<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended July 4, 1998 or
---------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ended to
------------------ --------------------
Commission file number 333-4723
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CLARK-SCHWEBEL HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant 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, Anderson, SC 29622
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(Address of Principal Executive Offices) (Zip Code)
(864) 224-3506
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(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--------------------- ----------------------
As of July 4, 1998, there were 9,000 shares outstanding of common stock of
Clark-Schwebel Holdings, Inc.
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CLARK-SCHWEBEL HOLDINGS, INC.
FORM 10-Q QUARTERLY REPORT FOR
FISCAL QUARTER ENDED JULY 4, 1998
TABLE OF CONTENTS
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<CAPTION>
PAGE NO.
PART I - FINANCIAL INFORMATION:
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ITEM 1. Financial Statements: 3
Consolidated Balance Sheets as of
January 3, 1998 and July 4, 1998. 4
Consolidated Statements of Income for the
Three and Six Months ended July 4, 1998 and
June 28, 1997. 5
Consolidated Statements of Stockholders' Equity and
Comprehensive Income as of January 3, 1998 and July 4, 1998. 6
Consolidated Statements of Cash Flows for the
Six Months ended July 4, 1998 and June 28, 1997. 7
Notes to Condensed and Consolidated Financial Statements. 8
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 13
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk. 26
PART II - OTHER INFORMATION:
ITEM 6. Exhibits and Reports on Form 8-K. 27
SIGNATURES 28
EXHIBITS
Exhibit 2.1 Merger Agreement, dated as of July 24, 1998, by and among
Clark-Schwebel Holdings, Inc., Vestar/CS Holding Company,
L.L.C., Vestar Equity Partners, L.P., EQ Corporation, and
Equilease Holding Corporation.
Exhibit 10.12 Heads of Agreement, dated as of March 31, 1998, by and
between Clark-Schwebel International, Inc. and Deschler
Group.
Exhibit 10.13 Forms of Employment Agreement, effective as of June 1, 1998,
by and between Clark-Schwebel, Inc. and the following
executives: Jack P. Schwebel, William D. Bennison, Richard
C. Wolfe, Donald R. Burnette, William H. Boyles, Dieter R.
Wachter, and Harvey A. Morse.
Exhibit 27 Financial Data Schedule
(electronic filing only)
</TABLE>
2
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
(See Pages 4 - 12 - This page is intentionally left blank)
3
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CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
JANUARY 3, 1998 AND JULY 4, 1998
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA
<TABLE>
<CAPTION>
JANUARY 3, JULY 4
1998 1998
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................ $ 147 $ 14,175
Accounts receivable, net ................................. 28,527 22,153
Inventories, net ......................................... 34,897 35,799
Other .................................................... 235 615
--------- ---------
Total current assets ............................... 63,806 72,742
--------- ---------
PROPERTY, PLANT AND EQUIPMENT ........................................ 72,133 74,565
Accumulated depreciation ....................................... (12,540) (16,623)
--------- ---------
Property, plant and equipment, net ....................... 59,593 57,942
--------- ---------
EQUITY INVESTMENTS ................................................... 65,411 65,341
GOODWILL ............................................................. 43,205 42,641
OTHER ASSETS ......................................................... 5,702 5,327
--------- ---------
TOTAL ASSETS ......................................................... $ 237,717 $ 243,993
========= =========
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accounts payable ......................................... $ 19,806 $ 22 994
Accrued liabilities ...................................... 16,706 15,261
Deferred tax liabilities -- current ...................... 2,370 2,370
--------- ---------
Total current liabilities .......................... 38,882 40,625
--------- ---------
LONG-TERM DEBT ....................................................... 155,994 155,994
DEFERRED TAX LIABILITIES ............................................. 20,575 19,578
LONG-TERM BENEFIT PLANS AND OTHER .................................... 4,139 4,139
COMMITMENTS AND CONTINGENCIES.........................................
--------- ---------
TOTAL LIABILITIES .................................................... 219,590 220,336
--------- ---------
EQUITY:
Common stock (par value per share - $.01) - 100,000 shares
authorized, 9,000 shares issued and outstanding ....... 9,000 9,000
Retained earnings ........................................ 13,664 22,310
Cumulative translation adjustment ........................ (4,537) (7,653)
--------- ---------
Total equity ....................................... 18,127 23,657
--------- ---------
TOTAL LIABILITIES AND EQUITY ......................................... $ 237,717 $ 243,993
========= =========
</TABLE>
See notes to consolidated financial statements.
4
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CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED-DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDING SIX MONTHS ENDING
------------------- -----------------
JUNE 28, JULY 4, JUNE 28, JULY 4,
1997 1998 1997 1998
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Net sales .................................. $ 61,061 $ 51,246 $ 123,299 $ 111,664
Cost of goods sold ......................... 47,217 39,331 95,851 84,546
-------- -------- --------- ---------
Gross profit ............................... 13,844 11,915 27,448 27,118
Selling, general and administrative
expenses .............................. 3,825 3,593 7,727 8,016
-------- -------- --------- ---------
Operating income ...................... 10,019 8,322 19,721 19,102
Other income (expense):
Interest expense ...................... (3,147) (4,377) (6,427) (8,885)
Other, net ............................ (3) 0 (3) (2)
-------- -------- --------- ---------
Income before income taxes ................. 6,869 3,945 13,291 10,215
Provision for income tax ................... (2,824) (1,540) (5,475) (4,090)
Income from equity investees, net .......... 944 1,450 1,582 2,521
-------- -------- --------- ---------
Net income ................................. 4,989 3,855 9,398 8,646
Accrued dividends on preferred stock ....... (1,225) 0 (2,416) 0
-------- -------- --------- ---------
Net income applicable to common
shares................................. $ 3,764 3,855 $ 6,982 $ 8,646
======== ======== ========= =========
</TABLE>
See notes to consolidated financial statements.
5
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CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK CUMULATIVE
--------------- ------------ RETAINED TRANSLATION OMPREHENSIVE
SHARE AMOUNT SHARES AMOUNT EARNINGS ADJUSTMENT TOTAL INCOME
----- ------ ------ ------ -------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 28, 1996 1,000 $ 35,000 9,000 $ 9,178 $ 7,005 $ (1,350) $ 49,833 $ 8,792
Repayment of management loans 822 822
Net income 18,515 18,515 18,515
Accrued preferred stock dividend (2,856) (2,856)
Redemption of preferred stock (1,000) (35,000) (1,000) (9,000) (45,000)
Cumulative translation adjustment (3,187) (3,187) (3,187)
------- -------- ------- ------- --------- -------- -------- -------
Balance at January 3, 1998 0 $ 0 9,000 $ 9,000 $ 13,664 $ (4,537) $ 18,127 $24,120
======= ======== ======= ======= ======== ======== ======== =======
Net income (Unaudited) 4,791 4,791 4,791
Cumulative translation adjustment
(Unaudited) (2,175) (2,175) (2,175)
------- -------- ------- ------- --------- -------- -------- -------
Balance at April 4, 1998 (Unaudited 0 $ 0 9,000 $ 9,000 $ 18,455 $ (6,712) $ 20,743 $26,736
======= ======== ======= ======= ======== ======== ======== =======
Net Income (Unaudited) 3,855 3,855 3,855
Cumulative translation adjustment
(Unaudited) (941) (941) (941)
------- -------- ------- ------- -------- -------- -------- -------
Balance at July 4, 1998 (Unaudited) 0 $ 0 9,000 $ 9,000 $ 22,310 $ (7,653) $ 23,657 $29,650
======= ======== ======= ======= ======== ======== ======== =======
</TABLE>
See notes to consolidated financial statements.
6
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CLARK-SCHWEBEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED-DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDING
-----------------
JUNE 28, JULY 4,
1997 1998
--------- ---------
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OPERATING ACTIVITIES:
Net income ............................................................... $ 9,398 $ 8,646
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of goodwill
and unearned revenue ............................................. 4,562 4,906
Amortization of deferred financing cost ............................. 417 404
Deferred tax provision .............................................. (595) (676)
Income from equity investments, net ................................. (1,540) (2,521)
Loss on sale of equipment ........................................... 11 7
Changes in assets and liabilities, net of the effects of the purchase
of the company:
Accounts receivable ........................................... (557) 6,374
Inventories ................................................... (4,130) (902)
Prepaid expenses and other .................................... 98 (320)
Accounts payable .............................................. 7,525 3,188
Accrued liabilities ........................................... (570) (1,445)
Other ............................................................... (6) (1)
-------- --------
Net cash provided by operating activities .................. 14,613 17,660
-------- --------
INVESTING ACTIVITIES:
Purchases of equipment ................................................... (3,541) (2,723)
Proceeds from sale of equipment .......................................... 1,494 25
Additional investment in CS-Interglas .................................... 0 (2,643)
-------- --------
Net cash used in investing activities ...................... (2,047) (5,341)
-------- --------
FINANCING ACTIVITIES:
Principal payments under long-term debt and
capital lease obligations ........................................... (2,301) 0
Proceeds from repayment of loans to management
Investor ............................................................ 23 0
Dividends received from ASCO ............................................. 0 1,709
-------- --------
Net cash (used in) provided by
financing activities ....................................... (2,278) 1,709
-------- --------
NET CHANGE IN CASH ............................................................. 10,288 14,028
CASH, BEGINNING OF PERIOD ...................................................... 4,064 147
-------- --------
CASH, END OF PERIOD ............................................................ $ 14,352 $ 14,175
======== ========
CASH PAID FOR INTEREST ......................................................... $ 6,030 $ 8,269
======== ========
CASH PAID FOR TAXES ............................................................ $ 6,372 $ 4,914
======== ========
</TABLE>
Noncash Transaction: The company accrued dividends on preferred stock of $2,416
for the period of December 29, 1996 - June 28, 1997.
See notes to consolidated financial statements.
7
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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 July 4, 1998 and for the period from
January 4, 1998 to July 4, 1998 of Clark-Schwebel Holdings, Inc. 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 January 3, 1998, and the Company's results of operations for the period
from December 29, 1996 to June 28, 1997.
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 January 3, 1998 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 January 3, 1998 included in the Company's Form
10-K for the year then ended.
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. The balance sheet
information is as of July 4, 1998 and the income statement information is for
the six months ended July 4, 1998.
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<CAPTION>
1998
--------
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Current assets ................................ $ 72,742
Noncurrent assets ............................. 171,251
--------
Total assets .................................. $243,993
========
Current liabilities ........................... $ 37,986
Noncurrent liabilities ........................ 135,189
Equity ........................................ 70,818
--------
Total liabilities and equity .................. $243,993
========
Net sales ..................................... $111,664
Gross profit .................................. 27,118
Income from continuing operations ............. 10,431
Net income .................................... $ 10,431
========
Dividends paid to Clark-Schwebel Holdings, Inc. $ 2,411
========
</TABLE>
8
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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 the lenders under the Credit Agreement. The amount of unrestricted
net assets at July 4, 1998 was $61,295, which represents the book value of the
foreign equity investments ($61,225) and distributions received in the form of
cash from the foreign equity investments, net of restricted payments to increase
equity ownership in foreign equity investments ($70).
2. 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 2, 1999 is referred
to herein as 1998. The fiscal year ended January 3, 1998 is referred to herein
as 1997. The 1998 fiscal year consists of 52 weeks, while the 1997 fiscal year
consisted 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 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.
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
9
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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.
GOODWILL - Goodwill represents the excess of the purchase price over the
fair value of the net assets acquired in the Acquisition of the Company from
Springs Industries in April 1996. Goodwill recorded from the Acquisition was
$45,128, and is being amortized on a straight-line basis over a period of 40
years.
3. LONG-TERM DEBT
Long-term debt consisted of the following:
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<CAPTION>
January 3, July 4,
1998 1998
-------- --------
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Senior Notes, payable in 2006, interest at 10.5% .................. $110,000 $110,000
Senior Debentures, payable in 2007, interest at 12.5% ............. 45,994 45,994
Revolving Credit Agreement, due 2002, interest at variable
rates .......................................................... 0 0
-------- --------
Total ............................................................. 155,994 155,994
Less current maturities ........................................... 0 0
-------- --------
Long-term debt .................................................... $155,994 $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 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. See
Note 6.
10
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The Company has a $65.0 million Revolving Credit Facility under the Credit
Agreement. The Company pays a quarterly commitment fee equal to 0.25% on the
unused portion of the Revolving Credit Facility, which was $65.0 million at July
4, 1998.
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 covenants also
require maintenance of certain financial ratios. At July 4, 1998, 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
long-term debt is owed at the Clark-Schwebel, Inc., operating company level, and
guaranteed by Clark-Schwebel Holdings, Inc.
No principal payments are required on any long-term debt in the next five
years.
4. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
January 3, July 4,
1998 1998
---------- ---------
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Finished goods ......................................... $ 12,301 $ 11,511
Raw material and supplies .............................. 8,854 10,384
In process ............................................. 15,317 15,853
-------- --------
Total at standard cost (which approximates average cost) 36,472 37,748
Less LIFO reserve ...................................... (1,575) (1,949)
-------- --------
Inventories, net ....................................... $ 34,897 $ 35,799
======== ========
</TABLE>
5. CONVERSION OF CS-INTERGLAS AG ("INTERGLAS") NOTE RECEIVABLE AND OPTION TO
PURCHASE A CONTROLLING INTEREST IN INTERGLAS
On March 31, 1998, the Company notified CS-Interglas of its intent to
convert its 20 million Deutsche mark convertible notes (the "Convertible Notes")
into CS-Interglas common stock. Effective June 30, 1998, the conversion
increased the Company's ownership of the outstanding common stock of Interglas
from 24.9% to 41.9%. The conversion was approved by the German Merger Control
Authorities. Interglas manufactures fiber glass, aramid and carbon fabrics in
Europe, with plants in Germany, Belgium, England and France. CS-Interglas sales
for the fiscal year ended June 30, 1997 were $154 million.
On March 31, 1998, the Company also entered into an agreement (the
"Interglas Purchase Agreement") with the Deschler-Group, the Company's joint
venture partner in Interglas who, following the Company's Convertible Notes
conversion described above, owns 41.9% of the outstanding common stock of
Interglas. Under the Interglas Purchase Agreement, the Company purchased 1.7% of
Interglas' common stock from the Deschler-Group for 4.75 million Deutsche marks
(approximately $2.6 million) on June 30, 1998. This purchase increased the
Company's ownership in Interglas from 41.9% to 43.6%. The Company's purchase of
additional shares in CS-Interglas was approved by the German Merger Control
Authorities. Additionally, pursuant to the Interglas Purchase Agreement, the
Company obtained two options from the Deschler-Group to purchase additional
shares of Interglas held by the Deschler-Group. The first option allows the
Company to purchase an additional 6.4% of Interglas' common stock from the
Deschler-Group on or before January 10, 1999, which, if exercised, will give the
Company control of Interglas. The second option allows the Company to purchase
the remaining shares of Interglas held by the Deschler-Group at any time through
December 31, 1999.
11
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6. SUBSEQUENT EVENTS
HEXCEL CORPORATION AGREES TO ACQUIRE ASSETS OF CLARK-SCHWEBEL
Through two separate transactions, Hexcel Corporation ("Hexcel") has agreed to
acquire certain assets and operating liabilities of Clark-Schwebel, Inc. In the
first transaction, Vestar Capital Partners and Management Investors have agreed
to sell the stock of the Clark-Schwebel Holdings, Inc. ("Holdings") to Stamford
C-S Acquisition Corp. ("Stamford") for an enterprise value of approximately $488
million, less debt and transaction expenses. Stamford then immediately agreed to
sell certain assets and operating liabilities of Clark-Schwebel, Inc. (the
"Company") to Hexcel for $453 million. Stamford will retain $60 million of
property, plant and equipment to be leased to Hexcel under a long-term capital
lease. Both transactions are expected to close in the third quarter, subject to
customary conditions to closing and required regulatory approvals.
CLARK-SCHWEBEL AND PARENT COMPANY LAUNCH CASH TENDER OFFERS AND CONSENT
SOLICITATIONS FOR NOTES AND DEBENTURES
As part of the sale described above, the Company and Holdings launched cash
tender offers and consent solicitations for their notes and debentures.
Pursuant to the tender offers, the Company and Holdings, respectively,
have offered to repurchase:
1. all $110,000,000 of the 10 1/2% Senior Notes of the Company due
2006. The purchase price offered for each $1,000 principal amount
tendered is based on a fixed spread of 50 basis points over the
yield of the 6 1/4% U.S. Treasury Notes due March 31, 2001, plus
accrued unpaid interest on the notes, minus the consent payment
described below.
2. all $45,994,000 of the 12 1/2% Senior Debentures of Holdings due
2007. The purchase price offered for each $1,000 principal amount
tendered is $1,067.50 plus accrued unpaid interest on the
debentures, minus the consent payment described below.
Concurrent with the tender offers, the issuers will be soliciting consents to
eliminate or modify substantially all of the convenants in the indentures
governing the notes and the debentures. Holders who tender their notes and
debentures will be required to consent to the proposed amendments.
The Company has offered to make consent payments of $25 per $1,000 principal
amount to the holders of the notes and debentures who tender their securities
and deliver their consents at or prior to 5:00 p.m. New York City time on the
consent date.
The Company and Holdings expect to purchase the tendered notes and debentures
with borrowings under proceeds from stock sale.
12
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the
consolidated financial statements and the notes thereto. It compares the results
of operations of Clark-Schwebel Holdings, Inc. (the "Company") for the three
months ended July 4, 1998 to the three months ended June 28, 1997. The
accompanying analysis also compares the results of operations of the Company for
the six months ended July 4, 1998 to the six months ended June 28, 1997.
GENERAL
Second quarter 1998 results reflect a decline in both sales and operating
income when compared to the same period in 1997. Shipments of fiber glass fabric
were below last year due primarily to what management believes is an
industry-wide inventory correction in the electronics industry. Sales of high
performance fabrics were also below last year. Operating income decreased as a
result of the decline in sales, despite a generally favorable sales mix and
improved pricing. Management is unable to predict when the electronics industry
will emerge from the slowdown, but believes that current conditions are
temporary in nature.
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RESULTS OF OPERATIONS
SECOND QUARTER 1998 COMPARED TO SECOND QUARTER 1997
NET SALES
Net sales for the second quarter of 1998 decreased $9.8 million, or 16.1%,
to $51.3 million from $61.1 million. Overall fiber glass sales were down by $6.6
million, or 13.0%, while high perfomance sales declined by $3.2 million, or
30.5%. Sales of electronic fiber glass decreased by 15.7%, while sales of
composite material fiber glass decreased by 4.5% when compared to 1997. The
Company experienced declines in both lightweight and heavyweight electronics
fiber glass sales compared to the second quarter of 1997 due to the
industry-wide inventory correction in the electronics industry. Lower demand for
coating & laminating and scrims products were partially offset by higher demand
from the aerospace industry, which primarily accounted for the decreased sales
of composite material fiber glass. The decrease in high performance sales
resulted primarily from a decline in sales to both the military and civilian
ballistics markets. These declines were partially offset by increased high
performance sales to the aerospace market.
GROSS PROFIT
Gross profit for the second quarter of 1998 decreased $1.9 million, or
13.9%, to $11.9 million from $13.8 million. Gross profit as a percentage of net
sales improved to 23.3% in 1998 from 22.7% in 1997. The decrease in gross profit
resulted from the decrease in net sales previously noted. The improvement in
gross profit as a percentage
14
<PAGE> 15
of net sales resulted primarily from a shift in sales mix weighted more towards
higher margin fiber glass fabrics.
SG&A
Selling, general, and administrative expenses decreased $0.2 million, or
6.1% to $3.6 million from $3.8 million. As a percentage of net sales, SG&A
expenses increased to 7.0% in 1998 from 6.3% in 1997. The decrease in SG&A
expenses resulted primarily from decreased freight costs due to the decrease in
sales, while the increase in SG&A expenses as a percentage of net sales resulted
from the decrease in net sales previously noted.
OPERATING INCOME
Operating income decreased $1.7 million, or 16.9%, to $8.3 million in the
second quarter of 1998 from $10.0 million in the same period a year ago. As a
percentage of net sales, operating income was 16.2%, down modestly from 16.4% in
1997. The decrease in gross profit was primarily responsible for the decrease in
operating income.
INTEREST EXPENSE
Interest expense incurred by the Company in the second quarter of 1998 was
$4.4 million compared to $3.1 million in the second quarter of 1997. Interest
expense increased in the second quarter of 1998 because of interest related to
the Senior Debentures that were issued on August 14, 1997.
15
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INCOME FROM EQUITY INVESTEES, NET
Income from equity investees, net, increased by $0.5 million to $1.4
million from $0.9 million in the second quarter of 1997. An increase in the
operating results reported by Asahi-Schwebel, coupled with the Company's
increased ownership in Asahi-Schwebel (43.3% in 1998 compared to 39% in 1997),
primarily caused the increase in equity income. This increase in equity income
was partially offset by the results reported by CS-Interglas, which were
slightly lower than last year's comparable results, and the results for CS Tech
Fab, which were also slightly lower.
The equity investment balance as of July 4, 1998 increased by $1.8 million from
the April 4, 1998 balance sheet. The increase resulted primarily from the
purchase of an additional 1.7% common equity interest in CS-Interglas for
approximately $2.6 million in June 1998, and the strong equity earnings recorded
in the second quarter of 1998, as noted above. However, these increases were
partially offset by a dividend distribution of $1.7 million received by the
Company in June 1998 from Asahi-Schwebel, and a decrease in the equity
investment balance of $1.4 million in the second quarter of 1998 due to foreign
currency translation adjustments. The effect of foreign currency translation had
no impact on the Company's results of operations or cash flows in the second
quarter of 1998.
16
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NET INCOME
Net income in the second quarter of 1998 decreased by $1.1 million, or
22.7%, to $3.9 million from $5.0 million in the second quarter of 1997. The
decrease in net income resulted from decreased operating income ($1.7 million)
and the increase in interest expense ($1.2 million). These results were
partially offset by increased income from equity investees, net ($0.5 million),
and decreased income tax expense ($1.3 million).
RESULTS OF OPERATIONS
FIRST SIX MONTHS OF 1998 COMPARED TO FIRST SIX MONTHS OF 1997
NET SALES
Net sales for the six months ended July 4, 1998 decreased $11.6 million, or
9.4%, to $111.7 million from $123.3 million for the same period in 1997. Overall
fiber glass sales decreased by $7.3 million, or 7.1%, while high performance
sales decreased by $4.3 million, or 20.6%. Sales of electronic fiber glass
decreased 8.1%, while sales of composite material fiber glass decreased by 4.1%
when compared to the first six months in 1997. Sales of electronic fiber glass
fabric were negatively impacted by the industry-wide inventory correction that
slowed sales in the second quarter. Lower demand for coating & laminating and
scrims products were partially offset by higher demand from the aerospace
industry, which primarily accounted for the decreased sales of composite
material fiber glass. The decrease in high performance sales resulted primarily
from a decline in sales to both the military and civilian ballistics markets.
These declines were partially offset by increased high performance sales to the
aerospace market.
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<PAGE> 18
GROSS PROFIT
Gross profit for the first half of 1998 decreased $0.3 million, or 1.2%, to
$27.1 million from $27.4 million in 1997. Gross profit as a percentage of net
sales improved to 24.3% in 1998 from 22.3% in 1997. The decrease in gross profit
resulted from the decrease in net sales previously noted. The improvement in
gross profit as a percentage of net sales resulted primarily from a shift in
sales mix weighted more towards higher margin fiber glass fabrics.
SG&A
Selling, general, and administrative expenses for the first half of 1998
increased modestly by $0.3 million, or 3.7% to $8.0 million from $7.7 million in
1997. As a percentage of net sales, SG&A expenses increased to 7.2% in 1998 from
6.3% in 1997. The increase in SG&A expenses resulted primarily from increased
compensation and fringe benefit costs, which were partially offset by decreased
freight costs in the second quarter. The increase in SG&A expenses as a
percentage of net sales resulted primarily from the decrease in net sales
previously noted.
OPERATING INCOME
As a result of the above factors, operating income for the first half of
1998 decreased by $0.6 million, or 3.1%, to $19.1 million from $19.7 million in
1997. As a percentage of net sales, operating income increased to 17.1% in the
first half of 1998 from 16.0% in 1997.
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INTEREST EXPENSE
Interest expense incurred by the Company in the first six months of 1998
was $8.9 million compared to $6.4 million in 1997. Interest expense increased
during the first half of 1998 because of interest related to the Senior
Debentures that were issued on August 14, 1997.
INCOME FROM EQUITY INVESTEES, NET
Income from equity investees, net, increased by $0.9 million to $2.5
million in the first half of 1998 from $1.6 million in 1997. An increase in the
operating results reported by Asahi-Schwebel, coupled with the Company's
increased ownership in Asahi-Schwebel (43.3% in 1998 compared to 39% in 1997),
primarily caused the increase in equity income. This increase in equity income
was partially offset by the results reported by CS-Interglas, which were
slightly lower than last year's comparable results, and the results for CS Tech
Fab, which were also slightly lower.
NET INCOME
Net income in the first half of 1998 decreased by $0.8 million, or 8.0%, to
$8.6 million from $9.4 million for the same period in 1997. The decrease in net
income resulted from decreased operating income (($0.6 million) and the increase
in interest expense ($2.5 million). These results were partially offset by
increased income from equity investees, net ($0.9 million), and decreased income
tax expense ($1.4 million).
19
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LIQUIDITY AND CAPITAL RESOURCES
DESCRIPTION OF INDEBTEDNESS
The Company had the following long-term debt at July 4, 1998: a $65.0
million Revolving Credit Facility under the Credit Agreement, none of which was
outstanding at quarter end, $110.0 million in Senior Notes, and $46.0 million in
Senior Debentures. The Revolving Credit Facility is available for working
capital and general corporate purposes and matures in April 2002. Substantially
all of the assets of Clark-Schwebel, Inc. (the "Operating Company") are subject
to liens in favor of the Credit Agreement lenders. The interest rate per annum
is variable and based upon (i) a Base Rate (defined in the Credit Agreement) or
(ii) LIBOR plus a margin which varies based upon the Company's financial
performance. The margin over LIBOR at July 4, 1998 was 0.75%.
The Senior Notes bear interest at a rate of 10.5% per annum, payable
semi-annually on April 15 and October 15 of each year. Other than upon a change
of control or as a result of certain assets sales, the Operating Company will
not be required to make any principal payments in respect of the Senior Notes
until maturity in April 2006. Holdings unconditionally and irrevocably
guarantees the Senior Notes, which are the obligation of the Operating Company.
Depending on market conditions and the Company's financial position, the
Operating Company may from time to time make open market purchases of the Senior
Notes.
The Senior Debentures bear interest at a rate of 12.5% per annum, payable
semi-annually on January 15 and July 15 to the extent permitted by the Credit
Agreement and
20
<PAGE> 21
the indenture governing the Senior Notes. If the Company is unable to pay
interest in cash due to the 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,
or a change of control or subsidiary change of control after January 15, 1998.
The Senior Debentures are subordinated to borrowings under the Credit Agreement
and to the Senior Notes.
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
indentures governing the Senior Notes and Senior Debentures. Additionally, such
terms 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 Credit Facility also requires the maintenance of certain financial ratios.
At July 4, 1998, 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 incurred at the Operating Company level.
All assets of Clark-Schwebel, Inc. represent restricted net assets under
the Credit Agreement 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
21
<PAGE> 22
the lenders under the Credit Agreement. The amount (in thousands) of
unrestricted net assets at July 4, 1998 was $61,295, which represents the book
value of the foreign equity investments ($61,225) and distributions received in
the form of cash from the foreign equity investments, net of restricted payments
to increase equity ownership in foreign equity investments, ($70).
FIRST SIX MONTHS OF 1998 COMPARED TO FIRST SIX MONTHS OF 1997
Cash provided by operating activities in the first six months of 1998 was
$17.7 million, compared with $14.6 million provided in the same period a year
ago. Cash provided by operating activities increased due to effective working
capital management. The Company spent $2.7 million on capital additions during
the first six months of 1998, compared to $3.5 million in the same period in
1997. The Company typically makes capital expenditures to enhance capacity and
improve manufacturing facilities and processing equipment. The Company
anticipates that capital spending in 1998 will be slightly below the levels
experienced in 1997. As noted below, the Company invested an additional $2.6
million in CS-Interglas in the second quarter of 1998, which increased the
Company's equity ownership from 41.9% to 43.6%. As of July 4, 1998, the Company
had cash and cash equivalents of approximately $14.2 million. In addition, the
Company had $65.0 million of undrawn availability under the Revolving Credit
Facility. The Company ended the first six months of 1998 with net debt of $146.8
million, consisting of $110.0 million in Senior Notes, $46.0 in Senior
Debentures, $5.0 million in accrued interest, less $14.2 million in cash and
cash equivalents.
22
<PAGE> 23
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 believes
that cash generated from operations and borrowing resources will be sufficient
to fund the Company's cash needs for the foreseeable future.
CONVERSION OF CS-INTERGLAS AG ("INTERGLAS") NOTE RECEIVABLE AND OPTION TO
PURCHASE A CONTROLLING INTEREST IN INTERGLAS
On March 31, 1998, the Company notified CS-Interglas of its intent to
convert its 20 million Deutsche mark convertible notes (the "Convertible Notes")
into CS-Interglas common stock. Effective June 30, 1998, the conversion
increased the Company's ownership of the outstanding common stock of Interglas
from 24.9% to 41.9%. The conversion was approved by the German Merger Control
Authorities. Interglas manufactures fiber glass, aramid and carbon fabrics in
Europe, with plants in Germany, Belgium, England and France. CS-Interglas sales
for the fiscal year ended June 30, 1997 were $154 million.
On March 31, 1998, the Company also entered into an agreement (the
"Interglas Purchase Agreement") with the Deschler-Group, the Company's joint
venture partner in Interglas who, following the Company's Convertible Notes
conversion described above, owns 41.9% of the outstanding common stock of
Interglas. Under the Interglas Purchase Agreement, the Company purchased 1.7% of
Interglas' common stock from the Deschler-Group for 4.75 million Deutsche marks
(approximately $2.6 million) on June 30, 1998. This purchase increased the
Company's ownership in Interglas from 41.9% to 43.6%.
23
<PAGE> 24
The Company's purchase of additional shares in CS-Interglas was approved by the
German Merger Control Authorities. Additionally, pursuant to the Interglas
Purchase Agreement, the Company obtained two options from the Deschler-Group to
purchase additional shares of Interglas held by the Deschler-Group. The first
option allows the Company to purchase an additional 6.4% of Interglas' common
stock from the Deschler-Group on or before January 10, 1999, which, if
exercised, will give the Company control of Interglas. The second option allows
the Company to purchase the remaining shares of Interglas held by the
Deschler-Group at any time through December 31, 1999.
RECENT DEVELOPMENTS
HEXCEL CORPORATION AGREES TO ACQUIRE ASSETS OF CLARK-SCHWEBEL
Through two separate transactions, Hexcel Corporation ("Hexcel") has agreed
to acquire certain assets and operating liabilities of Clark-Schwebel, Inc. In
the first transaction, Vestar Capital Partners and Management Investors have
agreed to sell the stock of the Clark-Schwebel Holdings, Inc. ("Holdings") to
Stamford C-S Acquisition Corp. ("Stamford") for an enterprise value of
approximately $488 million, less debt and transactions expenses. Stamford then
immediately agreed to sell certain assets and operating liabilities of
Clark-Schwebel, Inc. (the "Company") to Hexcel for $453 million. Stamford will
retain $60 million of property, plant and equipment to be leased to Hexcel under
a long-term capital lease. Both transactions are expected to close in the third
quarter, subject to customary conditions to closing and required regulatory
approvals.
24
<PAGE> 25
CLARK-SCHWEBEL AND PARENT COMPANY LAUNCH CASH TENDER OFFERS AND CONSENT
SOLICITATIONS FOR NOTES AND DEBENTURES
As part of the sale described above, the Company and Holdings launched cash
tender offers and consent solicitations for their notes and debentures.
Pursuant to the tender offers, the Company and Holdings, respectively, have
offered to repurchase:
1. all $110,000,000 of the 10 1/2% Senior Notes of the Company due 2006.
The purchase price offered for each $1,000 principal amount tendered
is based on a fixed spread of 50 basis points over the yield of the 6
1/4% U.S. Treasury Notes due March 31, 2001, plus accrued unpaid
interest on the notes, minus the consent payment described below.
2. all $45,994,000 of the 12 1/2% Senior Debentures of Holdings due 2007.
The purchase price offered for each $1,000 principal amount tendered
is $1,067.50 plus accrued unpaid interest on the debentures, minus the
consent payment described below.
Concurrent with the tender offers, the issuers will be soliciting consents
to eliminate or modify substantially all of the convenants in the indentures
governing the notes and the debentures. Holders who tender their notes and
debentures will be required to consent to the proposed amendments.
The Company has offered to make consent payments of $25 per $1,000
principal amount to the holders of the notes and debentures who tender their
securities and deliver their consents at or prior to 5:00 p.m. New York City
time on the consent date.
25
<PAGE> 26
The Company and Holdings expect to purchase the tendered notes and
debentures with borrowings under proceeds from stock sale
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
26
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit 2.1 Merger Agreement, dated as of July 24,
1998, by and among Clark-Schwebel Holdings,
Inc., Vestar/CS Holding Company, L.L.C.,
Vestar Equity Partners, L.P., EQ
Corporation, and Equilease Holding
Corporation.
Exhibit 10.12 Heads of Agreement, dated as of March
31, 1998, by and between Clark-Schwebel
International, Inc. and Deschler Group.
Exhibit 10.13 Forms of Employment Agreement, effective as
of June 1, 1998, by and between
Clark-Schwebel, Inc. and the following
executives: Jack P. Schwebel, William D.
Bennison, Richard C. Wolfe, Donald R.
Burnette, William H. Boyles, Dieter R.
Wachter, and Harvey A. Morse.
Exhibit 27 Financial Data Schedule
(electronic filing only)
(b) Reports on Form 8-K.
A Form 8-K was filed on May 26, 1998, during the quarter ended
July 4, 1998. The Form 8-K filing contained a press release
issued by the Company dated May 21, 1998.
Subsequent to the quarter ended July 4, 1998, a Form 8-K was
filed on July 29, 1998. The Form 8-K filing contained press
releases issued by the Company dated July 26, 1998 and July
28, 1998.
27
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLARK-SCHWEBEL HOLDINGS, INC.
-------------------------------------------------
(Registrant)
Date August 17, 1998 /s/ William D. Bennison
----------------- -------------------------------------------------
Name: William D. Bennison
Title: President
Date August 17, 1998 /s/ Donald R. Burnette
----------------- -------------------------------------------------
Name: Donald R. Burnette
Title: Vice President and Chief Financial Officer
28
<PAGE> 29
EXHIBIT INDEX
EXHIBIT 2.1 MERGER AGREEMENT, DATED AS OF JULY 24, 1998, BY AND AMONG
CLARK-SCHWEBEL HOLDINGS, INC., VESTAR/CS HOLDING COMPANY,
L.L.C., VESTAR EQUITY PARTNERS, L.P., EQ CORPORATION, AND
EQUILEASE HOLDING CORPORATION.
EXHIBIT 10.12 HEADS OF AGREEMENT, DATED AS OF MARCH 31, 1998, BY AND BETWEEN
CLARK-SCHWEBEL INTERNATIONAL, INC. AND DESCHLER GROUP.
EXHIBIT 10.13 FORMS OF EMPLOYMENT AGREEMENT, EFFECTIVE AS OF JUNE 1, 1998,
BY AND BETWEEN CLARK-SCHWEBEL, INC. AND THE FOLLOWING
EXECUTIVES: JACK P. SCHWEBEL, WILLIAM D. BENNISON, RICHARD C.
WOLFE, DONALD R. BURNETTE, WILLIAM H. BOYLES, DIETER R.
WACHTER, AND HARVEY A. MORSE.
EXHIBIT 27 FINANCIAL DATA SCHEDULE
(electronic filing only)
<PAGE> 1
EXECUTION COPY
EXHIBIT 2.1
================================================================================
MERGER AGREEMENT
DATED AS OF JULY 24, 1998
by and among
STAMFORD CS ACQUISITION CORP.,
CLARK-SCHWEBEL HOLDINGS, INC.,
and
THE OTHER PARTIES HERETO
================================================================================
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TABLE OF CONTENTS
<TABLE>
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ARTICLE I DEFINITIONS.........................................................................................1
ARTICLE II THE MERGER.........................................................................................9
2.1. The Merger......................................................................................9
2.2. Effective Time of the Merger....................................................................9
2.3. Effect of Merger................................................................................9
2.4. Supplementary Action...........................................................................10
ARTICLE III THE SURVIVING CORPORATION........................................................................10
3.1. Name...........................................................................................10
3.2. Certificate of Incorporation...................................................................10
3.3. Bylaws.........................................................................................10
3.4. Directors......................................................................................10
3.5. Officers.......................................................................................10
3.6. Authorized Capitalization......................................................................10
ARTICLE IV CONVERSION OF SHARES..............................................................................11
4.1. Conversion of Shares...........................................................................11
4.2. No Further Transfers...........................................................................11
4.3. Determination of Equity Consideration; Adjustment to Equity Consideration......................11
4.4. Overpayment Escrow Fund........................................................................14
ARTICLE V PAYMENT............................................................................................14
5.1. Exchange Procedure.............................................................................14
5.2. Lost Certificates..............................................................................14
5.3. Payment of Transaction Expenses and Employee Bonuses. .........................................15
ARTICLE VI CLOSING...........................................................................................15
6.1. The Closing....................................................................................15
6.2. Actions and Deliveries at the Closing..........................................................15
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................................17
7.1. Capitalization; Ownership of Shares............................................................17
7.2. Subsidiaries and Joint Ventures................................................................17
7.3. Organization...................................................................................18
7.4. Corporate Power and Authority; No Violations...................................................18
7.5. Financial Statements...........................................................................19
7.6. Absence of Certain Changes or Events...........................................................21
7.7. Title to Assets................................................................................21
7.8. Intellectual Property..........................................................................21
7.9. Contracts......................................................................................22
7.10. Litigation.....................................................................................23
7.11. Compliance With Laws...........................................................................23
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<TABLE>
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7.12. Environmental Matters..........................................................................23
7.13. Employee Benefit Plans.........................................................................24
7.14. Government Consents............................................................................24
7.15. Taxes..........................................................................................24
7.16. Real Property..................................................................................25
7.17. Broker's Fees..................................................................................26
7.18. Disclaimer.....................................................................................26
7.19. Change of Control..............................................................................26
7.20. Labor Relations and Employment.................................................................26
7.21. Insurance......................................................................................27
7.22. Customers and Suppliers........................................................................27
7.23. Transactions with Affiliates and Third Parties; Asset Sales....................................28
7.24. Corporate Records..............................................................................28
7.25. No Undisclosed Liabilities.....................................................................28
7.26. Year 2000 Compliance...........................................................................28
7.27. Joint Ventures.................................................................................29
ARTICLE VIII REPRESENTATIONS AND WARRANTIES OF THE BUYER.....................................................29
8.1. Organization...................................................................................29
8.2. Corporate Power and Authority; No Violations...................................................29
8.3. Brokers' Fees..................................................................................30
8.4. Litigation.....................................................................................30
8.5. Government Consents............................................................................30
8.6. Purchase for Investment........................................................................30
8.7. Adequate Funds. ...............................................................................30
ARTICLE IX REPRESENTATIONS AND WARRANTIES OF EQ..............................................................30
9.1. Organization...................................................................................30
9.2. Corporate Power and Authority; No Violations...................................................31
9.3. Financial Statements...........................................................................31
9.4. Absence of Certain Changes or Events...........................................................31
9.5. Brokers' Fees..................................................................................31
9.6. Litigation.....................................................................................32
9.7. Government Consents............................................................................32
ARTICLE X REPRESENTATIONS AND WARRANTIES OF EQUILEASE........................................................32
10.1. Organization...................................................................................32
10.2. Corporate Power and Authority; No Violations...................................................32
10.3. Ultimate Parent................................................................................32
10.4. Brokers' Fees..................................................................................33
10.5. Litigation.....................................................................................33
10.6. Government Consents............................................................................33
ARTICLE XI COVENANTS OF THE PARTIES..........................................................................33
11.1. Efforts........................................................................................33
11.2. Conduct of Business............................................................................33
11.3. Access.........................................................................................35
11.4. No Solicitation................................................................................35
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<TABLE>
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11.5. Books and Records..............................................................................36
11.6. Liabilities and Indemnification................................................................36
11.7. Insurance......................................................................................36
11.8. Litigation Support.............................................................................36
11.9. Employee Matters...............................................................................37
11.10. Other Actions..................................................................................37
11.11. Notice of Certain Events.......................................................................37
11.12. Reporting......................................................................................38
11.13. Further Assurances.............................................................................38
11.14. Buyer Restrictions.............................................................................39
11.15. Certain Stockholder Approvals..................................................................39
11.16. Tender Offers..................................................................................39
11.17. Tax Periods Ending on or Before the Closing Date. ............................................40
11.18. Buyer Escrow...................................................................................41
11.19. CS Interglas Options...........................................................................41
ARTICLE XII CONDITIONS TO THE BUYER'S OBLIGATIONS...........................................................42
12.1. Representations, Warranties and Covenants of the Company.......................................42
12.2. No Prohibition.................................................................................42
12.3. Third Party Consents...........................................................................42
12.4. Governmental Consents..........................................................................42
12.5. Document Deliveries............................................................................42
12.6. Repayment of Indebtedness to Third Parties; Termination of Security Interests..................42
12.7. Resignations...................................................................................42
12.8. Stockholder Agreements.........................................................................43
12.9. Stockholder Approval...........................................................................43
12.10. Release of Claims..............................................................................43
12.11. Tender Offer Waiting Periods and Exit Consents.................................................43
ARTICLE XIII CONDITIONS TO THE COMPANY'S OBLIGATIONS.........................................................43
13.1. Representations, Warranties and Covenants of the Buyer.........................................43
13.2. No Prohibition.................................................................................44
13.3. Governmental Consents..........................................................................44
13.4. Document Deliveries............................................................................44
ARTICLE XIV TERMINATION PRIOR TO CLOSING....................................................................44
14.1. Termination....................................................................................44
14.2. Effect of Termination..........................................................................44
ARTICLE XV MISCELLANEOUS...................................................................................45
15.1. Non-Survival of Representations and Warranties.................................................45
15.2. Entire Agreement...............................................................................45
15.3. Successors and Assigns; Third Party Beneficiaries..............................................45
15.4. EQ and Equilease Guarantees....................................................................46
15.5. Vestar Guarantee...............................................................................46
15.6. Headings.......................................................................................46
15.7. Modification and Waiver........................................................................46
15.8. Expenses.......................................................................................46
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15.9. Notices........................................................................................46
15.10. Governing Law; Forum...........................................................................47
15.11. Public Announcements...........................................................................48
15.12. Counterparts...................................................................................48
15.13. Released Parties...............................................................................48
15.14. Third Party Beneficiary........................................................................48
</TABLE>
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EXHIBITS:
<TABLE>
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Exhibit 1.1 -- Working Capital
Exhibit 2.2 -- Form of Certificate of Merger
Exhibit 4.4 -- Form of Escrow Agreement
Exhibit 11.18 -- Buyer Escrow Agreement
Exhibit 12.10 -- Form of Stockholder Release
SCHEDULES:
Schedule 1 -- Permitted Liens
Schedule 7.1 -- Ownership of Shares
Schedule 7.2 -- Subsidiaries
Schedule 7.3 -- Organization
Schedule 7.4 -- Corporate Power and Authority; No Violations
Schedule 7.6 -- Absence of Certain Changes or Events
Schedule 7.8 -- Intellectual Property
Schedule 7.9 -- Contracts
Schedule 7.10 -- Litigation
Schedule 7.11 -- Compliance with Laws
Schedule 7.12 -- Environmental Matters
Schedule 7.13 -- Employee Benefit Plans
Schedule 7.14 -- Consents
Schedule 7.15 -- Taxes
Schedule 7.16(a) -- Owned Real Property
Schedule 7.16(b) -- Leased Real Property
Schedule 7.17 -- Broker's Fees
Schedule 7.19 -- Change of Control
Schedule 7.20 -- Labor Relations and Employment
Schedule 7.21 -- Insurance
Schedule 7.22(a) -- Major Customers
Schedule 7.22(b) -- Major Suppliers
Schedule 7.23 -- Transactions with Affiliates and Third Parties
Schedule 7.25 -- No Undisclosed Liabilities
Schedule 8.2 -- Buyer Contravention
Schedule 8.5 -- Buyer Consents
Schedule 11.2 -- Conduct of Business
Schedule 12.1 -- Representations and Warranties
Schedule 12.3 -- Required Consents
Schedule 12.4 -- Required Government Consents
Schedule 12.10 -- Release
Schedule 13.3 -- Buyer Required Government Consents
</TABLE>
v
<PAGE> 7
MERGER AGREEMENT
This MERGER AGREEMENT (the "Agreement"), dated as of July 24,
1998, is made by and among Clark-Schwebel Holdings, Inc., a Delaware corporation
(the "Company"), Stamford CS Acquisition Corp., a Delaware corporation (the
"Buyer"), only for the purposes of Section 4.3, Vestar/CS Holding Company,
L.L.C. (the "Stockholders' Representative"), only for the purpose of Section
15.5, Vestar Equity Partners, L.P. ("Vestar"), and only for purposes of Sections
11.14, 11.17, 11.18, and 15.4, EQ Corporation, a Delaware corporation ("EQ"),
and Equilease Holding Company, a Delaware corporation ("Equilease"). All
capitalized words and terms contained in this Agreement shall have the meanings
set forth in Article I hereof.
RECITALS
WHEREAS, the Board of Directors and all of the stockholders of
the Company and the Board of Directors of the Buyer deem it advisable and in the
best interests of each such corporation and its respective stockholders to cause
the merger of the Buyer with and into the Company (the "Merger") upon the terms
and conditions set forth herein and in accordance with the General Corporation
Law of the State of Delaware (the "DGCL").
NOW, THEREFORE, in consideration of the mutual
representations, warranties, covenants and conditions contained herein, and in
order to set forth the terms and conditions of the Merger and the mode of
carrying the same into effect, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
"Actual Working Capital" has the meaning set forth in Section
4.3(c) hereof.
"Adjusted Per Share Equity Consideration" means an amount
equal to the Per Share Equity Consideration as adjusted by increasing the Final
Equity Consideration by any interest payable to the Stockholders, or decreasing
the Final Equity Consideration by any interest payable by the Stockholders'
Representative, in each case under Section 4.3(e) hereof.
"Affiliate" means, as to any person, any other person directly
or indirectly controlling, controlled by or under common control with that
person.
"Agreement" has the meaning set forth in the preface hereof.
"ASCO" has the meaning set forth in Section 12.12 hereof.
"ASCO JV Agreements" has the meaning set forth in Section
12.12 hereof.
<PAGE> 8
"Asahi" has the meaning set forth in Section 12.12 hereof.
"Auditor" has the meaning set forth in Section 4.3(g) hereof.
"Balance Sheet" has the meaning set forth in Section 7.5 hereof.
"Baseline Working Capital" has the meaning set forth in Section 4.3(b)
hereof.
"Benefit Plan" has the meaning set forth in Section 7.13(a) hereof.
"Business Transferee" has the meaning set forth in Section 15.3
hereof.
"Buyer" has the meaning set forth in the preface hereof.
"Buyer Escrow Agent" has the meaning set forth in the Buyer Escrow
Agreement.
"Buyer Escrow Agreement" has the meaning set forth in Section 11.18
hereof.
"Buyer Escrow Amount" has the meaning set forth in Section 11.18
hereof.
"Certificate of Merger" has the meaning set forth in Section 2.2.
hereof.
"Certificates" has the meaning set forth in Section 4.1 hereof.
"Closing" has the meaning set forth in Section 6.1 hereof.
"Closing Cash" has the meaning set forth in Section 4.3(c) hereof.
"Closing Debt" has the meaning set forth in Section 4.3(c) hereof.
"Closing Statement" has the meaning set forth in Section 4.3(c)
hereof.
"Closing Balance Sheet" has the meaning set forth in Section 4.3(c)
hereof.
"Closing Date" has the meaning set forth in Section 6.1 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" has the meaning set forth in Section 4.1(c) hereof.
"Company" has the meaning set forth in the preface hereof.
"Company Common Stock" means the Company's common stock, par value
$.01 per share.
<PAGE> 9
"Company Material Adverse Effect" has the meaning set forth in Section
7.3 hereof.
"Company Released Parties" has the meaning set forth in Section 7.18
hereof.
"Company SEC Documents" has the meaning set forth in Section 7.5(c)
hereof.
"Competition Laws" has the meaning set forth in Section 11.13 hereof.
"Confidentiality Agreement" has the meaning set forth in Section 11.3
hereof.
"Constituent Corporations" means the Company and the Buyer.
"Contracts" has the meaning set forth in Section 7.9 hereof.
"Credit Agreement" means that certain Credit Agreement, dated as of
April 17, 1996, among Clark-S Acquisition Corporation, Clark-Schwebel Holdings,
Inc., the financial institutions from time to time party thereto, The Chase
Manhattan Bank, as agent, collateral agent, documentation and syndication agent
for the Lenders; The Chase Manhattan Bank, as issuing bank and Bankers Trust
Company, Fleet National Bank, and NationsBank, N.A., as co-agent, as amended.
"CSI" has the meaning set forth in Section 12.12 hereof.
"C-S" has the meaning set forth in Section 11.19 hereof.
"DGCL" has the meaning set forth in the recitals hereof.
"Debt" means any liability (including without limitation accrued but
unpaid interest) in respect of (A) borrowed money, (B) capitalized lease
obligations, (C) the deferred purchase price of property or services (other than
trade payables incurred in the ordinary course of business), (D) obligations
under interest rate agreements and currency agreements and (E) guarantees of any
of the foregoing or guarantees of any Debt of the Joint Ventures (without double
counting).
"Defaulting Party" has the meaning set forth in Section 14.2 hereof.
"Disclosure Schedule" has the meaning set forth in Section 7.1 hereof.
"Effective Time" has the meaning set forth in Section 2.2 hereof.
"Employee Bonuses" means the bonuses to be paid to employees of the
Company in an aggregate amount of approximately $3.0 million at the Closing, the
actual amount of which shall be set forth in a written notice provided to the
Buyer by the Company at least 3 days prior to the Closing Date; provided, that
no individual employee of the Company shall receive or be entitled to receive a
bonus in an amount greater than $50,000; provided, further, that the Employee
Bonuses shall not include the bonuses payable to management under the 1998
Management Bonus Plan.
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<PAGE> 10
"Enterprise Value" means $488,000,000 (Four Hundred Eighty Eight
Million Dollars).
"Environmental Laws" means all laws, rules, regulations, ordinances,
codes, orders, decisions, injunctions, judgments, awards and decrees of any
Governmental Entity relating to the protection of the environment or of human
health from environmental hazards, or to any emission, discharge, generation,
processing, storage, holding, abatement, existence, release, threatened release
or transportation of any chemical or substance, including, but not limited to,
(i) CERCLA, the Resource Conservation and Recovery Act, the Clean Water Act, the
Clean Air Act, the Toxic Substances Control Act, environmental property transfer
statutes or requirements and (ii) all other requirements pertaining to
reporting, licensing, permitting, investigation or remediation of Hazardous
Substances in the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, sale, treatment, receipt, storage,
disposal, transport or handling of Hazardous Substances or relating to human
health or safety from exposure to Hazardous Substances.
"Environmental Lien" means a Lien, either recorded or unrecorded, in
favor of any Governmental Entity, arising under Environmental Laws.
"EQ" has the meaning set forth in the preface hereof.
"EQ Balance Sheet" has the meaning set forth in Section 9.3 hereof.
"EQ Financial Statements" has the meaning set forth in Section 9.3
hereof.
"Equilease" has the meaning set forth in the preface hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Amount" has the meaning set forth in Section 4.4 hereof.
"Escrow Agent" has the meaning given to such term in the Escrow
Agreement.
"Escrow Agreement" has the meaning set forth in Section 4.4 hereof.
"Estimated Working Capital" has the meaning set forth in Section
4.3(a) hereof.
"Estimated Working Capital Allowance" has the meaning set forth in
Section 4.3(b) hereof.
"Exchange Act" has the meaning set forth in Section 7.5(c) hereof.
"Final Equity Consideration" has the meaning set forth in Section
4.3(d) hereof.
"Financial Statements" has the meaning set forth in Section 7.5
hereof.
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<PAGE> 11
"Former Employees "has the meaning set forth in Section 11.10 hereof.
"GAAP" means United States (unless otherwise specifically provided
herein) generally accepted accounting principles as in effect for the period for
which it is referred to herein.
"Governmental Entity" means any governmental or political subdivision
thereof, whether federal, state, local or foreign, or any agency or
instrumentality of any such government or political subdivision, or any
judicial, quasi-judicial, administrative or regulatory body, commission or
tribunal.
"Hazardous Substances" means any substance that (a) is regulated under
any Environmental Law (including, without limitation, radioactive substances,
polychlorinated-biphenyls, petroleum and petroleum derivatives and products) or
(b) requires investigation, removal or remediation under applicable
Environmental Law.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indebtedness" of any person at any date means without duplication (a)
all indebtedness of such person for borrowed money or for the deferred purchase
price of property or services which, in accordance with GAAP, would be required
to be shown as a liability on the face of a balance sheet of such person on such
date (other than trade liabilities and accrued expenses and liabilities, in each
case to the extent incurred in the ordinary course of business and payable in
accordance with customary practices), (b) any other indebtedness of such person
which is evidenced by a note, bond, debenture or similar instrument, and (c) all
obligations of such person under capitalized lease obligations.
"Indemnified Party" has the meaning set forth in Section 11.6 hereof.
"Indentures" means, collectively, the Senior Debenture Indenture and
the Senior Note Indenture.
"Intellectual Property" has the meaning set forth in Section 7.8
hereof.
"Interim Closing Date" means the later to occur of (i) the Preliminary
Closing Date and (ii) the date on which the Company and its applicable
Subsidiary, as the case may be, on the one hand and the applicable trustee, on
the other hand shall have executed and delivered the Senior Debenture
Supplemental Indenture, the Senior Note Supplemental Indenture, and all
documents and certificates required by the Indentures to effect such
Supplemental Indentures as set forth in Section 11.16 shall have been duly
executed and delivered other than any payment to the holders of the Senior
Debentures or the Senior Notes. The requirements under clause (ii) relating to
documents and certificates (other than the Supplemental Indentures) shall be
deemed satisfied if the Company
5
<PAGE> 12
provides executed but undated copies or if practicable executed copies to be
effective on the Closing Date.
"Interim Financial Statements" means, collectively, the unaudited
consolidated balance sheet, unaudited consolidated statement of operations and
unaudited consolidated statement of cash flows of the Company and its
Subsidiaries for the period ended May 9, 1998.
"IRS" means the United States Internal Revenue Service.
"Joint Ventures" means, collectively (a) Asahi-Schwebel Co., Ltd., a
Japanese corporation, (b) CS Interglas AG, a German corporation, (c)
Clark-Schwebel Tech-Fab Company, a New York partnership, (d) Asahi-Schwebel
(Taiwan) Co. Ltd. and (e) Asahi-Schwebel Interglas Corp. (Philippines).
"Knowledge" means with respect to the Company, the actual knowledge of
any officer, management level employee or any Stockholder of the Company, and
with respect to the Buyer, the actual knowledge of any officer or management
level employee of the Buyer.
"Leases" has the meaning set forth in Section 7.16(b) hereof.
"Liabilities" means any liability or obligation of or arising out of
or relating to the Company or any of the Subsidiaries, or the operation or
ownership of the Company or any of the Subsidiaries (including as to
environmental matters), of whatever kind or nature (whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated, due or to become due).
"Liens" means liens, mortgages, security interests, pledges, charges
or other encumbrances.
"Litigation" has the meaning set forth in Section 7.10 hereof.
"Major Customer" has the meaning set forth in Section 7.22(a) hereof.
"Major Supplier" has the meaning set forth in Section 7.22(b) hereof.
"Overpayment" has the meaning set forth in Section 4.3(e) hereof.
"Overpayment Escrow Fund" has the meaning set forth in the Escrow
Agreement.
"Owned Real Property" has the meaning set forth in Section 7.16(a)
hereof.
"Permits" has the meaning set forth in Section 7.11 hereof.
6
<PAGE> 13
"Permitted Liens" means (i) Liens for Taxes or other governmental
charges or levies which are not due and payable or are being contested in good
faith and by appropriate proceedings and for which adequate reserves for such
contested amounts have been established in accordance with GAAP, (ii) those
Liens listed on Section 1 of the Disclosure Schedule and (iii) mechanic's,
worker's, materialmen's and other like Liens not yet delinquent, recorded
easements, covenants, and other restrictions, and utility easements, building
restrictions, encroachments, zoning restrictions and other encumbrances and
restrictions existing generally with respect to properties of a similar
character which, in each case, do not affect materially and adversely the use of
any property material to the conduct of the business of the Company and its
Subsidiaries.
"Per Share Equity Consideration" means the Final Equity Consideration
divided by the sum of the number of shares of Company Common Stock outstanding
at the Effective Time.
"Per Share Preliminary Equity Consideration" means the Preliminary
Equity Consideration divided by the sum of the number of shares of Company
Common Stock outstanding at the Effective Time.
"person" means any individual, firm, corporation, association,
unincorporated organization, joint stock company, general, limited or limited
liability partnership, limited liability company, trust, joint venture,
Governmental Entity or other entity.
"Preliminary Closing Date" means the later of (i) twenty-one days from
the date first written above and (ii) the date on which all of the conditions
set forth in Article XII except for the condition set forth in Section 12.11
have been satisfied; provided, that for the purpose of clause (ii) any condition
requiring that a document or certificate be delivered shall be deemed to be
satisfied if the Company provides the Buyer with an executed but undated copy of
such document or certificate on the Interim Closing Date and any condition in
respect of any action that can only be taken on the Closing Date shall be deemed
satisfied if the Company completed as much of such action as is practicable by
the Interim Closing Date and has provided reasonable assurance of its ability to
complete the required actions as of the Closing Date.
"Preliminary Closing Debt" has the meaning set forth in Section 4.3(a)
hereof.
"Preliminary Closing Cash" has the meaning set forth in Section 4.3(a)
hereof.
"Preliminary Equity Consideration" has the meaning set forth in
Section 4.3(a) hereof.
"Preliminary Statement" has the meaning set forth in Section 4.3(a)
hereof.
"Quick Return" has the meaning set forth in Section 11.17(a) hereof.
"Reference Rate" means the applicable federal rate as defined in the
Code.
7
<PAGE> 14
"Released Persons" has the meaning set forth in Section 15.13 hereof.
"Returns" has the meaning set forth in Section 7.15(a) hereof.
"Securities Act" has the meaning set forth in Section 7.5(a) hereof.
"Senior Debentures" means the 12 1/2% Senior Debentures due 2007 of
the Company issued pursuant to the Senior Debenture Indenture.
"Senior Notes" means the 10 1/2% Senior Notes due 2006 of
Clark-Schwebel, Inc. issued pursuant to the Senior Note Indenture.
"Senior Debenture Indenture" means that certain Indenture dated as of
August 14, 1997 between the Company and State Street Bank and Trust as trustee.
"Senior Note Indenture" means that certain Indenture dated April 17,
1996 among Clark-S Acquisition Corporation, CS Finance Corporation of Delaware,
the Company, the Subsidiary Guarantors (as defined therein) and Fleet National
Bank as trustee.
"Senior Debenture Solicitation" has the meaning set forth in Section
11.16 hereof.
"Senior Note Solicitation" has the meaning set forth in Section 11.16
hereof.
"Senior Debenture Supplemental Indenture" has the meaning set forth in
Section 11.16 hereof.
"Senior Note Supplemental Indenture" has the meaning set forth in
Section 11.16 hereof.
"Solicitations" has the meanings set forth in Section 11.16 hereof.
"State Return" has the meaning set forth in Section 11.17(a) hereof.
"Stockholder" has the meaning set forth in Section 4.1(a) hereof.
"Stockholders' Representative" has the meaning set forth in the
preface hereof.
"Subsidiary" means any corporation with respect to which the Company,
directly or indirectly through another Subsidiary, owns a majority of the common
stock or has the power to vote or direct the voting of sufficient securities to
elect a majority of the directors (other than a Joint Venture).
"Supplemental Indentures" has the meaning set forth in Section 11.16
hereof.
8
<PAGE> 15
"Surviving Corporation" means the Company, following the effectiveness
of the Merger.
"Taxes" means any and all taxes, charges, fees, levies or other
assessments, including, without limitation, income, excise, real or personal
property, sales, use, service, value added, license, net worth, transfer and
recording taxes, gross receipts, fees and charges, imposed by the IRS or any
other taxing authority or any Governmental Entity; and such term shall include
any interest, penalties or additional amounts attributable to, or imposed upon,
or with respect to, any such taxes, charges, fees, levies or other assessments.
"Transaction Expenses" means (i) all costs, fees and expenses paid or
payable by the Company or any of its Subsidiaries to Merrill Lynch & Co. or any
other financial advisor, (ii) all costs, fees and expenses paid or payable by
the Company or any of its Subsidiaries to Vestar Capital Partners in connection
with the consummation of the transactions contemplated by this Agreement, and
(iii) all other costs, fees (including applicable pre-payment premiums) and
expenses (including accounting, financial advisor, legal fees and expenses)
incurred by the Company or any of its Subsidiaries in connection with (a) the
transactions contemplated by this Agreement through the Closing Date and (b) the
repayment or redemption of, or the tender for, the Senior Debentures and the
Senior Notes; provided, however, that only fifty percent (50%) of all amounts in
excess of 106% of the aggregate principal amount of the Senior Debentures paid
or payable by the Company to the holders of the Senior Debentures in connection
with the redemption thereof shall be deemed to be a Transaction Expense.
"Transferee" has the meaning set forth in Section 12.12 hereof.
"Unpaid Balance" has the meaning set forth in Section 4.3(e) hereof.
"Vestar" has the meaning set forth in the other preface hereof.
"Working Capital" means the current assets of the Company and its
Subsidiaries (excluding cash, cash equivalents and short-term investments) less
the current liabilities of the Company and its Subsidiaries (excluding any
current liability for Debt, Transaction Expenses, Employee Bonuses, and income
taxes relating to the portion of the taxable year of the Company ending on the
Closing Date), all in accordance with GAAP applied on a consistent basis and
calculated consistent with Exhibit 1.1. Notwithstanding the foregoing, for
purposes of calculating current assets, (i) the LIFO reserve amount shall be
deemed to equal $0 and no asset for income tax refunds receivable shall be
recorded and (ii) for purposes of calculating current liabilities, the deferred
tax current portion shall be deemed to equal $2,370,000.
"Working Capital Principles" has the meaning set forth in Section
4.3(a) hereof.
9
<PAGE> 16
ARTICLE II
THE MERGER
II.1. The Merger. Upon the terms and subject to the
conditions hereof, two business days following the satisfaction or written
waiver of the conditions set forth in Articles XII and XIII hereof other than
those to be satisfied at Closing, (but in no event less than twenty-one days
from the date hereof), the Buyer shall be merged with and into the Company and
the separate existence of the Buyer shall thereupon cease, and the Company, as
the Surviving Corporation, shall continue to exist under and be governed by the
DGCL.
II.2. Effective Time of the Merger. The Merger shall become
effective when a properly executed Certificate of Merger in substantially the
form of Exhibit 2.2 attached hereto (the "Certificate of Merger") is duly filed
with the Secretary of the State of Delaware as provided in the DGCL. When used
in this Agreement, the term "Effective Time" shall mean the date and time at
which the Certificate of Merger is so filed or at such other time as Buyer and
the Company shall agree should be specified in the Certificate of Merger.
II.3. Effect of Merger. The Merger shall have the effects set
forth in the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, except as otherwise provided herein, all the
property, rights, privileges, powers and franchises of the Buyer and the Company
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of the Buyer and the Company shall become the debts, liabilities and duties of
the Surviving Corporation.
II.4. Supplementary Action. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that any
further assignments or assurances are necessary or desirable to vest or to
perfect or confirm of record in the Surviving Corporation the title to any
property or rights of either of the Constituent Corporations, or otherwise to
carry out the provisions of this Agreement, the officers and directors of the
Surviving Corporation are hereby authorized and empowered on behalf of the
respective Constituent Corporations, in the name of and on behalf of the
appropriate Constituent Corporation, to execute and deliver any and all things
necessary or proper to vest or to perfect or confirm title to such property or
rights in the Surviving Corporation, and otherwise to carry out the purposes and
provisions of this Agreement.
ARTICLE III
THE SURVIVING CORPORATION
III.1. Name. The name of the Surviving Corporation will be
Clark-Schwebel Holdings, Inc.
III.2. Certificate of Incorporation. The Certificate of
Incorporation of the Company as amended by the Certificate of Merger shall be
the Certificate of Incorporation of the Surviving Corporation. The Certificate
of Incorporation of the Surviving Corporation thereafter may be amended in
accordance with its terms and as provided by law.
III.3. Bylaws. The Bylaws of the Buyer immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation.
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<PAGE> 17
III.4. Directors. The directors of the Buyer immediately prior
to the Effective Time shall be the directors of the Surviving Corporation until
their respective successors are duly elected and qualified in the manner
provided in the Certificate of Incorporation and Bylaws of the Surviving
Corporation, or until their earlier resignation or removal, or as otherwise
provided by law. The Company shall procure, prior to and as a condition of
Closing, the resignation of each of its Directors.
III.5. Officers. The officers of the Company immediately prior
to the Effective Time shall be the officers of the Surviving Corporation until
their successors are duly elected and qualified in the manner provided in the
Certificate of Incorporation and Bylaws of the Surviving Corporation, or until
their earlier resignation or removal, or as otherwise provided by law.
III.6. Authorized Capitalization. The authorized
capitalization of the Surviving Corporation shall be 1,000 shares of Common
Stock, par value $.01 per share. After the Effective Time, the authorized
capitalization of the Surviving Corporation may be changed as provided by the
Certificate of Incorporation and Bylaws of the Surviving Corporation.
ARTICLE IV
CONVERSION OF SHARES
IV.1. Conversion of Shares.
(a) As of the Effective Time, by virtue of the Merger and
without any action on the part of any record holder or beneficial holder
("Stockholder") of shares of the Company Common Stock ("Certificates"), each
issued and outstanding share of the Company's Common Stock, excluding any shares
held in the Company's treasury, shall be automatically converted into and shall
represent only the right to receive cash in the amount of the Adjusted Per Share
Equity Consideration payable as set forth below. After the Effective Time, no
share of Common Stock shall be deemed to be outstanding or to have any rights
other than those set forth in this Section 4.1(a).
(b) Each share of the Company Common Stock held in the
treasury of the Company shall be canceled and retired and all rights in respect
thereof shall be canceled and cease to exist and no payment shall be made in
respect thereof.
(c) Each issued and outstanding share of Buyer's Common
Stock, par value $.01 per share ("Common Stock"), shall be converted into one
share of the Surviving Corporation's Common Stock, par value $.01 per share.
IV.2. No Further Transfers. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of Company Common
Stock shall thereafter be made.
IV.3. Determination of Equity Consideration; Adjustment to
Equity Consideration.
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<PAGE> 18
(a) At least three Business Days prior to the Closing Date, the
Company shall in good faith prepare at its sole cost and expense a statement in
accordance with GAAP applied on a basis consistent with the preparation of the
Interim Financial Statements (the "Preliminary Statement"), except as otherwise
provided in the Working Capital definition and that in the case of the Closing
Balance Sheet, a physical inventory shall be taken in accordance with Section
4.3(c) (GAAP as so modified is referred to herein as the "Working Capital
Principles"), containing an estimate of (i) the consolidated Working Capital of
the Company and the Subsidiaries immediately prior to the Closing ("Estimated
Working Capital"), (ii) a schedule of total Debt of the Company and its
Subsidiaries anticipated to be outstanding immediately prior to the Closing
("Preliminary Closing Debt"), and (iii) an estimate of cash, cash equivalents
and short-term investments, in each case, that would be reflected on a
consolidated balance sheet of the Company and its Subsidiaries prepared in
accordance with Working Capital Principles immediately prior to the Closing
("Preliminary Closing Cash"). Based upon the Preliminary Statement, a
preliminary determination of the Final Equity Consideration shall be made (the
"Preliminary Equity Consideration"), which Preliminary Equity Consideration
shall be an amount equal to the Enterprise Value (A) less Preliminary Closing
Debt, (B) less Transaction Expenses, (C) less the Employee Bonuses, (D) plus
Preliminary Closing Cash, (E) less the Escrow Amount and (F) plus or minus the
Estimated Working Capital Allowance as provided pursuant to clause (b) below.
(b) If Estimated Working Capital is greater than $23,200,000 (the
"Baseline Working Capital"), the Preliminary Equity Consideration shall be
increased by the amount of such excess, and if Estimated Working Capital is less
than Baseline Working Capital, the Preliminary Equity Consideration shall be
reduced by the amount by which Estimated Working Capital is less than Baseline
Working Capital. The amount of such excess or shortfall is referred to as the
"Estimated Working Capital Allowance."
(c) As promptly as practicable following the Closing Date, but in any
event within 60 days thereafter, the Surviving Corporation shall prepare and
deliver to the Stockholders' Representative a consolidated balance sheet of the
Company and the Subsidiaries as of the Closing (the "Closing Balance Sheet") and
a statement based thereon (the "Closing Statement") setting forth (i) actual
Working Capital immediately prior to the Closing ("Actual Working Capital"),
(ii) a schedule of total Debt outstanding immediately prior to the Closing
("Closing Debt"), (iii) a calculation of cash, cash equivalents and short-term
investments on hand ("Closing Cash"), in each case, that would be reflected on a
consolidated balance sheet of the Company and its Subsidiaries prepared in
accordance with the Working Capital Principles immediately prior to the Closing
and (iv) a calculation of the Final Equity Consideration. The Closing Balance
Sheet shall be prepared in accordance with GAAP applied on a basis consistent
with the preparation of the Interim Financial Statements and the Closing
Statement shall be derived from the Closing Balance Sheet and shall be prepared
in accordance with the Working Capital Principles. For purposes of calculating
the Closing Balance Sheet, the calculation of Actual Working Capital shall be
based on the results of a physical inventory taken by the Buyer and the
Surviving Corporation, on a date mutually agreeable to the parties, and in any
event within five days prior to or five days following the Closing Date (the
"Inventory Date"), at each and every location of the
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<PAGE> 19
Company, and observed by the accountants and/or representatives of the parties.
The Stockholders' Representative shall have reasonable access to the Surviving
Corporation's and the Subsidiaries' books and records and the accountants' work
papers related to the preparation of the Preliminary Statement, the Closing
Balance Sheet and the Closing Statement. The Surviving Corporation shall pay for
all costs and expenses incurred in connection with the preparation of the
Closing Balance Sheet and Closing Statement.
(d) The "Final Equity Consideration" shall be an amount equal to
Enterprise Value (A) less Closing Debt, (B) less Transaction Expenses, (C) less
the Employee Bonuses, (D) plus Closing Cash, and (E) plus the amount by which
Actual Working Capital exceeds Baseline Working Capital or minus the amount by
which Actual Working Capital is less than Baseline Working Capital, as the case
may be.
(e) If the Preliminary Equity Consideration is less than the Final
Equity Consideration (such difference being referred to herein as the "Unpaid
Balance"), then, in addition to the Preliminary Equity Consideration payable to
the Stockholders under Section 4.3(a), within five (5) Business Days after the
final determination of the Closing Statement and the Final Equity Consideration
(whether such determination is made by agreement of the Stockholders'
Representative and the Surviving Corporation or by the Auditor, as provided
herein), the Surviving Corporation shall deliver to the Stockholders'
Representative for the benefit of the Stockholders, an amount equal to the
Unpaid Balance, together with interest thereon at the Reference Rate in effect
from time to time from the Closing Date until the date of such payment, in cash
in immediately available funds by wire transfer to a bank account or accounts
designated in writing by the Stockholders prior to the Closing Date. If the
Preliminary Equity Consideration is greater than the Final Equity Consideration
(such difference being referred to herein as the "Overpayment"), then, within
five (5) Business Days after the final determination of the Closing Statement
and the Final Equity Consideration (whether such determination is made by
agreement of the Stockholders' Representative and the Surviving Corporation or
by the Auditor, as provided herein), the Stockholders' Representative shall
reimburse to the Surviving Corporation an amount equal to the Overpayment,
together with interest thereon at the Reference Rate in effect from time to time
from the Closing Date until the date of such payment, in cash in immediately
available funds by wire transfer to a bank account designated in writing by the
Buyer prior to the Closing Date less any amounts paid to the Surviving
Corporation from the Overpayment Escrow Fund.
(f) The Closing Statement and the calculation of the Final Equity
Consideration shall be binding upon the parties unless the Stockholders'
Representative gives written notice of disagreement therewith to the Surviving
Corporation within thirty (30) days after their receipt of the Closing
Statement, specifying in reasonable detail the nature and extent of such
disagreement. The Stockholders' Representative and the Surviving Corporation
shall thereafter negotiate in good faith to resolve any such disagreements. If
the Surviving Corporation and the Stockholders' Representative mutually agree
upon the Closing Statement and the calculation of the Final Equity Consideration
within thirty (30) days after Surviving Corporation's receipt of such notice,
such agreement shall be binding upon the parties. If the Stockholders'
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Representative and the Surviving Corporation are unable to resolve any
disagreements within thirty (30) days, the Stockholders' Representative and the
Surviving Corporation shall select an Auditor within 15 days after such 30 day
period to resolve the disagreements over accounting matters in accordance with
the provision of this Section 4.3.
(g) The "Auditor" shall be an independent nationally
recognized certified public accounting firm mutually selected by the
Stockholders' Representative and the Surviving Corporation, provided that if the
Stockholders' Representative and the Surviving Corporation are unable to
mutually agree upon an Auditor, the Stockholders' Representative and the
Surviving Corporation shall select one of the "big five" accounting firms by lot
after eliminating one firm designated unacceptable by the Stockholders'
Representative and one firm designated as unacceptable by the Surviving
Corporation; provided, further, that the office of the "big five" accounting
firm selected by lot shall not have done any work for the Stockholders'
Representative, the Buyer, EQ or Equilease during the eighteen (18) months
immediately preceding the Closing Date. The Auditor shall have reasonable access
to the Company's and the Subsidiaries' books and records required to resolve the
disputes, and the Auditor shall be directed to address and resolve solely the
individual disputed line items on the Closing Statement. The Stockholders'
Representative and the Surviving Corporation shall use their reasonable efforts
to cause the Auditor to resolve all disagreements over individual line items as
soon as practicable, but in any event within 30 days after the Auditor's
engagement. The resolution of such disagreements by the Auditor and the reasons
therefore shall be in writing and shall be final and binding on the
Stockholders' Representative and the Surviving Corporation absent fraud or
manifest error. The fees and expenses of the Auditor shall be paid by the party
whose position is, ruled as by the Auditor, most incorrect. The Surviving
Corporation and the Stockholders' Representative shall each be entitled to make
a presentation to the Auditor, pursuant to procedures to be agreed to among the
Stockholders' Representative, the Buyer and the Auditor, advocating the merits
regarding the differences espoused by each party. The Buyer and the
Stockholders' Representative each agree to provide the Auditor with all
information it shall reasonably require, and the Auditor will be permitted (to
the extent it considers appropriate) to base its determination on such
information and on the accounting and other records of the Surviving Corporation
and the Subsidiaries.
IV.4. Overpayment Escrow Fund. At the Closing the amount of
$5,000,000 (the "Escrow Amount") shall be remitted to the Escrow Agent to be
held and disbursed by the Escrow Agent in accordance with the terms of the
Escrow Agreement in the form of Exhibit 4.4 attached hereto (the "Escrow
Agreement").
ARTICLE V
PAYMENT
V.1. Exchange Procedure.
(a) Promptly following the Effective Time, the
Surviving Corporation shall mail or deliver to each Stockholder a letter of
transmittal and instructions for use in effecting the surrender of the
Certificates for payment therefor. Upon surrender to the Buyer of a Certificate
together with a duly executed letter of transmittal and any other required
documents, the Stockholder
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holding such Certificate shall be paid in exchange therefor the Per Share
Preliminary Equity Consideration payable in respect of such shares, and the
Certificate so surrendered shall forthwith be canceled. Such payments shall be
paid in cash at the Closing (or in respect of Certificates surrendered after the
Closing Date, on the date of such surrender) in immediately available funds by
wire transfer to a bank account designated by each Stockholder at least two days
prior to the Closing.
(b) Until surrendered as contemplated by Section 5.1, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender a pro rata portion of the
Preliminary Equity Consideration. No interest shall be paid or will accrue on
the amount payable at the Effective Time upon surrender of a Certificate. If
payment is to be made to a Stockholder other than the person in whose name the
Certificate surrendered is registered, it shall be a condition of payment that
the Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the Stockholder requesting such payment shall pay any
transfer or other taxes required by reason of the payment to a person other than
the registered holder of the Certificate surrendered or establish that such tax
has been paid or is not applicable.
V.2. Lost Certificates. In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
registered holder of such lost, stolen or destroyed Certificate in form and
substance acceptable to the Buyer, the Buyer will issue in exchange for such
lost, stolen or destroyed Certificate the portion of the Preliminary Equity
Consideration due in respect thereof in the manner set forth in Section 5.1.
When authorizing such payments in exchange therefor, the Board of Directors of
the Surviving Corporation may, in its sole discretion and as a condition
precedent to the payment thereof, require the owner of such lost, stolen or
destroyed Certificate to give the Surviving Corporation a bond in the sum as it
may reasonably direct as indemnity against any claim that may be made against
the Surviving Corporation with respect to the Certificate alleged to have been
lost, stolen or destroyed.
V.3. Payment of Transaction Expenses and Employee Bonuses. At the
Closing, the Company shall pay or cause to be paid all Transaction Expenses and
the Employee Bonuses.
ARTICLE VI
CLOSING
VI.1. The Closing. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York, commencing at
10:00 a.m. local time two business days after the satisfaction or written waiver
of the conditions set forth in Articles XII and XIII except those that are to be
satisfied at the Closing or at such other date, place or time as the parties may
agree (the "Closing Date").
VI.2. Actions and Deliveries at the Closing. At the Closing:
(a) The Company will deliver or cause to be delivered to the
Buyer:
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(i) a copy of resolutions of the board of directors of the Company
and the consent of the Stockholders of the Company, authorizing the execution,
delivery and performance of this Agreement and all related documents and
agreements, certified by the Secretary of the Company, as being true and correct
copies of the originals thereof subject to no modifications or amendments;
(ii) a certificate of the Secretary of the Company certifying as to
the incumbency of the officers of the Company and as to the signatures of such
officers who have executed documents delivered at the Closing on behalf of the
Company;
(iii) certificates, dated within five days of the Closing, of the
Secretary of State of Delaware establishing that the Company is validly in
existence and otherwise is in good standing to transact business; and
(iv) a certificate of the Chief Financial Officer and the President
of the Company certifying as to the fulfillment of the conditions set forth in
Section 12.1 hereof;
(v) (A) a copy of a payoff letter in customary form, which shall be
reasonably satisfactory to the Buyer, from The Chase Manhattan Bank indicating
that all Indebtedness of the Company under the Credit Agreement has been repaid
in full and all of the agreements and instruments relating to such Indebtedness
under the Credit Agreement, including all security agreements, filings and
related instruments will be terminated as of the Effective Time upon the
satisfaction of the conditions set forth in such letter, and (B) a certificate
of Vestar Capital Partners indicating that all amounts due and owing under its
Management Agreement have been paid in full and such Management Agreement has
been terminated;
(vi) the Escrow Agreement executed by the Escrow Agent and the other
parties thereto; and
(vii) a legal opinion of counsel to the Company with regard to the
capitalization of the Company, the authority of the Company to enter into this
Agreement and consummate the transactions contemplated hereby, the
enforceability of this Agreement against the Company and the validity of the
Merger, in form and substance reasonably satisfactory to the Buyer.
(b) The Buyer will deliver or cause to be delivered to the Company:
(i) a copy of resolutions of the board of directors of the Buyer
authorizing the execution, delivery and performance of this Agreement and all
related documents and agreements, each certified by the Secretary of the Buyer
as being true and correct copies of the originals thereof subject to no
modifications or amendments;
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(ii) a certificate of the Secretary of the Buyer certifying as to the
incumbency of the officers of the Buyer and as to the signatures of such
officers who have executed documents delivered at the Closing on behalf of the
Buyer;
(iii) a certificate, dated within five days of the Closing, of the
Secretary of State of Delaware establishing that the Buyer is in existence and
otherwise is in good standing to transact business;
(iv) a certificate of the Chief Financial Officer of the Buyer
certifying as to the fulfillment of the conditions set forth in Section 13.1
hereof;
(v) the Escrow Agreement executed by the Escrow Agent and the other
parties thereto; and
(vi) a legal opinion of counsel to the Buyer, EQ, and Equilease with
regard to the authority of the Buyer, EQ, and Equilease to enter into this
Agreement and consummate the transactions contemplated hereby, the
enforceability of this Agreement against the Buyer, EQ, and Equilease and the
validity of the Merger, in form and substance reasonably satisfactory to the
Company.
(c) The Company shall cause the Certificate of Merger to be filed in
accordance with the DGCL, and shall take any and all other lawful actions, and
do any other lawful things necessary to effect the Merger and to enable the
Merger to become effective.
(d) The Buyer shall make the payments described in Section 5.1 hereof.
(e) The Company shall make the payments described in section 5.3
hereof.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Buyer that
the statements contained in this Article VII are correct and complete as of the
date hereof.
VII.1. Capitalization; Ownership of Shares. The authorized
capital stock of the Company consists of (i)100,000 shares of Company Common
Stock, of which 9,000 shares are issued and outstanding and (ii) 10,000 shares
of Preferred Stock, none of which shares are issued and outstanding. All of the
shares of capital stock of the Company outstanding as of the date of this
Agreement are owned of record and beneficially by the Stockholders as set forth
in Section 7.1 of the disclosure schedule delivered by the Company to the Buyer
in connection herewith (the "Disclosure Schedule"). All of such shares are duly
authorized, validly issued, fully paid and non-assessable. Except as set forth
on Section 7.1 of the Disclosure Schedule, there are no securities
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<PAGE> 24
presently outstanding, and at the Effective Time there will not be any
outstanding securities which are convertible into, exchangeable for, or carrying
the right to acquire, equity securities of the Company, or subscriptions,
warrants, options, calls, convertible securities, registration or other rights
or other arrangements or commitments obligating the Company to issue, transfer
or dispose of any of its equity securities or any ownership interest therein.
There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company. Except as set
forth in Section 7.1 of the Disclosure Schedule, there are no voting trusts,
proxies, or other agreements or understandings with respect to the voting of any
capital stock of the Company. There are no bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
Stockholders of the Company may vote. Except as set forth on Section 7.1 of the
Disclosure Schedule, there are not any outstanding contractual obligations (i)
of the Company or any of the Subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock of the Company or any of the Joint Ventures,
(ii) of the Company to vote or to dispose of any shares of the capital stock of
any of the Subsidiaries or any of the Joint Ventures, or (iii) of the Company to
provide funds to, or make any material investment in, any Subsidiary, any Joint
Venture or in any other person.
VII.2. Subsidiaries and Joint Ventures. Except for the
Subsidiaries, the Joint Ventures and as set forth in Section 7.2 of the
Disclosure Schedule, the Company does not own, directly or indirectly, any
capital stock or any other equity interest in any person. The name, jurisdiction
of incorporation, capitalization and ownership of each Subsidiary and, as to the
ownership of the issued and outstanding capital stock or other equity interests,
to the Knowledge of the Company, of each Joint Venture is set forth in Section
7.2 of the Disclosure Schedule. Except as set forth on Section 7.2 of the
Disclosure Schedule, the Company owns all of the issued and outstanding shares
of capital stock of the Subsidiaries and each Joint Venture which they purport
to own, free and clear of any Liens, except for Permitted Liens, and all of such
shares are duly authorized, validly issued, fully paid and non-assessable.
Except as set forth on Section 7.2 of the Disclosure Schedule, there are no
outstanding securities convertible into, exchangeable for, or carrying the right
to acquire, equity securities of any of the Subsidiaries or, to the Knowledge of
the Company, any of the Joint Ventures, or subscriptions, warrants, options,
calls, convertible securities, registration or other rights or other
arrangements or commitments obligating any Subsidiary or, to the Knowledge of
the Company, any of the Joint Ventures to issue, transfer or dispose of any of
its equity securities or any ownership interest therein. Except as set forth on
Section 7.2 of the Disclosure Schedule, there are no outstanding stock
appreciation, phantom stock, profit participation, or similar rights with
respect to any Subsidiary or, to the Knowledge of the Company, any of the Joint
Ventures. Except as set forth on Section 7.2 of the Disclosure Schedule, there
are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of any Subsidiary or, to the
Knowledge of the Company, any of the Joint Ventures.
VII.3. Organization. The Company and each of the Subsidiaries
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation with all requisite corporate power
and authority to own, lease and operate its properties and assets and to carry
on its business as it is now being conducted, except where the failure to be
organized, existing and in good standing or to have such power and authority
would not be
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reasonably likely to have a material adverse effect on the assets, business,
operations or financial condition of the Company and the Subsidiaries taken as a
whole other than such effects attributable to general economic conditions or to
other changes generally affecting companies in the same business as the Company
(a "Company Material Adverse Effect"). The Company and each of the Subsidiaries
is duly qualified or licensed to do business and in good standing as a foreign
corporation in the jurisdictions set forth in Section 7.3 of the Disclosure
Schedule, which are all of the jurisdictions where the nature of the property
owned or leased by it, or the nature of the business conducted by it, makes such
qualification or license necessary and the absence of such qualification would
have a Company Material Adverse Effect. True and complete copies of the
certificate of incorporation and bylaws (or substantially equivalent documents)
of the Company and each of the Subsidiaries have been delivered or made
available to the Buyer.
VII.4. Corporate Power and Authority; No Violations. The
Company has full power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by the Company of this Agreement and the consummation
by the Company of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company, including due and
valid authorization by the board of directors and the Stockholders of the
Company and no other corporate proceedings on the part of the Company or the
Stockholders are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except to the extent that such enforceability (a) may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally, and (b) is subject to general
principles of equity. Except as set forth in Section 7.4 of the Disclosure
Schedule, neither the execution, delivery and performance by the Company of this
Agreement nor the consummation by the Company of the transactions contemplated
hereby will, with or without the giving of notice or the passage of time, or
both, (i) violate any provision of law, rule, regulation, order, judgment, writ,
injunction or decree applicable to the Company or any of the Subsidiaries, or
any of their properties or assets, (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any note, bond, mortgage, indenture, license, contract or agreement to
which the Company or any of the Subsidiaries is a party or by which the Company
or any of the Subsidiaries or any of their assets is bound or result in the
imposition of any Lien (other than Permitted Liens) upon any of the assets of
the Company or any of the Subsidiaries; or (iii) conflict with or violate any
provision of the certificate of incorporation or bylaws (or substantially
equivalent documents) of the Company or any of the Subsidiaries or require
notice to or filing with any Governmental Authority pursuant to an Environmental
Law, except, in the case of clauses (i) or (ii), for violations, conflicts,
breaches, defaults, accelerations, terminations, modifications, cancellations or
failures to give notice or Liens which in the aggregate would not be reasonably
likely to have a Company Material Adverse Effect and would not prevent or
materially delay, hinder or impair the consummation of the transactions
contemplated hereby.
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VII.5. Financial Statements.
(a) The Company has previously furnished to the Buyer true and
complete copies of its audited consolidated balance sheet, audited consolidated
statement of operations, audited consolidated statement of cash flows and
audited consolidated statement of changes in stockholders' equity, together with
notes thereto, for the fiscal year ended January 3, 1998, and the unaudited
consolidated balance sheet, unaudited consolidated statement of operations and
unaudited consolidated statement of cash flows for the period ended May 9, 1998
(collectively, the "Financial Statements"). The Financial Statements fairly
present the consolidated financial position, the consolidated results of
operations, changes in stockholders' equity (in the case of the audited
financial statements), cash flows and the other information included therein of
the Company and the Subsidiaries for the periods or as of the dates therein set
forth, in each case in accordance with GAAP consistently applied during the
periods involved, except that the unaudited Financial Statements are subject to
normal year end adjustments (which in the aggregate will not be material) and
lack footnotes and other presentation items required for full disclosure under
GAAP. The unaudited consolidated balance sheet at May 9, 1998, is sometimes
referred to herein as the "Balance Sheet." The Financial Statements have been
based upon the information contained in the Company's books and records,
represent fairly and accurately the Company's financial condition and related
results of operations as of the times and for the periods referred to therein.
The Company's books of account and financial records fairly reflect the
Company's income, expenses and liabilities.
(b) The Company has previously furnished to the Buyer true and
complete copies of the following:
(i) consolidated audited financial statements (statement of
operations, balance sheet and statement of cash flows) for Asahi-Schwebel Co.
Ltd. (which includes Asahi-Schwebel (Taiwan) since its acquisition in March of
1996) stated on a United States GAAP basis for the years ended March 31, 1998,
1997, 1996 and 1995;
(ii) consolidated audited financial statements (statement of
operations, balance sheet and statement of cash flows) for CS Interglas AG
stated on a German GAAP basis for the years ended June 30, 1997, 1996, and 1995;
(iii) monthly statements of operations from Asahi-Schwebel Co.,
Ltd. stated on a Japanese GAAP basis for the months of April and May of 1998;
(iv) monthly statements of operations from Asahi-Schwebel
(Taiwan) stated on a Taiwanese GAAP basis for the months of April and May of
1998;
(v) monthly consolidated statements of operations and balance
sheets from CS Interglas AG stated on a German GAAP basis for each of the months
from July 1, 1997 thru May 30, 1998; and
(vi) unaudited financial statements (statement of operations,
balance sheet and statement of cash flows) for the years ended December 31, 1996
and
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January 3, 1998 and monthly statements of operations, balance sheets
and statements of cash flows for each of the months from January thru
April of 1998 for Clark-Schwebel Tech-Fab Company.
To the Knowledge of the Company, the audited financials of the Joint Ventures
fairly present the consolidated financial position, consolidated results of
operations, cash flows and other information included therein, set forth in each
case in accordance with applicable GAAP set forth above. To the Knowledge of the
Company, (A) the monthly statements of operations for Asahi-Schwebel Co., Ltd.
are fairly presented in accordance with Japanese GAAP, (B) the monthly
statements of operations for Asahi-Schwebel (Taiwan) are fairly presented in
accordance with Taiwanese GAAP, and (C) the monthly statements of CS Interglas
AG are fairly presented in accordance with German GAAP. To the Knowledge of the
Company, the monthly statements of Asahi-Schwebel Co., Ltd. and CS Interglas AG
are prepared in a manner consistent with past practice based upon the books and
records of the relevant company. To the Knowledge of the Company, (1) the
unaudited financial statements for Clark-Schwebel Tech-Fab Company fairly
present the financial position, results of operations, cash flows and other
information included therein, in accordance with GAAP and (2) the monthly
statements of Clark-Schwebel Tech-Fab Company are fairly presented in accordance
with GAAP.
(c) The Company has filed with the SEC, and has heretofore
made available to Buyer true and complete copies of, all forms, reports,
schedules, statements and other documents required to be filed by it since
December 31, 1996, under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or the Securities Act of 1933, as amended (the "Securities Act")
(such forms, reports, schedules, statements and other documents, including any
financial statements or schedules included therein, are referred to as the
"Company SEC Documents"). The Company SEC Documents, at the time filed (a) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading and (b) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the applicable rules and regulations of the SEC thereunder. The financial
statements of the Company SEC Documents comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Forms 10-Q and 8-K of the SEC) and fairly
present (subject, in the case of the unaudited statements, to normal, recurring
audit adjustments) the consolidated financial position of the Company and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended.
VII.6. Absence of Certain Changes or Events. Except as
permitted or contemplated by this Agreement and except as set forth on Sections
7.6, 7.9 or 7.10 of the Disclosure Schedule, since the date of the Balance Sheet
(a) there has not occurred any events or circumstances that (individually or in
the aggregate) have resulted in or would be likely to result in a Company
Material Adverse Effect, and (b) the Company, the Subsidiaries and, to the
Knowledge of the Company the
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Joint Ventures, have operated their businesses only in the ordinary course
consistent with past practice.
VII.7. Title to Assets. Each of the Company and the
Subsidiaries has good (and, in the case of real property, marketable) title (or
leasehold interest with respect to capital leases) to all of the assets and
properties held or used in the business of the Company and the Subsidiaries
taken as a whole and which they purport to own, free and clear of all Liens
except for Permitted Liens, except for assets and properties sold, consumed or
otherwise disposed of in the ordinary course of business since the date of the
Balance Sheet. The Company or one of its Subsidiaries owns, leases or otherwise
has a valid right to use all assets and properties necessary to conduct in all
material respects their respective businesses in conformity with past practices.
VII.8. Intellectual Property. Section 7.8 of the Disclosure
Schedule sets forth an accurate and complete list of all of the material:
patents, patent applications, unregistered trademarks, unregistered service
marks, trade names, trademark registrations and all applications therefor and
copyright registrations and applications therefor used in the conduct of the
Company's and the Subsidiaries' respective businesses (collectively,
"Intellectual Property"). Except as set forth in Section 7.8 of the Disclosure
Schedule, the Company and its Subsidiaries, as the case may be, own and possess
all right, title and interest in and to the Intellectual Property. Neither the
Company nor any Subsidiary has received any written notices of or have Knowledge
of any infringement or misappropriation from any third party with respect to the
Intellectual Property, and, to the Knowledge of the Company, neither the Company
nor the Subsidiaries is currently infringing on the intellectual property on any
other person, except for any such infringement which would not have a Company
Material Adverse Effect. The Company and the Subsidiaries own or possess
adequate licenses to use all Intellectual Property necessary to conduct the
business of the Company and the Subsidiaries. To the Knowledge of the Company,
no material trade secret, confidential know how, or confidential information
owned by the Company or any Subsidiary has been disclosed or authorized to be
disclosed to any third party except pursuant to a confidentiality agreement,
which protects the Company's proprietary interest in and to such information. To
the Knowledge of the Company, neither the Company nor any of its Subsidiaries
has agreed to indemnify any Person for or against any actual claim of
interference, infringement, misappropriation or other conflict with respect to
the Intellectual Property. The transactions contemplated by this Agreement will
have no Company Material Adverse Effect on the right, title and interest in and
to the Intellectual Property.
VII.9. Contracts.
(a) Section 7.9 of the Disclosure Schedule sets
forth an accurate and complete list of each written contract or agreement
(including any and all amendments thereto) to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the Subsidiaries is
bound which (i) relates to the borrowing of money or the guaranty of any
obligation to borrow money; (ii) involves revenues or expenditures in excess of
$500,000 (excluding purchase and sale orders entered into in the ordinary course
of business consistent with past practice); (iii) is a collective bargaining
agreement; (iv) obligates the Company or any Subsidiary not to compete with any
business or which otherwise restrains or prevents the Company or any of the
Subsidiaries from
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carrying on any lawful business (excluding customary restrictive covenants
contained in agreements identified pursuant to clause (i) above); (v) relates to
employment, compensation, severance, consulting or indemnification between the
Company or any Subsidiary and any of their current or former respective
officers, directors, employees or consultants who are entitled to compensation
thereunder in excess of $100,000 per annum (other than Merrill Lynch & Co. and
Vestar Capital Partners); (vi) is a partnership or joint venture agreement;
(vii) relates to the acquisition or disposition by the Company or any Subsidiary
of any assets or the capital stock of any Person, which acquisition or
disposition was consummated at any time within the last two years preceding the
date hereof and pursuant to which the purchase price was in excess of $500,000
other than pursuant to sale or purchase orders entered into in the ordinary
course of business consistent with past practice; or (viii) is otherwise
material to the assets, business, operations or financial condition of the
Company and the Subsidiaries taken as a whole (collectively, the "Contracts").
The Company previously has furnished or made available to the Buyer true and
correct copies of all Contracts. All of the Contracts are valid, binding and in
full force and effect and are enforceable by the Company or the Subsidiary which
is a party thereto in accordance with their terms except to the extent that such
enforceability (a) may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally, and
(b) is subject to general principles of equity. Except as set forth in Section
7.9 of the Disclosure Schedule, neither the Company nor any of the Subsidiaries
is in breach or default under (and no event has occurred which with notice or
the passage of time or both would constitute a breach or default under) any
agreements listed in Section 7.9 of the Disclosure Schedule nor, to the
Knowledge of the Company, is any other party to any of the agreements listed in
Section 7.9 of the Disclosure Schedule in default thereunder (and no event has
occurred which with notice or the passage of time or both would constitute a
breach or default thereunder); excluding, however, in each instance, breaches or
defaults which, individually or in the aggregate, are not likely to have a
Company Material Adverse Effect.
(b) To the Knowledge of the Company, there is no material
contract of the Joint Ventures that would have a Company Material Adverse
Effect. For purposes of this representation, none of the following shall be
deemed to have a Company Material Adverse Effect: (i) contracts entered into the
ordinary course of business consistent with past practice,(ii) collective
bargaining or similar agreements with terms typical for similar agreements in
the country of operation or which have either been in place for more than 18
months or are substantially similar to prior collective bargaining agreements,
(iii) agreements the cost and expense for which are reflected on financial
statements for such Joint Venture that have been provided to the Buyer prior to
the date hereof and any refinancing thereof, if applicable or (vi) any contracts
that have been provided to the Buyer or otherwise disclosed to the Buyer prior
to the date hereof.
VII.10. Litigation. Except as set forth on Section 7.10 of the
Disclosure Schedule, as of the date hereof, there is no claim, action, suit,
arbitration, inquiry, proceeding, or investigation by or before any Governmental
Entity ("Litigation") pending or, to the Knowledge of the Company, threatened,
involving the Company or any of the Subsidiaries which individually or in the
aggregate would have a Company Material Adverse Effect or which would have a
material adverse effect on the ability of the Company to perform its obligations
hereunder, or which seeks to enjoin or obtain damages in respect of the
consummation of the transactions contemplated hereby. Neither the
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Company nor any of the Subsidiaries is subject to any outstanding orders,
rulings, judgments or decrees that would have a Company Material Adverse Effect.
Section 7.10 of the Disclosure Schedule also sets forth a list of each material
outstanding order, ruling, judgment or decree to which the Company or any
Subsidiary or any of its or their assets is bound or subject.
VII.11. Compliance With Laws. Except as set forth in Section
7.11 of the Disclosure Schedule, (i) the Company and the Subsidiaries are in
compliance with all applicable laws, rules, regulations, ordinances, decrees or
orders of any Governmental Entity currently in effect, except where the failure
to comply therewith is not reasonably likely to have a Company Material Adverse
Effect and (ii) the Company and the Subsidiaries have all governmental permits,
licenses and authorizations necessary for the lawful conduct of their businesses
("Permits") and are in compliance with the terms of the Permits, except for any
non-compliance which is not likely to have a Company Material Adverse Effect. No
investigation or review by any Governmental Entity with respect to the Company
or any of the Subsidiaries is pending or, to the Knowledge of the Company,
threatened, nor has any Governmental Entity indicated any intention to conduct
any such investigation or review, other than, in each case, those the outcome of
which are not likely to have a Company Material Adverse Effect or prevent or
materially delay the consummation of the transactions contemplated hereby.
VII.12. Environmental Matters. Except as set forth on Section
7.12 of the Disclosure Schedule, or except as would not, to the Knowledge of the
Company, in the aggregate, result in a fine, penalty or cost that would have a
Company Material Adverse Effect:
(a) the Company and the Subsidiaries are in compliance with
all applicable Environmental Laws;
(b) neither the Company nor any of the Subsidiaries has
received written notice from a Governmental Entity alleging that the
Company or any Subsidiary is not in compliance with Environmental Laws;
(c) no Environmental Lien has attached to any property that
is currently owned or operated by the Company or any Subsidiary; and
(d) notwithstanding anything herein to the contrary, the
representations and warranties contained herein and the disclosure of
certain matters in Section 7.12 of the Disclosure Schedule are not
intended to impair or otherwise limit the Buyer's rights to
indemnification pursuant to that certain Agreement and Plan of Merger
dated as of February 24, 1996 by and among Springs Industries, Inc.,
Fort Mill A Inc., Vestar/CS Holding Company, L.L.C. and Clark-S
Acquisition Corporation.
VII.13. Employee Benefit Plans.
(a) Section 7.13 of the Disclosure Schedule sets forth an
accurate and complete list of each employee benefit plan (as such term is
defined in Section 3(3) of ERISA), and
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any other bonus, deferred compensation, incentive compensation, stock, severance
or other plan or arrangement, other than a non-material fringe benefit plan
(each of the foregoing, a "Benefit Plan"), currently maintained or contributed
to by the Company or any Subsidiary. With respect to each Benefit Plan, the
Company previously has furnished to the Buyer a true and correct copy of, where
applicable, (i) the most recent annual report (Form 5500) filed with the IRS,
(ii) the plan document, (iii) each trust agreement and group annuity contract,
if any, relating to such Benefit Plan, (iv) the most recent summary plan
description and (v) the most recent determination letter issued by the IRS.
(b) Neither the Company nor any Subsidiary has an obligation
to contribute to any multiemployer plan (as defined in Section 3(37) of ERISA),
and no Benefit Plan is or was subject to Title IV of ERISA. Except as set forth
in Section 7.13 of the Disclosure Schedule, with respect to the Benefit Plans,
all required contributions (i) to date have been made or properly accrued by the
Company and (ii) as of the Closing Date will have been made or properly accrued
by the Company on or prior to the Closing Date.
(c) Each of the Benefit Plans has been administered in
accordance with its terms in all material respects and is in compliance in all
material respects with applicable laws and regulations.
(d) Except as set forth in Section 7.13 of the Disclosure
Schedule, each of the Benefit Plans which is intended to be a qualified plan
within the meaning of Section 401(a) of the Code has been determined by the IRS
to be so qualified and to the Knowledge of the Company nothing has occurred to
cause the loss of such qualified status, excepting circumstances that are
reasonably regarded as correctable under one or more of the procedures provided
by the Employee Plans Compliance Resolution System.
(e) Except as set forth in Section 7.13 of the Disclosure
Schedule, no Benefit Plan provides health, medical or life insurance benefits
with respect to current or former employees of the Company or any Subsidiary
beyond their retirement or other termination of service other than (i) coverage
mandated by applicable law, or (ii) benefits the full cost of which are borne by
the current or former employee (or his or her beneficiary).
VII.14. Government Consents. Except as set forth in Section 7.14 of
the Disclosure Schedule, no consent, approval or authorization of, or exemption
by, or filing with, any Governmental Entity (other than pursuant to the HSR Act)
is required in connection with the execution, delivery and performance by the
Company of this Agreement or the taking of any other action contemplated hereby,
excluding, however, consents, approvals, authorizations, exemptions and filings,
if any, which the Buyer is required to obtain or make and consents or
authorizations which, if not obtained, are not reasonably likely to have a
Company Material Adverse Effect.
VII.15. Taxes. Except in each case as set forth in Section 7.15 of
the Disclosure Schedule:
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(a) Each of the Company, the Subsidiaries, and any affiliated
group (within the meaning of Code ss.1504) of which the Company (or any combined
or unitary group of which the Company or a Subsidiary) was the common parent
have: (a) timely filed with the appropriate Tax authority and in all material
respects correctly and accurately prepared all returns, declarations, reports,
estimates, forms, information returns and statements ("Returns") required to be
filed or sent by or with respect to it in respect of any Taxes; (b) properly
paid all Taxes that are shown due and payable on such Returns; (c) established
on its books and records and in the Financial Statements reserves in accordance
with GAAP for the payment of all accrued Taxes not yet due and payable; and (d)
complied in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of Taxes from employees and
other persons.
(b) There are no Liens for Taxes upon the assets of the
Company or any of the Subsidiaries, except Permitted Liens.
(c) No written claim or deficiency for any Taxes in excess of
$25,000 has been asserted and the Company has no Knowledge of any such claim or
deficiency that could be asserted against the Company or any of the Subsidiaries
which has not been resolved and paid in full.
(d) There are no outstanding waivers or comparable consents
given by the Company or any of the Subsidiaries regarding the application of the
statute of limitations with respect to any Taxes or Returns.
(e) No audits or proceedings before any Governmental Entity
are presently pending with regard to any Taxes or Returns and the Company and
the Subsidiaries have not received any written notices of any such audits or
proceedings.
(f) Except as set forth in Section 7.15 of the Disclosure
Schedule, neither the Company nor any Subsidiary has entered into any
compensatory agreement (whether written or oral) with respect to the performance
of service for which payment thereunder would result in a nondeductible expense
to the Company or the Surviving Corporation pursuant to Section 280G of the
Code.
(g) With respect to the Company and the Subsidiaries, there
are (i) no outstanding requests for rulings, powers of attorney, or tax sharing
agreements; (ii) no "check-the-box" elections have been made; and (iii) no
consents or elections under Section 341(f) of the Code have been filed.
VII.16. Real Property.
(a) Section 7.16(a) of the Disclosure Schedule is a true,
correct and complete list of all of the real property owned by the Company or
any Subsidiary (the "Owned Real Property"). The Company or a Subsidiary, as
applicable, has good and marketable fee simple title to all of the Owned Real
Property. All Owned Real Property, material structures and other material
buildings and material equipment of each of the Company and the Subsidiaries are
in satisfactory operating condition and repair for the requirements of the
business as presently conducted. Section
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7.16(a) of the Disclosure Schedule contains a complete and accurate legal
description of each parcel of Owned Real Property. The Company is not a party to
any contract or option pursuant to which any person has a future right to
purchase or lease any of the Owned Real Property.
(b) Section 7.16(b) of the Disclosure Schedule is a true,
correct and complete list of all of the leases (the "Leases") for real property
to which the Company or any Subsidiary is a party that provide for payments in
excess of $100,000 per year. Each Lease is valid, binding and in full force and
effect. No notice of default or termination under any lease is outstanding and
no termination event or condition exists to the Knowledge of the Company under
any lease, and the Company holds each leasehold interest in each lease free and
clear of all Liens other than Permitted Liens. The Company has previously
delivered to the Buyer true and complete copies of all of the Leases. To the
Knowledge of the Company, no disagreement or dispute exists with any of the
lessors under the Leases, nor does any other reason exist, which is likely to
cause any such lessor to refuse any consent to the transactions contemplated
hereby that may be required under the Leases. Except as set forth on Section
7.16(b) of the Disclosure Schedule, there are no leases, licenses or agreements
with respect to the occupancy of the Owned Real Property of any kind of nature,
whether or not of record.
VII.17. Broker's Fees. Section 7.17 of the Disclosure Schedule
lists all liabilities on the part of the Company, any Subsidiary or any
Affiliate or representative of the Company or any Subsidiary, to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement. None of such fees or commissions shall be borne
by the Buyer or the Surviving Corporation.
VII.18. Disclaimer. Except as set forth in this Agreement,
none of the Company, any Subsidiary or any officer, director, employee, agent,
stockholder, or Affiliate of the Company or any Subsidiary (such officers,
directors, employees, agents, stockholders and Affiliates being collectively
referred to herein as the "Company Released Parties") makes any representation
or warranty, express or implied, at law or in equity, in respect of the Company,
the Subsidiaries or any of their respective assets, Liabilities or operations,
including, without limitation, with respect to merchantability or fitness for
any particular purpose, and any such other representations or warranties are
hereby expressly disclaimed.
VII.19. Change of Control. Except as set forth on Section 7.19
of the Disclosure Schedule, the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated by this Agreement
will not constitute a "change of control" under, require the consent from, or
the giving of notice to, any third party pursuant to, permit a third party to
terminate or accelerate vesting, repayment or repurchase rights, or create any
other detriment under the terms, conditions or provisions of any Contract,
except individually or in the aggregate as is not likely to have a Company
Material Adverse Effect.
VII.20. Labor Relations and Employment. Except as set forth on
Section 7.20 of the Disclosure Schedule, (i) neither the Company nor any of the
Subsidiaries is a party to or bound by any collective bargaining or similar
agreement with any labor organization or labor union; (ii) no
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union claims to represent the employees of the Company or any of the
Subsidiaries and the Company does not have any Knowledge of any union organizing
activities among the Company or any of the Subsidiaries; (iii) there is no labor
strike, dispute, slowdown, stoppage or lockout actually pending, or, to the
Knowledge of the Company, threatened against the Company or any of the
Subsidiaries, and during the past three years there has not been any such
action; (iv) the Company and the Subsidiaries are, and have at all times been,
in material compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages, hours of work
and occupational safety and health, and are not engaged in any unfair labor
practices as defined in the National Labor Relations Act or other applicable
law, ordinance or regulation; (v) there is no unfair labor practice charge or
complaint against the Company or any of the Subsidiaries pending or, to the
Knowledge of the Company, threatened before the National Labor Relations Board
or any similar state or foreign agency; (vi) no charges respect to or relating
to the Company or any of the Subsidiaries are pending before the Equal
Employment Opportunity Commission or any other agency responsible for the
prevention of unlawful employment practices; (vii) neither the Company nor any
of the Subsidiaries has received notice of the intent of any federal, state,
local or foreign agency responsible for the enforcement of labor or employment
laws to conduct an investigation with respect to or relating to the Company or
any of the Subsidiaries and no such investigation is in progress; and (viii)
there are no complaints, lawsuits or other proceedings pending or to the
Knowledge of the Company threatened in any forum by or on behalf of any present
or former employee of the Company or any of the Subsidiaries alleging breach of
any express or implied contract of employment, any law or regulation governing
employment or the termination thereof or other discriminatory, wrongful or
tortious conduct in connection with the employment relationship.
VII.21. Insurance. Section 7.21 of the Disclosure Schedule
accurately identifies each material insurance policy (including policies
providing property, casualty, environmental, liability, liability, malpractice
and workers compensation insurance) and all other material types of insurance of
the Company and the Subsidiaries, together with carriers and liability limits
for each such policy. Each such policy is duly in force and no notice has been
received by the Company or any of the Subsidiaries from any insurance carrier
purporting to cancel or reduce coverage under any such policy. The Company and
the Subsidiaries are current in all premiums or other payments due thereunder
and no notice has been received by the Company or any of the Subsidiaries from
any insurance carrier purporting to increase any such premiums in any material
respect. All insurance coverage held for the benefit of the Company or the
Subsidiaries is adequate to cover risks customarily insured against by similar
companies in their industry.
VII.22. Customers and Suppliers.
(a) Section 7.22(a)(i) of the Disclosure Schedule sets
forth a true and complete list of the ten largest customers (the "Major
Customers") of the Company as of July 4, 1998. Except as set forth on Section
7.22(a)(ii) of the Disclosure Schedule, since July 4, 1998 neither the Company
nor any of the Subsidiaries has experienced the loss of any of its Major
Customers, nor received any notice of the intention of any Major Customer to
terminate its relationship with the Company or any of the Subsidiaries, nor to
the Knowledge of the Company has any Major Customer
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otherwise indicated that it intends to terminate or materially alter its
relationship with the Company or any of the Subsidiaries.
(b) Section 7.22(b)(i) of the Disclosure Schedule sets forth a
true and complete list of the ten largest suppliers (the "Major Suppliers") of
the Company as of July 4, 1998. Except as set forth on Section 7.22(b)(ii) of
the Disclosure Schedule, since July 4, 1998 neither the Company nor any of the
Subsidiaries has experienced the loss of any of its Major Suppliers, nor
received any notice of the intention of any Major Supplier to terminate its
relationship with the Company or any of the Subsidiaries, nor to the Knowledge
of the Company has any Major Supplier otherwise indicated that it intends to
terminate or materially alter its relationship with the Company or any of the
Subsidiaries.
VII.23. Transactions with Affiliates and Third Parties; Asset
Sales.
(a) Section 7.23 of the Disclosure Schedule sets forth a true
and complete list and summary of all transactions or series of transactions
involving amounts, in each case, in excess of $100,000 within the past two
years, or currently existing between or relating to the Company and any
Affiliate of the Company (other than Subsidiaries).
(b) Except as set forth on Section 7.23 of the Disclosure
Schedule, since January 1, 1996 there have been no transfers or other
dispositions of any assets (including, without limitation Intellectual Property,
property, plants or equipment) relating to the business of the Company other
than the disposition of inventory in the ordinary course of business or
properties or assets which were replaced by equivalent or superior properties or
assets in the ordinary course of business.
VII.24. Corporate Records. The minute books of the Company and each
Subsidiary previously made available to Buyer contain complete and accurate
records of all meetings and accurately reflect all other corporate action of the
stockholders and boards of directors (including committees thereof) of the
Company and its Subsidiaries. The stock certificate books and stock transfer
ledgers of the Company and its Subsidiaries previously made available to Buyer
are true, and correct and complete. All stock transfer taxes levied or payable
with respect to all transfers of shares of the Company and its Subsidiaries
prior to the date hereof have been paid and appropriate transfer tax stamps
affixed.
VII.25. No Undisclosed Liabilities. As of the date of the
Balance Sheet, except as set forth on the Balance Sheet and Section 7.25 of the
Disclosure Schedules, neither the Company nor any of the Subsidiaries has any
liability or obligations of any nature, whether or not accrued, contingent or
otherwise, that would be required by GAAP to be reflected on a consolidated
balance sheet of the Company and the Subsidiaries (including the notes thereto).
Since the date of the Balance Sheet, neither the Company nor any of its
Subsidiaries has incurred any material liabilities of any nature, whether or not
accrued or contingent other than (a) liabilities incurred in the ordinary course
of business; (b) liabilities which are disclosed on any Disclosure Schedule; and
(c) liabilities
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(other than those described in clause (a) or (b) above) which individually or in
the aggregate do not exceed $1,000,000 or would not have a Company Material
Adverse Effect.
VII.26. Year 2000 Compliance. The Company has initiated a plan
to prepare the Company's computer systems and applications for the year 2000. At
January 3, 1998, the Company had made substantial progress in programming its
business systems for year 2000 compliance. The Company estimates that all
computer systems and applications will be year 2000 compliant prior to that
date. The Company expects to incur primarily internal staff costs related to
infrastructure and facilities enhancements necessary to prepare the systems for
the year 2000. Testing and conversion of system applications is expected to cost
approximately $1.7 million over the next three years. This estimate includes the
cost to purchase and install two software systems to replace systems which are
currently not year 2000 compliant.
VII.27. Joint Ventures.
(a) Except as set forth on Section 7.27 of the Disclosure
Schedule, since January 3, 1998, the Company has not authorized or approved (a)
the issuance (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) of any stock of any
class or any other securities or equity equivalents (including without
limitation, stock appreciation rights), or amendment in any respect of any of
the terms of any such securities or equity equivalents outstanding on the date
hereof, of any of the Joint Ventures or (b) any actions over which the Company
has approval or veto rights on the part of any of the Joint Ventures.
(b) To the Knowledge of the Company as of the date hereof,
the annual report distributed to the shareholders of CS Interglas AG in
compliance with the laws of Germany for the most recently completed fiscal year
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to the Company that
the statements contained in this Article VIII are correct and complete as of the
date hereof.
VIII.1. Organization. The Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
VIII.2. Corporate Power and Authority; No Violations. The
Buyer has full power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. The execution,
delivery and performance by the Buyer of this Agreement and the consummation by
the Buyer of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Buyer, including due and valid
authorization by
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the board of directors and the stockholders of the Buyer and no other corporate
proceedings on the part of the Buyer are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by the Buyer and constitutes the valid
and binding obligation of the Buyer, enforceable against the Buyer in accordance
with its terms, except to the extent that such enforceability (a) may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally, and (b) is subject to general
principles of equity. Except as set forth in Section 8.2 of the Disclosure
Schedule, neither the execution, delivery and performance by the Buyer of this
Agreement nor the consummation by the Buyer of the transactions contemplated
hereby will, with or without the giving of notice or the passage of time, or
both, (i) violate any provision of law, rule, regulation, order, judgment, writ,
injunction or decree applicable to the Buyer, or (ii) conflict with or violate
any provision of the certificate of incorporation or bylaws (or substantially
equivalent documents) of the Buyer, except, in the case of clause (i), for
violations which in the aggregate would not prevent or materially delay, hinder
or impair the consummation of the transactions contemplated hereby.
VIII.3. Brokers' Fees. Neither the Buyer nor any Affiliate or
representative of the Buyer has any Liability to pay any fees or commissions to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement for which the Company could become liable or obligated.
VIII.4. Litigation. No Litigation against the Buyer is pending
or, to the Knowledge of the Buyer, is threatened which seeks to delay, prevent,
adversely affect or restrict the consummation of the transactions contemplated
hereby.
VIII.5. Government Consents. Except as set forth in Section
8.5 of the Disclosure Schedule, no consent, approval or authorization of, or
exemption by, or filing with, any Governmental Entity (other than pursuant to
the HSR Act) is required in connection with the execution, delivery and
performance by the Buyer of this Agreement or the taking of any other action
contemplated hereby, excluding, however, consents, approvals, authorizations,
exemptions and filings, if any, which the Buyer is required to obtain or make
and consents or authorizations which, if not obtained, would not prevent or
materially delay, hinder or impair the consummation of the transactions
contemplated hereby.
VIII.6. Purchase for Investment. The Buyer is acquiring the
Company for investment and not with a view to any public resale or other
distribution thereof in violation of the Securities Act of 1933, as amended, or
any applicable state securities laws.
VIII.7. Adequate Funds. Prior to the date hereof, the Buyer
has delivered to the Company written commitments from Bank of America National
Trust and Savings Association which contain the general terms and conditions
upon which such bank has agreed to make loans to the Buyer, the proceeds of
which loans will be sufficient to enable the Buyer to consummate the transaction
contemplated in this Agreement.
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ARTICLE IX
REPRESENTATIONS AND WARRANTIES OF EQ
EQ hereby represents and warrants to the Company that the
statements contained in this Article IX are correct and complete as of the date
hereof.
IX.1. Organization. EQ is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation.
IX.2. Corporate Power and Authority; No Violations. EQ has
full power and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance by EQ of this Agreement and the consummation by EQ of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of EQ, including due and valid authorization by the
board of directors of EQ and no other corporate proceedings on the part of EQ
are necessary to authorize this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by EQ and constitutes the valid and binding obligation of EQ,
enforceable against EQ in accordance with its terms, except to the extent that
such enforceability (a) may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally, and (b) is subject to general principles of equity. Neither the
execution, delivery and performance by EQ of this Agreement nor the consummation
by EQ of the transactions contemplated hereby will, with or without the giving
of notice or the passage of time, or both, (i) violate any provision of law,
rule, regulation, order, judgment, writ, injunction or decree applicable to EQ,
or (ii) conflict with or violate any provision of the certificate of
incorporation or bylaws (or substantially equivalent documents) of EQ, except,
in the case of clause (i), for violations which in the aggregate would not
prevent or materially delay, hinder or impair the consummation of the
transactions contemplated hereby.
IX.3. Financial Statements. EQ has previously furnished to the
Company true and complete copies of its audited consolidated balance sheet,
audited consolidated statement of operations, audited consolidated statement of
cash flows and audited consolidated statement of changes in stockholders'
equity, together with notes thereto, for the fiscal years ended December 31,
1997 and 1996 (collectively, the "EQ Financial Statements"). The EQ Financial
Statements fairly present the consolidated financial position, the consolidated
results of operations, changes in stockholders' equity, cash flows and the other
information included therein of EQ and its subsidiaries for the periods or as of
the dates therein set forth, in each case in accordance with GAAP consistently
applied during the periods involved. The audited consolidated balance sheet at
December 31, 1997, is sometimes referred to herein as the "EQ Balance Sheet."
The EQ Financial Statements have been based upon the information contained in
the EQ's books and records, represent fairly and accurately the EQ's financial
condition and related results of operations as of the times and for the periods
referred to therein. EQ's books of account and financial records fairly reflect
EQ's income, expenses and liabilities.
IX.4. Absence of Certain Changes or Events. Since the date of
the EQ Balance Sheet (a) there has not occurred any events or circumstances that
(individually or in the aggregate)
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have resulted in or would be reasonably likely to have a material adverse effect
on the assets, business, operations or financial condition of EQ and its
subsidiaries taken as a whole, (b) EQ and its subsidiaries have operated their
businesses only in the ordinary course consistent with past practice, and (c) EQ
has not taken any of the actions described in Section 11.14.
IX.5. Brokers' Fees. Neither EQ nor any Affiliate or
representative of EQ has any Liability to pay any fees or commissions to any
broker, finder or agent with respect to the transactions contemplated by this
Agreement for which the Company could become liable or obligated.
IX.6. Litigation. No Litigation against EQ is pending or, to
the Knowledge of EQ, is threatened which seeks to delay, prevent, materially
adversely affect or restrict the consummation of the transactions contemplated
hereby.
IX.7. Government Consents. No consent, approval or
authorization of, or exemption by, or filing with, any Governmental Entity
(other than pursuant to the HSR Act) is required in connection with the
execution, delivery and performance by EQ of this Agreement or the taking of any
other action contemplated hereby, excluding, however, consents, approvals,
authorizations, exemptions and filings, if any, which EQ is required to obtain
or make and consents or authorizations which, if not obtained, would not prevent
or materially delay, hinder or impair the consummation of the transactions
contemplated hereby.
ARTICLE X
REPRESENTATIONS AND WARRANTIES OF EQUILEASE
Equilease hereby represents and warrants to the Company that
the statements contained in this Article X are correct and complete as of the
date hereof.
X.1. Organization. Equilease is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation.
X.2. Corporate Power and Authority; No Violations. Equilease
has full power and authority to execute, deliver and perform this Agreement and
to consummate the transactions contemplated hereby. The execution, delivery and
performance by Equilease of this Agreement and the consummation by Equilease of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Equilease, including due and valid authorization
by the board of directors of Equilease and no other corporate proceedings on the
part of Equilease are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Equilease and constitutes the valid and binding
obligation of Equilease, enforceable against Equilease in accordance with its
terms, except to the extent that such enforceability (a) may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally, and (b) is subject to general
principles of equity. Neither the execution, delivery and performance by
Equilease of this Agreement nor the consummation by Equilease of the
transactions contemplated hereby will,
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with or without the giving of notice or the passage of time, or both, (i)
violate any provision of law, rule, regulation, order, judgment, writ,
injunction or decree applicable to Equilease, or (ii) conflict with or violate
any provision of the certificate of incorporation or bylaws (or substantially
equivalent documents) of Equilease, except, in the case of clause (i), for
violations which in the aggregate would not prevent or materially delay, hinder
or impair the consummation of the transactions contemplated hereby.
X.3. Ultimate Parent. Equilease is a subchapter "C"
corporation (as defined by the Code) and no corporation which owns any of the
issued and outstanding capital stock of Equilease includes Equilease in its
consolidated federal income tax return. Equilease owns, directly or indirectly,
all of the issued and outstanding capital stock of EQ.
X.4. Brokers' Fees. Neither Equilease nor any Affiliate or
representative of Equilease has any Liability to pay any fees or commissions to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement for which the Company could become liable or obligated.
X.5. Litigation. No Litigation against Equilease is pending
or, to the Knowledge of Equilease, is threatened which seeks to delay, prevent,
materially adversely affect or restrict the consummation of the transactions
contemplated hereby.
X.6. Government Consents. No consent, approval or
authorization of, or exemption by, or filing with, any Governmental Entity
(other than pursuant to the HSR Act) is required in connection with the
execution, delivery and performance by Equilease of this Agreement or the taking
of any other action contemplated hereby, excluding, however, consents,
approvals, authorizations, exemptions and filings, if any, which Equilease is
required to obtain or make and consents or authorizations which, if not
obtained, would not prevent or materially delay, hinder or impair the
consummation of the transactions contemplated hereby.
ARTICLE XI
COVENANTS OF THE PARTIES
XI.1. Efforts. Subject to the terms and conditions herein
provided and applicable law, each of the parties hereto agrees to use its
commercially reasonable efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary, proper or advisable to
consummate and effect the transactions contemplated by this Agreement on the
first business day on which the tender offers described in the Solicitations may
be consummated, including, without limitation, obtaining all required consents
and approvals, making all required filings and applications and complying with
or responding to any requests by Governmental Entities. The Buyer and the
Company shall make all filings required under the HSR Act no later than the
first business day following the day on which the Company mails the Senior
Debenture Solicitation and the Senior Note Solicitation. The Buyer and the
Company shall use commercially reasonable efforts to obtain "early termination"
under the HSR Act.
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XI.2. Conduct of Business.
(a) Except as may be otherwise contemplated by this Agreement
or Section 11.2 of the Disclosure Schedule or required by law or any Contracts
or other agreements or arrangements disclosed in the Disclosure Schedule or as
the Buyer may otherwise expressly consent to in writing, from the date hereof
and prior to the Closing, the Company will, and will use its best efforts to
cause each of the Subsidiaries and use its commercially reasonable efforts to
cause each of the Joint Ventures, to operate its business only in the ordinary
and usual course consistent with past practice.
(b) Without limiting the generality of the foregoing, except
as may be otherwise contemplated by this Agreement or Section 11.2 of the
Disclosure Schedule or required by law or as the Buyer may otherwise expressly
consent to in writing from the date hereof and prior to the Closing, neither the
Company nor any of the Subsidiaries will:
(i) (A) declare, set aside or pay any dividend or other
actual or deemed distribution (whether in cash, stock or property or
any combination thereof) in respect of any of its capital stock; (B)
split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or
(C) amend the terms of, repurchase, redeem or otherwise acquire, or
permit any Subsidiary to repurchase, redeem or otherwise acquire or
make any payments in respect of, any of its securities or any
securities of the Subsidiaries, or propose to do any of the foregoing;
(ii) authorize for issuance, issue, sell, deliver or agree
or commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any of its stock of any class or any other
securities (including Indebtedness having the right to vote) or equity
equivalents (including, without limitation, stock appreciation rights),
or amend in any respect any of the terms of any such securities or
equity equivalents outstanding on the date hereof;
(iii) amend or propose to amend its certificate of
incorporation or bylaws or equivalent documents or adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company
or any of its Subsidiaries;
(iv) acquire, sell, lease, encumber, transfer or dispose of
any assets (except that the Company and the Subsidiaries may sell
inventory in the ordinary course of business consistent with past
practice) or make any capital expenditures aggregating over $500,000,
except in each case pursuant to Contracts in effect on the date hereof
or pursuant to the Company's Capital Expenditure Budget; modify or
amend any Contracts (including any relating to Indebtedness) outside of
the ordinary course of business; enter into any material contract,
commitment or transaction outside the ordinary course of business;
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(v) except for revolving credit loans obtained under the
Credit Agreement or Debt under the Indentures, incur or assume any
Indebtedness or issue or sell any debt securities or warrants or rights
to acquire any debt securities of the Company or any of the
Subsidiaries or guarantee (or become Liable for) any Indebtedness of
others or mortgage, pledge or otherwise encumber any assets or
consensually create any Lien thereupon other than Permitted Liens;
(vi) make any loans, advances or capital contributions
outside of the ordinary course of business, except to wholly-owned
Subsidiaries;
(vii) except as may otherwise be required by GAAP or the
Financial Accounting Standards Board, change any of the financial or
tax accounting principles or practices used by it, other than an
accounting method change for accounts receivable discount deductions
under mark-to-market accounting rules for dealers in securities;
(viii) make any Tax election except in the ordinary course
of business consistent with past practice or settle or compromise any
material tax liability;
(ix) (1) enter into, adopt, amend or terminate any
Benefit Plan or any agreement, arrangement, plan or policy between
itself and one or more of its directors or executive officers or key
employees or (2) increase in any manner the compensation bonus or
fringe benefits of any director, officer or employee or pay any benefit
not required by any plan or arrangement as in effect as of the date
hereof, except in the case of officers and employees for normal
increases in compensation and normal year-end bonuses in the ordinary
course of business and consistent with past practice; or enter into any
contract, agreement, commitment or arrangement to do any of the
foregoing;
(x) except in the ordinary course of business, settle or
compromise any pending or threatened suit, action or claim with a cost
of $250,000 or more;
(xi) acquire (by merger, consolidation or acquisition of
stock or assets) any corporation, partnership or other business
organization or division thereof or any equity interest therein;
(xii) materially amend, modify, supplement or extend any
material Contract; or
(xiii) agree to take any of the foregoing actions or
authorize or approve any Joint Venture taking any of the foregoing
actions.
(c) Neither the Company nor any Subsidiaries will take any
action or otherwise authorize or consent to any action by any Joint
Ventures described in clauses (i), (ii) or (iii) of Section 11.2(b),
except for dividends payable by CS Interglas AG according to the terms
and
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conditions of the Heads of Agreement, dated as of March 31, 1998, by and between
Clark-Schwebel International, Inc. and Deschler Group.
XI.3. Access. From the date hereof and prior to the Closing,
the Company shall provide the Buyer with such information as the Buyer may from
time to time reasonably request with respect to the Company, the Subsidiaries
and, to the extent permitted by applicable Contracts, the Joint Ventures and
their assets and properties and the transactions contemplated by this Agreement,
and with respect to the Joint Ventures shall use all commercially reasonable
efforts to, provide the Buyer and its representatives, including among others,
environmental consultants and other consultants, counsel and auditors,
reasonable access during regular business hours and upon reasonable notice to
the personnel, representatives, facilities properties, books and records of the
Company, the Subsidiaries and the Joint Ventures as the Buyer may from time to
time reasonably request. Any disclosure whatsoever during such investigation by
the Buyer shall not constitute any enlargement or additional representations or
warranties of the Company or any of its Affiliates beyond those specifically set
forth in this Agreement. All such information and access shall be subject to the
terms and conditions of the Confidentiality Agreement, dated May 19, 1998,
executed by the Buyer (the "Confidentiality Agreement").
XI.4. No Solicitation. From and after the date hereof until
the earlier to occur of the Closing Date and any termination of this Agreement
as provided in Article XIV hereof, the Company and its Subsidiaries shall not,
and shall not permit any Affiliates, officers, directors, employees,
representatives or agents, to directly or indirectly, encourage, solicit,
participate in, initiate or continue discussions or negotiations with, or
provide any information to, any person (other than the Buyer and its Affiliates
and representatives) concerning any merger, sale of assets, sale of shares of
capital stock or similar transactions involving the Company or any Subsidiary or
division of the Company and any existing discussions or negotiations with third
persons relating thereto shall be terminated immediately.
XI.5. Books and Records. For a period of five (5) years from
the Closing, the Surviving Corporation shall, and shall cause the Subsidiaries
to, provide to the Stockholders' Representative, for any purpose relating to
liabilities for taxes or under securities laws or in defense of any claims
against, or claims made by, the Stockholders, reasonable access to the books and
records of the Surviving Corporation upon reasonable advance written notice
during regular business hours for the sole purpose of obtaining information for
use as aforesaid and will permit such Stockholder to make such extracts and
copies thereof as may be necessary. Such Stockholder shall reimburse the
Surviving Corporation or the Subsidiary for the reasonable out-of-pocket
expenses incurred by any of them in performing the covenants contained in this
Section 11.5.
XI.6. Liabilities and Indemnification. The Buyer agrees that
all rights to indemnification for acts or omissions occurring prior to the
Closing (other than any act or omission relating to the transactions
contemplated by this Agreement) now existing in favor of the current or former
directors or officers (the "Indemnified Parties") of the Company and the
Subsidiaries as provided in their respective certificates of incorporation or
by-laws (or similar organizational documents) or the existing indemnification
contracts disclosed on Section 7.9 to the Disclosure
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Schedule shall survive the Merger and shall continue in full force and effect in
accordance with their terms. This Section 11.6 shall survive the consummation of
the Merger at the Effective Time, is intended to be for the benefit of and shall
be enforceable by each of the Indemnified Parties, and shall be binding on all
successors and assigns of the Buyer and the Surviving Corporation.
XI.7. Insurance. The Company and the Subsidiaries shall
maintain, and the Buyer shall cause the Surviving Corporation and the
Subsidiaries to maintain, the Company's and the Subsidiaries' existing officers'
and directors' liability insurance, if available, for a period of not less than
four (4) years after the Closing; provided, that the Surviving Corporation, the
Company and the Subsidiaries may substitute therefor policies of insurers with
at least equal rating with at least the same coverage containing terms and
conditions which are no less advantageous to the beneficiaries thereof,
provided, further, that in no event shall the Surviving Corporation be required
to expend in any one year an amount in excess of one hundred and fifty percent
(150%) of the annual premiums of such insurance as of the date hereof (it being
understood that if the annual premiums of such insurance exceed such amount, the
Surviving Corporation shall be obligated only to obtain a policy with the
greatest coverage available for a cost not exceeding such amount); provided,
further, that the Buyer shall cause the Surviving Corporation and the
Subsidiaries to maintain, the Company's and the Subsidiaries' existing officers'
and directors' liability insurance, if available, for up to an additional three
(3) years after the fourth anniversary of the Closing Date if the Stockholders
agree to pay the premium therefor and all other costs and expenses related
thereto.
XI.8. Litigation Support. In the event and for so long as any
party actively is contesting or defending against any Litigation in connection
with (a) any transaction contemplated under this Agreement, or (b) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or transaction on or prior
to the Closing Date involving any of the Company and the Subsidiaries, each of
the other parties shall cooperate with the defending or contesting party and its
counsel in the defense or contest, all at the sole cost and expense of the
defending or contesting party (unless the defending or contesting party is
otherwise entitled to indemnification from the other party).
XI.9. Employee Matters.
(a) From and after the Closing Date, the Surviving
Corporation and the Subsidiaries shall adopt or provide for persons formerly
employed by the Company, or any Subsidiary or their predecessors (collectively,
"Former Employees"), such plans, programs, policies, arrangements or agreements
that will provide such Former Employees with benefits that are in the aggregate
comparable to the benefits provided to such Former Employees under the Benefit
Plans on the date hereof, and the Surviving Corporation and its Subsidiaries
shall continue such Benefit Plans for at least two years following the Closing
Date.
(b) From and after the Closing Date, the Surviving
Corporation shall and its Subsidiaries shall adopt or provide for current
employees such plans, programs, policies, arrangements or agreements that will
provide such employees with benefits that are in the aggregate comparable to the
benefits provided to such employees under the Benefit Plans on the date hereof,
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and the Surviving Corporation and the Subsidiaries shall continue such Benefit
Plans in effect for at least two years following the Closing Date.
XI.10. Other Actions.
(a) The Company shall not, and shall not permit any
of the Subsidiaries to, take any action that would, or that could reasonably be
expected to, result in (i) any of the representations and warranties of the
Company set forth in this Agreement that are qualified as to materiality
becoming untrue, (ii) any of such representations and warranties that are not so
qualified becoming untrue in any manner which is material to the Company or
(iii) any of the conditions to Buyer's obligations as set forth in Article XII
hereof not being satisfied. In addition, the Company shall use all commercially
reasonable efforts, at its sole cost and expense, to obtain the waivers,
consents and/or amendments described in Section 12.12.
(b) The Buyer shall not take any action that would,
or that could reasonably be expected to, result in (i) any of the
representations and warranties of the Buyer set forth in this Agreement becoming
untrue in any material respect or (ii) any of the conditions to the Company's
obligations as set forth in Article XIII hereof not being satisfied.
XI.11. Notice of Certain Events. The Company and the
Buyer shall promptly notify in writing each other of:
(i) any notice or other communication from any
person alleging that the consent of such person is or may be required
in connection with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any
Government Entity in connection with the transactions contemplated by
this Agreement;
(iii) any action, suits, claims, investigations or
proceedings commenced or, to the Knowledge of the executive officers of
the notifying party, threatened against, relating to or involving or
otherwise affecting such party or any of its subsidiaries which would
reasonably be expected to cause the conditions in Articles XII and XIII
not to be satisfied;
(iv) any administrative or other order or
notification relating to any material violation or claimed material
violation of law;
(v) the occurrence or non-occurrence of any event
or the discovery of any fact or circumstance of which the Company or
the Buyer has Knowledge, the occurrence or non-occurrence of which
would cause any representation or warranty contained in this Agreement
to be untrue or inaccurate in any respect material to the Company and
its Subsidiaries taken as a whole at or prior to the Interim Closing
Date;
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(vi) any material failure of any party to comply
with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder;
(vii) any proposal or inquiry by any third party
regarding a merger, consolidation, business combination, purchase or
distribution of any amount of the assets or capital stock or other
equity interest in the Company or any Subsidiary; and
(viii) any notice or other communication from any
Joint Venture in connection with the transactions contemplated by this
Agreement or with regard to matters otherwise material to the operation
of such Joint Venture.
;provided, however, that the delivery of any notice pursuant to this Section
11.11 shall not limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
XI.12. Reporting. During the period from the date of this
Agreement through the Effective Time, (i) as requested by Buyer, the Company
shall confer on a regular basis with one or more representatives of Buyer with
respect to material operational matters; and (ii) the Company shall, within 30
days following each fiscal month, deliver to Buyer financial statements,
including an income statement and balance sheet for such month;
XI.13. Further Assurances. The Buyer and the Company shall
take or cause to be taken all commercially reasonable actions necessary, proper
or advisable to obtain any consent, waiver, approval or authorization relating
to any statute, rule, regulation, order, decree, administrative and judicial
doctrine, and other Laws which are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade ("Competition Laws") that is required for the consummation of the
transactions contemplated hereby; provided however, the agreement of the parties
contained herein shall not require the Buyer to take any action that would (i)
require divestiture by Buyer of any of its existing business operations or of a
not insubstantial portion of the business operations to be acquired pursuant to
this Agreement, or (ii) impose a commercially unreasonable burden on, or
restriction upon, Buyer's existing business operations or the business
operations to be acquired pursuant to this Agreement.
XI.14. Buyer Restrictions.
(a) Except as may be required by law or as the
Company may otherwise expressly consent to in writing, from the date hereof and
prior to the Closing, each of the Buyer, EQ and Equilease will operate each of
their respective businesses only in the ordinary and usual course consistent
with past practice.
(b) Without limiting the generality of the foregoing,
except as may be required by law or as the Company may otherwise expressly
consent to in writing from the date hereof and prior to the Closing, EQ will not
(i) declare, set aside or pay any dividend or other actual or deemed
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock; (ii) split, combine or reclassify any of
its capital stock or issue or authorize
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or propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock; (iii) amend the terms of,
repurchase, redeem or otherwise acquire any of its securities; or (iv) adopt a
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization.
XI.15. Certain Stockholder Approvals. The Company shall have
obtained written consent in accordance with the shareholder approval
requirements of Section 280G(b)(5) of the Code with respect to all Benefit
Plans, Contracts and any other contract, plan, policy or arrangement that
without such consent would or could constitute "parachute payments" (within the
meaning of Section 280G of the Code).
XI.16. Tender Offers. As soon as practicable after the date
hereof (a) the Company will make a written offer to repurchase all of the Senior
Debentures and request the consent of the holders of a majority in principal
amount of the Senior Debentures then outstanding to the deletion in their
entirety of certain covenants set forth in the Senior Debenture Indenture as
well as the events of default related solely to such covenants as more fully
described in that certain Senior Debenture Offer to Repurchase and Consent
Statement (the "Senior Debenture Solicitation"), and (b) the Company will cause
Clark-Schwebel, Inc. to make a written offer to repurchase all of the Senior
Notes and request the consent of the holders of a majority in principal amount
of the Senior Notes then outstanding to the deletion in their entirety of
certain covenants set forth in the Senior Note Indenture as well as the events
of default related solely to such covenants as more fully described in the
Senior Note Offer to Repurchase and Consent Statement (the "Senior Note
Solicitation;" and together with the Senior Debenture Solicitation, the
"Solicitations"). The Solicitations, including any amendments or supplements
thereto, shall be prepared by the Company in accordance and compliance with
applicable law, and shall be prepared in consultation with and be subject to
reasonable approval by the Buyer and its counsel (including, without limitation,
selection of the covenants and events of defaults to be deleted in connection
with such solicitation); provided, however, that the terms of the pricing of the
tender offers described in the solicitations shall be within the reasonable
discretion of the Company and shall be based upon the advice of the dealer
manager designated in the Solicitations as to what pricing is required to
complete such tender offers without having to extend the initial term of such
tender offers. The Buyer agrees to provide the Company and its counsel with all
information concerning the Buyer necessary to prepare the Solicitations. In
connection with and in furtherance of the foregoing, the Company agrees to enter
into and deliver or cause to be delivered as soon as practicable after the
relevant Consent Date (as defined in the Solicitations) (i) a supplemental
indenture executed by State Street Bank and Trust Company, as trustee, which
shall become effective upon consummation of the tender offer described in the
Senior Debenture Solicitation (the "Senior Debenture Supplemental Indenture")
and all other documents and certificates required by the Senior Debenture
Indenture, applicable law or reasonably requested by the trustee in order to
effect the amendment of such indenture, and (ii) a supplemental indenture
executed by State Street Bank and Trust Company, as trustee, which shall become
effective upon consummation of the tender offer described in the Senior Note
Solicitation (the "Senior Note Supplemental Indenture," and together with the
Senior Debenture Supplemental Indenture, the "Supplemental Indentures") and all
other documents and certificates required by the Senior Note Indenture,
applicable law or reasonably requested by the trustee in order to effect the
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amendment of such indenture, all in form and substance reasonably satisfactory
to the Buyer. The Company agrees that after the Supplemental Indentures have
been executed and delivered by the Company and Clark-Schwebel, Inc. and executed
by the relevant Trustee it will not, and will cause Clark-Schwebel, Inc. not to,
terminate, modify or otherwise supplement the tender offers described in the
Solicitations without the consent of the Buyer except as may be required by
applicable law. After the execution thereof, the Company agrees not to amend,
modify or otherwise supplement the terms of either of the Supplemental
Indentures without the prior written consent of the Buyer except as may be
required by applicable law. Each of the Company and the Buyer agree to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and effect the transactions
contemplated by this Section 11.16. At the mailing date thereof, neither the
Senior Debenture Solicitation nor the Senior Note Solicitation will include any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing shall not apply to the extent that any such untrue statement
of material fact or omission to state a material fact was made by the Company in
reliance upon and in conformity with written information concerning the Buyer or
any of its Affiliates furnished to the Company by the Buyer specifically for use
in the Senior Debenture Solicitation and the Senior Note Solicitation.
XI.17. Tax Periods Ending on or Before the Closing Date.
(a) The Company shall prepare or cause to be prepared and
file or cause to be filed a tax return on "Form 4466 - Corporation Application
for Quick Refund of Overpayment of Estimated Tax" (the "Quick Return") for the
Company in order to obtain a refund of all estimated federal taxes paid by the
Company prior to the Closing Date for the 1998 tax year. The Company shall also
prepare and file as soon as practicable its income tax returns for each state
government in respect of which an income tax return is required to be filed (the
"State Returns"). The Company shall permit the Stockholders' Representative to
review the State Returns prior to filing and to review the Quick Return on or
before January 6, 1999 and shall file such Quick Return within three (3)
business days after the Stockholders' Representative completes its review of the
Quick Return. The State Returns shall be filed as soon as practicable. The
Company shall pay to the Stockholders' Representative any refund of estimated
taxes paid by the Company prior to the Closing Date for the 1998 tax year (the
"1998 Estimated Taxes") received by the Company pursuant to the Quick Return and
the State Returns within five (5) days of the receipt of such refund. If the
request for refund on the Quick Return is rejected for any reason, the Company
shall file its Federal income tax return as soon as practicable in the normal
course requesting the same amount of refund as was reflected on the Quick Return
except to the extent otherwise required by law. Within five days of receipt of
any refund pursuant to such return, the Company shall pay the amount of such
refund to the Stockholders' Representative. The Buyer agrees that it shall not,
and shall cause the Company and its Subsidiaries not to, take any action or to
permit the taking of any action, that will have the effect of prohibiting the
Company from seeking a full refund of the amount of the 1998 Estimated Taxes. In
no event shall the amount payable to the Stockholders' Representative exceed the
amount of the 1998 Estimated Taxes.
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(b) The Company agrees to pay to the Stockholders'
Representative the amount of the actual refund, which amount shall not exceed
$500,000, received by the Company pursuant to the Company's 1997 federal income
tax return to be filed in September 1998. The amount of any such refund shall be
paid to the Stockholders' Representative within five (5) days of the receipt of
such refund. The Company acknowledges and agrees that such 1997 federal income
tax return will (i) be prepared in the ordinary course of business; (ii) not
include any carryback of deductions or losses incurred in 1998 or otherwise seek
a cash refund in excess of $500,000; and (iii) be subject to the Buyer's review
and approval (which approval shall not be reasonably withheld).
XI.18. Buyer Escrow. As soon as practicable after the date
hereof, the Buyer will remit the amount of $5,000,000 (the "Buyer Escrow
Amount") to the Buyer Escrow Agent to be held and disbursed by the Buyer Escrow
Agent in accordance with the terms of the Buyer Escrow Agreement substantially
in the form of Exhibit 11.18 attached hereto (the "Buyer Escrow Agreement") with
such changes as the Buyer Escrow Agent reasonably requests (which changes shall
not materially effect the economic rights of the Buyer or the Company);
provided, however, that the Buyer shall remit the Buyer Escrow Amount to the
Buyer Escrow Agent no later than the date on which the Buyer Escrow Agent
executes the Buyer Escrow Agreement unless the Buyer Escrow Agent executes the
Buyer Escrow Agreement after 2:00 p.m. New York City time, in which case the
Buyer shall remit the Buyer Escrow Amount to the Buyer Escrow Agent on the next
succeeding business day.
XI.19. CS Interglas Options. Upon the written request by the
Buyer at least two business days prior to the Closing, and to the extent
permitted by applicable law, the Company shall cause Clark-Schwebel
International, Inc. ("C-S") to give notice, immediately prior to the Closing, to
Deschler-Group of the exercise of the option under Section 6.1 of that certain
Heads of Agreement by and among Deschler-Group, Clark-Schwebel, Inc. and C-S
dated March 30, 1998, provided that Buyer agrees in writing to pay all costs and
expense of exercising such option and provides the cash needed to exercise such
option immediately prior to the Closing.
ARTICLE XII
CONDITIONS TO THE BUYER'S OBLIGATIONS
The obligation of the Buyer to consummate the transactions
contemplated hereby shall be subject to the satisfaction (or waiver) at or prior
to the Closing of all of the following conditions:
XII.1. Representations, Warranties and Covenants of the
Company.
(a) The Company shall have performed and complied in
all material respects with all of its respective agreements, obligations and
covenants contained herein and required to be performed at or prior to the
Closing Date.
(b) The representations and warranties of the Company
contained herein shall be true and correct on the date hereof and as of the
Interim Closing Date, except for
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representations and warranties that speak as of a specific date or time other
than the Interim Closing Date, which shall be true as of such date or time. This
condition shall be deemed satisfied unless the failure of the representations
and warranties of the Company to be true and correct, in the aggregate, is
material and adverse to the business of the Company and its Subsidiaries taken
as a whole. For purpose of determining whether a representation or warranty is
true or correct, and except as provided on Section 12.1 of the Disclosure
Schedule, all requirements that a fact or event be or not be material or have or
not have a Company Material Adverse Effect shall be ignored.
XII.2. No Prohibition. (i) No order, judgment, ruling,
charge, decree or injunction of any Governmental Entity shall be in effect which
prohibits the consummation of the transactions contemplated hereby or (ii) no
proceeding therefor shall have been threatened or commenced by any Governmental
Agency which seeks to prohibit, restrain or delay the consummation of the
transactions contemplated by this Agreement.
XII.3. Third Party Consents. The consents listed on Section
12.3 of the Disclosure Schedule shall not have been revoked and shall be valid
and enforceable as of the Closing Date.
XII.4. Governmental Consents. The applicable waiting period
(and any extensions thereof) under the HSR Act shall have expired or been
terminated.
XII.5. Document Deliveries. The Buyer shall have received
from the Company the documents listed in Section 6.2(a) hereof.
XII.6. Repayment of Indebtedness to Third Parties;
Termination of Security Interests. All Indebtedness of the Company under the
Credit Agreement will be contemporaneously repaid in full and canceled and the
Buyer shall have received a copy of the Payoff Letter described in Section
6.2(a)(v)(A).
XII.7. Resignations. All directors of the Company and its
Subsidiaries specified by the Buyer prior to the Closing Date shall have
resigned such directorships.
XII.8. Stockholder Agreements. All agreements, restrictions,
encumbrances or other arrangements governing the capital stock of the Company
and the Subsidiaries as set forth on Section 7.1 of the Disclosure Schedule
shall have terminated and be of no further force and effect.
XII.9. Stockholder Approval. The Stockholders of the Company
shall have unanimously consented to the transactions contemplated hereby.
XII.10. Release of Claims. Each Stockholder shall have
executed a release in the form attached hereto as Exhibit 12.10.
XII.11. Tender Offer Waiting Periods and Exit Consents. The
waiting periods (and any extensions thereof) under applicable law for the tender
offers described in the Solicitations shall have expired and all conditions
necessary for the Company or its Subsidiary, as applicable, to complete such
tender offer on the Closing Date shall have been fulfilled (other than making
the
44
<PAGE> 51
payments to the holders of the Senior Debentures and the Senior Notes) and
all actions required pursuant to Section 11.16 in order to make the Senior
Debenture Supplemental Indenture and the Senior Note Supplemental Indenture
effective upon consummation of the tender offers described in the solicitations
shall have been completed.
XII.12. ASCO Consent. In the event that within five days of
the date hereof the Buyer executes an agreement with any Person (the
"Transferee") pursuant to which the Transferee or an affiliate of the Transferee
shall become a Business Transferee, the Company shall receive all consents and
waivers from Asahi Chemical Industry Co., Ltd. ("Asahi") or amendments executed
by Asahi, applicable, with respect to the Joint Venture Agreement, dated as of
September 18, 1970, by and among Clark-Schwebel Fiber Glass Corporation, Asahi
Chemical Industry Co., Ltd. and Fukui Seiren co., Ltd, as amended and all
related agreements (collectively, the "ASCO JV Agreements"), in form and
substance reasonably satisfactory to Buyer and the Transferee which consents and
waivers or amendment are necessary to permit and/or effect a sale, assignment or
transfer to a Qualified Transferee of (i) all shares of the common voting stock
in Asahi-Schwebel Co., Ltd. ("ASCO") held by Clark-Schwebel International, Inc.
("CSI") and (ii) all of CSI's rights under the ASCO JV Agreements without
triggering any rights of Asahi thereunder. A "Qualified Transferee" shall mean a
corporation wholly owned by the Transferee which either has the name Clark
Schwebel Corporation or a different name which is acceptable to Asahi.
ARTICLE XIII
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligations of the Company to consummate the transactions
contemplated hereby shall be subject to the satisfaction (or waiver) at or prior
to the Closing of all of the following conditions:
XIII.1. Representations, Warranties and Covenants of the
Buyer.
(a) The Buyer shall have performed and complied
in all material respects with its agreements and covenants contained herein on,
prior to or as of the Closing Date.
(b) The representations and warranties of the
Buyer contained herein shall be true and correct as of the Closing Date, except
for representations and warranties that speak as of a specific date or time
other than the Closing Date, which shall be true as of such date or time.
XIII.2. No Prohibition. No order, judgment, ruling, charge,
decree or injunction of any Governmental Entity shall be in effect which
prohibits the consummation of the transactions contemplated hereby.
XIII.3. Governmental Consents. The applicable waiting period
(and any extensions thereof) under the HSR Act shall have expired or been
terminated and the consents, approvals, authorizations, exemptions and waivers
from Governmental Entities listed on Section 13.3 of the Disclosure Schedule,
which consents shall be required in order to enable the Company to consummate
the transactions contemplated hereby (except for such consents, approvals,
45
<PAGE> 52
authorizations, exemptions and waivers, the absence of which would not prohibit
consummation of such transactions or render such consummation illegal).
XIII.4. Document Deliveries. The Company shall have received
from Buyer the documents listed in Section 6.2(b) hereof.
ARTICLE XIV
TERMINATION PRIOR TO CLOSING
XIV.1. Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) By the mutual written consent of the Company and
the Buyer;
(b) By either the Company or the Buyer in writing,
without liability to the terminating party on account of such termination
(except as otherwise provided in Section 14.2), if the Closing shall not have
occurred on or before September 15, 1998;
(c) By either the Company or the Buyer if there shall
have been a material breach of any of the representations, warranties or
covenants in this Agreement on the part of the other party, which breach is not
cured within 30 days following written notice to the party committing such
breach, or which breach, by its nature, cannot be cured prior to the Closing, in
each case which breach prevents the satisfaction of any condition contained
herein (provided, that the terminating party is not then in material breach of
any of the representations, warranties or covenants in this Agreement); or
(d) By the Company if the Buyer has not remitted the
Buyer Escrow Amount to the Buyer Escrow Agent as required pursuant to Section
11.18.
XIV.2. Effect of Termination. Termination of this Agreement
pursuant to this Article XII shall terminate all obligations of the parties
hereunder, except for the obligations under Sections 15.8, 15.10 and 15.11
hereof and the Confidentiality Agreement, provided, however, that nothing in
this Section 14.2 shall relieve or limit the Liability hereunder of any party
(the "Defaulting Party") to the other party or parties on account of (i) a
wilful breach of a representation or warranty, or (ii) breach of a covenant
contained herein by the Defaulting Party. In the case of such a breach, in
addition to any damages for which the Defaulting Party may be liable, the
Defaulting Party shall reimburse the other party or parties for any expenses
incurred by such party or parties in order to enforce its or their rights under
this Agreement (including reasonable attorney's fees and expenses).
46
<PAGE> 53
ARTICLE XV
MISCELLANEOUS
XV.1. Non-Survival of Representations and Warranties. None of
the covenants, representations and warranties in this Agreement or any
certificate delivered pursuant to this Agreement shall survive the Closing
except for covenants which, by their terms, are to be performed after the
Closing.
XV.2. Entire Agreement. This Agreement (including the
Disclosure Schedule and all Exhibits hereto), the Escrow Agreement and the
Confidentiality Agreement constitute the sole understanding of the parties with
respect to the subject matter hereof and shall not be deemed to contemplate any
other material transaction involving the Company and its Subsidiaries (including
the exercise of the option described in Section 11.19) other than the Merger.
XV.3. Successors and Assigns; Third Party Beneficiaries.
(a) The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties hereto; provided, however, that this Agreement may not be
assigned by any party without the prior written consent of the other parties ,
provided, further, that the Buyer may assign this Agreement and the Company and
the Stockholders hereby consent thereto, in whole or in part, (i) to any
wholly-owned subsidiary of the Buyer, (ii) to any lender to the Buyer, any
subsidiary or Affiliate thereof or any agent on behalf thereof as security for
obligations to such lender in respect of its financing arrangements and any
refinancing, extension, refunding or renewals thereof and (iii) on or after the
Closing, to any successor of the Surviving Corporation in the event of a merger,
consolidation or sale of stock or to any purchaser of all or substantially all
of the assets of the Surviving Corporation, and to any transferee or lessee of
all or a substantial part of any of the Surviving Corporation's assets or
business and any such transferee shall be entitled to enforce the Surviving
Corporation's rights on an individual basis. The Buyer agrees to cause the
purchaser or the lessee of substantially all of the assets or all of the capital
stock of Clark-Schwebel, Inc. or the Company (the "Business Transferee") to
assume the obligations of the Buyer and the Surviving Corporation under Sections
4.3, 11.6, 11.7 and 11.9 of this Agreement. No assignment of this Agreement to a
Business Transferee shall be permitted unless such Business Transferee assumes
the obligations of the Buyer and the Surviving Corporation as set forth in the
preceding sentence. The assignment of this Agreement shall not relieve the Buyer
from the obligations assumed by such Business Transferee. For the purpose of
this Section 15.3, all members of an affiliated group that purchase or lease
assets of Clark-Schwebel, Inc. or the Company shall be deemed to be the same
"Business Transferee."
XV.4. EQ and Equilease Guarantees. Each of EQ and Equilease
hereby irrevocably agree to be liable and responsible for the obligations of the
Buyer and the Surviving Corporation hereunder as if they were the Buyer.
XV.5. Vestar Guarantee. Vestar hereby irrevocably agrees
to be liable and responsible for the obligations of the Stockholders'
Representative pursuant to Section 4.3 hereunder as if it were the Stockholders'
Representative.
47
<PAGE> 54
XV.6. Headings. The headings of the articles, sections
and paragraphs of this Agreement are inserted for convenience only and shall not
be deemed to constitute part of this Agreement or to affect the construction
hereof.
XV.7. Modification and Waiver. No amendment, modification or
alteration of the terms or provisions of this Agreement shall be binding unless
the same shall be in writing and duly executed by the parties hereto, except
that any of the terms or provisions of this Agreement may be waived in writing
at any time by the party which is entitled to the benefits of such waived terms
or provisions. No waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof (whether or
not similar). No delay on the part of any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof.
XV.8. Expenses. Except as otherwise provided herein, the
Company on the one hand and the Buyer on the other hand shall each pay all costs
and expenses incurred by it or on its behalf in connection with this Agreement
and the transactions contemplated hereby including, without limiting the
generality of the foregoing, fees and expenses of its own financial consultants,
accountants and counsel.
XV.9. Notices. Any notice, request, instruction or other
document to be given hereunder by any party hereto to any other party shall be
in writing and shall be given (and will be deemed to have been duly given upon
receipt) by delivery in person, by electronic facsimile transmission, by
overnight courier or by registered or certified mail, postage prepaid,
if to the Company, to:
Clark-Schwebel Holdings, Inc.
2200 South Murray Avenue
P.O. Box 2627
Anderson, SC 29622
Attention: President
Telecopy: 864-260-3377
with a copy to:
Vestar Capital Partners
245 Park Avenue, 41st Floor
New York, NY 10167
Attention: Sander M. Levy
Managing Director
Telecopy: 212-808-4922
and a copy to:
Kirkland & Ellis
48
<PAGE> 55
655 15th Street, N.W., Suite 1200
Washington, D.C. 20005-5793
Attention: Jack M. Feder, Esq.
Telecopy: 202-879-5200
if to the Buyer, to:
Stamford CS Acquisition Corp.
206 Danbury Road
Wilton, CT 06899
Attention: President
Telecopy: 203-834-6360
with a copy to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, IL 60606-1285
Attention: Peter C. Krupp
Telecopy: 312-407-0411
XV.10. Governing Law; Forum. This Agreement shall be
construed in accordance with and governed by the laws of the State of New York
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. Except as explicitly provided otherwise herein, each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any litigation arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of New York or the United States
of America, in each case located in County of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such litigation brought in any such court has been brought
in an inconvenient forum.
XV.11. Public Announcements. None of the parties shall make
any public statements, including, without limitation, any press releases, with
respect to this Agreement and the transactions contemplated hereby without the
prior written consent of the other parties except as such party in good faith
believes may be required by applicable law or pursuant to any Contract (in which
case the disclosing party will use its reasonable best efforts to consult with
the other party in advance as to the contents and timing thereof).
XV.12. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument.
49
<PAGE> 56
XV.13. Released Parties. The Buyer, the Company and its
Subsidiaries for themselves and their past, present and future Affiliates,
hereby release and forever discharge the persons listed on Section 15.14 of the
Disclosure Schedule (the "Released Persons") from any and all Claims incurred by
any of them which are related directly or indirectly to events or circumstances
occurring prior to Closing in connection with any such Released Person's acting
as an officer, director or stockholder of the Company, any of its Subsidiaries
or any Joint Venture except to the extent arising out of (i) fraud,
misappropriation or similar acts, (ii) contractual obligations and (iii) any
loans or advances owed to the Company or its Subsidiaries. For the purpose of
this Section 15.14, the term Claim shall mean and include all past, present and
future disputes, claims, controversies, demands, rights, obligations,
liabilities, actions and causes of action of every kind and nature, including:
(i) any unknown, unsuspected or undisclosed claim; and (ii) any claim, right or
cause of action based upon any breach of any express, implied, oral or written
contract or agreement.
XV.14. Third Party Beneficiary. It is the intention and the
agreement of the parties hereto that the Stockholders and all present and former
officers and directors of the Company or any Subsidiary shall have the full
rights of a third party beneficiary with respect to the obligations of the Buyer
and the Surviving Corporation under Sections 11.6, 11.7, 11.8 and 11.17 of the
Merger Agreement, and the obligations of EQ and Equilease under Section 15.4,
including, without limitation, the obligation of the Buyer, the Surviving
Corporation, EQ and Equilease to provide the benefits, take the actions or make
the payments required under such provisions of the Merger Agreement.
[SIGNATURE PAGE FOLLOWS]
50
<PAGE> 57
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
CLARK-SCHWEBEL HOLDINGS, INC.
By:
--------------------------------------
Name:
Title:
VESTAR/CS HOLDING COMPANY, L.L.C.
By:
--------------------------------------
Name:
Title:
VESTAR EQUITY PARTNERS, L.P.
By: Vestar Associates, L.P.,
Its: General Partner
By: Vestar Associates Corporation,
Its: General Partner
By:
--------------------------------------
Name:
Title:
STAMFORD CS ACQUISITION CORP.
By:
--------------------------------------
Name:
Title:
EQ CORPORATION
By:
--------------------------------------
Name:
Title:
<PAGE> 58
EQUILEASE HOLDING COMPANY
By:
---------------------------------
Name:
Title:
<PAGE> 59
EXHIBIT 2.2
CERTIFICATE OF MERGER
OF
STAMFORD CS ACQUISITION CORP.
(a Delaware corporation)
INTO
CLARK-SCHWEBEL HOLDINGS, INC.
(a Delaware corporation)
The undersigned corporation does hereby certify:
FIRST: The name, form of entity and state of organization
of each of the constituent entities of the merger are as follows:
<TABLE>
<CAPTION>
Name Form Of Entity State Of Organization
- ---- -------------- ---------------------
<S> <C> <C>
Stamford CS
Acquisition Corp. corporation Delaware
Clark-Schwebel
Holdings, Inc. corporation Delaware
</TABLE>
SECOND: The Merger Agreement, dated as of July 24, 1998, by
and between Clark-Schwebel Holdings, Inc., a Delaware corporation, Stamford CS
Acquisition Corp., a Delaware corporation and the other parties thereto (the
"Merger Agreement"), has been approved, adopted, certified, executed and
acknowledged by each of the constituent entities in accordance with Sections 251
and 228 of the General Corporation Law of the State of Delaware.
THIRD: The name of the entity surviving the merger is
Clark-Schwebel Holdings, Inc. (the "Surviving Corporation").
FOURTH: The certificate of incorporation of Clark-Schwebel
Holdings, Inc. shall be amended and restated in the form attached hereto as
Exhibit A. [FORM TO BE ATTACHED]
FIFTH: The executed Merger Agreement is on file at the
principal place of business of the Surviving Corporation. The address of said
principal place of business is 206 Danbury Road, Wilton, CT 06899.
SIXTH: A copy of the Merger Agreement will be furnished upon
request and without cost to any stockholder or member, as applicable, of any
constituent entity.
<PAGE> 60
IN WITNESS WHEREOF, the undersigned has executed this
Certificate of Merger this __ day of August, 1998.
CLARK-SCHWEBEL HOLDINGS, INC.,
a Delaware corporation
By:
---------------------------------
Name:
Title:
[Signature Page to Certificate of Merger]
<PAGE> 1
EXHIBIT 10.12
HEADS OF AGREEMENT
1. PARTIES: Deschler-Group and Clark-Schwebel Inc.
("CS") and Clark-Schwebel International Inc.
("CS Intl."), legal successors to
Clark-Schwebel Fiber Glass Corporation, as
parties to a certain Shareholders Agreement
dated January 7/8, 1993.
2. CSI SHARE CAPITAL: CS-Interglas AG (CSI) is a stock corporation
under German law with its place of business
at Erbach, registered in the Commercial
Register of the Lower Court (Amtsgericht) of
Ulm under HRB 2182.
2.1 The CSI share capital amounts to DM
40.045.050 and is represented by 800.901
shares issued and outstanding in the nominal
value of DM 50/share.
2.2 The CSI-shares are presently held as
follows:
<TABLE>
<S> <C>
Deschler-Group 431.464 shares
CS Intl. 199.000 shares
independent shareholders 170.437 shares
--------------
total number of shares 800.901 shares
</TABLE>
The 199,000 CSI shares presently held by CS
Intl. ("CS Intl. Shares") are blocked in a
deposit account (the "Deposit Account") with
Deutsche Bank AG based on the Deposit
Agreement between the Deschler-Group, CS
Intl. (as successor of CS and of
Clark-Schwebel Fiber Glass Corporation) and
Deutsche Bank AG dated as of March 25, 1993
(the "Deposit Agreement"). As soon as the
conversion of the Convertible Bonds becomes
effective, the obligation of CS Intl. to
keep certain CSI-shares in the Deposit
Account will terminate pursuant to Section
5.1 of the Deposit Agreement. EXHIBIT 1 is
the joint release letter of the
Deschler-Group and of CS-Intl. to Deutsche
Bank AG.
2.3 There exists a contingent authorized capital
in the unused amount of DM 15.954.950. This
contingent authorized capital has been
established to cover conversion rights from
a convertible bond issue of which still DM
20.017.120 are
<PAGE> 2
2
outstanding. The conversion rate stands at 8
convertible bonds in exchange for 5
CSI-shares representing a nominal DM 80 per
CSI share conversion rate.
2.4 The Deschler-Group represents and warrants
that the information provided in these Heads
of Agreement about the shares held by the
Deschler-Group, CS Intl. and the independent
shareholders, the share capital of CSI and
the authorized capital are correct in all
respects.
3. CONVERSION OF
CONVERTIBLE BONDS: 3.1 CS Intl. exercises its option to have its
convertible bonds in the aggregate amount of
DM 20.000.000 converted into 250.000 shares
of stock of CSI, with the right to receive
dividends on these shares for the period
starting form April 1, 1998, such conversion
being subject to the clearance by the German
Merger Control Authorities (see also Section
14.1 below). EXHIBIT 2 is the exercise of
such option addressed to CSI as of March 31,
1998 together with the receipt by CSI
executed by Prof. Dr. Mailander under a
power of attorney of CSI dated as of March
30, 1998 (EXHIBIT 3).
3.2 Subject to this conversion, the stockholding
of CS Intl. will be increased to 449.000
CSI-shares.
4. BALANCING OF
SHARE INTEREST: 4.1 Deschler-Group and CS Intl. will following
the conversion of the convertible bonds held
by CS Intl. undertake to meet their
obligations from their Shareholders
Agreement to equally balance their mutual
share interests in CSI as follows:
The total number of shares presently held by
Deschler-Group amounts to 431.464.
The total number of shares then held by CS
Intl. amounts to 449.000.
50% of this joint shareholding is 440.232
shares. As a consequence thereof, CS Intl.
will have to transfer to Deschler-Group
8.768 shares free of any charge (the
"Equalization Shares").
<PAGE> 3
3
4.2 Pursuant to this balancing of the share
interests between Deschler-Group and CS
Intl., the CSI shareholding will be split as
follows:
<TABLE>
<S> <C>
Deschler-Group 440.232
CS Intl. 440.232
independent shareholders 170.437
---------
Total number of shares issued and
outstanding 1.050.901
</TABLE>
with DM 17.120 convertible bonds
outstanding, and held by independent
shareholders, and valid for a maximum of 214
shares, raising the maximum number of shares
eventually issued and outstanding to
1.051.115
4.3 The Deschler Group keeps deposited 76,558
CSI shares, 9,245 plus 67,313 shares, in the
Deposit Account under the Deposit Agreement.
Such shares owned by the Deschler-Group
shall then be covered by the Deposit
Agreement and only released as provided for
in these Heads of Agreement and the Revised
Shareholders' Agreement.
5. SALE AND TRANSFER
OF SHARE INTEREST: Deschler-Group agrees to sell and to
transfer to CS Intl. 18.013 CSI-shares (the
"Additional Shares") in consideration for a
cash payment of DM 4.750.000. The payment
will become due and payable at the Closing,
as defined below, in exchange for the
transfer of the Additional Shares, whereby
CS Intl. and the Deschler-Group shall
declare a set-off between the obligation of
the delivery of the Equalization Shares and
8,768 of the Additional Shares requiring
Deschler-Group. to transfer and deliver to
CS Intl. 9,245 of the Additional Shares.
Such Additional Shares shall be delivered
into the Deposit Account and covered by the
Deposit Agreement.
6. OPTION FOR
CONTROL INTEREST: 6.1 Deschler-Group grants to CS Intl. the option
to purchase 67.313 CSI-shares (the "Control
Shares") which together with the other CSI
shares then held by CS Intl. would vest a
majority share interest in CS Intl. (440.232
+ 18.013 + 67.313 = 525.558 shares out of a
maximum number of 1.051.115) assuming CS
Intl. has not previously disposed of its CSI
shares.
<PAGE> 4
4
6.2 The option price for the Control Shares
shall be DM 17.750.000.
6.3 The option shall be exercisable by CS Intl.
by written notice at any time prior to
January 10, 1999 and shall expire
thereafter.
6.4 The option price shall be due and payable
within 10 days from the date of receipt by
Deschler-Group of the written option notice
in exchange for the transfer and delivery to
CS Intl. of the Control Shares, to be kept
in the Deposit Account under the Deposit
Agreement but owned by CS Intl., such
payment of the option price, transfer and
delivery being subject to the clearance of
the acquisition of the Control Interest by
the German Merger Control Authorities. Such
10-day period shall be extended by the
period of time until the exercise of the
option and the acquisition of the Control
Interest has been cleared by the German
Merger Control Authorities plus additional
10 working days from the receipt of the
clearance letter by CS Intl.
7. VOTING RIGHTS: 7.1 CS-Intl. will be entitled to the voting
rights from the Additional Shares from the
date of their transfer in conformity with
Clause 5.
7.2 Equally, CS-Intl. will win the additional
voting rights from the Control Shares upon
their transfer in conformity with Clause
6.4.
8. DIVIDEND RIGHTS: Rights to receive dividends from the
Additional Shares and the Control Shares
will be split, with respect to the net
amount of such dividend payment after
deduction of all German and US taxes to be
paid by CSI and CS Intl. thereon, between
Deschler-Group and CS Intl. pro rata
temporis with respect to the business year
during which the transfer occurred. CS Intl.
as transferee will pay to Deschler-Group
such portion of the dividends received for
the Additional Shares and for the Control
Shares as will be determined by the pro rata
apportionment of shareholdings on the basis
of a 365 days year.
<PAGE> 5
5
9. RESIDUAL SHARES
PURCHASE OPTION: 9.1.1 The Deschler Group grants to CS Intl. the
option to purchase all of the residual
CSI-shares held by Deschler-Group following
the transfer to CS Intl. of the Additional
Shares and the Control Shares, i.e. the
option to purchase 354.906 CSI-shares or any
smaller number of CSI-shares resulting from
subsequent sales in conformity with clause
9.3 (the "Residual Deschler 9.1.1 Shares").
This option shall be exercisable by CS Intl.
by written notice at any time through
December 31, 1999 at the latest and shall
expire thereafter (the "9.1.1 Option"). The
option price shall cost DM 162 per share.
9.1.2 In case CS Intl. does not exercise the
option granted in Section 6.2 with respect
to the Control Interest, CS Intl. is still
entitled to exercise the option for all
shares remaining without the acquisition of
the Control Shares ("Residual Deschler 9.1.2
Shares"). Such option shall be exercisable
by CS Intl. by written notice at any time
prior to December 31, 1999, at the latest,
and shall expire thereafter (the "9.1.2
Option"). The Option Price shall cost DM
178,20 per share.
9.2 The Option Price shall be due and payable
within 10 days from the date of receipt by
the Deschler-Group of the written Option
Notice in exchange for the transfer and
delivery to CS Intl. of the Residual
Deschler Shares under the 9.1.1 Option or
the 9.1.2 Option, all such shares to be kept
in the Deposit Account under the Deposit
Agreement but owned by CS Intl., such
payment of the option price, transfer and
delivery being subject to the clearance by
the German Merger Control Authorities. Such
10-day period shall be extended by the
period of time until the exercise of the
option and the acquisition of the Control
Interest has been cleared by the German
Merger Control Authorities plus additional
10 working days from the receipt of the
clearance letter by CS Intl.
9.3 Deschler-Group shall during the option
periods under Clause 6 or this Clause 9 not
sell, give away, transfer, pledge, or assign
any of these Residual Deschler Shares unless
in conformity with the provisions hereunder:
(1) Deschler-Group shall be allowed to
sell shares in small numbers on the
Stock Exchange not exceeding during
<PAGE> 6
6
any CSI business year 10,000
CSI-shares. Deschler-Group shall
promptly inform CS Intl. of each
sale of shares hereunder by quoting
the number of shares sold. Upon
receipt of such notice from
Deschler-Group, CS Intl. shall
release the respective shares from
the Deposit Account by giving
notice to Deutsche Bank AG, as
provided for under the Deposit
Agreement.
(2) Deschler-Group shall be permitted
to sell blocks of 10,000 or more
CSI-shares during any CSI business
year by private sales to one or
more third parties interested in
buying those shares. CS Intl. has
the right of first refusal
(Vorkaufsrecht) within the meaning
of Sections 504pp. of the German
Civil Code (BGB) with respect to
such sales hereunder. Irrespective
of the right of first refusal for
CS-Intl., Deschler Group shall
disclose at least 20 days before
such sale to third parties may take
place the intention to sell and the
purchasing terms with a third party
to give CS-Intl. the freedom to
exercise its option to buy the
Residual Deschler Shares.
10. ADMITTANCE OF
CSI SHARES TO
STOCK EXCHANGE: The former CSI-bearer preferred shares have
been converted into ordinary bearer shares
and are registered for trading at the
regulated markets at the Stuttgart and
Frankfurt stock exchanges. CS Intl. and
Deschler-Group agree to ask the CSI
management to apply for admittance of all of
the CSI-shares issued and outstanding for
trading at the regulated markets (Geregelter
Verkehr) of the two stock exchanges,
provided that CSI has not acknowledged and
will not acknowledge the German Take-Over
Codex. CSI management will be mandated and
authorized to render all information and all
necessary support for the admittance for
trading of these shares over the stock
exchanges.
11. BOARD OF SUPERVISORS: The CSI Board of Supervisors is composed of
nine members of which three are elected by
the CSI work force. Upon the transfer of the
Control Shares to CS Intl. Mr. Walter
Deschler will resign from the Board and will
be elected to become its lifetime honorary
chairman without a vote, though with the
right to use his office at CSI premises.
11.1 From and after the transfer of the Control
Shares to CS Intl., Deschler-Group will
still be entitled to hold one seat on the
CSI Board of Supervisors and CS Intl. agrees
to
<PAGE> 7
7
support the election of always one
Deschler-Group nominee to the Board also
with the right to have one office at CSI
premises reserved for his/her use. This
privilege for the Deschler-Group will last
until such time when Deschler-Group will no
longer own 15 % or more of the CSI-shares
issued and outstanding.
11.2 If CS' accounting firm confirms in writing
that the election of two Deschler-Group
nominees to the Board and the procedure
agreed upon hereunder or any other mutually
acceptable procedure does not prevent CS
from consolidating CSI into its annual
accounts under US Accounting Rules, the
Deschler-Group will be entitled to hold two
seats on the CSI Board of Supervisors and CS
Intl. support the election of always two
Deschler-Group nominees to the Board, also
with the right to have one office at the CSI
premises reserved for their use. This
privilege for the Deschler-Group will last
until such time as the Deschler-Group no
longer owns 15% or more of the CSI-Shares
issued and outstanding.
The Deschler-Group covenants that always one
of its two nominees on the Board at the
request of CS Intl. shall support and vote
for all resolutions proposed by CS Intl.
which do not violate these Heads of
Agreement or the Revised Shareholders'
Agreement or which do not relate to matters
requiring qualified majority of
shareholders' of at least 75% of the votes
in the shareholders' meeting. EXHIBIT 4 is
the irrevocable power of attorney by the
Deschler-Group to CS Intl. to vote in the
shareholders' meeting of CSI for the
resignation of such of the Deschler-Group
nominees who fail to vote in favor of
resolutions proposed by CS Intl. as agreed
hereunder.
11.3 The Deschler-Group covenants that one or two
additional members of the Board of
Supervisors, who were nominated by the
Deschler-Group, will resign from such Board
within 10 days from the exercise of the
option to buy the Control Interest depending
on how many seats on the board of
Supervisors go to CS-Intl. under Section
11.1 or 11.2, respectively. The
Deschler-Group shall fully back and assist
CS-Intl. that its nominees shall be
appointed to the Board of Supervisors
instead o the two or three nominees from the
Deschler-Group resigning, such appointment
to be made either by application to the
Commercial Register
<PAGE> 8
8
Court or in calling an extraordinary
shareholders' meeting of CSI.
12. DIVIDEND POLICY: CS Intl. and Deschler-Group agree to cause
their nominees on the Board of Supervisors
to vote for the proposal to the annual
shareholders meeting of a dividend for the
next three dividend periods as follows:
- for 1997/1998 DM 6,00 dividend plus DM
2,00 bonus per share
- for 1998/1999 DM 7,00 dividend per share
- for 1999/2000 DM 7,00 dividend per share
and also to vote in the shareholders meeting
in favor of such proposal, always provided
that the annual surplus as shown on the CSI
audited balance sheet in each of the
business years will be in excess of DM 12
mio.; otherwise the payouts for dividends
and bonus will be reduced proportionately to
the deficit below DM 12 mio. annual surplus.
For subsequent periods the parties will
endorse proposals for a payout of always up
to 50 % of the annual surplus.
CS Intl. is only required to cause their
nominees on the Board of Supervisors or to
vote in the shareholders' meeting in favor
of the dividend policy as agreed upon above
if (i) CSI has sufficient funds and
liquidity to pay out such dividends, (ii)
CSI is and after the payment of such
dividends will be in full compliance with
and can satisfy all obligations of all
material agreements having an impact on the
dividends, e.g. loan agreements and profit
participation capital, (iii) such
distributions will not impair CSI's ability
to meet any of its obligations, e.g. as a
joint venture partner in the proposed
Philippine project, and (iv) CSI can fully
meet the on-going capital requirements as
projected or to be projected in the yearly
budgets established by the Management Board.
The annual surplus will be determined from
the annual accounts in accordance with
general accounting rules and procedures
under German law consistently applied. CS
Intl. will favorably consider the on-going
appointment of Mr. Hahnemann as tax advisor
to CSI, whereby CS Intl. has the freedom to
arrange for the appointment of the auditors
of CS as statutory auditors of CSI.
Any dividend payout commitment will expire
as soon as Deschler-Group no longer holds 15
% or more of the CSI-shares issued and
outstanding.
<PAGE> 9
9
13. TAKE ALONG
COMMITMENT: If CS Intl. should elect within 5 years from
the Closing to sell or to otherwise transfer
to a party unrelated to CS Intl. by majority
vote or ownership more than 35 % of all of
the CSI-shares issued and outstanding
Deschler-Group shall be entitled to demand
from CS Intl. the procurement of a put
option on a pro rata basis to the buying
third party for the Residual Deschler Shares
at the equivalent prices and conditions. In
the event of a sale of all CSI-shares held
by CS Intl. , CS Intl. has the right to
require Deschler-Group to sell all its
shares on the same terms and conditions as
CS Intl., but at least for a price per share
of DM 178,20 and Deschler-Group shall
cooperate with and take reasonable steps
needed to effect such sale.
14. RESERVATIONS 1. CS, CS Intl. and the Deschler-Group
shall work together to arrange for
the necessary filing of the
transactions contemplated hereunder
with the German Merger Control
Authorities. The conversion into
CSI shares under Section 3 above
and the acquisition of the
Additional Shares shall become part
of one joint filing. EXHIBIT 5 is
the confirmation by the Management
Board of CSI to assist in the
urgent filing for clearance with
the German Merger Control
Authorities and to give access to
all information related thereto by
freeing its respective personnel to
assist in this respect.
2. The Parties shall be bound to
refine these terms into a Revised
Shareholders Agreement according to
the terms of these Heads of
Agreement, such Revised
Shareholders' Agreement becoming
binding and enforceable upon the
procurement of all necessary
consents of the merger control
authorities having jurisdiction
thereon. Until such Revised
Shareholders' Agreement comes into
force, the Shareholders' Agreement
in place, as modified by its 1.
Amendment dated as of October 9,
1997 and as modified in these Heads
of Agreement, shall be binding on
the Parties hereto.
3. CS Intl. shall be entitled under
such Revised Shareholders Agreement
to conduct a due diligence
investigation in CSI following the
transfer of the Additional Shares
and prior to the elapse of the
option period through January 10,
1999. EXHIBIT 6 contains the
consent by the CSI Management Board
to allow auditors and attorneys
acting on behalf of
<PAGE> 10
10
CS and CS Intl. access to all
relevant information, subject to
standard confidentiality
commitments.
4. The Closing of this transaction for
the Additional Shares shall take
place on April 30, 1998, 4:00 p.m.
at the offices of Haver &
Mailander, Lenzhalde 83 at
Stuttgart, or at another time and
date mutually agreed upon in case
the filing for the acquisition of
the Additional Shares has not been
cleared by the German Merger
Control Authorities by April 20,
1998. There is no individual
appearance of the Parties foreseen.
5. The Parties shall keep the contents
under these Heads of Agreement or
the revised Shareholders Agreement
confidential and shall not disclose
any pertinent information except as
this may be required under the
pertinent laws in the jurisdictions
to which CS Intl. and CSI are
subject, and except to potential
purchasers of CS or its affiliates.
15. GENERAL TERMS: 1. Deschler-Group, CS and CS Intl.
will terminate the existing
Shareholders Agreements of January
7/8, 1993, and the 1. Amendment
thereto of October 9, 1997 with the
execution of the Revised
Shareholders Agreement.
2. The Revised Shareholders Agreement
shall be negotiated in English but
executed in German and shall be
subject to German law.
3. The obligations of the Parties
hereto shall run through until June
30, 2008 which also applies to
representations and warranties
hereunder, unless terminated
earlier by the Parties or because
of obsolescence. The liability of
the Deschler-Group for the
representations and warranties made
herein shall run for 24 months
unless German law provides for a
longer statute of limitations
(Verjahrung).
4. German law applies to this
Agreement. These Heads of Agreement
shall be fully binding on the
Parties hereto. German law applies
excluding the CISC, if applicable.
5. Amendment, supplements or
modifications of the provisions of
this Agreement, including this
paragraph, shall, in order to be
effective, be in writing and
appropriately executed by the
Parties.
<PAGE> 11
11
6. The headings in this Agreement
serve only for the purpose of
better orientation in the text of
this Agreement. They are of no
significance to the content or
interpretation of this Agreement.
7. If provisions of this Agreement are
totally or partially legally
invalid or unenforceable, the
validity of the remaining
provisions shall not be affected.
The same applies if there is a gap
in this Agreement. In the place of
the invalid or unenforceable
provision, or to fill in any gap,
an appropriate provision should be
provided that, to the extent
possible, comes as close as
possible to what the Parties to
this Agreement wanted, or,
according to the meaning and
purpose of this Agreement, would
have wanted, if they had considered
the issue upon drafting this
Agreement or upon including a
provision at some later time. This
also applies when the invalidity of
a provision relates to a provision
in this Agreement concerning the
measure of performance or time
(period or date). In such cases, a
provision is to be substituted that
comes as close as possible to the
original intent while still being a
legally permissible measurement of
the performance or time (period or
date).
8. The members of the Deschler Group
shall be deemed jointly and
severally liable for all
obligations entered into in this
Agreement in the name of the
Deschler Group. CS and CS Intl.
shall equally be deemed jointly and
severally liable for all
obligations entered into in this
agreement by either of them.
9. All formal notices to be granted
under this Agreement must be in
writing to be effective. They shall
be deemed received no later than
three days after being deposited in
the mail, if at the same time as
depositing such in the mail, it is
also sent by telefax to the
recipient, and this recipient is
either the respective designated
agent or
if to the Deschler Group
Mr. Walter Deschler
Schaffelkinger Weg 13
Ulm/Donau, Germany
Telefax No. 49-731-3997-490
<PAGE> 12
12
and if to CS Int.
Clark-Schwebel International,
Inc. P.O. Box 2627 Anderson,
South Carolina 29622, USA
Attn: Chief Executive Officer
Telefax No. (864) 260-6591
or the designated replacement
authorized recipient.
10. Exclusive venue shall be reserved
for the courts having ordinary
jurisdiction at Frankfurt/Main,
Germany.
Date/Place: Ulm/Anderson, March 30, 1998
- ---------------------------------------------------
Walter Deschler
on behalf of the Deschler-Group:
a) Deschler Beteiligungsgesellschaft Burgerlichen Rechts, consisting of
Mrs. Marion Deschler-Poss, Siesmayerstra(beta)e 4 A, 60323 Frankfurt
Walter Deschler, Schaffelkinger Weg 13, 89077 Ulm/Danube
Deschler Stiftung, Soeflingerstra(beta)e 246, 89077 Ulm/Danube, the
Deschler Stiftung represented by its Managing Director, Walter Deschler
b) Mr. Walter Deschler, Schaffelkinger Weg 13, 89077 Ulm/Danube
- --------------------------------------------------
Clark-Schwebel International, Inc. and
Clark-Schwebel, Inc., both Delaware companies,
P.O. Box 2627, Anderson, South Carolina 29622, USA
represented by J.P. Schwebel, Chairman and Attorney-in-Fact
<PAGE> 13
EXHIBIT 1
<TABLE>
<S> <C>
Deschler Beteiligungsgesellschaft Burglichen Rechts Clark-Schwebel International, Inc.
Mrs. Marion Deschler-Poss
Walter Deschler
Deschler Stiftung
Walter Deschler
Schaffelkinger Weg 13 300 Delaware Avenue, Suite 523
89077 Ulm/Danube Wilmington, Delaware 19801
Germany USA
Deutsche Bank AG
Ulm Branch
Munsterplatz 33
89073 Ulm
March 30, 1998
</TABLE>
RE: DEPOSIT OF 201,001 AND OF 199,000 BEARER SHARES OF CS INTERGLAS AG
Dear Ladies and Gentlemen:
We hereby notify you, based on the Deposit Agreement of March 25, 1993 between
Deutsche Bank AG, Deschler Beteiligungsgesellschaft Burglichen Rechts and
Clark-Schwebel International, Inc. as successor of Clark-Schwebel Fiber Glass
Corporation that Deutsche Bank AG can release from the Deposit the 199,000
Bearer Shares of CS Interglas AG with the global certificate St. 157.679 Nr. 000
001 - 157 679 and St. 41.321 Nr. 378 695 - 420 015 and can hand over to Clark
Schwebel International, Inc. and its representative such global certificates, as
well as release to the Deschler-Group from their 201,001 shares by global
certificate for the shares No. 157,680 to 358,680 a number of 124,443 share but
keeping 76,558 shares in deposit under the continuing Deposit Agreement of March
25, 1993. The release to the Deschler Group shall take place in exchange of the
global certificate for the 201,001 shares for one or more share certificates
representing 76,558 shares.
Yours sincerely,
Clark-Schwebel International, Inc. Walter Deschler
<PAGE> 14
EXHIBIT 2
CLARK-SCHWEBEL INTERNATIONAL INC.
CS-Interglas AG
c/o Prof. Dr. K. Peter Mailander
Haver & Mailander
Lenzhalde 83-85
70192 Stuttgart
31. Marz 1998
CONVERSION OF CONVERTIBLE NOTES
Gentlemen:
Clark-Schwebel International Inc. pursuant to the acquisition from
Clark-Schwebel, Inc. holds DM 20.000.000 Convertible Notes issued by
CS-Interglas AG under and in accordance with Terms of Notes ("Terms"). Under
Sect. 2 para 4 of the Terms every holder of Notes is entitled to give notice of
its decision to convert.
Based upon the foregoing Clark-Schwebel International Inc. hereby gives notices
to CS-Interglas AG of its election to have DM 20.000.000 Convertible Notes
converted into 250.000 bearer shares in the nominal value of DM 50,- per share
of CS Interglas AG to be issued from a contingent share capital authorized by
the shareholders meeting of February 26, 1993. This conversion shall become
effective as of June 30, 1998; the Convertible Notes shall bear interest through
March 31, 1998 and the Shares assigned upon conversion shall have pro rata
temporis rights to receive dividends from and after April 1, 1998.
We will tender the Convertible Notes in exchange for the newly issued shares on
June 30, 1998 or any other date as agreed at your offices.
Please confirm the due receipt of this notice by signing and returning to us the
enclosed copy.
Sincerely
Clark-Schwebel International Inc. Confirmed:
By: ----------------------------------
--------------------------------
J.P. Schwebel, Attorney-in-Fact March 31, 1998 Prof. Dr. Mailander
as attorney-in-fact
for CS Interglas AG
under the attached Power
of Attorney of March 30, 1998
<PAGE> 15
EXHIBIT 3
[TO BE PRINTED ON THE STATIONARY OF CS-INTERGLAS AG AND EXECUTED BY TWO MEMBERS
OF THE MANAGEMENT BOARD (VORSTAND)]
POWER OF ATTORNEY
The undersigned CS-Interglas AG of Erbach, registered in the Commercial Register
of the Lower Court (Amtsgericht of Ulm) under HRB 2182 grants hereby to
Prof. Dr. K. Peter Mailander
Haver & Mailander
Lenzhalde 83-85
70192 Stuttgart
Federal Republic of Germany
the Power of Attorney to receive and accept on behalf of CS-Interglas AG the
exercise of the conversion of Deutsche Marks twenty million Convertible Bonds
held by Clark-Schwebel, International, Inc. of 300 Delaware Avenue, Suite 523,
Wilmington, Delaware 19801, USA as well as to execute the receipt of having
received such exercise of the conversion. This Power of Attorney expires on
April 10, 1998. Prof. Mailander is relieved from the restrictions of Section 181
of the German Civil Code (BGB), and he is authorized to grant a sub-power of
Attorney within the limits of this Power of Attorney to members of his firm
Haver & Mailander shown on such firm's stationary.
March 30, 1998
-----------------------------
CS-Interglas AG
<PAGE> 16
EXHIBIT 4
POWER OF ATTORNEY
The undersigned Walter Deschler on behalf of the Deschler Group grants hereby to
Clark Schwebel International, Inc.,
300 Delaware Avenue, Suite 523
Wilmington, Delaware 19801
USA
the Power of Attorney to vote in shareholder's meetings of CS-Interglas AG all
shares held by Walter Deschler, Deschler Beteiligungs Gesellschaft bR, Mrs.
Marion Deschler-Poss and the Deschler Stiftung as well as shares held
individually by Mr. Walter Deschler (the "Deschler Group"). This Power of
Attorney is restricted to votes on the withdrawal and dismissal of one member of
the Board of Supervisors of CS Interglas AG elected as nominees of the Deschler
Group. This Power of Attorney is irrevocable. It expires if all shares held by
the Deschler Group in CS-Interglas AG fall below 15% of all outstanding and
issue shares. CS International is relieved from the restrictions of Section 181
of the German Civil Code.
March 31, 1998
-------------------------------
Walter Deschler
on behalf of the Deschler Group
<PAGE> 17
EXHIBIT 5
TO BE PRINTED ON THE STATIONERY OF CS INTERGLAS AG AND
EXECUTED BY TWO MEMBERS OF THE MANAGEMENT BOARD (VORSTAND).
Clark-Schwebel International, Inc.
Clark-Schwebel, Inc.
300 Delaware Avenue, Suite 523
Wilmington, Delaware 19801
USA
March 31, 1998
RE: GERMAN MERGER CONTROL FILING WITH RESPECT TO THE
ACQUISITION OF MORE THAN 25% AND MORE THAN 50% OF
ALL SHARES OF CS INTERGLAS AG (CSI)
Dear Ladies and Gentlemen,
We hereby confirm that we will assist you in the preparation of all filings for
clearance with the German Merger Control Authorities with respect to your
acquisition of additional shares of CSI which increases your holdings in CSI to
more than 25% and more than 50%, respectively. Our personnel will be available
on short notice to assist in this respect so that the filing can be made with
the authorities within the shortest possible period of time.
Yours sincerely,
C.S. Interglas AG
<PAGE> 18
EXHIBIT 6
TO BE PRINTED ON THE STATIONERY OF CS-INTERGLAS AG AND
EXECUTED BY TWO MEMBERS OF THE MANAGEMENT BOARD (VORSTAND)
Clark-Schwebel International, Inc.
Clark-Schwebel, Inc.
300 Delaware Avenue, Suite 523
Wilmington, Delaware 19808
USA
March 31, 1998
RE: DUE DILIGENCE AT CS INTERGLAS AG (CSI)
Dear Ladies and Gentlemen,
We hereby confirm that you, your parent company Clark-Schwebel, Inc., and their
accounting and legal advisors will be authorized to conduct a full due diligence
of the business of CS Interglas AG and of all its affiliates. We will give full
access to all books and records including those on disks, software, or other
non-hard copy memories. Our personnel shall be available for details,
explanations, and assistance. We assume that the due diligence will be conducted
within a reasonable period of time at our premises or otherwise as to be agreed
upon. Please notify us in advance of at least eight working days in writing as
soon as you have decided to start conducting the due diligence. This letter is
subject to the execution of the enclosed confidentiality covenant by you and by
Clark-Schwebel Inc.
Yours sincerely,
CS-Interglas AG
<PAGE> 19
EXHIBIT TO EXHIBIT 6
CONFIDENTIALITY COVENANT
The undersigned Clark-Schwebel Inc. and Clark-Schwebel International Inc., 300
Delaware Avenue, Suite 523, Wilmington, Delaware 19808, USA and P.O. Box 26271
Anderson, SC 29622 hereby covenant, jointly and separately, to keep all
information retrieved during the conduct of due diligence of the business of
CS-Interglas AG and its affiliates strictly confidential. Such information shall
not be disclosed to any third parties except to accounting and legal advisors of
Clark-Schwebel Inc. and/or Clark-Schwebel International Inc. Copies shall only
be kept as far as is necessary for the proper documentation of the due diligence
report to be prepared by Clark-Schwebel Inc., Clark-Schwebel International Inc.
and its advisors.
March 30, 1998
- -------------------------------- ---------------------------------
Clark-Schwebel Inc. Clark-Schwebel International Inc.
<PAGE> 1
EXHIBIT 10.13
CLARK-SCHWEBEL, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is effective as of June 1, 1998, between CLARK-SCHWEBEL,
INC., a Delaware corporation (the "Company"), and ("Executive") and shall become
effective on the Effective Date (as defined below).
WHEREAS, the execution and delivery of this Agreement by the Company
and Executive is made to ensure the continued dedication and loyalty of
Executive to the Company and the fair treatment of Executive upon the sale of
the Company.
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Employment. So long as Executive is an employee of the Company on
the Effective Date (as defined below), the Company shall employ Executive, and
Executive hereby agrees to accept employment with the Company, upon the terms
and conditions set forth in this Agreement for the period beginning on the date
(the "Effective Date") of the consummation of a Change of Control Transaction
(as defined below) and ending on the Expiration Date (as defined below) unless
terminated earlier in accordance with the provisions of Section 4 hereof (the
"Employment Period"); provided, however, that if a Change of Control Transaction
occurs and Executive's employment with the Company is terminated by the Company
prior to the Effective Date, upon a final determination (which determination
shall be made by an arbitrator in accordance with the provisions set forth in
Section 16 hereof) that such termination was at the request of a third party who
has taken steps reasonably calculated to effect such Change of Control
Transaction, then for all purposes of this Agreement, the "Effective Date" shall
mean the date immediately prior to the date of such termination of Executive's
employment by the Company. A "Change of Control Transaction" shall be deemed to
occur when (a) neither Vestar/CS Holding Company, L.L.C. nor any of its
affiliates ("Vestar") directly or indirectly is able to elect or designate for
election a majority of the members of the board of directors of the Company, (b)
neither Clark-Schwebel Holdings, Inc. nor any of its affiliates ("Holdings")
owns a majority of the outstanding capital stock of the Company entitled to vote
generally in the election of directors of the Company, or (c) the Company
transfers all or substantially all of its assets to any person or entity other
than Vestar or Holdings.
2. Position and Duties.
(a) During the Employment Period, Executive shall serve as the of the
Company and shall have the normal duties, responsibilities and authority of the
, subject to the power of the board of directors of the Company (the "Board") to
expand or limit such duties, responsibilities and authority and to override
actions of the .
<PAGE> 2
(b) During the Employment Period, Executive shall report to his
immediate supervisor or the Board, as applicable, and Executive shall devote his
best efforts and his full business time and attention (except for permitted
vacation periods and reasonable periods of illness or other incapacity) to the
business and affairs of the Company and its subsidiaries. Executive shall
perform his duties and responsibilities to the best of his abilities in a
diligent, trustworthy, businesslike and efficient manner.
3. Base Salary and Benefits. During the Employment Period, Executive
shall be entitled to the following:
(a) Base Salary. Executive's base salary shall be per annum or such
higher (but not lower) amount as the Board may designate from time to time in
accordance with the Company's compensation policies as in effect immediately
prior to the Effective Date (the "Base Salary"), which salary shall be payable
in regular installments in accordance with the Company's general payroll
practices and shall be subject to customary withholding.
(b) Annual Bonus. Following the end of each fiscal year, Executive
shall be awarded a bonus (the "Annual Bonus") with respect to that fiscal year
which shall be calculated using the methodology set forth in the 1998 Approved
Bonus Plan attached hereto as Exhibit A or the 1998 Sales Commission Plan
attached hereto as Exhibit B, as applicable, as modified from year to year,
which Annual Bonus (if any) shall be payable on or before February 28 of the
next succeeding fiscal year.
(c) Benefits. In addition to the Base Salary and Annual Bonus payable
to Executive pursuant to this Section 3, Executive will be entitled to
participate in any pension benefit plan, welfare benefit plan (including without
limitation any medical, prescription, dental, disability and life insurance
plan), tax-deferred savings plan and other benefit arrangement offered by the
Company to its executive employees as of the date of this Agreement or, if more
beneficial to Executive, any such plan or other benefit arrangement in effect
during the Employment Period. In addition, each Executive will be entitled to
the number of vacation days determined in accordance with the Company's vacation
policy as in effect on the date of this Agreement. Executive shall also be
entitled to (i) prompt reimbursement for all reasonable expenses incurred by
Executive in the performance of his duties in accordance with the Company's
business expense reimbursement policy and (ii) an office of a size and with
furnishings and other appointments and to support personnel substantially equal
to those in effect on the date of this Agreement.
4. Termination.
(a) Unless renewed by the mutual agreement of the Company and
Executive, the Employment Period shall end on the anniversary of the Effective
Date (the "Expiration Date"); provided, that the Employment Period (i) shall
terminate prior to the Expiration Date upon Executive's resignation, death or
Disability (as defined below), (ii) may be terminated by the Company at any time
prior to the Expiration Date for Cause (as defined below) or without Cause,
2
<PAGE> 3
and (iii) may be terminated by Executive at any time prior to the Expiration
Date for Good Reason (as defined below) or without Good Reason.
(b) If the Employment Period is terminated due to Executive's death or
Disability prior to the Expiration Date, Executive shall be entitled to only
such benefits as are customarily provided in such circumstances by the Company
(which benefits shall be no less favorable than the benefits provided by the
Company in such circumstances as of the date of this Agreement). For purposes of
this Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180 consecutive
days as a result of incapacity due to mental or physical illness; provided, that
a return to work for less than thirty consecutive days during any period of
Disability shall not be deemed to interrupt the running of (and shall be
included in) the aforementioned 180 day period.
(c) If the Employment Period is terminated by the Company without Cause
or by Executive for Good Reason prior to the Expiration Date, Executive shall be
entitled to receive the following benefits: (i) the Base Salary (as in effect on
the date of termination) that would have been payable to Executive from the date
of termination to the end of the Employment Period had such termination not
occurred, payable in regular installments in accordance with the Company's
general payroll practices and subject to customary withholding, (ii) cash
payments in respect of the amounts that Executive would have been entitled to
receive or to be allocated pursuant to the Clark-Schwebel, Inc. Retirement
Partnership Plan (as in effect on the date of this Agreement) from the date of
termination to the end of the Employment Period had such termination not
occurred, payable in regular installments in accordance with the Company's
general payroll practices and subject to withholding, and (iii) an amount equal
to the average of (A) the Annual Bonus most recently earned by or paid to
Executive prior to the date of termination and (B) the Annual Bonus earned by or
paid to Executive for the bonus period immediately prior to the most recently
ended bonus period, for each bonus period that would have occurred from the date
of termination to the end of the Employment Period had such termination not
occurred, which amount shall be payable on or before February 28 of the
succeeding fiscal year. In addition, (1) Executive and his family shall be
entitled to participate in the medical and dental plans offered by the Company
from the date of termination through the end of the Employment Period as if such
termination had not occurred, and thereafter, Executive shall be entitled to
participate in such medical and dental plans pursuant to the provisions of Part
6 of Subtitle B of Title I of the Employee Retirement Income Security Act of
1974, as amended and (2) the Company shall continue to pay the premiums on life
and long-term disability insurance policies for Executive from the date of
termination through the end of the Employment Period as if such termination had
not occurred. During the one year period following the date of termination, the
Company shall pay the reasonable costs and expenses of one executive
outplacement firm to help the Executive secure other employment. Notwithstanding
the foregoing, (A) in connection with any amounts payable pursuant to clause
(ii) immediately above, Executive shall not be permitted to participate in the
Clark-Schwebel, Inc. Retirement Partnership Plan and any payments made pursuant
to such clause (ii) shall not be grossed up to compensate Executive for the loss
of the benefit of tax deferred treatment received by the participants of such
plans and (B)
3
<PAGE> 4
the Company shall not be obligated to pay or provide any benefit or amount set
forth in this paragraph (c) if Executive has breached in any material respect
the provisions of paragraph 6 hereof.
(d) If the Employment Period is terminated prior to the Expiration Date
by the Company for Cause or by Executive other than for Good Reason, Executive
shall only be entitled to receive his Base Salary through the date of
termination.
(e) For purposes of this Agreement, "Cause" shall mean (a) a material
breach of this Agreement by Executive which is not cured within thirty (30) days
of receipt of written notice from the Board specifying such breach, (b)
Executive's willful and repeated failure (except by reason of Disability) to
comply with the lawful directives of the Board or his superior officer(s)
consistent with the terms of this Agreement after a written demand for such
compliance is delivered to Executive by the Board or such officer identifying
specifically the nature of such noncompliance, (c) gross negligence or willful
misconduct in the performance of Executive's duties under this Agreement, (d)
fraud committed by Executive with respect to the Company or any of its
subsidiaries, or (e) the commission of a felony or a crime involving moral
turpitude; provided, that Executive will not be deemed to have been terminated
for Cause unless (i) the Company notifies Executive of the facts and
circumstances providing the basis for termination for Cause, (ii) Executive has
had the opportunity to be heard before the Board, and (iii) three-quarters of
the Board determines that the Company may terminate Executive for Cause under
the Agreement.
(f) For purposes of this Agreement, "Good Reason" shall mean (a) a
material breach of the Agreement by the Company which is not cured within thirty
(30) days of receipt of written notice from Executive specifying such breach,
(b) the assignment to Executive of duties inconsistent with his position,
authority or responsibility or a material reduction or a material adverse
alteration of such duties, authority or responsibility or (c) a material
relocation of the offices of the Company where the Executive performs his duties
under this Agreement on the Effective Date. Executive's continued employment by
the Company for a period of not more than ninety (90) days after the occurrence
of the event giving rise to Executive's right to terminate this Agreement for
Good Reason shall not be deemed a waiver of such right.
5. Confidential Information. Executive acknowledges that the secret or
confidential information, observations and data obtained by him while employed
by the Company and its subsidiaries concerning the business or affairs of the
Company and its subsidiaries ("Confidential Information") are the property of
the Company or such subsidiaries. Therefore, Executive agrees that, except as
may be required by law or legal process, he shall not disclose to any
unauthorized person or use for his own purposes any Confidential Information
without the prior written consent of the Board, unless and to the extent that
the aforementioned matters become generally known to and available for use by
the public other than as a result of Executive's acts or omissions. Executive
shall deliver to the Company at the termination of the Employment Period, or at
any other time the Company may request, all memoranda, notes, plans, records,
reports, computer tapes, printouts and software and other documents and data
(and copies thereof) relating
4
<PAGE> 5
to the Confidential Information or the business of the Company or any subsidiary
which he may then possess or have under his control.
6. Non-Compete, Non-Solicitation.
(a) In further consideration of the compensation to be paid to
Executive hereunder, Executive acknowledges that in the course of his employment
with the Company he has and shall become familiar with the Company's trade
secrets and with other Confidential Information concerning the Company and its
subsidiaries and that his services have been and shall be of special, unique and
extraordinary value to the Company and its subsidiaries. Therefore, Executive
agrees that during the Noncompete Period (as defined below), he shall not
directly or indirectly own any interest in, manage, control, participate in,
consult with, render services for, or in any manner engage in any business
competing with the businesses of the Company or its subsidiaries, as such
businesses exist or are in process on the date of the termination of Executive's
employment, within any geographical area in which the Company or its
subsidiaries engage or plan to engage in such businesses. Nothing herein shall
prohibit Executive from being a passive owner of not more than 2% of the
outstanding stock of any class of a corporation which is publicly traded, so
long as Executive has no active participation in the business of such
corporation.
(b) During the Noncompete Period, Executive shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of the Company or any subsidiary to leave the employ of the Company or such
subsidiary, or in any way interfere with the relationship between the Company or
any subsidiary and any employee thereof, (ii) hire any person who was a key
employee of the Company or any subsidiary at any time during the Employment
Period or (iii) induce or attempt to induce any customer, supplier, licensee,
licensor, franchisee or other business relation of the Company or any subsidiary
to cease doing business with the Company or such subsidiary, or in any way
interfere with the relationship between any such customer, supplier, licensee or
business relation and the Company or any subsidiary.
(c) If, at the time of enforcement of this Section 6, a court shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law. Executive agrees that the restrictions
contained in this Section 6 are reasonable.
(d) In the event of the breach or a threatened breach by Executive of
any of the provisions of this Section 6, the Company, in addition and
supplementary to other rights and remedies existing in its favor, may apply to
any court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent any violations
of the provisions hereof (without posting a bond or other security). In
addition, in the event of an alleged breach or violation by Executive of this
Section 6, the Noncompete Period shall be tolled until such breach or violation
has been duly cured.
5
<PAGE> 6
(e) For the purposes of this Agreement, "Noncompete Period" shall mean
(i) if Executive's employment is terminated during the Employment Period by the
Company other than for Cause or by Executive with Good Reason, a period
continuing until the Expiration Date, or (ii) if Executive's employment is
terminated during the Employment Period by the Company for Cause or by Executive
without Good Reason, a period continuing until the first anniversary of the
Expiration Date.
7. Executive's Representations. Executive hereby represents and
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive do not and shall not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity other than the
Company, and (iii) upon the execution and delivery of this Agreement by the
Company, this Agreement shall be the valid and binding obligation of Executive,
enforceable in accordance with its terms. Executive hereby acknowledges and
represents that he has consulted with independent legal counsel regarding his
rights and obligations under this Agreement and that he fully understands the
terms and conditions contained herein.
8. Survival. Paragraphs 4 through 6 and paragraphs 9 through 17 and
Sections 19 through 21 shall survive and continue in full force in accordance
with their terms notwithstanding any termination of the Employment Period.
9. Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed by first class mail,
certified or registered, return receipt requested, postage prepaid, to the
recipient at the address below indicated:
Notices to Executive:
Notices to the Company:
Clark-Schwebel, Inc.
2200 South Murray Avenue
(P.O. Box 2627)
Anderson, SC 29622
Attn: President
6
<PAGE> 7
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or mailed.
10. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
11. Complete Agreement. This Agreement embodies the complete agreement
and understanding among the parties and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way. The
captions of this Agreement are for convenience of reference only, are not part
of this Agreement and shall not be used to interpret this Agreement.
12. No Strict Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party as the supposed drafter of the language.
13. Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
14. Successors and Assigns.
(a) This Agreement is intended to bind and inure to the benefit of and
be enforceable by Executive, the Company and their respective heirs, personal
representatives, successors and assigns, except that Executive may not assign
his rights or delegate his obligations hereunder without the prior written
consent of the Company otherwise than by will or the laws of descent and
distribution.
(b) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean the Company as herein defined
and any successor to its business and/or assets as aforesaid that assumes and
agrees to perform this Agreement by operation of law or otherwise.
7
<PAGE> 8
15. Dispute Resolution.
(a) If any dispute, claim or difference arises out of this Agreement or
the employment relationship thereby created, or as to the rights and liabilities
of the parties hereunder or as to the breach or invalidity hereof, or in
connection with the construction of this Agreement including any dispute, claim
or difference as to whether an issue is arbitrable (each such event being
hereinafter called a "Dispute"), the parties will settle such Dispute
exclusively by binding arbitration in accordance with the Commercial Arbitration
rules of the American Arbitration Association in effect as of the date of
commencement of the arbitration.
(b) Either party may demand that any Dispute be submitted to binding
arbitration. The demand for arbitration shall be in writing, shall be served on
the other party in the manner prescribed in this Agreement for the giving of
notices, and shall set forth a short statement of the factual basis for the
claim, specifying the matter or matters to be arbitrated.
(c) The arbitration will be held in the City of Atlanta unless the
parties mutually agree to have the arbitration held elsewhere, and judgment upon
the award made therein may be entered by any court having jurisdiction thereof;
provided, further, that nothing contained in this Section 15 will be construed
to limit or preclude a party from bringing any action in any court of competent
jurisdiction in the United States for injunctive or other provisional relief to
compel another party hereto to comply with its obligations under this Agreement
or any other agreement between or among the parties during the pendency of the
arbitration proceedings.
(d) The arbitration shall be conducted by an arbitrator appointed by
the American Arbitration Association (the "Arbitrator") who shall conduct such
evidentiary or other hearings as he deems necessary or appropriate and
thereafter shall make a final determination as soon as practicable after the
conclusion of the hearings. Any arbitration pursuant hereto shall be conducted
by the Arbitrator as the parties may mutually agree or if the parties do not so
agree under the guidance of the Federal Rules of Civil Procedure and the Federal
Rules of Evidence, but the Arbitrator shall not be required to comply strictly
with such rules in conducting any such arbitration.
(e) The Company shall bear its own fees and expenses incurred in
connection with the arbitration, the fees and expenses of the Arbitrator
incurred in connection with the arbitration, and shall pay the reasonable fees
and expenses (including the legal fees of one law firm) incurred by Executive in
connection with the arbitration.
(f) The Arbitrator shall have the authority to award any remedy or
relief that a Court of the State of New York could order or grant, including
without limitation, specific performance of any obligation under this Agreement,
the awarding of punitive damages, the issuance of an injunction, or the
imposition of sanctions for abuse or frustration of the arbitration process. The
decision and award of the Arbitrator shall be in writing and counterpart copies
thereof shall be delivered to each party. The decision and award of the
Arbitrator shall be binding on all parties. In rendering such decision and
award, the Arbitrator shall not add to, subtract from or otherwise modify
8
<PAGE> 9
the provisions of this Agreement. Either party to the arbitration may seek to
have the ruling of the Arbitrator entered in any court having jurisdiction
thereof.
(g) Each party agrees that it will not file suit, motion, petition or
otherwise commence any legal action or proceeding for any matter which is
required to be submitted to arbitration as contemplated herein except in
connection with the enforcement of an award rendered by the Arbitrator and
except to seek the issuance of an injunction or temporary restraining order
pending a final determination by the Arbitrator. Upon the entry of any order
dismissing or staying any action or proceeding filed contrary to the preceding
sentence, the party which filed such action or proceeding shall promptly pay to
the other party the reasonable attorney's fees, costs and expenses incurred by
such other party prior to the entry of such order.
(h) All aspects of the arbitration shall be considered confidential and
shall not be disseminated by any party with the exception of the ability and
opportunity to prosecute its claim or assert its defense to any such claim. The
Arbitrator shall be required to issue prescriptive orders as may be required to
enforce and maintain this covenant of confidentiality during the course of the
arbitration and after the conclusion of same so that the result and underlying
data, information, materials and other evidence are forever withheld from public
dissemination with the exception of its subpoena by a court of competence
jurisdiction in an unrelated proceeding brought by a third party.
16. Amendment and Waiver. The provisions of this Agreement may be
amended or waived only with the prior written consent of the Company and
Executive (or their respective successors and legal representatives), and no
course of conduct or failure or delay in enforcing the provisions of this
Agreement shall affect the validity, binding effect or enforceability of this
Agreement or be deemed a waiver of such provisions.
17. CHOICE OF LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE
EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF NEW YORK OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK. IN FURTHERANCE OF THE FOREGOING,
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL CONTROL THE INTERPRETATION AND
CONSTRUCTION OF THIS AGREEMENT (AND ALL SCHEDULES AND EXHIBITS HERETO), EVEN
THOUGH UNDER THAT JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
18. At-will Employment. Prior to the Effective Date, Executive shall be
employed by the Company on an "at will" basis and the employment relationship
between the Company and Executive may be terminated at any time by either the
Company or Executive for any reason whatsoever, with or without cause.
9
<PAGE> 10
19. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which Executive may qualify. Amounts that are vested benefits or that
Executive is otherwise entitled to receive under any plan, policy, practice or
program or any contract or agreement with the company or any of its affiliated
companies at or subsequent to the termination of the Employment Period shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement. No such amounts shall
reduce any amounts payable under this Agreement.
20. No Duty to Mitigate. In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not Executive obtains other
employment.
21. Interest. If any payment to Executive required by this Agreement is
not made within the time for such payment specified herein, the Company shall
pay to Executive interest on such payment at the legal rate payable from time to
time upon judgments in the state courts in the State of South Carolina from the
date such payment is payable under the terms hereof until paid.
* * * * *
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
CLARK-SCHWEBEL, INC.
By
-------------------------------------
Name:
Title:
----------------------------------------
SWORN TO before me this
day of , 1998
- --- -----------
(SEAL)
- --------------------------
Notary Public for South Carolina
My commission expires :
--------------
11
<PAGE> 12
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
name title salary term Address state
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
William D. Bennison President $213,200.00 third 12 Belfrey Drive Greer, SC
29650
- ------------------------------------------------------------------------------------------------------------------------------
Richard C. Wolfe Executive Vice-President of $172,800.00 third 205 Fox Creek Anderson, SC 29261
Manufacturing Road
- ------------------------------------------------------------------------------------------------------------------------------
Jack P. Schwebel Chairman $260,000.00 third 10 Dogwood Hills Pound Ridge, NY
10576
- ------------------------------------------------------------------------------------------------------------------------------
Donald R. Burnette Chief Financial Officer $125,000.00 third 32 Regan Court Inman, SC
29349
- ------------------------------------------------------------------------------------------------------------------------------
William H. Boyles Vice-President Fiber Glass $139,000.00 second 300 Belfrey Drive Greer, SC
Sales and Marketing 29650
- ------------------------------------------------------------------------------------------------------------------------------
Dieter R. Wachter Vice-President High $130,000.00 second 44 Maywood Road Darien, CT 06820
Performance Fabric
- ------------------------------------------------------------------------------------------------------------------------------
Harvey A. Morse Vice-President Human $104,000.00 second 408 Sutton Anderson, SC 29621
Resources Place, Harpers
Ridge
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 13
EXHIBIT A TO EXHIBIT 10.13
CLARK-SCHWEBEL, INC.
1998 EXECUTIVE BONUS POOL
Attached is the 1998 Executive Bonus Plan as submitted by management and
recommended by the Compensation and Benefit Committee.
1. The plan is based on EBITDA. From $0 - $29.9M EBITDA, the pool is $0K,
or Board discretion. A table is attached that reflects the % of bonus
pool earned at various levels of EBITDA up to $56M or 125% of pool.
2. A secondary pool of 10.0% would be set aside to reward management
members outside the incentive plan. (In the past, these awards have
been recommended by the responsible Vice President, based on individual
special performance.)
3. The plan participant pool would be split between earned @ 70% and
discretionary @ 30%. Payout of the discretionary portion would be
determined by the appropriate Vice President and President, based on
individual goals and performance against those goals.
4. There will be five levels of participation ranging from 40.0% to 120%
of annual base salary based on level of responsibility.
5. The bonus allocation pool will be calculated by multiplying the base
pay (W-2 base pay) of each individual by their level of participation
and totaling. The earned bonus of 70% is then allocated to participants
based on the allocation pool while the 30% discretionary portion is
based on individual's performance as determined by their respective
manager.
<PAGE> 14
CLARK-SCHWEBEL, INC.
BONUS POOL SCHEDULE
<TABLE>
<CAPTION>
POOL: $2,055K
$000
% EARNED
EBITDA POOL POOL
- ------ ---- ------
<S> <C> <C>
0 - 29.9 BOARD DISCRETION
30.0 25.0 $ 514.0
37.0 50.0 $1,028.0
44.0 75.0 $1,541.0
50.0 100.0 $2,055.0
56.0 125.0 $2,568.8
</TABLE>
PARTICIPATION LEVEL AS A % OF BASE SALARY
PLAN LEVEL I. 120%
II. 100%
III. 80%
IV. 60%
V. 40%
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CLARK-SCHWEBEL HOLDINGS INC. FOR THE SIX MONTHS ENDED
JULY 4, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS<F1>
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> JUL-04-1998
<CASH> 14,175
<SECURITIES> 0
<RECEIVABLES> 22,153
<ALLOWANCES> 0
<INVENTORY> 35,799
<CURRENT-ASSETS> 72,742
<PP&E> 74,565
<DEPRECIATION> 16,623
<TOTAL-ASSETS> 243,993
<CURRENT-LIABILITIES> 40,625
<BONDS> 155,994
0
0
<COMMON> 9,000
<OTHER-SE> 14,657
<TOTAL-LIABILITY-AND-EQUITY> 243,993
<SALES> 111,664
<TOTAL-REVENUES> 111,664
<CGS> 84,546
<TOTAL-COSTS> 84,546
<OTHER-EXPENSES> 8,018
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,885
<INCOME-PRETAX> 10,215
<INCOME-TAX> 4,090
<INCOME-CONTINUING> 8,646
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,646
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>The results of operations for the six months ended July 4, 1998 represent
the results of Clark-Schwebel Holdings, Inc. ("Company") for the period of
January 4, 1998 through July 4, 1998 (successor company). A change in ownership
resulted from a leveraged buyout on April 17, 1996, and the transaction resulted
in a new basis of accounting for the Company. Therefore, the results of
operations for the six months ended July 4, 1998 are not fully comparable to
preceding reporting periods. This schedule contains summary financial
information from the Company's financial statements and is qualified in its
entirety by reference to such financial statements.
</FN>
</TABLE>
