7.6% of net sales.
Income From Equity Investees, Net. Income from equity investees, net,
increased $1.4 million in 1995 from $1.2 million in 1994. This improvement
resulted primarily from higher net income reported by Asahi-Schwebel and
CS-Interglas due to increased world wide demand for fiber glass fabric.
Similar to the U.S. market, this increase was driven primarily by the strong
demand for electronics. CS Tech-Fab reported a slight increase in net income.
INCOME FROM CONTINUING OPERATIONS. The significant improvements in
operating results and income from equity investees were more than enough to
offset the increase in SG&A expenses, as income from continuing operations
for 1995 was 83.9% higher than in 1994.
LIQUIDITY AND CAPITAL RESOURCES
HISTORICAL. On April 17, 1996, the Company was purchased from Springs
Industries for approximately $192.9 million, funded by a combination of
equity and debt. Equity of $45.0 million was provided by Vestar/CS Holding
and the Management Investors in exchange for all of the capital stock of
Holdings. Vestar/CS Holding contributed $43.2 million in exchange for $35.0
million liquidation value of the 12.5% participating preferred stock of
Holdings ("Preferred Stock") and $8.2 million of the common stock of Holdings
("Holdings Common Stock"). The Management Investors invested $1.8 million in
Holdings Common Stock. Approximately $0.8 million of the contribution from
the Management Investors was financed by loans from the Company. The funded
debt used to finance the Acquisition consisted of $110.0 million of Senior
Notes, $15.0 million of loans under a Term Loan under the Credit Agreement,
and $35.0 million of loans under a Revolving Credit Facility under the Credit
Agreement. The required amortization payments under the Term Loan are $0.4
million in 1997, $1.6 million in 1998, $2.1 million in 1999, $2.5 million in
2000, $2.9 million in 2001 and $1.6 million in 2002. As required by the
Credit Agreement, the Company prepaid $2.3 million of the Term Loan in the
first quarter of 1997. The Company may prepay the Term Loan at any time
without penalty. The Revolving Credit Facility matures in April 2002.
Substantially all of the
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<PAGE>
assets of CSI, the operating company, are subject to liens in favor of the
Credit Agreement lenders. 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 Senior Notes until maturity in April
2006. The Company is required to make semi-annual interest payments on April
15 and October 15 with respect to the Senior Notes.
Nine Months 1997 Compared to Nine Months 1996. Cash provided by operating
activities in the first nine months of 1997 was $24.3 million, compared with
$44.5 million provided in the same period a year ago. Despite improved
profitability in 1997 compared to 1996, cash provided by operating activities
declined because cash generated from working capital was less than the
comparable period in 1996. The Company spent $5.9 million on capital
additions during the first nine month of 1997. The Company anticipates
capital expenditures will approximate $10.0 million for fiscal 1997. As of
September 27, 1997, the Company had cash and cash equivalents of
approximately $7.9 million. In addition, the Company had $65.0 million of
undrawn availability under the Revolving Credit Facility. The Company ended
the quarter with debt, net of cash, of $148.1 million, consisting of $110.0
million in Senior Notes, $46.0 million in Senior Debentures, and $7.9 million
in cash and cash equivalents.
-- 1996 Compared to 1995. Cash provided by operations for the period from
April 18, 1996 to December 28, 1996 was $41.1 million, and for the period
from December 31, 1995 to April 17, 1996 was $8.0 million compared with $18.0
million provided by operations in fiscal 1995. Strong profitability coupled
with the Company's efforts to reduce its investment in working capital led to
the significant improvement in cash generated from operations for 1996. The
Company invested $2.0 million in capital expenditures for the period from
April 18, 1996 to December 28, 1996, and an additional $1.6 million for the
period from December 31, 1995 to April 17, 1996, which was moderate compared
to previous periods. The moderate level of capital spending was primarily the
result of fewer planned major projects for fiscal 1996. The Company typically
makes capital expenditures to enhance capacity and improve manufacturing
facilities and processing equipment. The Company anticipates that capital
spending in 1997 will increase to approximately $9.5 million. Strong cash
flow from operations and moderate capital spending allowed the Company to
reduce total long-term debt by $36.6 million since April 18, 1996. Debt of
$35.0 million which was borrowed under the Credit Agreement's Revolving
Credit Facility at Closing was repaid during the period, while the amount
outstanding under the Credit Agreement's Term Loan was reduced by $1.6
million. As of December 28, 1996, the Company had $55.0 million of undrawn
availability under the Revolving Credit Facility. The Company ended the year
with debt, net of cash, of $119.4 million, consisting of $110.0 million in
Senior Notes, $13.4 million under the Term Loan, and $4.0 million in cash and
cash equivalents.
To meet its liquidity needs, the Company has relied and expects to
continue to rely on internally generated funds and, to the extent necessary,
on undrawn commitments available under the Revolving Credit Facility. The
Company's ability to borrow in excess of the commitments set forth in the
Credit Agreement is limited by the terms of the Credit Agreement and the
Senior Notes' Indenture. Additionally, such terms place restrictions on the
Company with respect to liens, investments, dividends, debt repayments,
capital expenditures, transactions with affiliates, and mergers. All assets
of Clark-Schwebel, Inc. represent restricted net assets with the exception of
the foreign equity investments and distributions received from the foreign
equity investments. Except in limited circumstances, Clark-Schwebel, Inc. is
prohibited from transferring restricted net assets to Clark-Schwebel
Holdings, Inc. in the form of cash dividends, loans, or advances without the
consent of a third party lender. The amount of unrestricted net assets at
December 28, 1996 is $61,221, which represents the book value of the foreign
equity investments ($59,906) and distributions received in the form of cash
from the foreign equity investments ($1,315). The Company believes that cash
generated from operations and borrowing resources will be sufficient to fund
the Company's cash needs for the foreseeable future.
Following the Transactions. Following the closing of the Transactions,
the Company had outstanding indebtedness of $156.0 million ($110.0 million in
Senior Notes and $46.0 million in Old
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<PAGE>
Debentures) compared to outstanding indebtedness of $121.2 million before the
Transactions. Additionally, the Company's cash on hand was reduced by $16.2
million following the Transactions as a result of prepaying the Term Loan
($11.2 million) and paying $5.0 million in redemption of the Preferred Stock.
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 Senior Notes or the Debentures until April 2006 and July 2007,
respectively. Additionally, borrowings under the Revolving Credit Facility
under the Credit Agreement mature April 2002.
The Company's primary capital requirements continue to be debt service
and capital expenditures. The Company is required to make semi-annual
interest payments with regard to its Senior Notes on April 15 and October 15,
and with regard to its Debentures on January 15 and July 15. Interest
payments on the Debentures are subject to CSI meeting certain earnings
thresholds and complying with certain financial ratio tests under the terms
of the CSI Indenture and Credit Agreement. If, on any interest payment date
relating to the Debentures, CSI could not dividend or distribute a sufficient
amount of cash to Holdings under the terms of the CSI Indenture or Credit
Agreement in order to make such interest payment in cash, Holdings may make
such interest payment in the form of additional Debentures having an
aggregate principal amount equal to the amount of such interest.
The Company typically makes capital expenditures related primarily to the
maintenance and improvement of manufacturing facilities and processing
equipment. The Company estimates that capital expenditures will be
approximately $10.0 million in 1997.
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 certain drawing
conditions. At the time of redemption of the Preferred Stock and issuance of
the Debentures, the Company had no drawings under its Revolving Credit
Facility and $65.0 million in undrawn availability. 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. Historically, each of the
three joint venture interests has been wholly self-supporting and received no
distributions from the Company. See "Business--Joint Ventures."
ACCOUNTING STANDARDS
A summary of the Company's significant accounting policies is included in
Note 3 to the footnotes of the Audited Financial Statements for the fiscal
year ended December 28, 1996, enclosed in this Prospectus.
CERTAIN RELEVANT FACTORS
Under the "safe harbor" provisions of the Private Securities Litigation
Reform Act of 1995, forward looking statements, such as earnings projections,
are protected from liability as long as they are accompanied by meaningful
cautionary statements identifying important factors that could cause actual
results to differ materially from projected results. The Company wishes to
caution readers that the following important factors, among others, in some
cases have affected, and in the future could affect, the Company's actual
results and could cause the Company's actual results to differ materially
from those expressed in any
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<PAGE>
forward-looking statements made by, or on behalf of, the Company whether
contained herein, in other documents subsequently filed by the Company with
the SEC, or in oral statements:
- - A moderating growth rate or reduction in sales of electronics products,
which incorporate a significant percentage of the Company's products,
could materially affect operating results. The electronics industry is
cyclical and has experienced recurring downturns. A future downturn
could reduce demand for, and prices of, materials used in electronics
products, including those manufactured by the Company.
- - Rapid technology changes in the electronics industry have placed
increasingly rigorous demands on 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 semi-conductor technology could further
reduce the surface area of printed circuit boards and possibly demand
for the Company's products. Operating results could be materially
affected by the Company's ability to maintain its 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.
- - Virtually all fiber glass yarn manufactured in North America is produced
by two suppliers, and substitutes are not readily available. The Company
purchases substantially all of its fiber glass yarn from these two
suppliers. 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. During 1995 and through mid-1996,
the Company experienced a fiber glass yarn shortage which limited the
Company's ability to expand production of fiber glass fabrics.
Additionally, due in part to the fiber glass yarn shortage, the price of
fiber glass yarn increased over the prior 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.
- - The Company's customer base is concentrated. In 1996, 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.
- - The Company could face an increasingly competitive market place in
electronics fiber glass fabric resulting from expected capacity growth
in glass yarn and woven fiber glass both domestically and world wide.
- - The Company relies on constant communication with its customers to
anticipate the future volume of purchase orders. A variety of
conditions, both specific to the individual customer and generally
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affecting the customer's industry, can cause a customer to reduce or
delay orders previously anticipated by the Company.
- - 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 on 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 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, or to which Company waste has been transported, 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.
- - 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.
- - The Company's international joint ventures are subject to risks,
including exchange rates, unexpected changes in regulatory requirements,
tariffs, international trade restrictions or prohibitions, political and
economic instability, and changes in taxation. Equity income from the
international joint ventures may be materially affected by currency
exchange rate fluctuations.
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.
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THE BUSINESS
The Company believes it has been a leading manufacturer and marketer of
industrial fabrics, including electronics fiber glass fabric, composite
materials fiber glass fabric and high performance fabrics since the founding
of the business in 1960. The Company believes it is the largest producer of
fiber glass fabrics for use in the growing electronics industry, with an
estimated 50% market share in the United States. Fiber glass fabrics are a
critical component used in the production of printed circuit boards, which
are integral to virtually all advanced electronic products, including
computers, telecommunications equipment, advanced cable television equipment,
network servers, televisions, automotive equipment and home appliances. The
Company's fiber glass fabrics are also used in composite materials to
strengthen, insulate and enhance the dimensional stability of hundreds of
products in a variety of markets, such as aerospace, coating and laminating,
marine and tooling, building insulation and sports equipment. The Company is
also a leading manufacturer of high performance fabrics composed of
Kevlar-Registered Trademark-, Spectra-Registered Trademark- and quartz
fibers. High performance fabrics composed of Kevlar-Registered Trademark-,
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.
Electronics Fiber Glass Fabric
The Company believes it is a leading producer of electronics fiber glass
fabric in the United States. The Company sells fiber glass fabric to
manufacturers of high pressure laminates ("HPL") who, in turn, convert fiber
glass fabric into rigid and thin core laminates that are sold to
manufacturers of single-sided, double-sided and multilayered printed circuit
boards. Printed circuit boards require a highly engineered substrate material
on which to mount and interconnect semiconductor chips, passive electronic
devices and other electronic components. Due to its low cost, high strength,
dimensional stability, temperature resistance and electrical insulating
properties, fiber glass fabric has proven to be the most effective substrate
material used in the manufacture of printed circuit boards. In addition, the
Company believes that currently there is no cost-effective substitute
material which can satisfy the stringent quality and performance
specifications required of fiber glass fabric for HPLs in printed circuit
boards. Electronics fiber glass fabric represented 57.6%, 58.9% and 62.9% of
the Company's net sales in 1994, 1995 and 1996, respectively.
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.
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-Registered Trademark- coated conveyor belts, window shades, movie
screens, electrical insulation products, marine construction materials,
automotive tooling and roofing materials. Composite materials fiber glass
fabric represented 23.9%, 18.5% and 21.3% of the Company's net sales in 1994,
1995 and 1996, respectively.
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The Company's fiber glass fabrics can be found on major airframe programs
at The Boeing Company, McDonnell Douglas Corporation and Airbus Industries.
The Company expects increases in commercial aircraft build rates over the
next several years. The growing global economy and governmental regulations
forcing the removal of older, louder, less fuel efficient aircraft are
expected to drive demand for new aircraft.
High Performance Fabrics
The Company believes it is a leading producer of high performance fabrics
used primarily to make ballistic protection products, such as vests and
helmets worn by state, local and private police forces and the military and
to reinforce composite materials for aircraft applications. The Company's
high performance fabrics possess physical properties such as durability, low
weight and high tensile strength. The Company's line of high performance
products are manufactured by arranging and finishing aramid and other
materials, such as Kevlar-Registered Trademark-, Spectra-Registered
Trademark- 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-Registered Trademark- 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. High performance fabrics represented 18.5%, 22.6%
and 15.8% of the Company's net sales in 1994, 1995, and 1996, respectively.
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.
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.
-52-
<PAGE>
[GRAPHIC]
Source: PCI Quarterly Forecast (4th Quarter 1995) and Henderson Electronic
Market Forecast (December 1996)
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.
The following table illustrates the historical growth of the major
end-user markets for electronics fiber glass fabric.
-53-
<PAGE>
United States Electronic Equipment Production
(Dollars in Billions)
<TABLE>
<CAPTION>
Historical
CAGR
1992 1993 1994 1995 1996 1992-1996
------ ------- ------- ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Computer office equipment $82.7 $ 91.5 $106.8 $125.7 $143.1 14.7%
Industrial/Instrumentation 57.6 61.5 67.1 77.5 84.9 10.2
Communications 36.7 40.2 47.9 53.6 59.8 13.0
Military 52.2 49.0 45.5 44.5 43.7 (4.3)
Automotive/Consumer 16.9 18.2 20.9 21.6 22.6 7.5
------ ------- ------- ------- ------ --------
------ ------- ------- ------- ------ --------
TOTAL $246.1 $260.5 $288.2 $322.9 $354.1 9.5%
</TABLE>
Source: PCI Quarterly Forecast (4th Quarter 1995) and Henderson Electronic
Market Forecast (December 1996)
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. 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.
The ability of printed circuit boards to perform in high temperature
environments is directly correlated to the electronic materials used to
construct the board. 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.
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.
-54-
<PAGE>
- 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
Product Market 1996 Net Sales Product Application
- ------- ------ -------------- -------------------
<S> <C> <C> <C>
Electronics Fiber High pressure laminates Personal and mainframe computers,
Glass Fabric manufactured for printed 62.9% printers, cellular telephones, automotive
circuit boards electronics, advanced cable television
equipment, personal communication
devices, network servers
Composite Materials Aerospace, Commercial aircraft components, skis,
Water Coating/Laminating, electrical cable insulation, movie
Fiberglass Fabric Filtration, Marine, Tooling, 21.3% screens, window shades, pollution
Building control, reinforced roofing products
High Performance Fabrics Aerospace, Ballistics 15.8% Bullet-resistant vests and helmets,
(Kevlar-Registered Trademark-, aircraft interior/exterior components
Spectra-Registered Trademark-,
quartz)
</TABLE>
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.
-55-
<PAGE>
Customers
The Company's customer list includes many leading companies in their
respective industry segments. In 1996, 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, Allied-Signal Laminate
Systems and Park Electrochemical, each accounted for more than 10% of the
Company's 1996 net sales. Sales to the two customers represented as a
percentage of net sales 40.2% in 1994, 42.3% in 1995, and 43.3% in 1996,
respectively. 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 its customer base to continue to be concentrated. The
Company believes that each of its four largest electronics customers
purchased over 50% of its fiber glass fabrics supplies from the Company in
1996. 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.
The Company markets its products primarily through a direct sales force
and distributes its products primarily through the use of common carriers.
The Company generally manufactures products according to customer forecasts
and regular communications with its customers.
Raw Materials
The principal materials used in the manufacture of the Company's products
are fiber glass, Kevlar-Registered Trademark- and Spectra-Registered
Trademark- yarns, PVA sizing and silane binding agents and coating materials.
Over the past 35 years, the company has developed close beneficial
relationships with the two companies that produce virtually all the fiber
glass yarn manufactured in North America, PPG Industries, Inc. and
Owens-Corning. The Company currently purchases substantially all of its
fiber glass yarn from these two suppliers. Based on its long-standing
relationships with its fiber glass yarn suppliers and the volume of its
purchases, the Company believes it receives favorable terms on its purchases
of fiber glass yarn. DuPont, the sole manufacturer of Kevlar-Registered
Trademark-, has provided its Kevlar-Registered Trademark- yarn to the Company
for more than 20 years. The Company currently purchases substantially all of
its aramid yarn from this one supplier. There are a limited number of
manufacturers of fiber glass yarn and aramid yarn. Any disruption in the
ability or willingness of the Company's suppliers to deliver fiber glass or
aramid yarn to the Company, or any adverse changes to the terms governing its
yarn purchases, could have a material adverse effect on the Company's
business, financial condition, and results of operations.
Through mid-1996, fiber glass yarn was in short supply on a global basis,
and the price of fiber glass yarn increased in 1996 at a higher than
historical rate. During the latter half of 1996, fiber glass yarn supply
became sufficient to meet the Company's requirements and supply should be
sufficient for the foreseeable future. The Company generally has been able to
pass through its raw material price increases to customers.
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.
-56-
<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 1996, CS-Interglas had net sales of approximately
$168.7 million.
Asahi-Schwebel. The Company owns a 43.3% interest in Asahi-Schwebel, a
manufacturer of fiber glass fabrics for the electronics industry
headquartered in Japan. Asahi-Schwebel has plant facilities in Japan and a
majority interest in a fiber glass fabric manufacturing and finishing plant
in Taiwan. In 1996, Asahi-Schwebel had net sales of $135.8 million.
CS Tech-Fab. CS Tech-Fab is 50% owned by each of the Company and Les Fils
d'Auguste Chomarat, a French Company. CS Tech-Fab manufactures nonwoven fiber
glass materials for roofing and cement construction applications and for high
performance sails. In 1996, CS Tech-Fab had net sales of approximately $13.4
million.
The Company's joint venture interests are not subject to the covenants of
the Indenture governing the Senior Notes or the Credit Agreement.
Employees
As of August 27, 1997, the Company had 1,346 full time employees, all of
whom were located in the United States. Of these employees, 1,246 were
engaged in manufacturing and manufacturing related services, and 100 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.
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 joint
venture operations are subject to varying degrees of environmental regulation
in the jurisdictions in which those facilities are located.
Based upon an environmental review conducted by outside consultants in
connection with the Acquisition, the Company believes that it is currently in
substantial compliance with all material environmental requirements, and will
not require material capital expenditures to maintain compliance with such
requirements in the foreseeable future. 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
-57-
<PAGE>
Company may be held liable and may be required to pay the cost of remedying
the condition and/or satisfying third party damage claims. The Company has
from time to time been the subject of administrative proceedings, litigation
or investigations relating to environmental matters. Management does not
believe that the Company is currently subject to any environmental
proceedings, litigation or investigations which will have a material adverse
effect on the Company.
Patents And Trademarks
The Company has several United States patents, patent applications and
trademarks. While the Company considers its patents to be valuable assets,
the Company does not believe that its competitive position is dependent on
patent protection or that its operations are dependent on any individual
patent or group of related patents. However, in some instances, patents and
patent protection may serve as a barrier to entry in certain product lines.
The Company's policy is to obtain patents on its new products and enforce its
patent rights.
Properties
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 Product Manufactured
- ---------- -------------- ------------------------------
<S> <C> <C>
Statesville, North Carolina 553,000 Electronics Fiberglass Fabric
Washington, Georgia 160,000 Electronics Fiberglass Fabric
Cleveland, Georgia 93,000 Electronics Fiberglass Fabric
Anderson, South Carolina 432,000 Composite Materials, Fiberglass Fabric,
High Performance Fabrics
</TABLE>
In 1994, 1995 and 1996 the Company spent an aggregate of approximately
$23.6 million on facilities maintenance, capacity expansion, modernization,
and upgrades of equipment. Management believes that substantially all of its
property and equipment is in good condition and that, with current capacity
substantially full, it has sufficient capacity to meet its current
manufacturing needs. Through capacity expansion and productivity
improvements, management believes that the Company will meet its projected
manufacturing needs. The Company's existing manufacturing facilities have
approximately 1.2 million square feet of floor space and are highly automated
in their manufacturing processes and equipment. The manufacturing processes
and standards comply with applicable environmental and worker safety laws and
regulations. Three of the Company's four manufacturing facilities produce a
family of closely related products. Management believes that this focused
approach to manufacturing allows these facilities to shorten manufacturing
time, optimize product flow, and avoid long and costly equipment retooling
and employee training time, all of which lead to overall reduced costs.
Substantially all of the Company's assets are subject to liens in favor
of the Credit Agreement lenders.
-58-
<PAGE>
MANAGEMENT
Directors and Executive Officers of the Registrant
The following sets forth certain information with respect to members of
the Board of Directors and executive officers of the Company.
Name Age Position
- --------------- ---- --------
Jack P. Schwebel 72 Chairman of the Board
William D. Bennison 53 President and Director
Richard C. Wolfe 49 Executive Vice President and Director
William H. Boyles 54 Vice President - Fiberglass Sales and
Marketing
Donald R. Burnette 49 Chief Financial Officer, Treasurer and
Secretary
Harvey A. Morse 44 Vice President - Human Resources
Dieter R. Wachter 53 Vice President - High Performance
Fabrics
Norman W. Alpert 38 Director
John D. Howard 45 Director
Sander M. Levy 36 Director
Arthur J. Nagle 59 Director
Daniel S. O'Connell 43 Director
Frank Greenberg 67 Director
Gerard Seelig 70 Director
All of the above have been Directors since the Acquisition.
Jack P. Schwebel has served as Chairman of the Board of the Company since
the Acquisition. Mr. Schwebel also serves as a director of CS-Interglas and
Asahi-Schwebel. Mr. 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 has served as Executive Vice President of the Company
since the Acquisition. Mr. Wolfe joined the Company in 1986 as Vice
President, Manufacturing, and from 1989 to 1996, he served as Senior Vice
President of United States Manufacturing and Operational Functions. 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 Chief Financial Officer, Treasurer and
Secretary of the Company since the Acquisition. Mr. Burnette was Vice
President and Controller of the Company from 1993 to 1996. From 1987 to 1993,
Mr. Burnette was Vice President of Administration and Controller for the
Wamsutta
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<PAGE>
Home Products Division (a manufacturer of home furnishings) of Springs
Industries. Mr. Burnette served in various financial positions with Springs
Industries from 1978 to 1987. Mr. Burnette received a B.S. degree from
Francis Marion University.
Harvey A. Morse has served as Vice President, Human Resources since 1994.
From 1987 to 1994, 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.
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*(engaged in merchant banking) and was a founding partner of Vestar
at its inception in 1988. Mr. Alpert is Chairman of the Board of Directors
of Advanced Organics, Inc. and International AirParts Corporation and a
director of Russell-Stanley Corporation, Remington Products Company and Aearo
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 a Senior Managing Director for Bear Stearns & Co. Inc.
serving as head of its Merchant Banking Group. Mr. Howard founded Gryphon
Capital Partners (engaged in merchant banking) and serves as its Chief
Executive Officer. Previously Mr. Howard was Co-Chief Executive Officer of
Vestar Capital Partners. Mr. Howard is a director of Celestial Seasonings,
Inc. and Access Beyond, Inc. 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 Sun Apparel, Inc. 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 Aearo Corporation, Chart House Enterprises, Inc., Russell-Stanley
Corporation, La Petite Academy, Inc. and Remington Products Company, 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 Advanced Organics, Inc.,
Aearo Corporation, Pinnacle Automation, Inc., Russell-Stanley Corporation,
Sun Apparel, Inc., Reid Plastics, Inc. and Remington Products Company, 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.
- --------------------------
* Vestar/CS Holding Co., L.L.C., which is an affiliate of Vestar Capital
Partners, is the principal shareholder of the Company.
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<PAGE>
Frank Greenberg was the Chairman of the Board of Directors and Chief
Executive Officer of Burlington Industries, Inc. (engaged in textile
manufacturing) from 1986 until his retirement in 1994. Mr. Greenberg now
serves as Chairman of the Board of Burlington. Mr. Greenberg received a B. A.
degree from the University of Chicago.
Gerard L. Seelig has over 35 years of experience in managing worldwide
industrial and technology based businesses. Most recently he was an Executive
Vice President with Allied Signal, Inc. Prior to joining Allied Signal, Inc.,
he held Senior Executive positions at ITT (12 years) and Lockheed Corporation
(10 years). Mr. Seelig is a Director of Advanced Organics, Inc. and
International AirParts Corporation, companies in which Vestar or its
affiliates have a significant equity interest, Simplicity Corporation and
Larson-Davis Corporation. Mr. Seelig received a B. S. degree from Ohio State
University and an M.S. degree from New York University.
The term in office of each director ends when his or her successor has
been elected or upon his or her removal or resignation. Each executive
officer serves at the discretion of the Board of Directors.
Executive Compensation
The compensation of executive officers of the Company is determined by
the Board of Directors of the Company upon the recommendation of the
Compensation Committee. None of the historical benefit or compensation plans
of Springs Industries is described herein because each was terminated with
respect to the named officers in connection with the Acquisition. The
following table sets forth information concerning compensation received by
the five executive officers of the Company who received the most salary and
bonus in 1996 (the "Named Executive Officers") for services rendered in 1996
and 1995.
-61-
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
Restricted
Stock Options All Other
Name and Position Year Salary ($) Bonus ($) Awards (S)(1) SARs(#)(2) Payouts ($)(3) Compensation ($)
- ------------------ ------ ------------ ----------- -------------- ----------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bennison, William D. 1996 199,250 239,100 --- --- --- 626,325 (4)
President 1995 191,211 133,848 4,859 6,000 33,317 38,600 (5)
Schwebel, Jack P. (6) 1996 170,192 204,230 --- --- --- 9,873 (4)
Chairman of the Board 1995 --- --- --- --- --- ---
Wolfe, Richard C. 1996 161,000 193,200 --- --- --- 254,483 (4)
Executive Vice President 1995 153,846 92,308 4,859 4,000 22,846 27,640 (5)
Boyles, William H. 1996 125,077 125,077 --- --- --- 14,594 (4)
Vice President 1995 118,500 56,000 2,916 --- --- 12,500 (5)
Burnette, Donald R. 1996 114,000 114,000 --- --- --- 82,275 (4)
Chief Financing Officer, 1995 106,385 63,832 2,916 --- --- 12,851 (5)
Treasurer and Secretary
</TABLE>
(1) Under a Springs Industries' restricted stock award plan, certain
of the Named Executive Officers were awarded restricted shares of
Springs Industries Class A Common Stock. The dollar value shown
in the table for these shares is based on the $38.875 per share
closing market price on the date of grant of such shares. The
number of such shares is as follows: Mr. Bennison, 125: Mr.
Wolfe, 125: Mr. Boyles, 75; and Mr. Burnette, 75. One-third of
these shares vested in 1994, one-third in 1995 and one-third in
1996. Dividends were paid on all restricted stock holdings.
(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.
(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 on the
date of issuance of $16,658 and $11,423, respectively.
(4) In connection with the Acquisition, benefits payable under
certain executive compensation plans of Springs Industries were
accelerated and paid in cash to Messrs. Bennison, Wolfe, Boyles
and Burnette on the closing date of the Acquisition as follows:
Mr. Bennison received $613,452 under the Springs Industries
Incentive Stock Plan, Deferred Unit Stock Plan, Contingent
Compensation Plan and Excess Benefit Plan; Mr. Wolfe received
$241,619 under the Springs Industries Incentive Stock Plan,
Deferred Unit Stock Plan, Contingent Compensation Plan, and
Excess Benefit Plan; Mr. Boyles received $1,721 under the Springs
Industries Excess Benefit Plan; and Mr. Burnette received $69,402
under the Springs Industries Deferred Unit Stock Plan and Excess
Benefit Plan. Additionally, the Named Executive Officers
participated in the Company's Profit Sharing and 401(k) match
programs. The payments made pursuant to these programs for 1996
were as follows: Mr. Bennison - $12,873, Mr. Schwebel - $9,873,
Mr. Wolfe $12,873, Mr. Boyles - $12,873, Mr. Burnette - $12,873.
The payments made pursuant to all the above programs are listed
under All Other Compensation for 1996.
(5) 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 under All Other
Compensation for 1995.
(6) Represents compensation from April 18, 1996 to the end of the
year.
Management Equity Participation
In connection with the Acquisition, in order to provide financial
incentives for certain of its employees, the Company entered into a
management subscription agreement with each of the Management Investors
(each, a "Management Subscription Agreement"). The Management Subscription
Agreement
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<PAGE>
provides for certain rights with respect to shares of Holdings Common Stock
purchased by the Management Investors (the "Purchased Shares").
At Closing, the Management Investors purchased an aggregate of $1.8
million of Purchased Shares representing 18% of the fully diluted Common
Stock of Clark-Schwebel Holdings, Inc. Approximately $0.8 million of the
purchase price of the Purchased Shares was financed by the Company (the
"Management Loans"), which was secured by a pledge of the relevant Management
Investor's Holdings Common Stock. On July 14, 1997, Vestar/CS-Holding
purchased 10% of the Purchased Shares from the Management Investors on a pro
rata basis, and a portion of the proceeds of such purchase were used by the
relevant Management Investors to repay the Management Loans in full. Upon the
termination of employment of the holder, the Purchased Shares will be subject
to certain call provisions exercisable by the Company and/or Vestar/CS
Holding at a purchase price that varies depending upon the reason for the
termination and the number of years from the Acquisition. Upon the
termination of the holder's employment due to disability, death or
retirement, the holder will have the right, subject to certain limitations,
to cause the Company to purchase the holder's Holdings Common Stock at a
price that varies according to the number of years that have elapsed
following the Acquisition.
Compensation of Directors
Mr. Schwebel receives base annual compensation of $260,000 plus bonus for
his services as Chairman of the Board. Directors of the Company who are
neither employees of the Company nor affiliated with Vestar receive annual
compensation of $12,500 plus $2,500 per Board meeting attended plus $1,250
for each Board Committee meeting. Other directors do not receive any
compensation for services in such capacity.
Compensation Committee Interlocks and Insider Participation
Messrs. Greenberg, Nagle and Levy are the members of the Compensation
Committee which reviews and makes recommendations to the Board of Directors
regarding the compensation and benefits of the Company's executive officers
and key employees.
Since the Acquisition, each of these individuals has had an interest in
transactions or business relationships involving the Company. See the
information contained in Item 13, "Certain Relationships and Related
Transactions", which is incorporated herein by reference.
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 the
Company.
401(k) Plan
The Company has adopted 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 are 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 makes a
matching contribution. The maximum contribution for any participant for any
year will be 12.0% of such participant's eligible compensation.
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SECURITY OWNERSHIP
All of CSI's issued and outstanding capital stock is owned by Holdings.
Set forth below is certain information regarding the beneficial ownership of
Holdings Common Stock as of the date of this Prospectus by each person known
by Holdings to beneficially own 5.0% or more of the outstanding shares of
Holdings Common Stock, each director and Named Executive Officer and all
directors and 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.
Holdings' Common Stock
----------------------
Name Number Percentage
- ------- --------- ------------
Vestar/CS Holding Company, L.L.C. (1) (2)
c/o Vestar Equity Partners
245 Park Avenue, 41st Floor
New York, NY 10167................................. 7,380 82.0%
William D. Bennison (2)................................. 432 4.8%
Richard C. Wolfe (2).................................... 324 3.6%
William H. Boyles (2)................................... 108 1.2%
Donald R. Burnette (2).................................. 135 1.5%
Dieter R. Wachter (2)................................... 81 0.9%
Harvey A. Morse (2)..................................... 54 0.6%
Jack P. Schwebel (3).................................... 0 0
Norman W. Alpert (4).................................... 7,380 82.0%
John D. Howard.......................................... 0 0
Sander M. Levy (4)...................................... 7,380 82.0%
Arthur J. Nagle (4)..................................... 7,380 82.0%
Daniel S. O'Connell (4)................................. 7,380 82.0%
Frank Greenberg......................................... 0 0
Gerald L. Seelig........................................ 0 0
Directors and Executive Officers as a group (14 persons) 8,514 94.6%
(1) The sole manager of Vestar/CS Holding is Vestar. The sole general
artner of Vestar is Vestar Associates L.P., a limited partnership whose
sole general partner is Vestar Associates Corporation ("VAC"). In such
capacity, VAC exercises sole voting and investment power with respect to
all of the shares of Holdings held of record by Vestar/CS Holding.
Messrs. Alpert, Levy, Nagle and O'Connell, who are directors of the
Company, are affiliated with Vestar in the capacities described under
"Management--Directors and Executive Officers of the Company" and are
directors, executive officers and stockholders of VAC. Individually,
no stockholder, director or officer of VAC is deemed to have or
share such voting or investment power with respect to shares of Holdings
held of record by Vestar/CS Holding within, the meaning of Rule
13d-3 under the Exchange Act. Accordingly, no part of the shares of
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, Wachter, Morse and Burnette have
entered into the Securityholders Agreement which contains certain
agreements with respect to the capital stock and corporate governance of
the Company and the Voting Trust Agreement (as defined herein)
pursuant to which Messrs. Bennison, Wolfe, Boyles and Burnette have
agreed to vote their shares as directed by Vestar/CS Holding with
respect to certain matters. All outstanding shares of Holdings
Common
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Stock are held by Vestar/CS Holding, as trustee under the Voting
Trust Agreement. Each of Messrs. Bennison, Wolfe, Boyles and
Burnette is also party to a Management Subscription Agreement. See the
information under the subheading, "Management Equity Participation",
in Item 11, "Executive Compensation".
(3) Each of Mr. Schwebel's three adult children owns 1.94% of the fully
diluted Holdings Common Stock which shares are not included in the
table above as beneficially owned by Mr. Schwebel. 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/CS Holdings in the capacities described in Note (1) above and
under "Management--Directors and Executive Officers of the Company."
Beneficial ownership of Holdings capital stock for each of these
individuals includes 7,380 shares of Holdings Common Stock included in
the above table beneficially owned by Vestar/CS Holding, of which
such persons disclaim beneficial ownership. Each such person's
business address is c/o Vestar Equity Partners, L.P., 245 Park Avenue,
41st Floor, New York, New York 10167.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Securityholders Agreement and Voting Trust Agreement
In connection with the Acquisition, Vestar/CS Holding and the Management
Investors 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 the Company.
Pursuant to the Securityholders Agreement, Vestar/CS Holding has the
right to appoint all members to the Board of Directors of the Company,
provided that two of the directors designated by Vestar/CS Holding shall be
elected from the management of the Company. In addition, pursuant to the
Securityholders Agreement and 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, the merger, share exchange,
combination or consolidation of the Company with any other person, 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 or the
reorganization, recapitalization, liquidation, dissolution or winding-up of
the Company.
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 things, 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 its securities of the Company, except pursuant
to, among other things, 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 Holdings or pursuant to a
Demand Right.
Other Relationships
Upon consummation of the Acquisition, the Company paid to Vestar Capital
Partners an investment banking fee of approximately $1.5 million plus
out-of-pocket expenses for its services in structuring the transaction and
providing financial advice in connection therewith. Each of Messrs. Alpert,
Levy and Nagle (all of whom are directors of the Company) is a Managing
Director and Mr. O'Connell (a director of the Company), is the Chief
Executive Officer of Vestar. Each of Messrs. Alpert, Levy, Nagle and
O'Connell, four of the directors of the Company, benefits from any payments
received by Vestar Capital Partners.
Upon consummation of the Acquisition, the Company paid to Frank
Greenberg, a transaction fee of $600,000 for Mr. Greenberg's services in
connection with the transaction. Mr. Greenberg is a director of the Company.
Pursuant to a management advisory agreement (the "Management Agreement"),
Vestar Capital Partners 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
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developing and implementing strategies for improving the operational,
marketing and financial performance of the Company. The management advisory
fees to be paid per annum will equal the greater of (i) after fiscal 1996,
1.0% of the consolidated earnings of the Company before interest, taxes,
depreciation and amortization or (ii) $350,000. Approximately $258,000 was
paid to Vestar Capital Partners pursuant to the Management Agreement in 1996.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
Description of Certain Indebtedness
General. Clark-S Acquisition entered into the Credit Agreement with
Chase Manhattan Bank, as agent, and Bankers Trust Company, Fleet National
Bank and NationsBank, N.A., as co-agents and BHF-Bank Aktiengesellschaft
(collectively, the "Banks"). CSI, 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, as amended through the date of this Prospectus,
provides for a Revolving Credit Facility of $65.0 million. As of September
27, 1997, the Company had no borrowings outstanding under the Revolving
Credit Facility. The $65.0 million undrawn amount under the Revolving Credit
Facility is available for working capital and general corporate purposes.
Security. The obligations of CSI under the Credit Agreement are
unconditionally and irrevocably guaranteed by Holdings and certain future
subsidiaries of Holdings and CSI. 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 CSI and Holdings and certain future domestic
subsidiaries of Holdings (direct or indirect), whether now owned or hereafter
acquired subject to customary exceptions as set forth in the Credit
Agreement; (ii) a first priority perfected pledge of certain capital stock
owned by Holdings and certain future domestic subsidiaries of Holdings
(direct or indirect), whether now owned or hereafter acquired (other than
CS-Interglas, Asahi-Schwebel and CS Tech-Fab); and (iii) a first priority
perfected pledge of 65% of the capital stock of foreign subsidiaries owned by
Holdings and certain future domestic subsidiaries of Holdings (direct or
indirect), whether now owned or hereafter acquired (other than CS-Interglas,
Asahi-Schwebel and CS Tech-Fab).
Interest. At CSI'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) or (ii) the London Interbank Offered Rate
for one, two, three, six or, if available, nine or twelve months, plus 1.25%;
provided, however, 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. Loans made pursuant to the Revolving Credit Facility
may be borrowed, repaid and reborrowed from time to time, 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 loans or extend
letters of credit is 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,
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asset sales, acquisitions, mergers and consolidations, prepayments of other
indebtedness, 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.
Event 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
CSI.
Description of CSI Indenture
General. Clark-S Acquisition, CS Finance Corporation of Delaware, and
Holdings entered the CSI Indenture with Fleet National Bank. The information
relating to the CSI Indenture 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 CSI Indenture.
CSI issued the Senior Notes pursuant to the CSI Indenture in an aggregate
original principal amount of $110 million.
Security. The obligations of CSI under the CSI Indenture are
unconditionally and irrevocably guaranteed by Holdings and certain future
subsidiaries of CSI.
Interest. The Senior Notes 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.
Maturity. The Senior Notes will mature on April 15, 2006.
Covenants. The CSI Indenture contains certain covenants which, among
other things, limit the ability of CSI and the subsidiaries of CSI subject to
the CSI Indenture to incur additional indebtedness and issue preferred stock,
repay certain other indebtedness, pay dividends or make certain other
distributions, repurchase equity interests, consummate certain asset sales,
enter into certain transactions with affiliates, enter into sale and
lease-back transactions, incur liens, 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 CSI. In addition, under certain
circumstances, CSI will be required to make an offer to repurchase the Senior
Notes at a price equal to the principal amount thereof, plus accrued and
unpaid interest to the date of repurchase, with the proceeds of certain
significant asset sales.
Event of Default. The CSI Indenture 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 CSI
Indenture to be in full force and effect and change of control of Holdings or
CSI.
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DESCRIPTION OF NEW DEBENTURES
General
The New Debentures will be issued pursuant to an Indenture dated as of
August 14, 1997 (the "Indenture") between Holdings and States Street Bank and
Trust, as trustee (the "Trustee"). The terms of the New Debentures 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 Debentures are subject to all such terms, and Holders of New
Debentures 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 the Registration Rights
Agreement is available as set forth under "--Additional Information." The
definitions of certain terms used in this summary are set forth below under
"--Certain Definitions."
The New Debentures will be senior unsecured obligations of Holdings and
will rank senior in right of payment to all subordinated Indebtedness of
Holdings and pari passu in right of payment with all existing and future
senior Indebtedness, including Indebtedness pursuant to the Credit Agreement.
The New Debentures 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 Debentures will be structurally subordinated to
Indebtedness of CSI and the other Subsidiaries of Holdings. At September 27,
1997, the New Debentures were effectively subordinated to $110,000,000 of
Indebtedness under the CSI Indenture. There were no borrowings outstanding
under the Credit Agreement.
Restrictions in the Indenture on the ability of Holdings 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 Holdings or CSI, whether favored
or opposed by the management of the Company. While such restrictions cover a
wide variety of arrangements which have traditionally been used to effect
highly leveraged transactions, the Indenture may not afford holders of New
Debentures protection in all circumstances from the adverse aspects of a
highly leveraged transaction, reorganization, restructuring, merger or
similar transaction.
Under certain circumstances, Holdings 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, Holdings' interests in the Joint Ventures have
effectively been excluded from the Indenture's covenants. See "Business --
Joint Ventures."
Maturity and Interest
The Debentures will mature on July 15, 2007. Interest on the Debentures
will accrue at the rate of 121/2% per annum and will be payable semi-annually
in arrears on January 15 and July 15, commencing on January 15, 1998, to
Holders of record on the immediately preceding January 1 and July 1;
provided, however, that if on any interest payment date CSI could not
dividend or distribute a sufficient amount of cash to Holdings under the
terms of the CSI Indenture or the Credit Agreement in order to make such
interest payment in cash, Holdings may make such interest payment in the form
of additional Debentures having an aggregate principal amount equal to the
amount of such interest. Interest on the Debentures 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 Debentures will be
payable at the office
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or agency of Holdings maintained for such purpose within the City and State
of New York or, at the option of Holdings, payment of interest and Liquidated
Damages may be made by check mailed to the Holders of the Debentures at their
respective addresses set forth in the register of Holders of Debentures;
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and cash interest, premium, if any, and
Liquidated Damages, if any, on, all Global Debentures and all other
Debentures the Holders of which shall have provided wire transfer
instructions to Holdings or the Paying Agent. Until otherwise designated by
Holdings, Holdings' office or agency in New York will be the office of the
Trustee maintained for such purpose. The New Debentures will be issued in
denominations of $1,000 and integral multiples thereof.
Optional Redemption
The Debentures are not redeemable at the Company's option prior July 15,
2002. Thereafter, the Debentures 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 July 15 of the years indicated below:
Year Percentage
---- ----------
2002 106.250%
2003 104.167%
2004 102.083%
2005 and thereafter 100.00%
Notwithstanding the foregoing, Holdings may redeem the Debentures, in
whole or in part, after January 15, 1998 at a redemption price of 106% of the
principal amount thereof, in each case plus an amount in cash equal to all
accrued and unpaid interest and Liquidated Damages, if any, thereon to the
redemption date, with the net proceeds of an Equity Offering; provided, that
such redemption will occur within 60 days of the date of the closing of such
Equity Offering. In addition, notwithstanding the foregoing, Holdings may
redeem Debentures, in whole or in part, at the option of Holdings, after
January 15, 1998, at a redemption price of 106% of the principal amount
thereof, in each case plus an amount in cash equal to all accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date, in
the event of a Change of Control or a Subsidiary Change of Control.
If less than all of the Debentures are to be redeemed at any time,
selection of Debentures for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which the Debentures are listed, or, if the Debentures
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 Debentures 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 Debentures to be redeemed at its registered address.
If any Debenture is to be redeemed in part only, the notice of redemption
that relates to such Debenture will state the portion of the principal
amount thereof to be redeemed. A new Debenture in principal amount equal to
the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Debenture. On and after the
redemption date, interest ceases to accrue on Debentures or portions of them
called for redemption.
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Mandatory Redemption
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Debentures.
Repurchase at the Option of Holders
Change of Control
The Indenture provides that upon the occurrence of a Change of Control,
each Holder of Debentures will have the right to require Holdings to
repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of such Holder's Debentures 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, Holdings will
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Debentures
pursuant to the procedures required by the Indenture and described in such
notice. Holdings 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 Debentures 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 Change of Control Offer Period (the "Change of Control Purchase Date"),
Holdings will purchase all Debentures tendered in response to the Change of
Control Offer. Payment for any Debentures so purchased will be made in the
same manner as cash 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 Debenture is
registered at the close of business on such record date, and no additional
interest will be payable to Holders who tender Debentures pursuant to the
Change of Control Offer.
On the Change of Control Purchase Date, Holdings will, to the extent
lawful, (1) accept for payment all Debentures 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
Debentures or portions thereof so tendered and (3) deliver or cause to be
delivered to the Trustee the Debentures so accepted together with an
Officers' Certificate stating the aggregate principal amount of Debentures or
portions thereof being purchased by Holdings. The Paying Agent will promptly
mail to each Holder of Debentures so tendered the Change of Control Payment
for such Debentures, and the Trustee will promptly authenticate and mail (or
cause to be transferred by book entry) to each Holder a new Debenture equal
in principal amount to any unpurchased portion of the Debentures surrendered,
if any; provided that each such new Debenture will be in a principal 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 Debentures
to require that Holdings repurchase or redeem the Debentures in the event of
a takeover, recapitalization or other restructuring.
The Credit Agreement provides that certain Change of Control events with
respect to Holdings would constitute a default thereunder permitting the
lending parties thereto to accelerate the Indebtedness thereunder. In
addition, the CSI Indenture requires CSI to make an offer to repurchase the
Senior Notes upon
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the occurrence of substantially all of the events that would constitute a
Change of Control for purposes of the Indenture. The Company may not have
sufficient resources to repay Indebtedness under the Credit Agreement, to
repurchase tendered Senior Notes and to repurchase tendered Debentures.
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 the Company is prohibited from purchasing Debentures, the Company could
seek the consent of its lenders to the purchase of Debentures 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 Debentures. Holdings' failure to
purchase tendered Debentures would constitute an Event of Default under the
Indenture which would, in turn, constitute a default under the Credit
Agreement and may constitute a default under the CSI Indenture.
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
Holdings and its 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 Debentures to require the
Company to repurchase such Debentures as a result of a sale, lease or
transfer of less than all of the assets of the Company and its Subsidiaries
taken as a whole to another Person or group may be uncertain.
Asset Sales
The Indenture provides that Holdings will not, and will not permit any of
its Restricted Subsidiaries to, engage in an Asset Sale in excess of $10.0
million unless (i) Holdings (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
Holdings (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 other disposed of, and (ii) at least 75% (100% in the
case of lease payments) of the consideration therefor received by Holdings or
such Restricted Subsidiary is in the form of cash or Cash Equivalents;
provided that the amount of (x) any liabilities (as shown on Holdings' or
such Restricted Subsidiary's most recent balance sheet or in the notes
thereto, excluding contingent liabilities and trade payables), of Holdings or
any Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Debentures) that are assumed by the transferee of any
such assets and (y) any notes or other obligations received by Holdings or
any such Restricted Subsidiary from such transferee that are promptly, but in
no event more than 30 days after receipt, converted by Holdings 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 Holdings' actual receipt of any Net Proceeds from
an Asset Sale, Holdings 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 make 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 Holdings 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, Holdings will be required to make an offer to all
Holders of Debentures (an "Asset Sale Offer") to purchase the maximum
principal amount of Debentures 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 Debentures tendered pursuant to an
Asset Sale Offer is less than the Excess
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Proceeds, the Trustee shall select the Debentures 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"), Holdings will purchase the principal
amount of Debentures 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 Debentures tendered in response to the Asset Sale Offer.
Payment for any Debentures so purchased will 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 will be paid to the Person in whose name a Debenture is registered
at the close of business on such record date, and no additional interest will
be payable to Holders who tender Debentures pursuant to the Asset Sale Offer.
On or before the Asset Sale Purchase Date, Holdings will, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Asset Sale Offer Amount of Debentures or portions thereof tendered pursuant
to the Asset Sale Offer, or if less than the Asset Sale Offer Amount has been
tendered, all Debentures tendered, and will deliver to the Trustee an
Officers' Certificate stating that such Debentures or portions thereof were
accepted for payment by the Company in accordance with the terms of this
covenant. Holdings, 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 Debentures tendered by such Holder and accepted by
Holdings for purchase, and Holdings will promptly issue a new Debenture, and
the Trustee, upon delivery of an Officers' Certificate from Holdings will
authenticate and mail or deliver such new Debenture to such Holder, in a
principal amount equal to any unpurchased portion of the Debenture
surrendered. Any Debenture not so accepted will be promptly mailed or
delivered by Holdings to the Holder thereof. Holdings will publicly announce
the results of the Asset Sale Offer on the Asset Sale Purchase Date.
Certain Covenants
Restricted Payments
The Indenture provides that Holdings 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 Holdings' or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving Holdings)
(other than dividends or distributions payable in Equity Interests (other
than Disqualified Stock) of Holdings or dividends or distributions payable to
Holdings or any Wholly Owned Subsidiary of Holdings); (ii) purchase, redeem
or otherwise acquire or retire for value any Equity Interests of Holdings or
any direct or indirect parent of Holdings or other Affiliate or Restricted
Subsidiary of Holdings; (iii) make any principal payment on, or purchase,
redeem defease or otherwise acquire or retire for value any Indebtedness that
is subordinated to the Debentures, 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;
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(b) Holdings 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 Holdings and its Restricted
Subsidiaries after the date of the Indenture and all Restricted Payments
made by the Restricted Subsidiaries during the period commencing after
April 17, 1996 through the date of the Indenture, is less than the sum
of, without duplication, (i) 50% of the Consolidated Net Income of
Holdings for the period (taken as one accounting period) from the
beginning of the first fiscal quarter commencing after April 17, 1996 to
the end of Holdings' 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 April 17, 1996 by Holdings
from the issue or sale of, or from additional capital contributions in
respect of, Equity Interests of Holdings or of debt securities of
Holdings or any Restricted Subsidiary that have been converted into, or
canceled in exchange for, Equity Interests of Holdings (other than Equity
Interests (or convertible debt securities) sold to a Restricted
Subsidiary or an Unrestricted Subsidiary of Holdings and other than
Disqualified Stock or debt securities that have been converted into
Disqualified Stock), plus (iii) 100% of any cash dividends received by
Holdings or a Wholly Owned Subsidiary from an Unrestricted Subsidiary of
Holdings, 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 to
such person) following April 17, 1996, plus (v) to the extent that any
Restricted Investment that was made after April 17, 1996, 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 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
Holdings) of, or from substantially concurrent additional capital
contributions in respect of, Equity Interests of Holdings (other than
Disqualified Stock); (iii) the redemption, repurchase, retirement or other
acquisition of any Equity Interests of Holdings in exchange for, or out of
the proceeds of, the substantially concurrent sale (other than to a
Subsidiary of Holdings) of, or from substantially concurrent additional
capital contributions in respect of, other Equity Interests of Holdings
(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 Holdings) of, or from
substantially concurrent additional capital contributions in respect of,
Equity Interests of Holdings (other than Disqualified Stock); (v) the
distribution of the Joint Ventures or interests in the Joint Ventures or
Joint Venture Funds; (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 Holdings or any Restricted
Subsidiary of Holdings or any direct or indirect parent of Holdings held by
any member of Holdings' (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
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available for such payments hereunder since the April 17, 1996 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 Holdings from subsequent reissuances of
such Equity Interests to new members of management); (vii) loans to members
of management of Holdings or any Restricted Subsidiary the proceeds of which
are used for a concurrent purchase of Equity Interests of Holdings; (viii)
payments under the Management Advisory Agreement; (ix) payments by Holdings
of director's fees and the reasonable expenses of its directors in an
aggregate amount not to exceed $100,000 per year; (x) any principal payment
on, or purchase, redemption, defeasance or other acquisition or retirement
for value of any Indebtedness that is subordinated to the Debentures out of
Excess Proceeds available for general corporate purposes after consummation
of purchases of Debentures pursuant to an Asset Sale Offer; and (xi) any
payments permitted under the CSI Indenture (and amounts expended in respect
of such payments under this clause (xi) shall be excluded or included, as
applicable, in the calculation of the aggregate amount of Restricted Payments
under the Indenture made by the Restricted Subsidiaries to the extent such
amounts are excluded or included, as applicable, in the calculation of
"Restricted Payments" as defined in and calculated under the CSI Indenture);
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) and (x) shall be included in such
calculation.
The Board of Directors may designate any Subsidiary to be an Unrestricted
Subsidiary (subject to clause (c) of the definition of "Permitted
Investments") if such designation would not cause a Default. For purposes of
making such determination, all outstanding Investments (other than
Investments of Joint Venture Funds) by Holdings 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 there 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 Holdings 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 Holdings or
such Restricted Subsidiary, as the case may be, pursuant to the Restricted
Payment. Not later than the date of making any Restricted Payment, Holdings
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 Holdings' latest available financial statements.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that Holdings will not, and will 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 Holdings 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 Holdings and its
Restricted Subsidiaries may incur Indebtedness (including
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Acquired Indebtedness) or issue shares of Disqualified Stock if: (i) the
Fixed Charge Coverage Ratio for Holdings' 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 2.00
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 Holdings or a
Restricted Subsidiary pursuant to this paragraph.
The foregoing provisions will not apply to:
(i) Indebtedness permitted under the CSI Indenture
(regardless of whether such Indenture is in effect);
(ii) the incurrence by Holdings and its Restricted Subsidiaries
of the Existing Indebtedness and the Guarantee by Holdings of
Indebtedness under the Credit Agreement in an amount not to exceed the
amount referred to in the CSI Indenture;
(iii) the incurrence by Holdings of Indebtedness represented by
the Debentures;
(iv) the incurrence by Holdings 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
Holdings or such Restricted Subsidiary, in an aggregate principal amount
not to exceed $10.0 million at any time outstanding;
(v) the incurrence by Holdings 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 Holdings or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among Holdings 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
Holdings or a Wholly Owned Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by Holdings or such
Subsidiary, as the case may be;
(vii) the incurrence by Holdings or any of its Restricted
Subsidiaries 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 Holdings, its Restricted Subsidiaries
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 $15.0 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 Holdings' Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness
ceases to be Non-Recourse Debt of an Unrestricted
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Subsidiary, such event shall be deemed to constitute an incurrence of
Indebtedness by a Restricted Subsidiary of Holdings; and
(x) Indebtedness incurred by Holdings or any of its Restricted
Subsidiaries 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 Holdings or any of its Restricted Subsidiaries pursuant to
such agreements, in connection with the disposition of any business,
assets or Restricted Subsidiary of Holdings (other than guarantees or
similar credit support by Holdings 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 Holdings in good faith) actually received by Holdings 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 Holdings will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback
transaction; provided that Holdings or any Restricted Subsidiary may enter
into a sale and leaseback transaction if (i) Holdings or such Restricted
Subsidiary 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 Holdings 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 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 Holdings 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 Holdings 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 Holdings or any of its Restricted Subsidiaries, (ii) make loans or
advances to Holdings or any of its Restricted Subsidiaries or (iii) transfer
any of its properties or assets to Holdings 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 or the CSI Indenture including the Senior
Notes,
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as the case may be, in each case 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 or the CSI Indenture (including the
Senior Notes), as the case may be, in each case as in effect on the date of
the Indenture, (c) the Indenture and the Senior Debentures, (d) applicable
law, (e) any instrument governing Acquired Indebtedness or Capital Stock of a
Person acquired by Holdings 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; (j) or restrictions or encumbrances on dividends
and distributions to Holdings or any of its Restricted Subsidiaries under any
Indebtedness permitted by the Indenture that are no more restrictive with
respect to such dividend and other payment restrictions than those contained
in the Credit Agreement or the CSI Indenture, as the case may be, in each
case as in effect on the date of the Indenture.
Transactions with Affiliates
The Indenture provides that Holdings 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 Holdings or the relevant Restricted
Subsidiary than those that would have been obtained in a comparable
transaction by Holdings or such Restricted Subsidiary with an unrelated
Person and (ii) Holdings 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 Holdings 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; (t) the existence of, or the performance by
Holdings under the terms of, any securityholders agreement, registration
rights agreement voting trust agreement, loan document with employees or
purchase agreement with employees to which Holdings is a party on the Closing
Date including any amendment thereto; provided, that any such amendment is no
more disadvantageous to the holders of the Debentures in any material respect
than the original agreement as in effect on the Closing Date; (u) reasonable
compensation paid to, and indemnity provided on behalf of, officers and
directors of Holdings, CSI or any Restricted Subsidiary as determined in good
faith by Holdings' Board of Directors or senior management; (v) any
employment agreement entered into by Holdings or any of its Restricted
Subsidiaries in the ordinary course of business and consistent with the past
practice of Holdings or such Restricted Subsidiary;
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(w) transactions between or among Holdings and/or its Wholly Owned
Subsidiaries; (x) the provision of administrative or management services by
CSI or any of its officers to any of Holdings or the Restricted Subsidiaries;
(y) fees paid and reimbursement of out-of-pocket expenses pursuant to the
Management Advisory Agreement; and (z) transactions permitted by the covenant
described in "--Restricted Payments."
Line of Business
Holdings 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 Holdings and its
Restricted Subsidiaries are engaged on the date of the Indenture.
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Debentures are outstanding,
Holdings will furnish to the Holders of Debentures (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 Holdings 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 Holdings's certified independent
accountants and (ii) all current reports that would be required to be filed
with the Commission on Form 8-K if Holdings were required to file such
reports. In addition, whether or not required by the rules and regulations
of the Commission, at any time after Holdings files a registration statement
with respect to the Exchange Offer, Holdings 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, Holdings has agreed that, for so long as any Debentures remain
outstanding, it 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 Holdings shall not, in a single transaction
or series of related transactions, consolidate or merge with or into (whether
or not Holdings 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 Holdings and its Restricted
Subsidiaries taken as a whole in one or more related transactions, to another
corporation, Person or entity unless (i) Holdings is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than Holdings) or to 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
Holdings) 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 Holdings, under the Senior Debentures 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) Holdings or the entity or Person formed by or surviving
any such consolidation or merger (if other than Holdings), 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 Holdings
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 the
covenant described above under the caption "---Incurrence of Indebtedness and
Issuance of Preferred Stock"; and (v) Holdings delivers to the
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Trustee an Officers' Certificate and an Opinion of Counsel addressed to the
Trustee with respect to the foregoing matters.
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 Debentures; (ii) default in payment,
when due of the principal of or premium, if any, on the Debentures; (iii)
failure by Holdings 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 Holdings for 60 days after notice to comply with any of its other
agreements in the Indenture or the Debentures; (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
Holdings or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by Holdings 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 Holdings or any of its Restricted Subsidiaries to pay
final judgments aggregating in excess of $5 million, which judgments are not
paid, discharged or stayed for a period of 60 days; and (vii) certain events
of bankruptcy or insolvency with respect to Holdings 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
Debentures may declare all the Debentures 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, any
Significant Subsidiary or any group of Subsidiaries that, taken together,
would constitute a Significant Subsidiary, all outstanding Debentures will
become due and payable without further action or notice. Holders of the
Debentures may not enforce the Indenture or the Debentures except as provided
in the Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Debentures may direct the Trustee in
its exercise of any trust or power. However, the Trustee shall be under no
obligation to exercise any powers vested by the Indenture at the request or
direction of any of the Holders unless such Holders shall have furnished the
Trustee reasonable security or indemnity against costs, expenses, and
liabilities. The Trustee may withhold from Holders of the Debentures 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 Debentures
then outstanding by notice to the Trustee may on behalf of the Holders of all
of the Debentures 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 Debentures.
Holdings is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and Holdings 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.
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No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of Holdings,
as such, will have any liability for any obligations of Holdings under the
Debentures, the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Debentures by
accepting a Debenture waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Debentures. 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
Holdings may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Debentures ("Legal
Defeasance") except for (i) the rights of the Holders of outstanding
Debentures to receive payments in respect of the principal of, premium, if
any, and interest and Liquidated Damages on such Debentures when such
payments are due from the trust referred to below, (ii) Holdings' obligations
with respect to the Debentures concerning issuing temporary Debentures,
registration of Debentures, mutilated, destroyed, lost or stolen Debentures
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 Holdings' obligations in connection therewith
and (iv) the Legal Defeasance provisions of the Indenture. In addition,
Holdings may, at its option and at any time, elect to have the obligations of
Holdings 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 Debentures. 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 Debentures.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
Holdings must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Debentures, cash in U.S. 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 Debentures on the stated maturity
or on the applicable redemption date, as the case may be, and Holdings must
specify whether the Debentures are being defeased to maturity or to a
particular redemption date; (ii) in the case of Legal Defeasance, Holdings
will have delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (A) Holdings 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 Debentures 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, Holdings 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 Debentures 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, Holdings 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 Debentures 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
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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 Holdings or any of its
Subsidiaries is a party or by which Holdings or any of its Subsidiaries is
bound; (vi) Holdings 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)
Holdings must deliver to the Trustee an Officers' Certificate stating that
the deposit was not made by Holdings with the intent of preferring the
Holders of Debentures over the other creditors of Holdings with the intent of
defeating, hindering, delaying or defrauding creditors of Holdings or others;
and (viii) Holdings 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 Debentures 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 Holdings
may require a Holder to pay any taxes and fees required by law or permitted by
the Indenture. Holdings is not required to transfer or exchange any Debenture
selected for redemption. Also, Holdings is not required to transfer or exchange
any Debenture for a period of 15 days before a selection of Debentures to be
redeemed.
The registered Holder of a Debenture will be treated as the owner of its
for all purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture or
the Debentures may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the Debentures then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for Debentures), and any existing default or compliance with any provision of
the Indenture or the Debentures may be waived with the consent of the Holders of
a majority in principal amount of the then outstanding Debentures (including
consents obtained in connection with a tender offer or exchange offer for
Debentures).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Debentures held by a non-consenting Holder): (i) reduce
the principal amount of Debentures whose Holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Debenture or alter the provisions with respect to the redemption of the
Debentures (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 Debenture, (iv) waive
a Default or Event of Default in the payment of principal of or premium, if any,
or interest on the Debentures (except a rescission of acceleration of the
Debentures by the Holders of at least a majority in aggregate principal of the
Debentures and a waiver of the payment default that resulted from such
acceleration), (v) make any Debenture payable in money other than that stated in
the Debentures, (vi) make any change in the provisions of the Indenture relating
to waivers of past Defaults or the rights of Holders of Debentures to receive
payments of principal of or premium, if any, or interest on the Debentures,
(vii) waive a redemption payment with respect to any Debenture (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.
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Notwithstanding the foregoing, without the consent of any Holder of
Debentures, Holdings and the Trustee may amend or supplement the Indenture or
the Debentures to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Debentures in addition to or in place of certificated Debentures,
to provide for the assumption of Holdings's obligations to Holders of Debentures
in the case of a merger or consolidation, to make any change that would provide
any additional rights or benefits to the Holders of Debentures 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 Holdings, 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
Debentures 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 Debentures, 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
the Registration Rights Agreement without charge by writing to Clark-Schwebel
Holdings, Inc.
Book-Entry, Delivery and Form
Except as set forth in the next paragraph, the Debentures to be resold as
set forth herein will initially be issued in the form of one Global Debenture
(the "Global Debenture"). The Global Debenture will be deposited on the date of
the closing of the Exchange Offer 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
Debenture Holder").
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
Purchaser), 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.
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Holdings expects that pursuant to procedures established by the Depositary
(i) upon deposit of the Global Debenture, the Depositary will credit the
accounts of Participants designated by the Initial Purchaser with portions of
the principal amount of the Global Debenture and (ii) ownership of the
Debentures evidenced by the Global Debenture will be shown on, and the transfer
of ownership thereof will be affected 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 Debentures evidenced by the
Global Debenture will be limited to such extent.
So long as the Global Debenture is the registered owner of any Debentures,
the Global Debenture Holder will be considered the sole Holder under the
Indenture of any Debentures evidenced by the Global Debenture. Beneficial
owners of Debentures evidenced by the Global Debenture 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 Holdings 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 Debentures.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Debentures registered in the name of the
Global Debenture Holder on the applicable record date will be payable by the
Trustee to or at the direction of the Global Debenture Holder in its capacity as
the registered Holder under the Indenture. Under the terms of the Indenture,
Holdings and the Trustee may treat the persons in whose names Debentures,
including the Global Debenture, are registered as the owners thereof for the
purpose of receiving such payments. Consequently, neither Holdings nor the
Trustee has or will have any responsibility or liability for the payment of such
amounts to beneficial owners of Debentures. Holdings believes, however, that 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 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 Debentures
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
If (i) Holdings notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and Holdings is unable to locate a
qualified successor within 90 days or (ii) Holdings, at its option, notifies the
Trustee in writing that it elects to cause the issuance of Debentures in
certificated form, then, upon surrender by the Global Debenture Holder of its
Global Debenture, Debentures in certificated form will be issued to each person
that the Global Debenture Holder and the Depositary identify as being the
beneficial owner of the related Debentures.
Neither Holdings nor the Trustee will be liable for any delay by the
Depositary in identifying the beneficial owners of Debentures and Holdings 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 Debentures
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;
provided, however, that if on any interest payment date CSI could not dividend
or distribute a sufficient amount of cash
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to Holdings under the terms of the CSI Indenture or the Credit Agreement in
order to make such interest payment in cash, Holdings may make such interest
payment in the form of additional Debentures having an aggregate principal
amount equal to the amount of such interest. Secondary trading in long-term
notes and debentures of corporate issuers is generally settled in
clearing-house or next-day funds. In contrast, the Debentures 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 Debentures will, therefore, be required by
the Depositary to be settled in immediately available funds. Holdings expects
that secondary trading in the Certificated Exchange Debentures 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 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 or Paying Agent.
"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 Holdings or to any of its Wholly Owned Subsidiaries; 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 Holdings, 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
Holdings to a Wholly Owned Subsidiary or by a Wholly Owned Subsidiary to
Holdings or to another Wholly Owned Subsidiary, (d) an issuance of Equity
Interests by a Wholly Owned Subsidiary to Holdings or to another Wholly Owned
Subsidiary, (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
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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 Holdings, 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
Holdings 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 Holdings 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, 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 Holdings 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 Holdings of its common stock (other than a public offering
pursuant to a registration statement on Form S-8), Vestar
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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 Holdings or (ii) after the initial public offering by
Holdings 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 Holdings which indicates that, 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 Holdings on a fully
diluted basis after giving effect to the conversion and exercise of all
outstanding warrants, options and other securities of 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
Holdings, 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 Holdings and its Subsidiaries taken as a
whole to any person or group (other than a Wholly Owned Subsidiary 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 Holdings (together with any new directors whose election by
the Board of Directors of Holdings or whose nomination for election by the
shareholders of Holdings, 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 Holdings, as the case may be, then in office.
"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 Holdings 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 Holdings'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 Holdings and its Restricted Subsidiaries required to be
reflected as expenses on the books and records of Holdings, 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 Holdings
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
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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 Holdings
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 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 Holdings,
CSI, the lenders that may be from time to time parties thereto and The Chase
Manhattan Bank (formerly known as 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 The Chase Manhattan 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
CSI 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.
"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 Debentures mature.
"Eligible Accounts Receivable" means at a particular date, all
accounts receivable owned by Holdings 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 Holdings and Restricted
Subsidiaries as to which the following requirements have been fulfilled: (a)
Holdings or a Restricted Subsidiary has lawful and absolute title to such
Inventory;
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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).
"Equity Offering" means a Public Equity Offering or a Private Equity
Offering, as applicable.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that may be made by Holdings
pursuant to the Registration Rights Agreement to exchange New Debentures for
Old Debentures.
"Existing Indebtedness" means the Indebtedness of Holdings and its
Restricted Subsidiaries in existence on the date of the 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 Holdings 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 Holdings
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 Holdings 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)
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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.
"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 Debenture 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 Holdings or a Wholly Owned Subsidiary of Holdings, 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 Holdings for consideration
consisting of common equity securities of Holdings or of any direct or indirect
parent of Holdings shall not be deemed to be an Investment.
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"Joint Venture" means (a) each of Clark-Schwebel Corporation,
Clark-Schwebel Tech-Fab Company, CS-Interglas AG and Asahi-Schwebel Co., Ltd.,
(b) any other Person whose sole asset is directly or indirectly (i) a Joint
Venture (unless such Joint Venture or Person is a Restricted Subsidiary by
virtue of an Investment pursuant to clause (d) of the definition of "Permitted
Investment") (ii) any interest in a Joint Venture and (iii) Joint Venture Funds.
"Joint Venture Funds" means any distributions or dividends, directly
or indirectly, of or from any of the Joint Ventures or interests in the Joint
Ventures or any proceeds from the sale of, or distributions or dividends from,
any of the Joint Ventures.
"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).
"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, Holdings and CSI as in effect on April 17, 1996, with
only such amendments, alterations, modifications or waivers thereto which are
not materially adverse to the interests of the CSI or the holders of Senior
Debentures.
"Maturity Date" means July 15, 2007.
"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 of CSI in an amount not to exceed $11.5 million.
"Net Proceeds" means the aggregate cash proceeds received by Holdings
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.
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"Non-Recourse Debt" means Indebtedness (i) as to which neither
Holdings 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 Holdings
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 shall not have any recourse to the stock or assets of Holdings
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 Debentures by Holdings.
"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 with respect to any Person a certificate
signed on behalf of such Person by two Officers of such Person, one of whom must
be the principal executive officer, the principal financial officer, the
treasurer or the principal accounting officer of such Person, that meets the
requirements of the Indenture.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of the
Indenture. The counsel may be an employee of or counsel to Holdings, any
Subsidiary of Holdings or the Trustee.
"Permitted Investments" means (a) any Investments permitted by the
CSI Indenture (regardless of whether such Indenture is in effect at the time of
such Investment); (b) 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"; (c) Investments by Holdings
or any Restricted Subsidiary in cash in an amount not to exceed $5.0 million in
the aggregate; (d) Investments by Holdings or any Restricted Subsidiary in cash
in an amount not to exceed $15.0 million in the aggregate to enable Holdings 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 (d) the Joint Venture in which the Investment is made
becomes a Restricted Subsidiary; (e) stock, obligations or securities received
in settlement of debts created in the ordinary course of business and owing to
Holdings or any Subsidiary or in satisfaction of judgments; (f) the conversion
or exchange of debt of CS-Interglas AG for common securities of CS-Interglas AG;
(g) the contribution of shares of stock or other equity securities of an
Unrestricted Subsidiary to another Subsidiary; (h) Investments in any Wholly
Owned Subsidiary of Holdings (or in CS Interglas AG to the extent it is a Wholly
Owned Subsidiary of Holdings) and that is engaged in the same or a similar line
of business as Holdings and its Restricted Subsidiaries were engaged in on the
date of the Indenture and reasonable extensions or expansions thereof; or (i)
Investments by Holdings in any Person if as a result of such Investment (1) such
Person becomes a Wholly Owned Subsidiary of Holdings that is engaged in the same
or a similar line of business as Holdings 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, Holdings or a Wholly Owned Subsidiary of Holdings that is engaged in the
same or a similar line of business as Holdings and its Restricted Subsidiaries
were engaged in on the
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date of the Indenture and reasonable extensions or expansions thereof; and
(j) Investments by Holdings or any of its Restricted Subsidiaries using Joint
Venture Funds.
"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 Holdings or any Restricted
Subsidiaries; (iii) Liens on property of a Person existing at the time such
Person is merged into or consolidated with Holdings or any Restricted Subsidiary
of Holdings; 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 Holdings; (iv)
Liens on property of a Person existing at the time such Person becomes a
Restricted Subsidiary of Holdings; (v) Liens on property existing at the time of
acquisition thereof by Holdings or any Restricted Subsidiary of Holdings,
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 Holdings or any Restricted Subsidiary of Holdings 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 Holdings 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 encumbrances not interfering in any material respect with the
business of Holdings 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; (xix) Liens arising from filing Uniform Commercial Code
financing statements regarding leases; and (xx) Liens permitted under the CSI
Indenture.
"Permitted Refinancing Debt" means (a) any Indebtedness included in
the definition of "Permitted Refinancing Debt" in the CSI Indenture and (b) any
other Indebtedness of Holdings 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 Holdings 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,
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refinanced, renewed, replaced, defeased or refunded is subordinated in right
of payment to the Senior Debentures, 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 Debentures on terms at least
as favorable to the Holders of Senior Debentures 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 Holdings 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 Equity Offering" means a private offering of (i) Equity
Interests of Holdings other than Disqualified Stock of Holdings or (ii) of
Equity Interests of Holdings' parent or indirect parent corporation to the
extent that the cash proceeds therefrom are contributed to the equity capital of
Holdings or are used to purchase Equity Interests of Holdings (other than
Disqualified Stock of Holdings).
"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 of Holdings other than Disqualified Stock
of Holdings or (ii) of Equity Interests of Holdings' parent or indirect parent
corporation other than Disqualified Stock of Holdings' parent or indirect parent
corporation to the extent that the cash proceeds therefrom are contributed to
the equity capital of Holdings or are used to purchase Equity Interests of
Holdings (other than Disqualified Stock of Holdings).
"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 July 14, 1997, by and among Holdings and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time.
"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.
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"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Notes" means the 10 1/2% Senior Notes due 2006 issued pursuant
to the CSI Indenture in a principal amount not to exceed $110 million.
"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 Change of Control" means, with respect to a Restricted
Subsidiary, such time as (i) prior to the initial public offering by such
Restricted Subsidiary 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 such
Restricted Subsidiary or Holdings ceases to own, directly or indirectly, 100% of
the voting power of such Restricted Subsidiary or (ii) after the initial public
offering by such Restricted Subsidiary 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 such Restricted Subsidiary which indicates
that, or such Restricted Subsidiary 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 such Restricted Subsidiary on a fully diluted basis after giving effect
to the conversion and exercise of all outstanding warrants, options and other
securities of such Restricted Subsidiary, 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 such Restricted Subsidiary,
calculated on such fully diluted basis, than beneficially owned by the Initial
Investors or Holdings, or (iii) the sale, lease or transfer of all or
substantially all of the assets of such Restricted Subsidiary and its
Subsidiaries taken as a whole to any person or group (other than the Initial
Investors or Holdings or any of its Subsidiaries), or (iv) during any period of
two consecutive calendar years, individuals who at the beginning of such period
constituted the board of directors of such Restricted Subsidiary (together with
any new directors whose election by the board of directors of such Restricted
Subsidiary or whose nomination for election by the shareholders of such
Restricted Subsidiary, 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 such
Restricted Subsidiary, as the case may be, then in office.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sections
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
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Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not
party to any agreement, contract, arrangement or understanding with Holdings
or any Restricted Subsidiary of Holdings unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to
Holdings or such Restricted Subsidiary than those that might be obtained at
the time from Persons who are not Affiliates of Holdings; (c) is a Person
with respect to which neither Holdings 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 Holdings 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 this
Indenture and any Indebtedness of such Subsidiary shall be deemed to be
incurred by a Restricted Subsidiary of Holdings 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," Holdings shall be in default of such covenant).
The Board of Directors of Holdings 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 Holdings of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such
Indebtedness is permitted 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 is or becomes, as
the case may be, a Subsidiary, it is or it shall, as the case may be,
initially be an Unrestricted Subsidiary (A) except to the extent that it
becomes a Subsidiary in connection with an Investment pursuant to clause (d)
of the definition of "Permitted Investment" or (B) unless such Subsidiary is
designated by the Board of Directors as a Restricted Subsidiary for purposes
of the Indenture pursuant to a Board Resolution at the time such Joint
Venture becomes a Subsidiary.
"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 the
Indenture.
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THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
The Old Debentures were originally issued by Holdings on July 14, 1997
to the Initial Purchaser in exchange for and in redemption of all of
Holdings' then outstanding shares of Preferred Stock. The Initial Purchaser
originally acquired the Preferred Stock from Vestar/CS Holding pursuant to
the Purchase Agreement, and upon issuance of the Old Debentures in redemption
of the Preferred Stock, sold the Old Debentures to qualified institutional
buyers and to institutional accredited investors in reliance on Rule 144A
under the Securities Act. As a condition to the Purchase Agreement, Holdings
entered into the Registration Rights Agreement with the Initial Purchaser
(the "Registration Rights Agreement") pursuant to which Holdings agreed, for
the benefit of the holders of the Old Debentures 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. Holdings 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 Debentures. For each Old Debenture
surrendered to Holdings pursuant to the Exchange Offer, the holder of such
Old Debenture will receive a New Debenture having a principal amount equal to
that of the surrendered Old Debenture. Interest on each New Debenture 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 Debentures would in
general be freely tradeable after the Exchange Offer without further
registration under the Securities Act. However, any purchaser of Old
Debentures who is an "affiliate" of Holdings or who intends to participate in
the Exchange Offer for the purpose of distributing the New Debentures (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 Debentures 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 Debentures, unless such sale or transfer is made pursuant
to an exemption from such requirements.
As contemplated by these non-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent
to Holdings in the Letter of Transmittal that (i) the New Debentures are to
be acquired by the holder or the person receiving such New Debentures,
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 Debentures, (iii) the holder or any such other
person has no arrangement or understanding with any person to participate in
the distribution of the New Debentures, (iv) neither the holder nor any such
other person is an "affiliate" of Holdings 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 Debentures it must comply with
the registration and prospectus delivery requirements of the Securities Act
in connection with any resale of the New Debentures and cannot rely on those
no-action letters. As indicated above, each Participating Broker-Dealer that
receives a New Debenture for its own account in exchange for Old Debentures
must acknowledge that it (i) acquired the Old Debentures 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 Holdings or any
"affiliate" of Holdings (within the meaning of Rule 405 under the Securities
Act) to distribute the New Debentures 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 Debentures. For a
description of the procedures for such resales by Participating
Broker-Dealers, see "Plan of Distribution."
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In the event that changes in the law or the applicable interpretations
of the staff of the Commission do not permit Holdings 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 Debentures (other than an "affiliate"
of Holdings or an Initial Purchaser) is not eligible to participate in the
Exchange Offer, Holdings will (a) file the Shelf Registration Statement
covering resales of the Old Debentures, (b) use its reasonable best efforts
to 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 Debentures have
been sold thereunder. Holdings will, in the event of the filing of the Shelf
Registration Statement, provide to each applicable holder of the Old
Debentures 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 Debentures. A holder of Old Debentures that
sells such Old Debentures pursuant to the Shelf Registration Statement
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 Debentures 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 Debentures 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 will file
an Exchange Offer Registration Statement with the Commission on or prior to
45 days after August 14, 1997, (ii) Holdings will use its best efforts to
have the Exchange Offer Registration Statement declared effective by the
Commission on or prior to 120 days after August 14, 1997, (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
Holdings will commence the Exchange Offer and use its best efforts to issue
on or prior to 150 days after the Closing Date (the "Exchange Offer
Effectiveness Date"), New Debentures in exchange for all Old Debentures
tendered prior thereto in the Exchange Offer and (iv) if obligated to file
the Shelf Registration Statement, Holdings 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 fails 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 fails to
consummate the Exchange Offer within 30 day 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 Holdings will pay Liquidated Damages to each
Holder of Old Debentures, 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 Debentures 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 Debentures. All accrued
Liquidated Damages will be paid by Holdings on each Damages Payment Date to
the Global Debenture 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.
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Holders of Old Debentures will be required to make certain
representations to Holdings (as described in the Registration Rights
Agreement) in order to participate in the Exchange Offer and will be required
to deliver information to be used in connection with the Shelf Registration
Statement 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 Debentures 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
Debentures who were eligible to participate in the Exchange Offer but who did
not tender their Old Debentures will not have any further registration rights
and such Old Debentures will continue to be subject to certain restrictions
on transfer. Accordingly, the liquidity of the market for such Old Debentures
could be adversely affected.
Terms of the Exchange
Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, Holdings will accept any and all
Old Debentures validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date. Holdings will issue $1,000 principal
amount of New Debentures in exchange for each $1,000 principal amount of
outstanding Old Debentures accepted in the Exchange Offer. Holders may tender
some or all of their Old Debentures pursuant to the Exchange Offer. However,
Old Debentures may be tendered only in integral multiples of $1,000.
The form and terms of the New Debentures are the same as the form and
terms of the Old Debentures except that (i) the New Debentures bear a Series
B designation and a different CUSIP Number from the Old Debentures, (ii) the
New Debentures have been registered under the Securities Act and hence will
not bear legends restricting the transfer thereof and (iii) the holders of
the New Debentures 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 Debentures 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 Debentures will
evidence the same debt as the Old Debentures and will be entitled to the
benefits of the Indenture.
As of the date of this Prospectus, $45,994,000 aggregate principal
amount of Old Debentures were outstanding. This Prospectus and the Letter of
Transmittal will be mailed initially to the holders of record of the Old
Debentures as of the close of business on November 24, 1997.
Holders of Old Debentures do not have any appraisal or dissenters'
rights under the General Corporation Law of Delaware or the Indenture in
connection with the Exchange Offer. Holdings 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.
Holdings shall be deemed to have accepted validly tendered Old
Debentures when, as and if Holdings 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 Debentures from
Holdings.
If any tendered Old Debentures 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
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Debentures will be returned, without expense, to the tendering holder thereof
as promptly as practicable after the Expiration Date.
Holders who tender Old Debentures 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 Debentures pursuant to the Exchange Offer. Holdings will pay all 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
December 30, 1997, unless Holdings, 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, Holdings 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.
Holdings reserves the right, in its sole discretion, (i) to delay
accepting any Old Debentures, 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 Debentures
The New Debentures will bear interest from their date of issuance.
Holders of Old Debentures that are accepted for exchange will receive accrued
interest thereon to, but not including, the date of issuance of the New
Debentures. Such interest will be paid with the first interest payment on
the New Debentures on January 15, 1998 in the manner provided in the
Debentures. Interest on the Old Debentures accepted for exchange will cease
to accrue upon issuance of the New Debentures.
Interest on the Debentures is payable semi-annually on each January 15
and July 15, commencing on January 15, 1998; provided, however, that if on
any interest payment date CSI could not dividend or distribute a sufficient
amount of cash to Holdings under the terms of the CSI Indenture or the Credit
Agreement in order to make such interest payment in cash, Holdings may make
such interest payment in the form of additional Debentures having an
aggregate principal amount equal to the amount of such interest.
Procedures for Tendering
Only a holder of Old Debentures may tender such Old Debentures in the
Exchange Offer. To tender in the Exchange Offer, a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantee, or (in the case of a book-entry transfer), an Agent's
Message in lieu of the Letter of Transmittal, and any other required
documents, must be 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. In addition, prior to 5:00 p.m., New York City time, on the
Expiration Date, either (a) certificates for tendered Debentures must be
received by the Exchange Agent at such address or (b) such Debentures must be
transferred pursuant to the procedures for book-entry transfer described
below (and a
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confirmation of such tender received by the Exchange Agent, including an
Agent's Message if the tendering holder has not delivered a Letter of
Transmittal).
The term "Agent's Message" means a message transmitted by DTC, received
by the Exchange Agent and forming part of the confirmation of a book-entry
transfer, which states that DTC has received an express acknowledgment from
the participant in DTC tendering Debentures which are the subject of such
book-entry confirmation, that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal and that Holdings may enforce
such agreement against such participant. In the case of an Agent's Message
relating to guaranteed delivery, the term means a message transmitted by DTC
and received by the Exchange Agent, which states that DTC has received an
express acknowledgment from the participant in DTC tendering Old Debentures
that such participant has received and agrees to be bound by the Notice of
Guaranteed Delivery.
By executing the Letter of Transmittal, each holder will make to
Holdings 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 Holdings will
constitute agreement between such holder and Holdings in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD DEBENTURES 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 DEBENTURES
SHOULD BE SENT TO HOLDINGS. 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 Debentures 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 owner's 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 Debentures 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) 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 Debentures listed therein, such Old Debentures
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
Debentures with the signature thereon guaranteed by an Eligible Institution.
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If the Letter of Transmittal or any Old Debentures 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 evidence
satisfactory to Holdings of their authority to so act must be submitted with
the Letter of Transmittal.
Holdings understands that the Exchange Agent will make a request
promptly after the date of this Prospectus to establish accounts with respect
to the Old Debentures 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 Debentures by causing
such Book-Entry Transfer Facility to transfer such Old Debentures into the
Exchange Agent's account with respect to the Old Debentures in accordance
with the Book-Entry Transfer Facility's procedures for such transfer.
Although delivery of the Old Debentures 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, or (in the case of a
book-entry transfer) an Agent's Message in lieu of the Letter of Transmittal,
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.
The Exchange Agent and DTC have confirmed that the Exchange Offer is
eligible for the DTC Automated Tender Offer Program ("ATOP"). Accordingly,
DTC participants may electronically transmit their acceptance of the Exchange
Offer by causing DTC to transfer Old Debentures to the Exchange Agent in
accordance with DTC's ATOP procedures for transfer. DTC will then send an
Agent's Message to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Debentures and withdrawal of tendered
Old Debentures will be determined by Holdings in its sole discretion, which
determination will be final and binding. Holdings reserves the absolute
right to reject any and all Old Debentures not properly tendered or any Old
Debentures Holdings's acceptance of which would, in the opinion of counsel
for Holdings, be unlawful. Holdings also reserves the right in its sole
discretion to waive any defects, irregularities or conditions of tender as to
particular Old Debentures. Holdings' 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 Debentures must
be cured within such time as Holdings shall determine. Although Holdings
intends to notify holders of defects or irregularities with respect to
tenders of Old Debentures, neither Holdings, the Exchange Agent nor any other
person shall incur any liability for failure to waive such notification.
Tenders of Old Debentures will not be deemed to have been made until such
defects or irregularities have been cured or waived. Any Old Debentures
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 Debentures and (i) whose Old
Debentures are not immediately available, (ii) who cannot deliver their Old
Debentures, 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:
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(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 Debentures and the principal amount of
Old Debentures 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
Debentures (or a confirmation of book-entry transfer of such Old
Debentures 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 (or
facsimile thereof), as well as the certificate(s) representing all
tendered Old Debentures in proper form for transfer (or a confirmation
of book-entry transfer of such Old Debentures 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 Debentures according to the
guaranteed delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Old Debentures 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 Debentures 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
Debentures to be withdrawn (the "Depositor"), (ii) identify the Old
Debentures to be withdrawn (including the certificate number(s) and principal
amount of such Old Debentures, or, in the case of Old Debentures 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 the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Old Debentures were tendered (including any required signature guarantees) or
be accompanied by documents of transfer sufficient to have the Trustee with
respect to the Old Debentures register the transfer of such Old Debentures
into the name of the person withdrawing the tender and (iv) specify the name
in which any such Old Debentures 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 Holdings
whose determination shall be final and binding on all parties. Any Old
Debentures so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no New Debentures will be issued with
respect thereto unless the Old Debentures so withdrawn are validly
retendered. Any Old Debentures 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 Debentures may be
retendered by following one of the procedures described above under
"--Procedures for Tendering" at any time prior to the Expiration Date.
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Conditions
Notwithstanding any other term of the Exchange Offer, Holdings shall not
be required to accept for exchange, or exchange New Debentures for, any Old
Debentures, and may terminate or amend the Exchange Offer as provided herein
before the acceptance of such Old Debentures, 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 Holdings, might
materially impair the ability of Holdings to proceed with the Exchange
Offer or any material adverse development has occurred in any existing
action or proceeding with respect to Holdings 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 Holdings, might materially impair the ability of
Holdings to proceed with the Exchange Offer or materially impair the
contemplated benefits of the Exchange Offer to Holdings; or
(c) any governmental approval has not been obtained, which
approval Holdings shall, in its reasonable discretion, deem necessary
for the consummation of the Exchange Offer as contemplated hereby.
If Holdings determines in its reasonable judgment that any of the
conditions are not satisfied, Holdings may (i) refuse to accept any Old
Debentures and return all tendered Debentures to the tendering holders, (ii)
extend the Exchange Offer and retain Old Debentures tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders
to withdraw such Debentures (see "--Withdrawal of Tenders") or (iii) waive
such unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Old Debentures which have not been withdrawn.
Exchange Agent
The Exchange Agent for the Exchange Offer is:
To: State Street Bank and Trust Company (the "Exchange Agent")
<TABLE>
<S> <C>
By Mail: By Overnight Courier or Hand Delivery:
State Street Bank and Trust Company State Street Bank and Trust Company
Corporate Trust Department Corporate Trust Department
P.O. Box 778 Two International Plaza, 4th Floor
Boston, Massachusetts 02102-0078 Boston, Massachusetts 02110
Attention: Sandra Szczsponik Attention: Sandra Szczsponik
</TABLE>
By Facsimile Transmission:
(for Eligible Institutions only)
State Street Bank and Trust Company
(617) 664-5232
Attention: Sandra Szczsponik
For Information or Confirmation by Telephone:
(617) 664-5314
DELIVERY OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
-105-
<PAGE>
Fees and Expenses
The expenses of soliciting tenders will be borne by Holdings. 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 Holdings and its affiliates.
Holdings 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. Holdings, 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 Holdings. 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 Debentures will be recorded at the same carrying value as the
Old Debentures, which is face value, as reflected in Holdings' accounting
records on the date of exchange. Accordingly, no gain or loss for accounting
purposes will be recognized by Holdings. The expenses of the Exchange Offer
will be expensed over the term of the New Debentures.
Consequences of Failure to Exchange
The Old Debentures that are not exchanged for New Debentures pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such Old
Debentures may be resold only (i) to Holdings (upon redemption thereof or
otherwise), (ii) so long as the Old Debentures 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 Holdings), (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
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 Debentures
With respect to resales of New Debentures, based on interpretations by
the staff of the Commission set forth in no-action letters issued to third
parties, Holdings believes that a holder or other person who receives New
Debentures, whether or not such person is the holder (other than a person
that is an "affiliate" of Holdings within the meaning of Rule 405 under the
Securities Act) who receives New Debentures in exchange for Old Debentures in
the ordinary course of business and who is not participating, does not intend
to participate, and has no arrangement or understanding with any person to
participate, in the distribution of the New Debentures, will be allowed to
resell the New Debentures to the public without further registration under
the Securities Act and without delivering to the purchasers of the New
Debentures a prospectus that satisfies the requirements of Section 10 of the
Securities Act. However, if any holder acquires New Debentures in the
Exchange Offer for the purpose of distributing or participating in a
distribution of the New Debentures, 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
Debentures
-106-
<PAGE>
for its own account in exchange for Old Debentures, where such New Debentures
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
Debentures.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent
to Holdings in the Letter of Transmittal that (i) the New Debentures are to
be acquired by the holder or the person receiving such New Debentures,
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 Debentures, (iii) the holder or any such other
person has no arrangement or understanding with any person to participate in
the distribution of the New Debentures, (iv) neither the holder nor any such
other person is an "affiliate" of Holdings 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 Debentures it must comply with
the registration and prospectus delivery requirements of the Securities Act
in connection with any resale of the New Debentures and cannot rely on those
no-action letters. As indicated above, each Participating Broker-Dealer that
receives a New Debenture for its own account in exchange for Old Debentures
must acknowledge that it (i) acquired the Old Debentures for its own account
as a result of market-making activities or other trading activities, (ii) has
not entered into any arrangement with Holdings (within the meaning of Rule
405 under the Securities Act or understanding with Holdings or any
"affiliate" of the Securities Act) to distribute the New Debentures 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 Debentures. For a description of the procedures for such resales by
Participating Broker-Dealers, see "Plan of Distribution."
-107-
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is based upon current provisions of the
Internal Revenue Code of 1986, as amended, applicable Treasury regulations,
judicial authority and administrative rulings and practice. There can be no
assurance that the Internal Revenue Service (the "Service") will not take a
contrary view, and no ruling from the Service has been or will be sought.
Legislative, judicial or administrative changes or interpretations may be
forthcoming that could alter or modify the statements and conditions set
forth herein. Any such changes or interpretations may or may not be
retroactive and could affect the tax consequences to holders. Certain
holders (including insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) may be subject to special rules
not discussed below. Holdings recommends that each holder consult such
holder's own tax advisor as to the particular tax consequences of exchanging
such holder's Old Debentures for New Debentures, including the applicability
and effect of any state, local or foreign tax laws.
Kirkland & Ellis, special counsel to Holdings, has advised Holdings that
in its opinion, the exchange of the Old Debentures for New Debentures
pursuant to the Exchange Offer will not be treated as an "exchange" for
federal income tax purposes because the New Debentures will not be considered
to differ materially in kind or extent from the Old Debentures. Rather, the
New Debentures received by a holder will be treated as a continuation of the
Old Debentures in the hands of such holder. As a result, there will be no
federal income tax consequences to holders exchanging Debentures for New
Debentures pursuant to the Exchange Offer.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives New Debentures 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 Debentures.
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
Debentures received in exchange for Old Debentures where such Old Debentures
were acquired as a result of market-making activities or other trading
activities. Holdings 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.
Holdings will not receive any proceeds from any sales of the New
Debentures by Participating Broker-Dealers. New Debentures 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 Debentures 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 Broker-Dealer and/or the purchasers of any such New Debentures.
Any Participating Broker-Dealer that resells the New Debentures 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 Debentures
may be deemed to be an "underwriter" within the meaning of the Securities Act
and any profit on any such resale of New Debentures 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.
-108-
<PAGE>
LEGAL MATTERS
The validity of the issuance of the New Debentures will be passed upon
for Holdings by Kirkland & Ellis, Washington, D.C. 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 30, 1995,
and for the two 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 December
28, 1996 and for the fiscal year then ended 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 report.
-109-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Clark-Schwebel Holdings, Inc.
Audited Financial Statements
Independent Auditor's Report .................................... F-2
Consolidated Balance Sheets ..................................... F-4
Consolidated Statements of Income ............................... F-5
Consolidated Statements of Cash Flows ........................... F-6
Notes to Consolidated Financial Statements ...................... F-7
Unaudited Consolidated Financial Statements
Consolidated Balance Sheets ..................................... F-19
Consolidated Statements of Income ............................... F-20
Consolidated Statements of Cash Flows ........................... F-21
Notes to Condensed and Consolidated Financial Statements ........ F-22
F-1
<PAGE>
Report of Independent Public Accountants
To the Board of Directors of
Clark-Schwebel Holdings, Inc.:
We have audited the accompanying consolidated balance sheet of Clark-Schwebel
Holdings, Inc. (a Delaware corporation) and subsidiaries as of December 28,
1996, and the related consolidated statements of income and cash flows for each
of the two periods in the year ending December 28, 1996. 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 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 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Clark-Schwebel Holdings, Inc.
and subsidiaries as of December 28, 1996, and the results of their operations
and their cash flows for each of the two periods in the year ended December 28,
1996, in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in the index are the
responsibility of the Company's management and are presented for the purposes of
complying with the Securities and Exchange Commission's rules and are not a
required part of the basic financial statements. These schedules have been
subjected to the auditing procedures applied in our audit of the basic financial
statements and, in our opinion, fairly state in all material respects the
financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Columbia, South Carolina,
February 14, 1997.
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheet of Fort Mill A Inc. (the
"Predecessor") (a wholly owned subsidiary of Springs Industries, Inc.) as of
December 30, 1995, and the related statements of income and cash flows for the
two fiscal years in the period ended December 30, 1995. These financial
statements are the responsibility of the Predecessor's management. Our
responsibility is to express an opinion on the 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 30, 1995,
and the results of its operations and its cash flows for each of the two 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-3
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 30, 1995 and DECEMBER 28, 1996
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
DECEMBER 30, DECEMBER 28,
1995 1996
--------- ---------
(Predecessor (Successor
Basis) Basis)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................ $ 584 $ 4,064
Accounts receivable, net ......................... 33,298 25,794
Inventories, net ................................. 28,791 33,625
Other ............................................ 2,069 592
--------- ---------
Total current assets ....................... 64,742 64,075
--------- ---------
PROPERTY, PLANT AND EQUIPMENT .......................... 96,791 67,936
Accumulated depreciation ......................... (43,777) (5,841)
--------- ---------
Property, plant and equipment, net ......... 53,014 62,095
--------- ---------
EQUITY INVESTMENTS ..................................... 62,904 63,426
NET ASSETS OF DISCONTINUED OPERATIONS .................. 2,600 0
GOODWILL ............................................... 5,096 44,333
OTHER ASSETS ........................................... 373 6,808
--------- ---------
TOTAL ASSETS ........................................... $ 188,729 $ 240,737
========= =========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable ................................. $ 9,032 $ 21,448
Accrued liabilities .............................. 7,328 15,330
Deferred tax liabilities -- current .............. 2,024 2,056
Current maturities of long-term debt ............. 79 51
--------- ---------
Total current liabilities .................. 18,463 38,885
LONG-TERM DEBT ......................................... 5,907 123,440
DEFERRED TAX LIABILITIES ............................... 14,826 21,458
LONG-TERM BENEFIT PLANS, DEFERRED COMPENSATION AND OTHER 5,570 7,121
COMMITMENTS AND CONTINGENCIES ..........................
--------- ---------
TOTAL LIABILITIES ...................................... 44,766 190,904
--------- ---------
EQUITY:
Preferred stock (par value per share -
$.01) - 12.5% participating, 10,000
shares authorized, 0 and 1,000 shares
issued and outstanding, respectively ................. 0 35,000
Common stock (par value per share -
$.01) - 100,000 shares authorized,
9,000 shares issued and outstanding,
less management loans of $822 ........................ 0 9,178
Common stock (par value per share -
$1.00) - 1,000 shares authorized, 100
shares issued and outstanding ........................ 1 0
Retained earnings ...................................... 0 7,005
Investment by Springs .................................. 134,357 0
Cumulative translation adjustment ...................... 9,605 (1,350)
--------- ---------
Total equity ........................................... 143,963 49,833
--------- ---------
TOTAL LIABILITIES AND EQUITY ........................... $ 188,729 $ 240,737
========= =========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
1995 - April 18 -
April 17, December 28,
1994 1995 1996 1996
--------- --------- --------- ---------
(Predecessor Basis) (Successor Basis)
<S> <C> <C> <C> <C>
Net sales ....................................... $ 189,419 $ 231,306 $ 68,911 $ 152,003
Cost of goods sold .............................. 160,747 191,978 54,958 118,605
--------- --------- --------- ---------
Gross profit .................................... 28,672 39,328 13,953 33,398
Selling, general and adminstrative
expenses .................................. 14,370 17,750 4,812 10,418
Idle equipment write-off ........................ 1,836 0 0 0
--------- --------- --------- ---------
Operating income .......................... 12,466 21,578 9,141 22,980
Other income (expense):
Interest expense .......................... (401) (401) (148) (10,061)
Other, net ................................ (28) 12 (5) 50
--------- --------- --------- ---------
Income before income taxes ...................... 12,037 21,189 8,988 12,969
Provision for income tax ........................ (4,896) (8,444) (3,595) (5,460)
Income from equity investees, net ............... 1,176 2,553 1,174 2,633
--------- --------- --------- ---------
Income from continuing operations ............... 8,317 15,298 6,567 10,142
Discontinued operations:
Income from discontinued operations, net .. 426 111 0 0
Gain on sale of discontinued operation, net 2,573 0 0 0
--------- --------- --------- ---------
Net income ...................................... $ 11,316 $ 15,409 $ 6,567 10,142
========= ========= =========
Accrued dividends on preferred stock ............ (3,137)
---------
Net income applicable to common shares .... $ 7,005
=========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, DECEMBER 30, 1995 AND DECEMBER 28, 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
December 31,
1995 - April 18 -
April 17, December 28,
1994 1995 1996 1996
--------- --------- --------- ---------
(Predecessor Basis) (Successor
Basis)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income .......................................................... $ 11,316 $ 15,409 $ 6,567 $ 10,142
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ..................................... 10,028 11,128 3,526 7,284
Idle equipment write-off .......................................... 1,836 0 0 0
Deferred tax provision ............................................ 577 176 1,404 (1,128)
Income from equity investments, net ............................... (1,176) (2,553) (1,174) (2,633)
Income from discontinued operations, net .......................... (426) (111) 0 0
Gain on sale of discontinued operation, net ....................... (2,573) 0 0 0
Changes in assets and liabilities, net of the effects of the
purchase of the company:
Accounts receivable ........................................... (831) (8,244) 1,832 3,811
Inventories ................................................... (1,825) (2,931) (2,883) 3,323
Prepaid expenses and other .................................... (2,055) 1,465 (187) 1,399
Accounts payable .............................................. 833 3,181 (697) 14,011
Accrued liabilities ........................................... 261 367 (289) 5,076
Other ............................................................... 200 124 (131) (151)
--------- --------- --------- ---------
Net cash provided by operating activities ............... 16,165 18,011 7,968 41,134
--------- --------- --------- ---------
INVESTING ACTIVITIES:
Purchases of equipment .............................................. (11,543) (8,429) (1,603) (2,035)
Proceeds from sale of discontinued operation ........................ 19,130 0 0 0
Proceeds from sale of assets ........................................ 18 42 0 0
Payment for purchase of company ..................................... 0 0 0 (192,895)
--------- --------- --------- ---------
Net cash provided by (used in) investing activities ..... 7,605 (8,387) (1,603) (194,930)
--------- --------- --------- ---------
FINANCING ACTIVITIES:
Investment by Springs ............................................... (23,774) (8,982) (10,955) 0
Transfer of assets retained by Springs .............................. 0 0 4,461 0
Proceeds from issuance of stock ..................................... 0 0 0 45,000
Payment of acquisition fees, net .................................... 0 0 0 (10,128)
Loans to management investors ....................................... 0 0 0 (822)
Proceeds from long-term borrowings .................................. 0 0 0 160,000
Principal payments under long-term debt and capital lease obligations (43) (87) (29) (36,616)
--------- --------- --------- ---------
Net cash provided by (used in) financing activities ..... (23,817) (9,069) (6,523) 157,434
--------- --------- --------- ---------
NET CHANGE IN CASH ........................................................ (47) 555 (158) 3,638
CASH, BEGINNING OF PERIOD / YEAR .......................................... 76 29 584 426
--------- --------- --------- ---------
CASH, END OF PERIOD / YEAR ................................................ $ 29 $ 584 $ 426 $ 4,064
========= ========= ========= =========
CASH PAID FOR INTEREST .................................................... $ 401 $ 401 $ 120 $ 7,081
========= ========= ========= =========
CASH PAID FOR TAXES ....................................................... $ 0 $ 0 $ 0 $ 7,546
========= ========= ========= =========
</TABLE>
Noncash Transaction: The Company accrued dividends on preferred stock of $3,137
for the period of April 18 - December 28, 1996.
See notes to consolidated financial statements.
F-6
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS in THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the assets,
liabilities and results of operations as of December 28, 1996 and for the period
from April 18, 1996 to December 28, 1996 of Clark-Schwebel Holdings, Inc., the
successor company ("Company"), following the change in ownership (see Note 2).
The Company's primary assets is the capital stock of Clark-Schwebel, Inc., its
operating company. The statements also include the assets, liabilities, and
results of operations as of and for the period ended December 30, 1995 and
December 31, 1994, and for the period from December 31, 1995 to April 17, 1996
of Fort Mill A Inc., the predecessor company ("Predecessor Company"), prior to
the change in ownership. The statements of the Predecessor Company include
certain liabilities and expenses that historically were accounted for only at
the Springs Industries, Inc. ("Springs") - parent company level. The financial
statements of the Predecessor Company and Successor Company are not comparable
in certain respects due to differences between the costs bases of certain assets
and liabilities and the impact of interest expense on the Successor Company (see
Note 2).
Summarized Financial Information---The following table provides summarized
financial information for Clark-Schwebel, Inc., the operating company, on a
stand alone basis. Clark-Schwebel, Inc. is a wholly owned subsidiary of
Clark-Schwebel Holdings, Inc. and its separate financial statements are not
included or filed separately because management has determined that they would
not be material to investors since they are not significantly different from the
financial statements of Clark-Schwebel Holdings, Inc. The balance sheet
information is as of December 28, 1996 and the income statement information is
for the period of April 18, 1996 through December 28, 1996.
1996
----
(Successor)
Current assets .......................................... $ 64,038
Noncurrent assets ....................................... 176,662
--------
Total assets ............................................ $240,700
========
Current liabilities ..................................... $ 38,881
Noncurrent liabilities .................................. 152,019
Equity .................................................. 49,800
--------
Total liabilities and equity ............................ $240,700
========
Net sales ............................................... $152,003
Gross profit ............................................ 33,398
Income from continuing operations ....................... 10,135
Net income .............................................. 6,998
========
All assets of Clark-Schwebel, Inc. represent restricted net assets with
the exception of the foreign equity investments and distributions received from
the foreign equity investments. Except in limited circumstances, Clark-Schwebel,
Inc. is prohibited from transferring restricted net assets to Clark-Schwebel
Holdings, Inc. in the form of cash dividends, loans, or advances without the
consent of a third party lender. The amount of unrestricted net assets at
December 28, 1996 is $61,221, which represents the book value of the foreign
equity investments ($59,906) and distributions received in the form of cash from
the foreign equity investments ($1,315).
Operations---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.
F-7
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
2. PURCHASE 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, LLC
(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 and management investors had an 18% common equity
interest in the Company.
Under the Agreement, Springs agreed to (i) assume responsibility for
repayment of the Industrial Revenue Bonds payable in 2010 and related accrued
interest (see Note 4), (ii) pay $959 in certain accrued employee benefits, (iii)
provide indemnification for certain environmental, tax and other matters
(including the environmental matter described in Note 14 for which $175 was
accrued at December 30, 1995), (iv) 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, and (v) retain the $99 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 canceled.
The acquisition was accounted for as a purchase business combination. The
adjustment to net assets represents the step-up to fair value of the net assets
acquired as follows:
Purchase price ................................................... $ 192,895
Nonfinancing portion of fees and expenses ........................ 2,780
---------
Total purchase price ............................................. 195,675
Less fair value of net assets acquired ........................... (150,547)
---------
Excess of purchase price over fair value of net assets acquired .. $ 45,128
=========
The fair values of Clark-Schwebel, Inc.'s assets and liabilities at the
date of acquisition are presented below:
Current assets .......................................... $ 68,410
Property, plant and equipment ............................ 66,391
Equity investments ....................................... 62,314
Current liabilities ...................................... (20,282)
Other liabilities ........................................ (26,286)
---------
Net assets acquired ...................................... $ 150,547
=========
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. This
resulted in a step-up in the basis of inventory of $5,274 and property, plant
and equipment of $15,000. The excess of the purchase price over the fair value
of net assets acquired of $45,128 was recorded as goodwill, and is being
amortized on a straight-line basis over a period of 40 years.
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 Vestar.
In accordance with agreements related to the change of ownership
transaction, certain assets totaling $4,461 were transferred to Springs in the
first quarter of 1996. This balance has been separately disclosed on the face of
the accompanying 1996 statements of cash flows.
F-8
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
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.
Basis of Consolidation - The consolidated financial statements include the
accounts of the Company and its operating company and wholly-owned subsidiary,
Clark-Schwebel, Inc. All material intercompany amounts and transactions have
been eliminated.
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 December 31, 1994, December 30, 1995 and December 28, 1996
are referred to herein as 1994, 1995 and 1996, respectively. The 1994, 1995 and
1996 fiscal years each consisted of 52 weeks. Due to the purchase transaction on
April 17, 1996, the 52 week fiscal year in 1996 is comprised of the operations
of the Predecessor Company and the Successor Company.
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 include the allowance for doubtful
accounts receivable and the liabilities for certain long-term benefit plans.
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 the goods are shipped.
Cash and Cash Equivalents - Cash and cash equivalents include cash on hand
and in the bank as well as short term investments held for the purpose of
general liquidity. Such investments normally mature within three months from the
date of acquisition.
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 $2,133 at December 30, 1995
and $853 at December 28, 1996. The reserve at December 30, 1995 included $1,400
applicable to $2,782 of accounts receivable from one customer. The provision for
uncollectible amounts was $240, $1,842, ($84), and $160 for fiscal 1994, 1995,
1996 (Predecessor) and 1996 (Successor), respectively. Net write-offs were $29,
$349, ($6), and ($38), respectively, for the same periods.
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. (headquartered in Japan)
and Clark Schwebel Tech-Fab Company (located in Anderson, SC), which are
accounted for using the equity method of accounting.
F-9
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued)
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 stockholders' equity.
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.
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.
Certain Compensation Plans - Certain key employees of the Company were
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 for 1994, 1995, 1996 (Predecessor) and
1996 (Successor) was approximately $125, $145, $418 and $0, respectively.
4. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
December 30, December 28,
1995 1996
--------- ---------
<S> <C> <C>
Senior Notes, payable in 2006, interest at 10.5% ....................... $ 0 $ 110,000
Term Loan payable in quarterly installments of $440 beginning
December 31, 1997, $500 beginning March 31, 1998, $750 beginning
September 30, 1999, and $1,000 beginning September 30, 2001 through
maturity in 2002, interest at
variable rates ....................................................... 0 13,440
Revolving Credit Agreement, due 2002, interest at variable rates ....... 0 0
Capitalized lease obligation payable in equal monthly
installments of $7, through August 1997 .............................. 136 51
Industrial Revenue Bonds, payable in 2010, interest at 6.85%
(See Note 2) ......................................................... 5,850 0
--------- ---------
Total .................................................................. 5,986 123,491
Less current maturities ................................................ (79) (51)
--------- ---------
Long-term debt ......................................................... $ 5,907 $ 123,440
========= =========
</TABLE>
The senior notes accrue interest at a fixed rate of 10.5% per annum,
with interest payable semiannually in arrears on April 15 and October 15. The
senior notes are not redeemable at the option of the Company prior to April
15, 2001. The debt under the credit facility bears interest which varies with
LIBOR plus a margin which fluctuates based on the Company's leverage ratio.
On December 28, 1996 the interest rate was 6.9375% per annum. Interest is
typically payable monthly. The Company pays a quarterly commitment fee equal
to 0.375% on the unused portion of the revolving credit facility which was
$55,000 at December 28, 1996. Management estimates the fair value of the
Senior Notes is $115,500 at December 28, 1996, based on the estimated market
trading price for the Senior Notes as of December 28,
F-10
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
4. LONG-TERM DEBT - (Continued)
1996. The senior notes and the debt under the credit facility represent
liabilities of Clark-Schwebel, Inc., the operating company, and are
guaranteed by Clark-Schwebel Holdings, Inc.
The revolving credit facility and the senior notes' indenture contain
certain restrictive covenants which provide limitations on Clark-Schwebel, Inc.,
the operating 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.
At December 28, 1996, the Company was in compliance with such covenants.
Substantially all of the assets of Clark-Schwebel, Inc., the operating
company, are subject to liens in favor of the revolving credit facility lenders.
The aggregate five-year maturities of long-term debt subsequent to
December 28, 1996 follow: 1997 - $491; 1998 - $2,000; 1999 - $2,500; 2000 -
$3,000; 2001 - $3,500.
5. INVENTORIES
Inventories consisted of the following:
December 30, December 28,
1995 1996
-------- --------
Finished goods ............................... $ 10,145 $ 10,256
Raw material and supplies .................... 9,868 9,254
In process ................................... 12,828 15,215
-------- --------
Total at standard cost
(which approximates average cost) .......... 32,841 34,725
Less LIFO reserve ............................ (4,050) (1,100)
-------- --------
Inventories, net ............................. $ 28,791 $ 33,625
======== ========
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
1995 1996
-------- --------
Land ....................................... $ 1,306 $ 1,875
Buildings and improvements ................. 22,479 19,381
Machinery and equipment .................... 69,438 43,113
Construction in progress ................... 3,568 3,567
-------- --------
Total ...................................... 96,791 67,936
Less accumulated depreciation .............. (43,777) (5,841)
-------- --------
Property, plant and equipment, net ......... $ 53,014 $ 62,095
======== ========
F-11
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
7. OTHER CURRENT LIABILITIES
Accrued liabilities consisted of the following:
1995 1996
-------- --------
Accrued retirement and incentive ................... $ 2,361 $ 3,841
Employee benefit accruals .......................... 1,868 3,017
Accrued payroll .................................... 1,050 2,759
Accrued interest ................................... 4 2,477
Other accrued liabilities .......................... 1,044 2,235
Unearned revenue ................................... 1,001 1,001
-------- --------
Total accrued liabilities .......................... $ 7,328 $ 15,330
======== ========
8. INVESTMENT BY SPRINGS
The changes in Investment by Springs for the fiscal years ended December
31,1994 and December 30, 1995 were as follows:
1994 1995
--------- ---------
Beginning of year ............................ $ 143,044 $ 127,930
Net income ................................... 11,316 15,409
Intercompany charge for current
income tax provision ....................... 6,905 9,919
Intercompany charge for certain
administrative services .................... 2,452 3,041
Net cash paid to Springs, other
intercompany charges and cash paid by
Springs on behalf of the Company ........... (35,787) (21,942)
--------- ---------
End of year .................................. $ 127,930 $ 134,357
========= =========
Weighted average of Investment by Springs .... $ 135,487 $ 131,144
========= =========
The Investment by Springs account was eliminated at April 17, 1996 as part
of the accounting for the purchase transaction (see Note 1).
9. STOCKHOLDERS' EQUITY
Changes in stockholders' equity on a successor basis for the period of
April 18, 1996 through December 28, 1996 consisted of the following (in
thousands, except share amounts):
<TABLE>
<CAPTION>
Preferred Stock Common Stock Cumulative
--------------- ------------ Retained Translation
Shares Amount Shares Amount Earnings Adjustment
------ ------ ------ ------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Preferred stock issued on April 17,1996 1,000 $ 35,000
Common stock issued on April 17,1996 .. 9,000 $ 10,000
Management loans (see Note 16) ........ (822)
Net income ............................ $ 10,142
Accrued preferred stock dividend ...... (3,137)
Cumulative translation adjustment ..... ($ 1,350)
-------- -------- -------- -------- -------- --------
Balance at December 28, 1996 .......... 1,000 $ 35,000 9,000 $ 9,178 $ 7,005 ($ 1,350)
======== ======== ======== ======== ======== ========
</TABLE>
F-12
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
10. EMPLOYEE BENEFIT PLANS
Employees Profit Sharing/Retirement Plans
Substantially all associates of the Company are covered by defined
contribution plans. In 1994, 1995, and 1996 (Predecessor Company) the plan was
provided by Springs. The 1996 Successor Company plan operated substantially the
same as the Springs plan. The Company makes contributions to a defined
contribution Profit Sharing Plan annually based upon the profitability of the
Company. The contribution is allocated to participant accounts based upon
participant compensation. The amount of the Company contribution is subject to
approval by the Board of Directors.
In addition, associates are allowed to contribute a percentage of their
compensation to a defined contribution plan and the Company will match a portion
of their contribution. This plan, available to substantially all associates,
contains a matched savings provision that permits pre-tax employee
contributions. Participants can contribute from 1% to 12% of their compensation
and receive a 50% matching employer contribution on up to 4% of the
participant's contribution.
Defined contribution plan expense for 1994, 1995, 1996 (Predecessor) and
1996 (Successor) was $1,974, $1,810, $964 and $1,655, respectively.
Postretirement Benefits Other Than Pensions
The Company participates in a defined benefit postretirement medical plan
which covers substantially all salaried and nonsalaried employees. In 1994, 1995
and 1996 (Predecessor Company) the plan was provided by Springs. The benefit
cost and benefit obligation for these periods was allocated by Springs to the
Predecessor Company. The 1996 Successor Company plan operated identically as the
Springs plan, but was a separate plan on a stand alone company basis. 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. Postretirement benefit cost
consisted of the following components:
1994 1995 1996 1996
------ ------ ------ ------
(Predecessor) (Successor)
Service cost $ 89 $ 138 $ 41 $ 71
Interest cost 287 278 83 229
------ ------ ------ ------
$ 376 $ 416 $ 124 $ 300
====== ====== ====== ======
Management believes that the 1994, 1995 and 1996 (Predecessor) 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 1996 Successor amounts were determined on a stand alone company
basis.
The Company has assumed responsibility for the accrued benefits
attributable to employees of the Company. Pursuant to the Agreement, the Company
established employee benefit plans which are substantially similar to Springs'
employee benefit plans.
F-13
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
10. EMPLOYEE BENEFIT PLANS - (Continued)
The following table sets forth the status of the Company's obligation
under SFAS No. 106 at the end of 1995 and 1996:
Accumulated postretirement benefit obligation ("APBO") 1995 1996
-------- --------
Retirees ............................................ $ 1,200 $ 1,473
Fully eligible active plan participants ............. 800 393
Other active participants ........................... 2,000 2,145
-------- --------
Accumulated postretirement benefit obligation ....... $ 4,000 $ 4,011
Unrecognized gain/(loss) ............................ 0 (27)
-------- --------
Total recorded obligation ........................... $ 4,000 $ 3,984
======== ========
The 1995 and 1996 balance sheets include a liability of $4,000 and $3,984,
respectively, which is classified in "Long-Term Benefit Plans, Deferred
Compensation and Other."
For measurement purposes, an 11.4% annual rate of increase in the per
capita cost of covered health care benefits was assumed. This 11.4% rate is
assumed to decrease gradually to 6.3% 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% and postretirement benefit cost would
increase by approximately 10%. The discount rate used in determining the APBO at
December 28, 1996 was 7.75%.
11. 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, 1995, 1996 (Predecessor) and 1996 (Successor).
Components of the total income tax provision were as follows:
1994 1995 1996 1996
-------- -------- -------- --------
(Predecessor) (Successor)
Current federal .......... $ 6,002 $ 8,622 $ 3,739 $ 6,011
Current state ............ 903 1,297 563 1,096
-------- -------- -------- --------
Total current ............ 6,905 9,919 4,302 7,107
-------- -------- -------- --------
Deferred federal 502 129 56 (18)
Deferred state 75 47 20 (3)
-------- -------- -------- --------
Total deferred 577 176 76 (21)
-------- -------- -------- --------
Total provision $ 7,482 $ 10,095 $ 4,378 $ 7,086
======== ======== ======== ========
The total provision is included in the statements of income as follows:
<TABLE>
<CAPTION>
1994 1995 1996 1996
-------- -------- -------- --------
(Predecessor) (Successor)
<S> <C> <C> <C> <C>
Provision on income before income taxes .... $ 4,896 $ 8,444 $ 3,595 $ 5,460
Income from equity investees ............... 728 1,582 783 1,626
Income of discontinued operations .......... 264 69 0 0
Gain on sale of discontinued operations .... 1,594 0 0 0
-------- -------- -------- --------
Total provision $ 7,482 $ 10,095 $ 4,378 $ 7,086
======== ======== ======== ========
</TABLE>
F-14
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
11. 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>
1994 1995 1996 1996
-------- -------- -------- --------
(Predecessor) (Successor)
<S> <C> <C> <C> <C>
Provision at federal statutory tax rate ...... 35.0% 35.0% 35.0% 35.0%
State income tax, net of federal tax effect .. 3.5 3.4 3.4 4.2
Amortization of acquisition price not
deductible for tax purposes ................ 1.2 0.7 0.7 2.1
Other ........................................ 1.0 0.8 0.9 (0.2)
-------- -------- -------- --------
Effective tax rate............................ 40.7% 39.9% 40.0% 41.1%
======== ======== ======== ========
</TABLE>
Temporary differences and the related balances of deferred tax assets and
liabilities were as follows:
1995 1996
-------- --------
Employee benefit accruals .......................... $ 1,975 $ 3,356
Deferred compensation .............................. 186 0
Equity investments ................................. 2,562 2,376
Environmental reserve .............................. 67 0
Other items ........................................ 940 419
-------- --------
Total deferred tax assets .......................... 5,730 6,151
-------- --------
Property ........................................... 6,638 12,185
Equity investments ................................. 12,719 12,551
Inventories ........................................ 2,943 4,362
Other items ........................................ 280 566
-------- --------
Total deferred tax liabilities ..................... 22,580 29,665
-------- --------
Net deferred tax liabilities ....................... $ 16,850 $ 23,514
======== ========
12. 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 a 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 $12,809 and $14,282 at December 30, 1995 and December
28,1996, respectively.
The Convertible Notes, which had a carrying value of $13,922 and $13,037
at December 30, 1995 and December 28, 1996, respectively, are convertible into
common stock of Interglas at any time after December 31, 1996. At the Company's
option, conversion would result in the Company owning a total of 42% of the
outstanding common stock of Interglas as of December 28, 1996. Interest on the
Convertible Notes, which is included in income from equity investees, is at 8%
through December 31, 1996 and 5% thereafter. Interest income in 1994, 1995 and
1996 was recognized on an accrual basis. If Convertible Notes are not converted,
the principal balance plus outstanding interest becomes due on June 30, 2007.
Asahi-Schwebel Co. Ltd. ("ASCO")--- The Company owns a 39% common equity
interest in ASCO, a company which manufactures fiber glass fabrics. ASCO
operates a facility in Japan and, in 1996, acquired a majority interest in a
fiberglass manufacturer located in Taiwan. The Company's investment in ASCO had
a carrying value of $33,205 and $32,586 at December 30, 1995 and December 28,
1996,
F-15
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
12. EQUITY INVESTMENTS - (Continued)
respectively. The carrying value at December 28, 1996 exceeds 39% of ASCO's
total equity by approximately $2,700, 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 $2,968 and $3,521 at December 30,
1995 and December 28, 1996, respectively.
Combined Summarized Financial Information---The following table provides
combined summarized balance sheet information for these investees as of December
30, 1995 and December 28, 1996:
1995 1996
-------- --------
Current assets ............................. $139,541 $138,351
Noncurrent assets .......................... 101,538 127,221
-------- --------
Total assets ............................... $241,079 $265,572
======== ========
Current liabilities ........................ $ 47,883 $ 54,975
Noncurrent liabilities ..................... 92,345 85,665
Minority interest .......................... 0 9,715
Redeemable equity instrument ............... 21,341 21,341
Equity ..................................... 79,510 93,876
-------- --------
Total liabilities and equity ............... $241,079 $265,572
======== ========
The following table provides combined summarized income statement
information for these investees for the years ended December 31, 1994, December
30, 1995, and December 28,1996:
1994 1995 1996
-------- -------- --------
Net sales ................... $266,251 $328,145 $317,918
Operating income ............ 8,303 20,761 35,163
Net income .................. 3,045 13,207 16,643
======== ======== ========
13. MAJOR CUSTOMERS, CERTAIN CONCENTRATIONS, AND FAIR VALUE OF FINANCIAL
INSTRUMENTS
Sales to two customers exceeded 10% of net sales during fiscal 1994, 1995,
and 1996. Sales to the two customers represented as a percentage of net sales
40.2% in 1994, 42.3% in 1995, 43.4% in 1996 (Predecessor), and 43.2% in 1996
(Successor), respectively. Accounts receivable due from the these two customers
as a percent of total accounts receivable was 52% at December 30, 1995 and 57.8%
at December 28, 1996. 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 28, 1996.
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, short term investments,
accounts receivable, Convertible Notes, accounts payable and long-term debt.
Management estimates that the carrying value of such instruments approximates
fair value, with the exception of the Senior Notes (see Note 4).
F-16
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
14. COMMITMENTS AND CONTINGENCIES
The Company leases certain machinery and equipment under noncancelable
operating leases. Rent expense attributed to such leases was $432, $384, $177,
and $314 in 1994, 1995, 1996 (Predecessor), and 1996 (Successor), respectively.
Future minimum payments under the non-cancelable operating leases as of
December 28, 1996 were as follows:
1997 .................................. $ 473
1998 .................................. 217
1999 .................................. 96
2000 .................................. 81
2001 .................................. 79
-----
$ 946
=====
Prior to the Closing Date of the Acquisition, the Company was involved in
administrative proceedings under environmental laws and regulations, including
proceedings under the Comprehensive Environmental Response, Compensation and
Liability Act. On the closing date, Springs assumed all liabilities related to
the costs associated with these environmental matters. The Company had an
accrual of $175 related to these matters as of December 30, 1995. There was no
material provision for environmental matters in 1994, 1995 or 1996.
The Company is subject to legal proceedings and claims which arise in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not materially affect the Company's financial
position or results of operations.
15. 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
$42,925 for the first six months of 1994. 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.
16. RELATED PARTY TRANSACTIONS
In connection with the Acquisition, certain members of management (the
"Management Investors") made equity contributions to the Company pursuant to a
Management Subscription Agreement which provided the terms under which the
Management Investors could purchase shares in the Company. The Management
Subscription Agreement set forth the share price, vesting provisions,
disposition of shares upon termination of employment, and certain other rights
of the Management Investors with respect to the shares.
F-17
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(DOLLARS in THOUSANDS)
16. RELATED PARTY TRANSACTIONS - (Continued)
The Management Investors purchased $1.8 million, or 18%, of the common
equity in the Company. Approximately $0.8 million of the purchase price was
financed by the Company through a promissory note (the "Note"). The Note bears
interest at a rate of 6.51% annually. Principal and interest payments are
payable annually on April 17 through 2001. The remaining principal and accrued
interest are due in a balloon payment on April 17, 2006. In the event of the
sale or disposition of the shares, net proceeds from the sale or disposition
will be first applied to repayment of the Note.
The Management Investors have entered into a Securityholders Agreement
with the Company and Vestar/CS Holding which contains certain agreements among
such parties with respect to the capital stock and corporate governance of the
Company. The Securityholders Agreement gives Vestar/CS Holding the right to
appoint all members to the Board of Directors of the Company. Additionally, the
Securityholders Agreement restricts the ability of Management Investors to
transfer their equity interest except upon (A) the exercise of their tag along
rights, which allows Management Investors to sell their equity interest when
Vestar/CS Holding sells its equity interest in the Company; (B) a sale of the
Company; (C) the exercise of certain put and call options under the Management
Subscription Agreement; (D) a public sale of the Company's common stock.
The Management Investors have entered into a Voting Trust Agreement with
the Company and Vestar/CS Holding which requires Management Investors to vote
all of their common stock as directed by Vestar/CS Holding for the approval of
any of the following: amendment to the Company's Certificate of Incorporation,
merger, share exchange, combination or consolidation of the Company with any
other person, the sale, lease or exchange of all or substantially all of the
property and assets of the Company, or the reorganization, recapitalization,
liquidation, or dissolution of the Company.
Pursuant to a Management Advisory Agreement (the "Management Agreement"),
Vestar Capital Partners 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 per annum will equal the greater of (i) 1.0% of the
consolidated earnings of the Company before interest, taxes, depreciation and
amortization or (ii) $350. Approximately $258 was paid to Vestar pursuant to the
Management Agreement for services rendered between April 18, 1996 and December
28, 1996 (Successor Company).
Upon consummation of the Acquisition, the Company paid to Vestar Capital
Partners an investment banking fee of approximately $1.5 million plus
out-of-pocket expenses for its services in structuring the transaction and
providing financial advice in connection therewith. Additionally, a member of
the Company's Board of Directors received a fee of approximately $600 for his
consulting services in connection with the Acquisition.
F-18
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 28, 1996 and SEPTEMBER 27, 1997
(Dollars in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
DECEMBER 28, SEPTEMBER 27,
1996 1997
(SUCCESSOR (SUCCESSOR
BASIS) BASIS)
---------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................................... $ 4,064 $ 7,904
Accounts receivable, net.................................................... 25,794 25,428
Inventories, net............................................................ 32,633 36,809
Other....................................................................... 592 308
-------- --------
Total current assets...................................................... 63,083 70,449
-------- --------
PROPERTY, PLANT AND EQUIPMENT................................................. 67,936 70,136
Accumulated depreciation.................................................... (5,841) (10,414)
-------- --------
Property, plant and equipment, net.......................................... 62,095 59,722
-------- --------
EQUITY INVESTMENTS............................................................ 63,426 61,444
GOODWILL...................................................................... 44,333 43,503
OTHER ASSETS.................................................................. 6,808 6,182
-------- --------
TOTAL ASSETS.................................................................. $ 239,745 $ 241,300
-------- --------
-------- --------
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable............................................................ $ 21,448 $ 26,763
Accrued liabilities......................................................... 14,338 17,914
Deferred tax liabilities--current........................................... 2,056 2,056
Current maturities of long-term debt........................................ 51 0
-------- --------
Total current liabilities................................................. 37,893 46,733
-------- --------
-------- --------
LONG-TERM DEBT................................................................ 123,440 155,994
DEFERRED TAX LIABILITIES...................................................... 21,458 20,838
LONG-TERM BENEFIT PLANS AND OTHER............................................. 7,121 3,984
COMMITMENTS AND CONTINGENCIES.................................................
-------- --------
TOTAL LIABILITIES............................................................. 189,912 227,549
-------- --------
EQUITY:
Preferred stock (par value per share--$.01)--12.5% participating, 10,000
shares authorized, 1,000 and 0 shares issued and outstanding, respectively
(see Note 6).............................................................. 35,000 0
Common stock (par value per share--$.01)--100,000 shares authorized, 9,000
shares issued and outstanding, less management loans of $822 and $0,
respectively (see Note 6)................................................. 9,178 9,000
Retained earnings........................................................... 7,005 8,874
Cumulative translation adjustment........................................... (1,350) (4,123)
-------- --------
Total equity.............................................................. 49,833 13,751
-------- --------
TOTAL LIABILITIES AND EQUITY.................................................. $ 239,745 $ 241,300
-------- --------
-------- --------
</TABLE>
See notes to consolidated financial statements.
F-19
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED--Dollars in Thousands)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, APRIL 18, JUNE 29, DECEMBER 29,
1995 - 1996 - 1996 - 1997 - 1996 -
APRIL 17, SEPTEMBER 28, SEPTEMBER 28, SEPTEMBER 27, SEPTEMBER 27,
1996 1996 1996 1997 1997
------------------ ------------- ------------- ------------- -------------
(PREDECESSOR (SUCCESSOR BASIS)
BASIS)
<S> <C> <C> <C> <C> <C>
Net sales........................ $ 68,911 $ 47,959 $ 95,289 $ 57,107 $ 180,406
Cost of goods sold............... 54,958 38,038 75,782 43,941 139,792
------- ------------- ------------- ------------- -------------
Gross profit..................... 13,953 9,921 19,507 13,166 40,614
Selling, general and
administrative expenses........ 4,812 3,427 6,450 4,124 11,851
------- ------------- ------------- ------------- -------------
Operating income................. 9,141 6,494 13,057 9,042 28,763
Other income(expense):
Interest expense............... (148) (3,548) (6,682) (3,697) (10,124)
Other, net..................... (5) 54 53 2 (1)
------- ------------- ------------- ------------- -------------
Income before income taxes....... 8,988 3,000 6,428 5,347 18,638
Provision for income tax......... (3,595) (1,308) (2,779) (2,220) (7,695)
Income from equity investees,
net............................ 1,174 763 1,748 1,203 2,785
------- ------------- ------------- ------------- -------------
Net income....................... $ 6,567 2,455 5,397 4,330 13,728
------- ------------- ------------- ------------- -------------
------- ------------- ------------- ------------- -------------
Accrued dividends on preferred
stock.......................... (1,115) (1,988) (441) (2,857)
------------- ------------- ------------- -------------
Net income applicable to
commonshares................. $ 1,340 $ 3,409 $ 3,889 $ 10,871
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
See notes to consolidated financial statements.
F-20
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 29,
1995- APRIL 18 - 1996-
APRIL 17, SEPTEMBER 28, SEPTEMBER 27,
1996 1996 1997
------------ ------------- -------------
(PREDECESSOR BASIS) (SUCCESSOR BASIS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income......................................................... $ 6,567 $ 5,397 $ 13,728
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of goodwill and unearned revenue... 3,526 4,206 6,847
Amortization of deferred financing cost.......................... 0 388 626
Deferred tax provision........................................... 1,404 238 (345)
Income from equity investments, net.............................. (1,174) (1,748) (2,785)
Loss on sale of equipment........................................ 0 0 18
Changes in assets and liabilities, net of the effects of the
purchase of the company:
Accounts receivable............................................ 1,832 4,856 366
Inventories.................................................... (2,883) 5,783 (3,184)
Prepaid expenses and other..................................... (187) 785 671
Accounts payable............................................... (697) 8,251 5,315
Accrued liabilities............................................ (289) 7,888 3,037
Other............................................................ (131) 475 17
------------ ------------- -------------
Net cash provided by operating activities.................... 7,968 36,519 24,311
------------ ------------- -------------
INVESTING ACTIVITIES:
Purchases of equipment............................................. (1,603) (1,162) (5,929)
Payment for purchase of Company.................................... 0 (192,895) 0
Proceeds from sale of equipment.................................... 0 0 1,511
------------ ------------- -------------
Net cash used in investing activities ....................... (1,603) (194,057) (4,418)
------------ ------------- -------------
FINANCING ACTIVITIES:
Investment by Springs.............................................. (10,955) 0 0
Transfer of assets retained by Springs............................. 4,461 0 0
Proceeds from issuance of stock.................................... 0 45,000 0
Payment of acquisition fees, net................................... 0 (10,500) 0
Loans to management investors...................................... 0 (822) 0
Proceeds from long-term borrowings................................. 0 160,000 45,994
Principal payments under long-term debt and capital lease
obligations...................................................... (29) (35,596) (13,491)
Proceeds from repayment of loans to management investors........... 0 0 822
Redemption of preferred stock...................................... 0 0 (35,000)
Redemption of participation value of preferred stock............... 0 0 (10,000)
Payment of preferred stock dividend................................ 0 0 (5,994)
Dividends received from ASCO....................................... 0 104 1,616
------------ ------------- -------------
Net cash provided by (used in) financing activities.......... (6,523) 158,186 (16,053)
------------ ------------- -------------
NET CHANGE IN CASH................................................... (158) 648 3,840
CASH, BEGINNING OF PERIOD............................................ 584 426 4,064
------------ ------------- -------------
CASH, END OF PERIOD.................................................. $ 426 $ 1,074 $ 7,904
------------ ------------- -------------
------------ ------------- -------------
CASH PAID FOR INTEREST............................................... $ 120 $ 1,059 $ 6,383
------------ ------------- -------------
------------ ------------- -------------
CASH PAID FOR TAXES.................................................. $ 0 $ 2,541 $ 8,344
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
See notes to consolidated financial statements.
F-21
<PAGE>
CLARK-SCHWEBEL HOLDINGS, INC.
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS in THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the assets,
liabilities and results of operations as of September 27, 1997 and for the
period from December 29, 1996 to September 27, 1997 of Clark-Schwebel
Holdings, Inc., the successor company ("Company"), following the change in
ownership (see Note 2). The Company's primary asset is all of the capital
stock of Clark-Schwebel, Inc., its operating company. The statements also
include the assets and liabilities of the Company as of December 28, 1996,
and the results of operations for the period of December 31, 1995 to April
17, 1996 of Fort Mill A Inc., the predecessor company ("Predecessor
Company"), prior to the change in ownership, and the results of operations of
Clark-Schwebel Holdings, Inc., the successor company, for the period from
April 18, 1996 to September 28, 1996, following the change in ownership. The
statements of the Predecessor Company include certain expenses that
historically were accounted for only at the Springs Industries, Inc.
("Springs")--parent company level.
Summarized Financial Information---The following table provides
summarized financial information for Clark-Schwebel, Inc., the operating
company, on a stand alone basis. Clark-Schwebel, Inc. is a wholly owned
subsidiary of Clark-Schwebel Holdings, Inc. and its separate financial
statements are not included or filed separately because management has
determined that they would not be material to investors since they are not
significantly different from the financial statements of Clark-Schwebel
Holdings, Inc. The balance sheet information is as of September 27, 1997 and
the income statement information is for the nine months ended September 27,
1997.
1997
-----------
(SUCCESSOR)
Current assets................................................ $ 70,449
Noncurrent assets............................................. 170,851
-----------
Total assets.................................................. $ 241,300
-----------
-----------
Current liabilities........................................... $ 46,733
Noncurrent liabilities........................................ 180,816
Equity........................................................ 13,751
-----------
Total liabilities and equity.................................. $ 241,300
-----------
-----------
Net sales..................................................... $ 180,406
Gross profit.................................................. 40,614
Income from continuing operations............................. 14,112
Net income.................................................... 14,112
-----------
-----------
All assets of Clark-Schwebel, Inc. represent restricted net assets with
the exception of the foreign equity investments and distributions received
from the foreign equity investments. Except in limited circumstances,
Clark-Schwebel, Inc. is prohibited from transferring restricted net assets to
Clark-Schwebel Holdings, Inc. in the form of cash dividends, loans, or
advances without the consent of a third party lender. The amount of
unrestricted net assets at September 27, 1997 is $60,970, which represents
the book value of the foreign equity investments ($57,499) and distributions
received in the form of cash from the foreign equity investments ($3,471).
F-22
<PAGE>
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 of the Securities and Exchange
Commission (SEC). Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. All significant intercompany balances and transactions
have been eliminated. The balance sheet at December 28, 1996 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. Results of
operations for interim periods are not necessarily indicative of results for
the entire year. For further information, refer to the Company's consolidated
financial statements and footnotes for the year ended December 28, 1996
included in the Company's Form 10-K for the year then ended.
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 an affiliate of Vestar would acquire the Company (the
"Acquisition"). Pursuant to the Agreement, on April 17, 1996 (Closing Date),
Vestar/CS Holding Company, LLC (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 and management
investors had an 18% common equity interest in the Company.
Under the Agreement, Springs agreed to (i) assume responsibility for
repayment of the Industrial Revenue Bonds payable in 2010 and related accrued
interest, (ii) pay $959 in certain accrued employee benefits, (iii) provide
indemnification for certain environmental, tax and other matters, (iv) retain
the accounts receivable from one customer (which totaled $2,782 as of
December 30, 1995) and related $1,400 reserve, and (v) retain the $99 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 canceled.
The acquisition was accounted for as a purchase business combination. The
adjustment to net assets represents the step-up to fair value of the net
assets acquired as follows:
Purchase price...................................................... $ 192,895
Nonfinancing portion of fees and expenses........................... 2,780
---------
Total purchase price................................................ 195,675
Less fair value of net assets acquired.............................. (150,547)
---------
Excess of purchase price over fair value of net assets acquired..... $ 45,128
---------
---------
The fair values of Clark-Schwebel, Inc.'s assets and liabilities at the date
of acquisition are presented below:
Current assets...................................................... $ 68,410
Property, plant and equipment....................................... 66,391
Equity investments.................................................. 62,314
Current liabilities................................................. (20,282)
Other liabilities................................................... (26,286)
---------
Net assets acquired................................................. $ 150,547
---------
---------
F-23
<PAGE>
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. This
resulted in a step-up in the basis of inventory of $5,274 and property, plant
and equipment of $15,000. The excess of the purchase price over the fair
value of net assets acquired of $45,128 was recorded as goodwill, and is
being amortized on a straight-line basis over a period of 40 years.
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 an affiliate of Vestar.
In accordance with agreements related to the change of ownership
transaction, certain assets totaling $4,461 were transferred to Springs in
the first quarter of 1996. This balance has been separately disclosed on the
face of the accompanying 1996 statements of cash flows.
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.
Basis of Consolidation--The consolidated financial statements include the
accounts of the Company and its operating company and wholly-owned
subsidiary, Clark-Schwebel, Inc. All material intercompany amounts and
transactions have been eliminated.
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.
Accordingly, the interim periods will also be reported on the Saturday
closest to the calendar quarter end. The fiscal year ended January 3, 1998 is
referrred to herein as 1997. The fiscal year ended December 28, 1996 is
referred to herein as 1996. The 1996 fiscal year consisted of 52 weeks, while
the 1997 fiscal year will consist of 53 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 include the allowance for
doubtful accounts receivable and the liabilities for certain long-term
benefit plans. 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 the goods are shipped.
Cash and Cash Equivalents--Cash and cash equivalents include cash on hand
and in the bank as well as short term investments held for the purpose of
general liquidity. Such investments normally mature within three months from
the date of aquisition.
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.
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.
F-24
<PAGE>
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. (headquartered 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 stockholders' equity.
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.
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.
4. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 28, SEPTEMBER 27,
1996 1997
------------ -------------
<S> <C> <C>
Senior Notes, payable in 2006, interest at 10.5%.................................... $ 110,000 $ 110,000
Senior Debentures, payable in 2007, interest at 12.5%............................... 0 45,994
Term Loan payable in quarterly installments; paid in July 1997...................... 13,440 0
Revolving Credit Agreement, due 2002, interest at variable rates.................... 0 0
Capitalized lease obligation payable in equal monthly installments of $7, through
June 1997......................................................................... 51 0
------------ -------------
Total............................................................................... 123,491 155,994
Less current maturities............................................................. (51) 0
------------ -------------
Long-term debt...................................................................... $ 123,440 $ 155,994
------------ -------------
------------ -------------
</TABLE>
The Senior Notes accrue interest at a fixed rate of 10.5% per annum, with
interest payable semiannually in arrears on April 15 and October 15. The
Senior Notes are not redeemable at the option of the Company prior to April
15, 2001, except in the event of a public equity offering of the Company, at
which time a portion of the Senior Notes would be redeemable.
The Senior Debentures accrue interest at a fixed rate of 12.5% per annum
with interest payable semiannually in arrears on January 15 and July 15 to
the extent permitted by the Credit Agreement and the indenture governing the
Senior Notes. If the Company is unable to pay interest in cash due to the
F-25
<PAGE>
prohibitions contained in the Credit Agreement or such indenture, interest on
the Senior Debentures would be payable in additional Senior Debentures. The
Senior Debentures will not be redeemable at the Company's option prior to
July 15, 2002, except in the event of a public equity offering of the
Company, or a change of control or subsidiary change of control after January
15, 1998.
On July 14, 1997, the Company prepaid all of its outstanding indebtedness
under the Term Loan and amended the Credit Agreement to provide, among other
things, that the Company may, subject to certain conditions, pay cash
dividends on the Preferred Stock, pay up to $5 million in cash and issue
Senior Debentures in a redemption of the Preferred Stock, and make
semi-annual interest payments in cash on the Senior Debentures (see Note 6).
The Revolving Credit Facility under the Credit Agreement was also amended to
increase the aggregate amount of commitments thereunder to $65 million.
The Company pays a quarterly commitment fee equal to 0.25% on the unused
portion of the Revolving Credit Facility which was $65 million at September
27, 1997.
The Revolving Credit Facility, the Senior Notes, and the Senior
Debentures contain certain restrictive covenants which 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. At September 27, 1997, the Company was in compliance with
such covenants. With the exception of the Senior Debentures, which are
obligations of Clark-Schwebel Holdings, Inc., all other debt is held at the
Clark-Schwebel, Inc., operating company level.
No principal payments are required on any long-term debt in the next five
years due to the payment of the term loan in July 1997.
5. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 28, SEPTEMBER 27,
1996 1997
------------ -------------
<S> <C> <C>
Finished goods...................................................................... $ 9,264 $ 9,519
Raw material and supplies........................................................... 9,254 14,493
In process.......................................................................... 15,215 13,937
------------ -------------
Total at standard cost (which approximates average cost)............................ 33,733 37,949
Less LIFO reserve................................................................... (1,100) (1,140)
------------ -------------
Inventories, net.................................................................... $ 32,633 $ 36,809
------------ -------------
------------ -------------
</TABLE>
6. PREFERRED STOCK REDEMPTION AND ISSUANCE OF SENIOR DEBENTURES
On July 14, 1997, the Company amended the terms of its outstanding
participating preferred stock (the "Preferred Stock") by amending and
restating its certificate of incorporation (the "Certificate") to allow the
Company to redeem such Preferred Stock. On August 14, 1997 the Company issued
$46.0 million in 12.5% Senior Debentures due 2007 (the "Senior Debentures")
and paid $5 million in cash in exchange for and redemption of the Preferred
Stock. The $51.0 million redemption price was established as follows:
Book value of Preferred Stock..................................... $ 35.0
Accrued Preferred Stock dividends................................. 6.0
Common equity component of Preferred Stock........................ 10.0
---------
Total............................................................. $ 51.0
---------
---------
F-26
<PAGE>
Vestar/CS-Holding paid $1.0 million for the common equity component of
the Preferred Stock at the time of the Acquisition. The common equity
component was purchased for $10.0 million on the redemption date.
Vestar/CS-Holding sold the Preferred Stock on July 14, 1997 and
simultaneously purchased 10% of the outstanding Common Stock of the Company
from the management investors on a pro rata basis. Upon the consummation of
that transaction, all of the Company's outstanding loans to management were
repaid in full.
The overall net impact of the Preferred Stock redemption and issuance of
Senior Debentures was a reduction of equity by $44.2 million, an increase in
debt by $46.0 million, a reduction of liabilities by $6.0 million, and a
decrease in cash by $4.2 million.
7. SUBSEQUENT EVENT
On October 1, 1997, the Company purchased an additional 4.3% common
equity interest in Asahi-Schwebel Co., Ltd. ("ASCO"). A total of 56,160
additional shares were purchased for $2.7 million, with funds from existing
cash and short-term investments. After the completion of this transaction,
the Company's ownership percentage in this equity investment increased to
43.3%. ASCO manufactures fiber glass fabric in Japan and has a majority
interest in a fiber glass manufacturer located in Taiwan. This equity
investment will continue to be accounted for on the equity method of
accounting, in accordance with generally accepted accounting principles.
F-27
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATIONS OTHER THAN THOSE 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
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE CLARK-SCHWEBEL, INC. AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
------------------
TABLE OF CONTENTS
PAGE
Available Information................................................4
Prospectus Summary...................................................6
Summary Historical and Pro Forma Financial Data.....................15
Risk Factors........................................................19
The Transactions....................................................25
Use of Proceeds.....................................................27
Capitalization......................................................28
Selected Historical Financial Data..................................29
Unaudited Pro Forma Financial Statements............................33
Management's Discussion and Analysis of Financial Condition and
Results of Operations..............................................38
The Business........................................................51
Management..........................................................59
Security Ownership..................................................64
Certain Relationships and RelatedTransactions.......................66
Description of Certain Indebtedness.................................68
Description of New Debentures.......................................70
The Exchange Offer..................................................98
Certain Federal Income Tax Consequences............................108
Plan of Distribution...............................................108
Legal Matters......................................................109
Experts............................................................109
Index to Financial Statements......................................F-1
------------------
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.
[LOGO]
CLARK-SCHWEBEL
HOLDINGS, INC.
----------------------
PROSPECTUS
----------------------
OFFER TO EXCHANGE ITS
121/2% SERIES B SENIOR DEBENTURES
DUE 2007
FOR ANY AND ALL
OF ITS OUTSTANDING
121/2% SERIES A SENIOR DEBENTURES
DUE 2007
November 25, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Holdings 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.
Holdings' Certificate of Incorporation and By-laws provides for the
indemnification of directors and officers of Holdings 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 maintains and has in effect insurance policies covering all of
Holdings' directors and officers against certain liabilities for actions taken
in such capacities, including liabilities under the Securities Act of 1933.
<PAGE>
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits.
3.1 Amended and Restated Certificate of Incorporation of
Clark-Schwebel Holdings, Inc.*
3.2 Amended and Restated By-laws of Clark-Schwebel Holdings, Inc.*
4.1 Indenture dated as of August 14, 1997 between Clark-Schwebel
Holdings, Inc. and State Street Bank and Trust Company.*****
4.2 Rights Agreement dated as of July 14, 1997 between
Clark-Schwebel Holdings, Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation.*
5.1 Form of 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
Clark-Schwebel Holdings, Inc., Clark-Schwebel, Inc., and the
several banks and other financial institutions from time to
time parties thereto and The Chase Manhattan Bank (the
"Agent").**
10.2 Security Agreement, dated as of April 17, 1996, made by
Clark-Schwebel Holdings, Inc. in favor of the Agent.**
10.3 Pledge Agreement, dated as of April 17, 1996, made by
Clark-Schwebel Holdings, Inc. in favor of the Agent.**
10.4 Guarantee Agreement, dated as of April 17, 1996, made by
Clark-Schwebel Holdings, Inc. in favor of the Agent.**
10.5 Management Agreement, dated as of April 17, 1996, between
Clark-Schwebel Holdings, Inc. and Springs Industries, Inc.**
10.6 Intellectual Property Security Agreement, among Clark-Schwebel
Holdings, Inc., Clark-Schwebel, Inc. and the other parties
thereto.**
10.7 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.**
10.8 First Amendment to the Credit Agreement, dated as of March 27,
1997, among Clark-Schwebel Holdings, Inc., Clark-Schwebel,
Inc., the Agent and the other parties thereto.***
10.9 Second Amendment to the Credit Agreement, dated as of July 14,
1997, among Clark-Schwebel Holdings, Inc., Clark-Schwebel,
Inc., the Agent and the other parties thereto.*
- -------------------------
* Previously filed with the Company's Quarterly Report on Form 10-Q
for the quarter ended June 28, 1997.
** Previously filed with the Company's Registration Statement on Form
S-4, Registration No. 333-4722.
*** Previously filed with the Company's Quarterly Report on Form 10-Q
for the quarter ended March 29, 1997.
**** Previously filed with the Company's Annual Report on Form 10-K for
the year ended December 28, 1996.
***** Previously filed with the Company's Registration Statement on Form
S-4, Registration No. 333-36491.
II-2
<PAGE>
10.10 Executive Bonus Plan 1996.****
10.11 Executive Bonus Plan 1997.****
12.1 Statement of Computation of Ratio of Earnings to Fixed
Charges.
21.1 Subsidiaries of the Registrant.*****
23.1 Consent of Arthur Andersen, L.L.P.
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.
(b) Financial Statement Schedules.
Not Applicable.
- -------------------------
* Previously filed with the Company's Quarterly Report on Form 10-Q for the
quarter ended June 28, 1997.
** Previously filed with the Company's Registration Statement on Form S-4,
Registration No. 333-4722.
*** Previously filed with the Company's Quarterly Report on Form 10-Q for the
quarter ended March 29, 1997.
**** Previously filed with the Company's Annual Report on Form 10-K for the
year ended December 28, 1996.
***** Previously filed with the Company's Registration Statement on Form
S-4, Registration No. 333-36491.
II-3
<PAGE>
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) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any
financial statements required by Rule 3-19 of the chapter at the start of
any delayed offering or throughout a continuous offering. Financial
statements and information otherwise required by Section 10(a)(3) of the
Act need not be furnished, provided, that the registrant includes in the
prospectus, by means of a post-effective amendment, financial statements
required pursuant to this paragraph (a)(4) and other information necessary
to ensure that all other information in the prospectus is at least as
current as the date of those financial statements. Notwithstanding the
foregoing, with respect to registration statements on Form F-3, a
post-effective amendment need not be filed to include financial statements
and information required by Section 10(a)(3) of the Act or Rule 3-19 of
this chapter if such financial statements and information are contained in
periodic reports filed with or furnished to the Commission by the
registrant pursuant to section 13 or section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the Form F-3.
(5) That 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.
(6) That 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.
(7) 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.
(8) 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-4
<PAGE>
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 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.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Anderson, State of South
Carolina, on November 24, 1997.
CLARK-SCHWEBEL HOLDINGS, INC.
By: /s/ Donald R. Burnette
------------------------------------
Name: Donald R. Burnette
Title: Vice President and Chief
Financial Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement and power of attorney have been signed by the following persons in the
capacities and on the dates indicated:]
Signature Capacity Date
------------- ------------ --------
* President and Director November 24, 1997
---------------------- (principal executive
William D. Bennison officer)
* Chairman of the Board November 24, 1997
----------------------
Jack P. Schwebel
* Executive Vice President and November 24, 1997
---------------------- Director
Richard C. Wolfe
/s/ Donald R. Burnette Vice President and Chief November 24, 1997
----------------------- Financial Officer
Donald R. Burnette (principal financial
officer)
* Controller (principal November 24, 1997
---------------------- accounting officer)
Kyle J. Davidson
* Director November 24, 1997
----------------------
Norman W. Alpert
* Director November 24, 1997
----------------------
John D. Howard
* Director November 24, 1997
----------------------
Sander M. Levy
* Director November 24, 1997
----------------------
Daniel S. O'Connell
*By: /s/ Donald R. Burnette
-------------------------
Donald R. Burnette
Attorney-in-Fact
II-6
<PAGE>
Exhibit 12.1 RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL YEAR (DOLLARS IN
(DOLLARS IN THOUSANDS) THOUSANDS)
-------------------------------------------------------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(PREDECESSOR) 1996 1996 1996 1996
-------------------- (3.5 MONTHS) (8.5 MONTHS) (12 MONTHS) 1996 (3.5 MONTHS)
1992 1993 1994 1995 (PREDECESSOR) (SUCCESSOR) (COMBINED) (PRO FORMA) (PREDECESSOR)
--------- --------- --------- --------- ------------- ------------ ----------- ------------ -------------
Income
before
income
taxes..... $ 3,238 $ 8,620 $ 12,037 $ 21,189 $ 8,988 $ 12,969 $ 21,957 $ 21,957 $ 8,988
Equity
income
(loss).... (297) 13 529 3,393 82 1,811 1,893 1,893 82
--------- --------- --------- --------- ------ ------------ ----------- ------------ ------
Income
before
income
taxes and
extraordinary
items..... 2,941 8,633 12,566 24,582 9,070 14,780 23,850 23,850 9,070
Fixed
charges:
Cash
interest
expense... 473 401 401 401 148 9,458 9,606 15,207 148
Dividends on
preferred
stock..... N/A N/A N/A N/A N/A 5,185 5,185 0 N/A
Amortization
of bond
issue
costs..... 14 21 21 21 6 411 417 417 6
Amortization
of
deferred
debt...... 0 0 0 0 0 192 192 192 0
Interest
expense on
rental
expense... 401 194 144 128 41 124 165 165 41
--------- --------- --------- --------- ------ ------------ ----------- ------------ ------
Total fixed
charges... 888 616 566 550 195 15,370 15,565 15,981 195
--------- --------- --------- --------- ------ ------------ ----------- ------------ ------
--------- --------- --------- --------- ------ ------------ ----------- ------------ ------
<CAPTION>
<S> <C> <C> <C> <C>
1996 1996 1997 1997
(5.5 MONTHS) (9 MONTHS) HISTORICAL PRO FORMA
(SUCCESSOR) (COMBINED) (SUCCESSOR) (SUCCESSOR)
------------- ----------- ----------- -----------
Income
before
income
taxes..... $ 6,428 $ 15,416 $ 18,638 $ 14,810
Equity
income
(loss).... 1,166 1,248 2,785 2,785
------ ----------- ----------- -----------
Income
before
income
taxes and
extraordinary
items..... 7,594 16,664 21,423 17,595
Fixed
charges:
Cash
interest
expense... 6,315 6,463 9,497 13,153
Dividends on
preferred
stock..... 3,286 3,286 4,722 0
Amortization
of bond
issue
costs..... 265 271 424 424
Amortization
of
deferred
debt...... 124 124 203 203
Interest
expense on
rental
expense... 80 121 142 142
------ ----------- ----------- -----------
Total fixed
charges... 10,070 10,265 14,988 13,922
------ ----------- ----------- -----------
------ ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL YEAR (DOLLARS IN
(DOLLARS IN THOUSANDS) THOUSANDS)
-------------------------------------------------------------------------------------------------- -------------
(PREDECESSOR) 1996 1996 1996 1996
-------------------- (3.5 MONTHS) (8.5 MONTHS) (12 MONTHS) 1996 (3.5 MONTHS)
1992 1993 1994 1995 (PREDECESSOR) (SUCCESSOR) (COMBINED) (PRO FORMA) (PREDECESSOR)
--------- --------- --------- --------- ------------- ------------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income
before
income
taxes,
extraordinary
items
and fixed
charges... 3,829 9,249 13,132 25,132 9,265 30,150 39,415 39,831 9,265
--------- --------- --------- --------- ------ ------------ ----------- ------------ ------
--------- --------- --------- --------- ------ ------------ ----------- ------------ ------
Ratio of
earnings
to fixed
charges... 4.3 15.0 23.2 45.7 47.5 2.0 2.5 2.5 47.5
--------- --------- --------- --------- ------ ------------ ----------- ------------ ------
--------- --------- --------- --------- ------ ------------ ----------- ------------ ------
<CAPTION>
1996 1996 1997 1997
(5.5 MONTHS) (9 MONTHS) HISTORICAL PRO FORMA
(SUCCESSOR) (COMBINED) (SUCCESSOR) (SUCCESSOR)
------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income
before
income
taxes,
extraordinary
items
and fixed
charges... 17,664 26,929 36,411 31,517
------ ----------- ----------- -----------
------ ----------- ----------- -----------
Ratio of
earnings
to fixed
charges... 1.8 2.6 2.4 2.3
------ ----------- ----------- -----------
------ ----------- ----------- -----------
</TABLE>
<PAGE>
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,
November 21, 1997
<PAGE>
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
November 21, 1997
<PAGE>
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
----------
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)____
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445)
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.
225 Franklin Street, Boston, Massachusetts 02110)
(Address of principal executive offices) (Zip Code)
John R. Towers, Esq. Executive Vice President and General Counsel
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
----------
(CLARK-SCHWEBEL HOLDINGS, INC.)
(Exact name of obligor as specified in its charter)
Delaware (13-3883016)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 South Murray Avenue
(P.O. Box 2627)
Anderson, South Carolina 29622
(Address of principal executive offices) (Zip Code)
----------
12 1/2% Senior Debentures due 2007
Title of indenture securities)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervisory authority to which it
is subject.
Department of Banking and Insurance of The Commonwealth of Massachusetts,
100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington, D.C., Federal
Deposit Insurance Corporation, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee or of its parent, State
Street Corporation. (See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility.
1. A copy of the articles of association of the trustee as now in effect.
A copy of the Articles of Association of the trustee, as now in effect, is
on file with the Securities and Exchange Commission as Exhibit 1 to Amendment
No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1)
filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
2. A copy of the certificate of authority of the trustee to commence
business, if not contained in the articles of association.
A copy of a Statement from the Commissioner of Banks of Massachusetts that
no certificate of authority for the trustee to commence business was necessary
or issued is on file with the Securities and Exchange Commission as Exhibit 2 to
Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
3. A copy of the authorization of the trustee to exercise corporate trust
powers, if such authorization is not contained in the documents specified in
paragraph (1) or (2), above.
A copy of the authorization of the trustee to exercise corporate trust
powers is on file with the Securities and Exchange Commission as Exhibit 3 to
Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No.
22-17940) and is incorporated herein by reference thereto.
4. A copy of the existing by-laws of the trustee, or instruments
corresponding thereto.
A copy of the by-laws of the trustee, as now in effect, is on file with the
Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility
and Qualification of Trustee (Form T-1) filed with the Registration Statement of
Eastern Edison Company (File No. 33-37823) and is incorporated herein by
reference thereto.
1
<PAGE>
5. A copy of each indenture referred to in Item 4. if the obligor is in
default.
Not applicable.
6. The consents of United States institutional trustees required by Section
321(b) of the Act.
The consent of the trustee required by Section 321(b) of the Act is annexed
hereto as Exhibit 6 and made a part hereof.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining authority.
A copy of the latest report of condition of the trustee published pursuant
to law or the requirements of its supervising or examining authority is annexed
hereto as Exhibit 7 and made a part hereof.
NOTES
In answering any item of this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended,
the trustee, State Street Bank and Trust Company, a corporation organized and
existing under the laws of The Commonwealth of Massachusetts, has duly caused
this statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Hartford and The State of
Connecticut, on the 17th day of October, 1997.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Elizabeth C. Hammer
------------------------
NAME: Elizabeth C. Hammer
TITLE: Vice President
Dated: October 17, 1997
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, as amended, in connection with the proposed issuance by Clark-Schwebel
Holdings, Inc. of its 12 1/2% Senior Debentures due 2007, we hereby consent
that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Elizabeth C. Hammer
-------------------------------
NAME: Elizabeth C. Hammer
TITLE: Vice President
Dated: October 17, 1997
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company,
Massachusetts and foreign and domestic subsidiaries, a state banking
institution organized and operating under the banking laws of this
commonwealth and a member of the Federal Reserve System, at the close of
business June 30, 1997, published in accordance with a call made by the
Federal Reserve Bank of this District pursuant to the provisions of the
Federal Reserve Act and in accordance with a call made by the Commissioner of
Banks under General Laws, Chapter 172, Section 22(a).
<TABLE>
<CAPTION>
THOUSANDS OF
ASSETS DOLLARS
- ------ ------------
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin.................................................. 1,842,337
Interest-bearing balances........................................................................... 8,771,397
Securities.......................................................................................... 10,596,119
Federal funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and its Edge subsidiary................................................................... 5,953,036
Loans and lease financing receivables:
Loans and leases, net of unearned income.................. 5,769,090
Allowance for loan and lease losses....................... 74,031
Allocated transfer risk reserve........................... 0
Loans and leases, net of unearned income and allowances........................................ 5,695,059
Assets held in trading accounts..................................................................... 916,608
Premises and fixed assets........................................................................... 374,999
Other real estate owned............................................................................. 755
Investments in unconsolidated subsidiaries.......................................................... 28,992
Customers' liability to this bank on acceptances outstanding........................................ 99,209
Intangible assets................................................................................... 229,412
Other assets........................................................................................ 1,589,526
------------
Total assets........................................................................................ 36,097,449
------------
------------
LIABILITIES
Deposits:
In domestic offices............................................................................... 11,082,135
Noninterest-bearing....................................... 8,932,019
Interest-bearing.......................................... 2,150,116
In foreign offices and Edge subsidiary............................................................ 13,811,677
Noninterest-bearing....................................... 112,281
Interest-bearing.......................................... 13,699,396
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary............................................................ 6,785,263
Demand notes issued to the U.S. Treasury and Trading Liabilities.................................... 755,676
Other borrowed money................................................................................ 716,013
Subordinated notes and debentures................................................................... 0
Bank's liability on acceptances executed and outstanding............................................ 99,605
Other liabilities................................................................................... 841,566
Total liabilities................................................................................... 34,091,935
------------
EQUITY CAPITAL
Perpetual preferred stock and related surplus....................................................... 0
Common stock........................................................................................ 29,931
Surplus............................................................................................. 437,183
Undivided profits and capital reserves/ Net unrealized holding gains (losses)....................... 1,542,695
Cumulative foreign currency translation adjustments................................................. (4,295)
Total equity capital................................................................................ 2,005,514
------------
Total liabilities and equity capital................................................................ 36,097,449
</TABLE>
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
5
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
To Tender for Exchange
121/2% Senior Debentures due 2007
of
CLARK-SCHWEBEL HOLDINGS, INC.
Pursuant to the Prospectus Dated November 25, 1997
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
5:00 P.M., NEW YORK CITY TIME, ON DECEMBER 30, 1997
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:
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier or Hand Delivery: By Facsimile Transmission:
State Street Bank and Trust Company State Street Bank and Trust Company (for Eligible Institutions only)
Corporate Trust Department Corporate Trust Department
P.O. Box 778 Two InternationalPlaza, 4th Floor State Street Bank and Trust Company
Boston, Massachusetts 02102-0078 Boston, Massachusetts 02110 (617) 664-5232
Attention: Sandra Szczsponik Attention: Sandra Szczsponik Attention: Sandra Szczsponik
</TABLE>
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 (617)
664-5314.
The undersigned hereby acknowledges receipt of the Prospectus dated
November 25, 1997 (the "Prospectus") of Clark-Schwebel Holdings, Inc., a
Delaware corporation (the "Issuer"), and this Letter of Transmittal (the "Letter
of Transmittal"), that together constitute the Issuer's offer (the "Exchange
Offer") to exchange $1,000 in principal amount of its 121/2% Series B Senior
Debentures due 2007 (the "New Debentures"), 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
121/2% Series A Senior Debentures due 2007 (the "Old Debentures"), of which
$45,994,000 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 Old Debentures described in Box 1 below
(the "Tendered Debentures") 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 Debentures and the undersigned represents
that it has received from each beneficial owner of the Tendered Debentures
("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
Debentures, the undersigned hereby exchanges, assigns, and transfers to, or upon
the order of, the Issuer, all right, title, and interest in, to, and under the
Tendered Debentures.
<PAGE>
Please issue the New Debentures exchanged for Tendered Debentures 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 Debentures (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 Debentures, 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 Debentures to the Issuer or cause ownership of the
Tendered Debentures to be transferred to, or upon the order of, the Issuer, on
the books of the registrar for the Old Debentures and deliver all accompanying
evidences of transfer and authenticity to, or upon the order of, the Issuer upon
receipt by the Exchange Agent, as the undersigned's agent, of the New Debentures
to which the undersigned is entitled upon acceptance by the Issuer of the
Tendered Debentures pursuant to the Exchange Offer, and (ii) receive all
benefits and otherwise exercise all rights of beneficial ownership of the
Tendered Debentures, all in accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of Old Debentures 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 Issuer 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 Owners 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
Debentures and that the Issuer will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges, encumbrances, and adverse
claims when the Tendered Debentures are acquired by the Issuer as contemplated
herein. The undersigned and each Beneficial Owner will, upon request, execute
and deliver any additional documents reasonably requested by the Issuer 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 Debentures 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 Debentures, (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 Issuer, 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 Debentures 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 Debentures 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
Old Debentures is a Participating Broker-Dealer, such Participating
Broker-Dealer acquired the Old Debentures 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
2
<PAGE>
distribute the New Debentures to be received in the Exchange Offer, and (ii)
acknowledges that, by receiving New Debentures for its own account in
exchange for Old Debentures, where such Old Debentures 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
Debentures.
/ / CHECK HERE IF TENDERED DEBENTURES ARE BEING DELIVERED HEREWITH.
/ / CHECK HERE IF TENDERED DEBENTURES 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 DEBENTURES 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).
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
BOX 1
DESCRIPTION OF DEBENTURES TENDERED
(Attach additional signed pages, if necessary)
<TABLE>
<S> <C> <C> <C>
Name(s) and Address(es) of Registered Debenture Certificate Aggregate Aggregate
Holder(s), exactly as name(s) appear(s) on Number(s) of Principal Amount Principal Amount
Debenture Certificate(s) Debentures* Represented by Tendered**
(Please fill in, if blank) Certificate(s)
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
Total
- ----------------------------------------------------------------------------------------------------------
* Need not be completed by persons tendering by
book-entry transfer.
** The minimum permitted tender is $1,000 in principal
amount of Old Debentures. 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 Debenture Certificates
identified in this Box 1 or delivered to the
Exchange Agent herewith shall be deemed tendered.
See Instruction 4.
- ----------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
BOX 2
BENEFICIAL OWNER(S)
State of Principal Residence of Each Principal Amount of Tendered Debentures
Beneficial Owner of Tendered Debentures Held for Account of Beneficial Owner
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 5, 6 and 7)
TO BE COMPLETED ONLY IF NEW DEBENTURES EXCHANGED FOR OLD
DEBENTURES AND UNTENDERED OLD DEBENTURES ARE TO BE SENT
TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE
UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail New Debenture(s) and any untendered Old Debenture to:
Name(s):
- ----------------------------------------------------------------------
(please print)
Address:
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
(include Zip Code)
Tax Identification or
Social Security No.:
- ----------------------------------------------------------------------
4
<PAGE>
BOX 4
USE OF GUARANTEED DELIVERY
(See Instruction 2)
TO BE COMPLETED ONLY IF OLD DEBENTURES 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 DEBENTURES
IS TO BE MADE BY BOOK-ENTRY TRANSFER.
Name of Tendering Institution:
--------------------------------------
Account Number:
-------------------------------------------------------
Transaction Code Number:
----------------------------------------------
5
<PAGE>
BOX 6
TENDERING HOLDER SIGNATURE
(See Instructions 1 and 5)
In Addition, Complete Substitute Form W-9
- ------------------------------------------------------------------------------
X ------------------------------- Signature Guarantee
(Signature of Registered
Holder(s) or Authorized (If required by Instruction 5)
Signatory)
Authorized Signature
Note: The above lines must be X -------------------------------
signed by the registered
holder(s) of Old Debentures as
their name(s) appear(s) on the Name:
Old Debentures or by persons(s) -----------------------------
authorized to become registered (please print)
holder(s) (evidence of which
authorization must be Title:
transmitted with this Letter of
Transmittal). If signature is -----------------------------
by a trustee, executor,
administrator, guardian, Name of Firm:
attorney-in-fact, officer, or
other person acting in a -----------------------------
fiduciary or representative (Must be an Eligible Institution
capacity, such person must set as defined in Instruction 2)
forth his or her full title
below. See Instruction 5. Address:
Name(s): -----------------------------
--------------------------
-----------------------------
--------------------------
-----------------------------
Capacity: (include Zip Code)
-------------------------
Area Code and Telephone Number:
--------------------------
-----------------------------
Street Address:
------------------- Dated:
-----------------------------
--------------------------
--------------------------
(include Zip Code)
Area Code and Telephone Number:
- ----------------------------------
Tax Identification or
Social Security Number:
- ----------------------------------
BOX 7
BROKER-DEALER STATUS
/ / Check this box if the Beneficial Owner of the Old
Debentures is a Participating Broker-Dealer and such
Participating Broker-Dealer acquired the Old
Debentures for its own account as a result of
market-making activities or other trading activities.
6
<PAGE>
PAYOR'S NAME: CLARK-SCHWEBEL HOLDINGS, 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
----------------------------------------------------------------
SUBSTITUTE City, State and ZIP Code
----------------------------------------------------------------
Form W-9
List account number(s) here (optional)
Department
of the ----------------------------------------------------------------
Treasury
Internal Part 1--PLEASE PROVIDE YOUR TAXPAYER Social Security
Revenue IDENTIFICATION NUMBER ("TIN") IN THE Number or TIN
Service BOX AT RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW
----------------------------------------------------------------
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. / /
----------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF Part 3--
PERJURY, I CERTIFY THAT THE INFORMATION Awaiting TIN / /
PROVIDED ON THIS FORM IS TRUE, CORRECT
AND COMPLETE.
SIGNATURE _________________
DATE ____________________
----------------------------------------------------------------
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.
7
<PAGE>
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Old Debentures. 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 Debentures must be
received by the Exchange Agent at its address set forth herein or such
Tendered Debentures must be transferred pursuant to the procedures for
book-entry transfer described in the Prospectus under the caption "Exchange
Offer--Book-Entry Transfer" (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
Debentures, 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 Debentures should be sent to the Company. Neither
the Issuer nor the registrar is under any obligation to notify any tendering
holder of the Issuer's acceptance of Tendered Debentures prior to the closing
of the Exchange Offer.
2. Guaranteed Delivery Procedures. Holders who wish to tender their Old
Debentures but whose Old Debentures are not immediately available, and who
cannot deliver their Old Debentures, this Letter of Transmittal or any other
documents required hereby to the Exchange Agent prior to the Expiration Date
must tender their Old Debentures 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 or hand delivery)
setting forth the name and address of the holder, the certificate number(s) of
the Tendered Debentures and the principal amount of Tendered Debentures, 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 Old Debentures 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 Debentures 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 Old Debentures pursuant to the guaranteed delivery procedures
described above must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery relating to such Old Debentures 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 Debentures 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 Debentures 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.
8
<PAGE>
4. Partial Tenders. Tenders of Old Debentures will be accepted only in
integral multiples of $1,000 in principal amount. If less than the entire
principal amount of Old Debentures 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
Debentures Tendered" (Box 1) above. The entire principal amount of Old
Debentures delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated. If the entire principal amount of all Old
Debentures held by the holder is not tendered, then Old Debentures for the
principal amount of Old Debentures not tendered and New Debentures issued in
exchange for any Old Debentures 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.
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 Debentures, the signature must correspond
with the name(s) as written on the face of the Tendered Debentures without
alteration, enlargement or any change whatsoever.
If any of the Tendered Debentures are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Debentures 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 Debentures are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Debentures, and New Debentures issued in exchange therefor are to be
issued (and any untendered principal amount of Old Debentures 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 Debentures, nor provide a separate bond
power. In any other case, such registered holder(s) must either properly
endorse the Tendered Debentures 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 Debentures, such Tendered Debentures 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 Debentures,
with the signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Tendered Debentures 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
Issuer, evidence satisfactory to the Issuer of their authority to so act must be
submitted with this Letter of Transmittal.
Endorsements on Tendered Debentures 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 Debentures 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 Debentures
and/or substitute Old Debentures 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 Issuer will pay all transfer taxes, if any,
applicable to the exchange of Tendered Debentures pursuant to the Exchange
Offer. If, however, a transfer tax is imposed for any reason other than the
transfer and exchange of Tendered Debentures 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
9
<PAGE>
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 Debentures listed in this
Letter of Transmittal.
8. Tax Identification Number. Federal income tax law requires that the
holder(s) of any Tendered Debentures which are accepted for exchange must
provide the Issuer (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 Issuer 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.
To prevent backup withholding, each holder of Tendered Debentures 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 Debentures 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 Issuer reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Issuer'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
Debentures will be determined by the Issuer in its sole discretion, which
determination will be final and binding. The Issuer reserves the right to
reject any and all Old Debentures not validly tendered or any Old Debentures the
Issuer's acceptance of which would, in the opinion of the Issuer or their
counsel, be unlawful. The Issuer also reserves the right to waive any
conditions of the Exchange Offer or defects or irregularities in tenders of Old
Debentures as to any ineligibility of any holder who seeks to tender Old
Debentures 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 Issuer shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of Old
Debentures must be cured within such time as the Issuer shall determine.
Neither the Issuer, the Exchange Agent nor any other person shall be under any
duty to give notification of defects or irregularities with respect to tenders
of Old Debentures, nor shall any of them incur any liability for failure to give
such notification. Tenders of Old Debentures will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any Old
Debentures 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 Debentures.
11. No Conditional Tender. No alternative, conditional, irregular, or
contingent tender of Old Debentures or transmittal of this Letter of Transmittal
will be accepted.
12. Mutilated, Lost, Stolen or Destroyed Debentures. Any tendering Holder
whose Old Debentures have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated herein for further
instructions.
10
<PAGE>
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 Debentures and Issuance of New Debentures;
Return of Old Debentures. Subject to the terms and conditions of the Exchange
Offer, the Issuer will accept for exchange all validly tendered Old Debentures
as soon as practicable after the Expiration Date and will issue New Debentures
therefor as soon as practicable thereafter. For purposes of the Exchange Offer,
the Issuer shall be deemed to have accepted tendered Old Debentures when, as and
if the Issuer has given written or oral notice (immediately followed in writing)
thereof to the Exchange Agent. If any Tendered Debentures are not exchanged
pursuant to the Exchange Offer for any reason, such unexchanged Old Debentures
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."
11
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
With Respect to
12 1/2% Senior Debentures due 2007
of
CLARK-SCHWEBEL HOLDINGS, INC.
Pursuant to the Prospectus Dated November 25, 1997
This form must be used by a holder of 12 1/2% Senior Debentures due 2007
(the "Debentures") of Clark-Schwebel Holdings, Inc., a Delaware corporation
(the "Company"), who wishes to tender Debentures to the Exchange Agent
pursuant to the guaranteed delivery procedures described in "The Exchange
Offer -- Guaranteed Delivery Procedures" of the Company's Prospectus, dated
November 25, 1997 (the "Prospectus") and in Instruction 2 to the related
Letter of Transmittal. Any holder who wishes to tender Debentures 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 DECEMBER 30, 1997 UNLESS EXTENDED
(THE "EXPIRATION DATE").
--------------------------------------------------------------
State Street Bank and Trust Company
(the "Exchange Agent")
<TABLE>
<CAPTION>
By Mail: By Overnight Courier or Hand Delivery: By Facsimile Transmission:
<S> <C> <C>
State Street Bank and Trust Company State Street Bank and Trust Company (for Eligible Institutions only)
Corporate Trust Department Corporate Trust Department
P.O. Box 778 Two International Plaza, 4th Floor State Street Bank and Trust Company
Boston, Massachusetts 02102-0078 Boston, Massachusetts 02110 (617) 664-5232
Attention: Sandra Szczsponik Attention: Sandra Szczsponik Attention: Sandra Szczsponik
</TABLE>
For Information or Confirmation by Telephone:
(617) 664-5314
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 Debentures set forth below pursuant to the guaranteed
delivery procedures set forth in the Prospectus and in Instruction 2 of the
Letter of Transmittal.
The undersigned hereby tenders the Debentures listed below:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Certificate Number(s) (if known) of Debentures or Aggregate Principal Aggregate Principal
Account Number at the Book-Entry Facility Amount 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 Debentures or on a security
position listing as the owner of Debentures, 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):
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Capacity:
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Address(es):
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3
<PAGE>
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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 Debentures
tendered hereby in proper form for transfer (or confirmation of the
book-entry transfer of such Debentures 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.
Name of firm
-------------------------- -------------------------------------
(Authorized Signature)
Address Name
------------------------------- ---------------------------------
(Please Print)
Title
- -------------------------------------- --------------------------------
(Include Zip Code)
Area Code and Tel. No. Dated , 1996
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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 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 Debentures
referred to herein, the signature must correspond with the name(s) written on
the face of the Debentures 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 Debentures, the signature must correspond with
the name shown on the security position listing as the owner of the
Debentures.
If this Notice of Guaranteed Delivery is signed by a person other
than the registered holder(s) of any Debentures 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 Debentures 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.
5
<PAGE>
EXHIBIT 99.3
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
CLARK-SCHWEBEL HOLDINGS, INC.
121/2% Senior Debentures due 2007
To Registered Holder and/or Participant of the Book-Entry Transfer
Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
November 25, 1997 (the "Prospectus") of Clark-Schwebel Holdings, 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 12 1/2% Series A Senior Debentures due 2007 (the "Old
Debentures") held by you for the account of the undersigned.
The aggregate face amount of the Old Debentures held by you for the account
of the undersigned is (fill in amount):
$ of the 12 1/2% Series A Senior Debentures due 2007
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
/ / TO TENDER the following Old Debentures held by you for the account of
the undersigned (insert principal amount of Debentures to be tendered,
if any): $
/ / NOT TO TENDER any Old Debentures held by you for the account of the
undersigned.
If the undersigned instruct you to tender the Old Debentures 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 (i) the
undersigned's principal residence is in the state of (fill in state)
, (ii) the undersigned is acquiring the New Debentures in the
ordinary course of business of the undersigned, (iii) 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 Debentures,
(iv) the undersigned acknowledges that any person participating in the Exchange
Offer for the purpose of distributing the New Debentures 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 Debentures 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 Debentures," and (v) the undersigned is not an
"affiliate," as defined in Rule 405 under the Act, of the Company; (b) to agree,
on behalf of the undersigned, as set forth in the Letter of Transmittal; and
(c) to take such other action as necessary under the Prospectus or the Letter of
Transmittal to effect the valid tender of such Debentures.
________________________________________________________________________________
SIGN HERE
Name of Beneficial Owner(s): __________________________________________________
Signature(s): _________________________________________________________________
Name (please print): __________________________________________________________
Address: ______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
Telephone Number: _____________________________________________________________
Taxpayer Identification or Social Security Number: ____________________________
Date: _________________________________________________________________________
________________________________________________________________________________
