<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 21, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
FIBERITE HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------------
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DELAWARE 2295 41-1414333
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
2055 EAST TECHNOLOGY CIRCLE
TEMPE, AZ 85284
(602) 730-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
DR. JAMES E. ASHTON
CHIEF EXECUTIVE OFFICER
FIBERITE HOLDINGS, INC.
2055 EAST TECHNOLOGY CIRCLE
TEMPE, AZ 85284
(602) 730-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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Copies to:
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CAMERON JAY RAINS, ESQ. JOHN SCHUSTER, ESQ.
GRAY CARY WARE & FREIDENRICH CAHILL GORDON & REINDEL
A PROFESSIONAL CORPORATION 80 PINE STREET
4365 EXECUTIVE DRIVE, SUITE 1600 NEW YORK, NY 10005
SAN DIEGO, CA 92121 (212) 701-3000
(619) 677-1400
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------------
CALCULATION OF REGISTRATION FEE
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===========================================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE
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Common Stock, $0.01 par value.......... 5,750,000 shares $17.00 $97,750,000.00 $29,622.00
===========================================================================================================
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(1) Includes 750,000 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purposes of computing the registration fee.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED , 1997
PROSPECTUS
, 1997
5,000,000 SHARES
FIBERITE LOGO
FIBERITE HOLDINGS, INC.
COMMON STOCK
Of the 5,000,000 shares of common stock, $0.01 par value per share (the
"Common Stock"), offered hereby, 3,000,000 shares are being sold by Fiberite
Holdings, Inc. and 2,000,000 shares are being sold by the Selling Stockholders.
The Company will not receive any of the proceeds from the sale of the shares by
the Selling Stockholders. See "Principal and Selling Stockholders."
Prior to this offering (the "Offering"), there has been no public market
for the Common Stock of the Company. It is currently estimated that the initial
public offering price will be between $15.00 and $17.00 per share. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. The Company has applied for quotation of the
Common Stock on the New York Stock Exchange under the symbol "FBT."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
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Per Share........................ $ $ $ $
Total(3)......................... $ $ $ $
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(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deducting expenses payable by the Company estimated at $ .
(3) Certain of the Selling Stockholders, and under certain circumstances the
Company, have granted the Underwriters a 30-day option to purchase up to
750,000 additional shares of Common Stock solely to cover over-allotments,
if any. If such option is exercised in full, the total Price to the Public,
Underwriting Discounts and Commissions, Proceeds to the Company and Proceeds
to the Selling Stockholders will be $ , $ , $ and
$ , respectively. See "Underwriting."
The shares of Common Stock are offered by the several Underwriters subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery in New York, New York on or about , 1997.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
COWEN & COMPANY
SALOMON BROTHERS INC
<PAGE> 3
[INSIDE FRONT COVER]
The Company has filed domestic and foreign trademark applications for the
trademark "Fiberite." All other brand names and trademarks appearing in this
Prospectus are the property of their respective holders.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and Consolidated Financial Statements and Notes thereto appearing
elsewhere in this Prospectus. Fiberite Holdings, Inc. conducts all of its
operations through its wholly owned subsidiary, Fiberite, Inc. ("Fiberite"). As
used in this Prospectus, unless the context otherwise requires, the term
"Company" includes Fiberite Holdings, Inc. and all of its subsidiaries and its
and their respective predecessors and subsidiaries. The term "Predecessor"
refers to the business predecessors of the Company prior to October 6, 1995.
Except as otherwise noted, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option. See "Underwriting."
THE COMPANY
The Company is a leading supplier of advanced composite materials to the
worldwide aerospace, industrial and recreational markets. The Company's
composite materials are comprised of carbon, glass or other fibers that are
impregnated with one of the Company's proprietary resin matrices, creating
materials with more favorable strength- and stiffness-to-weight, dimensional
stability and thermal insulative properties than those of many high performance
materials, including metals and alloys. The Company's final products are
principally sold in rolls, sheets or in granular or chopped forms and are
subsequently incorporated by the Company's customers into a manufactured
component. The Company's advanced composite materials are qualified to a broad
range of specifications within the commercial and military aerospace industries
and are used in interior and exterior aircraft structures, satellite and missile
components, and solid rocket motor ablative insulation structures. The Company
also sells carbon-carbon materials for use in the manufacture of commercial and
military aircraft brakes. Additionally, the Company's composite materials are
qualified to a wide range of industrial and recreational specifications,
including electronic and small engine components, under-the-hood automotive
applications, golf club shafts and fishing rods. The Company's strong position
in its markets resulted in an increase in net sales of approximately 36% from
fiscal 1993 to fiscal 1996.
Over the last two decades, there has been significant growth in the use of
composite materials as a result of improvements in applications engineering,
advances in composites technology and declining costs to the customer in
manufacturing its final products. In particular, the use of composite materials
on commercial aircraft has increased as a result of both the growth in
commercial aircraft deliveries and the increase in composites used on a
per-aircraft basis as manufacturers strive to reduce aircraft weight and to
maximize both fuel efficiency and payload capacity. Industry analysts believe
the demand for commercial aircraft will be favorably influenced by a significant
increase in air travel expected over the next decade, and the Company believes
its established position and broad range of qualifications in the commercial
aircraft market position it to capitalize on this trend. The Company's sales for
commercial aircraft interior and exterior applications were approximately 31%,
33% and 35% of net sales in fiscal 1994, 1995 and 1996, respectively. In
addition, sales of carbon-carbon materials, the substantial majority of which
are used in commercial aircraft brakes, were approximately 8%, 10% and 10% of
net sales in fiscal 1994, 1995 and 1996, respectively.
The Company is also a leading supplier of advanced composite materials for
military aircraft and for satellite applications. The Company believes there
will be increased use of advanced composite materials in defense programs over
the next several years primarily as a result of military aircraft moving from
the development stage to the production phase. Sales for military aircraft
exterior applications were approximately 13%, 14% and 12% of net sales in fiscal
1994, 1995, and 1996, respectively. Recently, there has also been a significant
increase in the use of advanced composite materials by the U.S. satellite market
due in large part to the growth in the telecommunications industry and the
associated need for commercial satellites.
In October 1995, a group of financial investors led by DLJ Merchant Banking
Partners, L.P. and related investors and Carlisle Group, L.P. acquired all of
the outstanding stock of ICI Composites, Inc., a wholly owned subsidiary of ICI
American Holdings, Inc., and substantially all of the assets of Fiberite Europe
GmbH, a wholly owned subsidiary of Deutsche ICI GmbH.
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FIBERITE COMPETITIVE STRENGTHS
The Company believes it benefits from the following competitive strengths:
Strong Market Position and Reputation. The Company has been a leading
supplier of advanced composite materials for over 40 years, and management
believes the Company has established a reputation in its markets for high
quality products and excellent customer service. The Company has been integral
in the development of advanced composite materials for strategic missile
programs since 1955, has engineered materials for the space industry since the
early 1960s and has developed advanced composite materials for virtually every
major commercial and military aircraft program since the early 1970s. The
Company believes its established position and broad range of qualifications
position it to capitalize on emerging opportunities for composite applications
in new and existing markets.
Broad Range of Qualifications. Management believes Fiberite has one of the
broadest ranges of qualifications of any composite materials manufacturer. The
Company's materials are qualified and used by substantially all of the leading
aerospace prime contractors, including Airbus Industrie, AlliedSignal, Inc.,
Bell Helicopter Textron Inc., The Boeing Company, General Electric Company,
Lockheed Martin Corporation, McDonnell Douglas Corp., Northrop-Grumman
Corporation and Thiokol Corp. The Company's industrial composite materials are
sold to numerous blue chip manufacturers such as International Business Machines
Corporation and Motorola, Inc. The Company's materials are also used by
suppliers of technologically advanced recreational products, such as Callaway
Golf Company and Cobra Golf Inc.
Favorable Operating Leverage. Over the past 10 years, the Company has
invested more than $75.0 million in updating and maintaining its equipment and
expanding its operating facilities. As a result, the Company believes it has the
manufacturing capacity to meet its anticipated growth for the next several
years. In addition, in recent years the Company has improved its manufacturing
processes, thereby reducing company-wide cycle time. Also, as a result of a
successful structural reorganization, the Company believes its operations are
among the most efficient in the industry, with net sales per employee of
$291,000 for fiscal 1996.
Technological Expertise. Fiberite has extensive experience in
manufacturing, materials science, process engineering, polymer chemistry and
textiles. The Company's chemists, technical service engineers, process
engineers, applications engineers and technically orientated sales force work
with customers to identify and engineer solutions to meet such customers'
material requirements. In addition, the Company's relationship with the Wilton
Centre, a research division of Imperial Chemical Industries, PLC, provides the
Company with access to substantial research facilities and expertise.
Experienced Management Team. Fiberite's management has extensive
experience in the composite and aerospace industries. James E. Ashton, Ph.D.,
Chief Executive Officer, has nearly 28 years of experience in the composites
industry and has led research in composites design and analysis and managed
significant commercial and military composites production programs. Carl W.
Smith, President and Chief Operating Officer, has over 25 years of experience in
the composites industry, including 11 years with large aerospace prime
contractors. Jon B. DeVault, Senior Vice President, Marketing, has over 30 years
of experience with composite materials and structures used in the aerospace
industry.
FIBERITE STRATEGY
The Company has adopted the following strategies to enhance its position as
a leading supplier of advanced composite materials:
Capitalize on Growth in the Commercial Aerospace Industry. Industry
analysts believe that the demand for commercial aircraft will be favorably
influenced by the projected increase in annual revenue passenger miles from
approximately 1.6 trillion in 1995 to approximately 4.3 trillion in 2015.
Additionally, the Company believes suppliers of advanced composite and
carbon-carbon materials will benefit from greater utilization of such materials
on modern aircraft. The Company also believes there will be an increase in the
use of composites as a result of growth in the telecommunications industry and
the associated need for commercial
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satellites. The Company's objective is to capitalize on these trends by
continuing to supply a wide variety of advanced composite and carbon-carbon
materials to the commercial aerospace market.
Maximize Growth Opportunities in the Defense Industry. The Company
believes there will be increased demand for advanced composite materials in
defense programs over the next several years primarily due to military aircraft
moving from the development stage into the production phase. As a result, the
Company's strategy is to increase sales to its military customers by
capitalizing on prior development activities and current qualifications and by
maximizing customer service. Additionally, the Company plans to continue working
with its defense customers to develop composite materials for next generation
military aircraft.
Pursue Opportunities for New Applications. The Company believes that
improvements in applications engineering and composites technology will result
in increased utilization of advanced composite materials both within the
Company's existing markets and in new markets. The Company's objective is to
pursue new opportunities, focusing on applications where the Company can add
value through its composite development and applications experience.
Grow Through Strategic Acquisitions. Over the past two years, the Company
has completed a series of acquisitions designed to extend and expand the range
of the Company's product offerings. Such acquisitions included the acquisition
of: (i) BP Chemicals (Hitco) Inc.'s Fibers and Materials Division, which
solidified the Company's position as the world's leading supplier of aerospace
ablative materials; (ii) Ligustica SA's polyester/epoxy blend continuous fiber
technology, which provided entry into certain marine and industrial markets; and
(iii) Simmaco SARL's polyester bulk molding compound business, which expanded
the Company's range of products for industrial markets. The Company intends to
continue pursuing strategic acquisitions that will complement or extend its
product lines or add new manufacturing and service capabilities.
THE OFFERING
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Common Stock offered by the Company......................... 3,000,000 shares
Common Stock offered by the Selling Stockholders............ 2,000,000 shares
Common Stock to be outstanding after the Offering........... 14,494,657 shares(1)
Use of proceeds............................................. Retirement of certain indebtedness.
See "Use of Proceeds."
Proposed New York Stock Exchange Symbol..................... FBT
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(1) Based upon shares outstanding as of January 15, 1997. Excludes 403,000
shares of Common Stock issuable upon exercise of outstanding options. See
"Management -- 1995 Long Term Incentive and Share Award Plan," "Description
of Capital Stock" and Note 14 of Notes to Consolidated Financial Statements.
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SUMMARY CONSOLIDATED FINANCIAL DATA
The following table is derived from the Company's and the Predecessor's
respective Consolidated Financial Statements and should be read in conjunction
with such Consolidated Financial Statements and the Notes thereto, "Selected
Financial Data" and "Management's Discussion and Analysis of Financial
Conditions and Results of Operations" included elsewhere in this Prospectus.
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<CAPTION>
FISCAL YEAR ENDED(1)
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PRO FORMA
DEC. 27, 1992 DEC. 26, 1993 DEC. 25, 1994 DEC. 31, 1995(2) DEC. 31, 1996
------------- ------------- -------------- ------------------ --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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STATEMENT OF OPERATIONS DATA:
Net sales........................ $ 164,530 $ 161,190 $172,970 $207,325 $218,827
Gross profit..................... 15,395 18,781 33,501 34,965 42,739
Marketing, general and
administrative................. 13,984 17,871 10,315 24,386 20,495
Research and technology.......... 10,858 10,655 8,134 10,002 8,890
Stock-based compensation(3)...... -- -- -- -- 9,678
Amortization..................... 1,600 -- -- 1,691 2,879
Other expense(4)................. 14,318 -- -- -- --
-------- -------- -------- -------- --------
Operating income (loss)(5)....... (25,365) (9,745) 15,052 (1,114) 797
Interest (income) expense,
net(6)......................... 769 (3) (127) 11,794 10,775
Income tax expense (benefit)..... -- (3,100) 5,788 -- --
Cumulative effect of accounting
change(7)...................... -- (9,390) -- -- --
-------- -------- -------- -------- --------
Net income (loss)(6)............. $ (26,134) $ (16,032) $ 9,391 $(12,908) $ (9,978)
======== ======== ======== ======== ========
Net income (loss) per common and
common equivalent share........ $ (2.60) $ (1.59) $ 0.93 $ (1.19) $ (0.90)
Common and common equivalent
shares......................... 10,068 10,068 10,068 11,131 11,131
OTHER DATA:
Adjusted operating income(8)..... $ 10,936
Adjusted interest expense(8)..... 6,547
Adjusted net income before
extraordinary item(8).......... 2,633
Adjusted net income per share
before extraordinary item(8)... 0.18
Adjusted common and common
equivalent shares(8)........... 14,915
EBITDA(9)........................ $ (13,325) $ (11,406) $ 23,436 $ 15,203 $ 16,662
Depreciation..................... 10,440 7,729 8,384 14,626 12,986
Capital expenditures............. 3,295 2,372 3,574 4,713 6,317
Net sales per average number of
employees...................... 148 172 218 270 292
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AT DECEMBER 31, 1996
-------------------------------------
AS
ACTUAL ADJUSTED(10)
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(IN THOUSANDS)
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BALANCE SHEET DATA:
Cash and cash equivalents.......................................................... $ 755 $ 755
Working capital.................................................................... 17,764 17,764
Total assets....................................................................... 161,188 158,997
Long-term debt, net of current portion............................................. 105,702 62,112
Stockholders' equity (deficit)..................................................... (2,087) 39,312
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(1) Prior to December 23, 1994, the Company's fiscal year coincided with ICI
American's fiscal year, which ended the last Sunday in December. Subsequent
to October 6, 1995, the Company adopted a calendar fiscal year.
(2) Reflects the effects of the Acquisition (as defined) as if the Acquisition
had taken place as of January 1, 1995. Adjustments include increasing
depreciation and amortization to reflect the effect of the re-valuation of
assets to fair market value as discussed in note 5 below and increasing
interest expense to reflect the effect of the Credit Agreement (as defined)
and the 11.3% Subordinated Discount Notes (as defined). See "The Company"
and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(3) Stock-based compensation was $9.7 million in fiscal 1996, reflecting the
impact of an amendment to the Company's stock option plans which removed
the variable features related to certain performance criteria.
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(4) Represents write-off of intangibles and other fixed assets.
(5) As of the date of the Acquisition, which was accounted for as a purchase,
the assets of the Company were re-valued to fair market value and the
Company began to recognize increased depreciation and amortization expense
associated with such re-valued assets. Depreciation and amortization
expenses were approximately $8.3 million, $16.3 million and $15.9 million
for fiscal 1994, 1995 and 1996, respectively. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
(6) In connection with the Acquisition, the Company incurred $120.1 million in
long-term debt, including $90.0 million under the Credit Agreement and
$30.1 million in 11.3% Subordinated Discount Notes. Interest expense
associated with debt incurred in connection with the Acquisition was $2.9
million and $11.0 million for fiscal 1995 and 1996, respectively.
(7) Cumulative effect of change in accounting for post-retirement benefits
other than pensions resulting from adoption of SFAS No. 106.
(8) Adjusted to give effect to (i) the Offering and the use of proceeds
therefrom including (a) reduction of interest expense related to the
prepayment in full of the 11.3% Subordinated Discount Notes and a repayment
of a portion of the Credit Agreement and (b) reduction of amortization
expense related to the write-off of deferred financing costs associated
with the 11.3% Subordinated Discount Notes and (ii) the elimination of the
non-recurring, stock-based compensation discussed in note 3 above.
(9) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization. EBITDA is presented because it is a widely
accepted financial indicator used by certain investors and analysts to
analyze and compare companies on the basis of operating performance. EBITDA
is not intended to represent cash flows for the period, nor has it been
presented as an alternative to operating income as an indicator of
operating performance and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles. See the Consolidated Financial
Statements and the Notes thereto appearing elsewhere in this Prospectus.
(10) Adjusted to give effect to the sale by the Company of 3,000,000 shares of
Common Stock at an initial public offering price of $16.00 per share and
the application of the net proceeds therefrom, including recognition of a
$2.2 million extraordinary loss related to the write-off of deferred
financing costs associated with the 11.3% Subordinated Discount Notes. See
"Use of Proceeds" and "Capitalization."
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RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information contained in this Prospectus before purchasing the Common
Stock offered hereby. This Prospectus contains forward-looking statements within
the meaning of the federal securities laws, and actual results and the timing of
certain events could differ materially from those projected in the
forward-looking statements as a result of numerous factors, including the
factors set forth below and elsewhere in this Prospectus.
RELIANCE ON SIGNIFICANT CUSTOMERS
The Company sells, and anticipates that it will continue to sell, the
majority of its products to a relatively concentrated customer base and to
suppliers to such customer base. For fiscal 1996, approximately 65% of the
Company's sales were attributable to products designed to specifications
established by AlliedSignal, Inc. ("AlliedSignal"), The Boeing Company
("Boeing"), McDonnell Douglas Corp. ("McDonnell Douglas") and Thiokol Corp.
("Thiokol"). Pursuant to some of the Company's agreements with such customers,
the customers are permitted to reduce, cancel or delay orders or shipments of
the Company's products. Any such reduction, cancellation or delay in orders by
or shipments to any significant customer as a result of any manufacturing or
supply difficulties or otherwise, or the loss of any significant customer for
any reason, could have a material adverse effect on the Company's business,
operating results, prospects and financial condition.
The Company plans its operations and establishes operating budgets and
personnel levels in advance of customer orders based upon estimates of its
customers' requirements. These estimates are based in part upon periodically
published estimates by large aerospace prime contractors that have historically
differed, in some cases materially, from such customers' actual requirements. To
the extent estimated orders or revenues fail to materialize following advance
expenditures by the Company in anticipation of such orders or revenues, the
Company's business, operating results, prospects and financial condition may be
adversely affected. See "Business -- Markets and Applications."
LIMITED SUPPLY OF RAW MATERIALS
The Company's profitability depends largely on the price and continuity of
supply of its raw materials, including carbon fiber, fiberglass, rayon and
resins, which are supplied by a limited number of sources and in recent years
have, from time to time, been subject to limited supply. In particular, there
are a limited number of suppliers of the carbon fibers that are used in a
majority of the Company's products. The Company is, and expects to remain
throughout 1997, on allocation for the carbon fiber materials used in a
significant portion of its products. There can be no assurance that the carbon
fiber supply currently committed to the Company will be available when required
or at the prices currently agreed to or that the Company's allocation will be
sufficient to meet currently projected demand or additional opportunities.
The Company acquires all of the rayon fiber used in some of its ablative
products from a single source. This source, which the Company believes is
currently the only manufacturer of rayon qualified for the U.S. launch vehicles
market, has indicated its intent to discontinue the manufacture of qualified
rayon. The Company believes there is a sufficient amount of stockpiled qualified
rayon to meet the Company's manufacturing requirements through 1998, and a
second source for rayon is currently undergoing a pre-qualification process. The
Company believes that, due in part to the strategic importance of certain launch
vehicle applications to the U.S. Government, an alternative source of rayon will
be qualified by the U.S. Government on or prior to exhaustion of existing
qualified rayon supplies. However, there can be no assurance that a new source
will become available or that the available rayon supply will be adequate to
meet the Company's requirements.
Although certain of the Company's agreements with its customers provide for
price adjustments in the event of certain changes in the cost of raw materials,
the Company's ability to pass on increases in the costs of such raw materials to
its customers is dependent on market conditions, including the extent to which
the Company's customers choose to switch to alternative materials not produced
by the Company. Because the Company purchases large volumes of such raw
materials, any decrease in the supply or increase in the cost of
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the Company's raw materials could have a material adverse effect on the
business, operating results, prospects and financial condition of the Company.
See "Business -- Manufacturing Process and Raw Materials."
RISKS RELATED TO THE QUALIFICATION PROCESS
In many instances the sources and quality of the carbon fibers and resin
components used in particular applications of the Company's products are subject
to qualification by the Company's customer, the prime contractor or end user of
the Company's products. Accordingly, changes by the Company's suppliers in the
design of their products could require costly and time-consuming requalification
by the Company. There can be no assurance that material disruptions in supply,
which have occurred periodically in the past, will not occur in the future. In
the event of any such disruption, if the Company were unable to qualify
alternative manufacturing sources for existing or new products in a timely
manner, the Company's business, operating results and prospects could be
materially adversely affected. See "Business -- Manufacturing Process and Raw
Materials."
VOLATILITY OF AND DEPENDENCE UPON THE COMMERCIAL AIRCRAFT INDUSTRY
Approximately 31%, 33% and 35% of the Company's net sales for fiscal 1994,
1995 and 1996, respectively, were derived from sales to the commercial aircraft
industry (exclusive of carbon-carbon materials used in aircraft brakes), which
consisted almost exclusively of sales to Boeing, McDonnell Douglas, Airbus
Industrie ("Airbus") or their suppliers. In addition, approximately 8%, 10% and
10% of the Company's net sales in fiscal 1994, 1995 and 1996, respectively, were
derived from the sale of carbon-carbon materials, the majority of which were
used in commercial airplane brakes. The commercial aircraft industry is cyclical
in nature and is subject to significant change based on general economic
conditions and airline profitability. From 1992 through 1994, domestic airlines
suffered significant operating losses. As a result of these losses, as well as
the high levels of debt incurred to purchase new aircraft and the excess
capacity within the commercial airline sector, the commercial aircraft industry
experienced a reduction in new orders for commercial aircraft and related spare
parts and the deferral or cancellation of deliveries of previously ordered
aircraft. Although worldwide commercial airline profitability and commercial
aircraft build rates have improved since 1994, there can be no assurance that
any improvement in the commercial aerospace industry will be sustained. Any
significant decline in profitability of commercial airlines or reduction in the
demand for commercial aircraft would have a material adverse effect on the
Company's business, operating results, prospects and financial condition. See
"Business -- Markets and Applications."
DEPENDENCE ON GOVERNMENT DEFENSE AND SPACE PROGRAMS; FEDERAL GOVERNMENT
CONTRACTS
Approximately 30%, 30% and 33% of the Company's net sales for fiscal 1994,
1995 and 1996, respectively, were derived from government defense and space
programs, primarily involving military aircraft and launch vehicles (exclusive
of carbon-carbon materials used in aircraft brakes). This portion of the
Company's business is dependent upon government space and defense budgets,
particularly those of the U.S. Government. In recent years, the defense budget
of the U.S. Government has declined, resulting in reduced demand for new
aircraft, spare parts, satellites and missiles. The substantial majority of U.S.
and foreign defense and space program budgets are subject to evaluation and
approval on at least an annual basis, and the Company's defense and space
contracts frequently contain provisions permitting the cancellation of a
contract if funding for a program is reduced or canceled. The U.S. and foreign
defense and space program budgets and the demand for related equipment may
decline in future years. Failure of the Company to replace sales attributable to
a significant defense or space program or contract at the end of that program or
contract, whether due to cancellation, spending cuts, budgetary constraints or
otherwise, could have a material adverse effect on the Company's business,
operating results, prospects and financial condition.
United States Government contracts, by their terms, generally can be
terminated at any time by the U.S. Government, without cause, at the convenience
of the U.S. Government. Termination or reduction in a U.S. Government program or
termination of a contract between the U.S. Government and one of the Company's
customers could result in reduced demand by such customers for the Company's
products. United States Government contractors or subcontractors who fail to
comply with applicable government procurement
9
<PAGE> 11
related statutes and regulations may also be subject to potential contract
termination, suspension or debarment from contracting with the U.S. Government.
Most U.S. Government contracts are also subject to modification in the event of
changes in funding, and the Company's contractual costs and revenues are subject
to adjustment as a result of audits by the Defense Contract Audit Agency and
other U.S. Government auditors. Furthermore, business awarded to the Company
under U.S. Government contracts may also be protested by competitors. See
"Business -- Markets and Applications."
HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT
The Company recognized net losses of approximately $10.0 million and $6.5
million for fiscal 1996 and the period October 6, 1995 to December 31, 1995,
respectively. The Company's historical losses have resulted in an accumulated
deficit of approximately $16.5 million as of fiscal 1996. There can be no
assurance that the Company will maintain profitability on a quarterly basis or
achieve profitability on an annual basis in the future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
HAZARDOUS MATERIALS AND ENVIRONMENTAL REGULATIONS; LEGAL PROCEEDINGS
The Company is subject to numerous federal, state and foreign environmental
laws and regulations that impose strict requirements for, among other things,
the control and abatement of discharges of air, water and soil pollutants and
for the manufacture, storage, handling, transport and disposal of hazardous
materials. The Company believes that it is in compliance with these laws and
regulations. Nevertheless, there is the risk of accidental contamination or
injury from these materials. If an accident occurred, or past practices of the
Company resulted in environmental harm, the Company could, under certain
circumstances, be held liable for related costs and damages which could exceed
the Company's resources or otherwise have a material adverse effect on the
Company's business, operating results, prospects and financial condition. In
addition, it is possible that current or future laws and regulations could
require the Company to make substantial expenditures for preventive or remedial
action, reduction of exposure to such material, or changes to waste discharge
treatment or disposal practices. There can be no assurance that the business,
operating results, prospects and financial condition of the Company will not be
materially and adversely affected by any accidents or prior practices involving
hazardous materials or the interpretation and enforcement of environmental laws
and regulations. See "Business -- Environmental Matters."
The Company is one of the defendants in a number of lawsuits alleging
damages as a result of the plaintiffs' exposure to hazardous materials,
including asbestos formerly used in certain of the Predecessor's products. The
aggregate damages sought by the plaintiffs are subject to proof at trial and
include unspecified compensatory and punitive damages. Although the Company
believes its exposure in these matters is limited, due in part to the large
number of defendants in each lawsuit and the potential availability to the
Company of insurance and rights to indemnification against certain potential
liabilities, there can be no assurance that the Company will not ultimately be
found jointly and severally liable for all damages in any or all of these
claims, or that these claims or other claims related to materials used in the
Company's products will be covered by available insurance or indemnification, or
that, if covered, the amount of insurance will be sufficient to cover any
potential adverse judgment. See "Business -- Legal Proceedings."
INTEGRATION OF ACQUISITIONS; MANAGEMENT OF GROWTH
The Company intends to strategically pursue acquisition targets that could
enable the Company to add new customers, provide new products, add manufacturing
and service capabilities or increase product sales to existing customers. There
can be no assurance that the Company will successfully identify, acquire or
profitably integrate and manage additional companies or businesses. During the
eight-month period ended December 31, 1996, the Company acquired certain assets
from Simmaco relating to bulk molding compounds and licensed certain technology
from Ligustica relating to advanced composite materials for marine structures.
The anticipated benefits of the foregoing or any other acquisition by the
Company will not be realized unless the Company is successful in integrating the
acquisition target in an efficient and effective manner. Moreover, the
acquisition or license of businesses or technologies from third parties is
subject to certain risks, including
10
<PAGE> 12
the risks of diverting management attention, undisclosed or contingent
liabilities and the uncertainties associated with identifying the financial and
operating characteristics of businesses operating as divisions or subsidiaries
of larger enterprises. If the expected synergies from such transactions do not
materialize or if the Company fails to successfully integrate new businesses
into its existing businesses or is unable to accurately identify and analyze the
financial or operating characteristics of the target prior to acquisition, the
Company's business, operating results, prospects and financial condition could
be materially adversely affected.
The Company's ability to compete effectively as an independent company and
to manage future growth will depend upon its ability to continue to implement
and improve operating and financial systems on a timely basis. For example, the
Company is currently replacing the management and information system it leases
from ICI American (as defined) with new, stand-alone systems. Any significant
delay or interruption in the implementation of such systems could materially
adversely affect the Company's business, operating results, prospects and
financial condition.
COMPETITION
The markets for the Company's products are highly competitive. The Company
believes that product quality, product performance, customer service, ongoing
reductions in manufacturing cycle time, on-time delivery and price are the
principal factors considered by customers in each of the Company's markets. Some
of the Company's competitors may have lower costs, newer technology or greater
financial or other resources than the Company and could replace the Company as
the holder of sole source or limited source qualifications or become an
additional qualified source of materials for the commercial aerospace, space and
defense markets. In addition, the Company believes that the excess manufacturing
capacity currently experienced by it and its principal competitors could result
in ongoing pressure on prices and operating margins. There can be no assurance
that the Company will be able to compete successfully with either existing or
new competitors or that the effects of such excess capacity or the loss of sole
source or limited source qualifications will not materially and adversely affect
its business, operating results, prospects and financial condition. See
"Business -- Competition."
RESEARCH CAPABILITY
A portion of the Company's research activities are conducted at Imperial
Chemical Industries, PLC's ("ICI") Wilton Centre ("Wilton Centre") pursuant to
an agreement between the Company and ICI. This agreement can be terminated by
either party following one year's notice. In the event ICI were to elect to
terminate its research agreement with the Company, the Company would be required
to replace the lost research capability, either through costly internal
development or through establishment of a research relationship with a capable
outside entity. Although management is unaware of any plans by ICI to terminate
the research relationship, there can be no assurance that such termination will
not occur or that, should it occur, the Company would be able to replace lost
research and development capability. Any significant inability or delay in the
introduction of new products by the Company due to the loss of this relationship
could have a material adverse effect on the Company's business, operating
results, prospects and financial condition. See "Business -- Research and
Technology."
RESTRICTIONS IMPOSED BY INDEBTEDNESS
Upon completion of the Offering, the Company will have approximately $70.0
million outstanding under the Credit Agreement. The Credit Agreement contains a
number of covenants that, among other things, restrict the ability of the
Company and its subsidiaries to dispose of assets, incur additional
indebtedness, repay other indebtedness, pay dividends, make certain investments
or acquisitions, repurchase or redeem capital stock, engage in mergers or
consolidations, engage in certain transactions with subsidiaries and affiliates
and otherwise restrict certain corporate activities. There can be no assurance
that such restrictions will not adversely affect the Company's ability to
finance its future operations or capital needs or engage in other business
activities that may be in the best interest of the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
11
<PAGE> 13
FOREIGN OPERATIONS, COUNTRY RISKS AND EXCHANGE RATE FLUCTUATIONS
Approximately 11% of the Company's net sales for each of fiscal 1995 and
1996, respectively, were derived from operations conducted at facilities located
in Germany and France. The Company's international operations are subject to a
number of additional risks, including currency exchange rate fluctuations, trade
barriers, exchange controls, national labor strikes, political risks and risks
of increases in duties, taxes and governmental royalties, as well as changes in
laws and policies governing operations of foreign-based companies. In addition,
earnings of the Company's foreign subsidiaries and intercompany payments are
subject to foreign income tax rules that may reduce cash flows available to meet
required debt service and other obligations of the Company. Certain of the
Company's international revenues have been derived from sales to foreign
government agencies or their contractors and are subject to risks similar to
those set forth in "Dependence on Government Defense and Space Programs; Federal
Government Contracts."
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's quarterly operating results have varied significantly and are
expected to vary in the future. These fluctuations may be caused by many
factors, including, among others: the size and timing of individual orders,
customer order deferrals or cancellations, market acceptance of new products,
technological changes, competitive pricing pressures, changes in the Company's
operating expenses, personnel changes, foreign currency exchange rates, mix of
products sold, quality control of products sold, and general economic
conditions. As a result of the foregoing and other factors, the Company believes
that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as indications of future
performance. The Company may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall and, accordingly, any
significant shortfall of demand in relation to the Company's expectations or any
material delay of customer orders could have a material adverse effect on the
Company's business, operating results and prospects. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- General."
DEPENDENCE ON KEY PERSONNEL
The Company's performance is substantially dependent on the performance of
its executive officers and key employees. In particular, the services of Dr.
James E. Ashton, the Company's Chief Executive Officer, would be difficult to
replace. Although the Company has employment agreements with certain of its
executive officers and key employees, such agreements do not preclude the
departure of the officer or employee. The Company does not maintain any key man
life insurance with respect to any officers or employees. The loss of the
services of any of its executive officers or other key employees could have a
material adverse effect on the Company's business, operating results, prospects
and financial condition. See "Management -- Directors and Executive Officers."
LABOR UNIONS; RISK OF WORK STOPPAGE
The Company's facilities in Orange, CA, Winona, MN, and Delano, PA, are
unionized. Approximately 258 of the Company's employees from the Winona facility
are covered by a collective bargaining agreement which expires on December 31,
1997 and approximately 193 additional employees from the Delano and Orange
facilities are covered by collective bargaining agreements which expire on March
29, 1998 and October 30, 1998, respectively. Additionally, employees at the
Company's German and French facilities are represented by national collective
bargaining arrangements. Although the Company believes its relations with its
employees are good, there can be no assurance that the Company will not
experience work stoppages or slowdowns in the future. Any such work stoppage or
slowdown could have a material adverse effect on the Company's business,
operating results, prospects and financial condition. In addition, there is no
assurance that the Company's non-union facilities will not become subject to
labor union organizational efforts. See "Business -- Employees."
CONTROL BY THE DLJ INVESTORS
Upon completion of the Offering, the DLJ Investors (as defined) will own or
control approximately 50% of the Common Stock of the Company. The DLJ Investors
have the right to nominate a majority of the
12
<PAGE> 14
directors of the Company and will be able to control the vote on all matters
submitted to a vote of the holders of the Company's Common Stock. In general,
the DLJ Investors will have sufficient voting power to determine, without the
consent of the Company's other stockholders, but subject to the terms of the
Shareholders Agreement (as defined), the outcome of any corporate transaction or
other matter submitted to the shareholders for approval, including any going
private transaction, merger, consolidation or sale of all or substantially all
of the Company's assets. See "Principal and Selling Stockholders" and "Certain
Transactions -- Shareholders Agreement."
BENEFITS OF OFFERING TO SELLING STOCKHOLDERS
The Selling Stockholders will receive substantial proceeds from this
Offering and certain other material benefits in connection with the Offering.
The Offering will establish a public market for the Common Stock and provide
significantly increased liquidity to the Selling Stockholders for the shares of
Common Stock they will own after the Offering. See "Dilution" and "Principal and
Selling Stockholders."
SPECIAL SECURITY AGREEMENT
Fiberite's business includes development and manufacture of defense related
products for various U.S. governmental agencies, including the Department of
Defense. In connection with its defense related work, and because one of
Fiberite's ultimate owners is a French corporation, Fiberite has been required
by the Department of Defense to enter into and comply with the terms of a
Special Security Agreement among the Company, Fiberite and DLJMB and its
affiliates (the "Security Agreement").
The Security Agreement contains a number of restrictions relating to the
management, corporate governance and operations of the Company and Fiberite. In
particular, the Security Agreement requires that the board of directors of
Fiberite be comprised of at least two persons with no prior relationship with
Fiberite or any of its affiliates (each an "Outside Director"); at least two
directors of Fiberite (each an "Inside Director"); and an officer of Fiberite
who has received the requisite security clearance (the "Officer Director"). The
Chairman of the Board of Fiberite may not be an Inside Director, and the total
number of Outside Directors and the Officer Director must be greater than the
number of Inside Directors. In addition, Fiberite is required to notify the
Defense Investigative Service of any proposal of its intention to form a new
subsidiary or to acquire ownership or control of another company. Fiberite is
also obligated to prevent access by the Company to classified and controlled
unclassified information entrusted to Fiberite.
As a result of the Security Agreement, the Company's representatives on the
board of directors of Fiberite may not constitute a majority of such board, and
the Company's ability to effect the control of Fiberite is limited accordingly.
Management of the Company and Fiberite believe each corporation is in material
compliance with the terms of the Security Agreement. However, in the event
Fiberite commits a material breach of the Security Agreement, the U.S.
Government may, among other things, revoke Fiberite's facility security
clearance, terminate any classified contracts pursuant to which Fiberite is a
party and suspend Fiberite from participating in any federal government
contract. See "Management -- Special Security Agreement."
NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common
Stock, and there can be no assurance that an active public market for the Common
Stock will develop or be sustained after the Offering. The initial public
offering price of the Common Stock will be determined by negotiations between
the Company, the Selling Stockholders and the representatives of the
Underwriters. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The trading price
of the Company's Common Stock could be subject to significant fluctuations in
response to variations in quarterly operating results, the gain or loss of
significant orders, changes in earnings estimates by analysts, announcements of
technological innovations or new products by the Company or its competitors,
general conditions in the composites industry, competitors' operating results
and other events or factors, many of which are beyond the Company's control. In
addition, the stock market in general has experienced extreme price and volume
fluctuations which have affected the market price for many companies in
industries similar or related to that of the Company and which have been
unrelated to the operating performance of these
13
<PAGE> 15
companies. These market fluctuations may adversely affect the market price of
the Company's Common Stock.
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Common Stock in the Offering will experience immediate and
substantial dilution. To the extent outstanding options to purchase the Common
Stock are exercised, there will be further dilution. See "Dilution."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock in the public
market following this Offering could adversely affect the market price of the
Common Stock. See "Shares Eligible for Future Sale."
14
<PAGE> 16
THE COMPANY
In October 1995, a group of financial investors (the "Financial Investors")
led by DLJ Merchant Banking Partners, L.P. and related investors (collectively,
the "DLJ Investors") and Carlisle Group, L.P. ("Carlisle Group") acquired all of
the outstanding stock of ICI Composites, Inc. ("ICI Composites"), a wholly owned
subsidiary of ICI American Holdings, Inc. ("ICI American"), and substantially
all of the assets of Fiberite Europe GmbH ("Fiberite Europe"), a wholly owned
subsidiary of Deutsche ICI GmbH, (the "Acquisition"). The Company was
established in 1947 and since that time has operated under the Fiberite
trademark. The Company was privately owned until 1980 when it was purchased by
Beatrice Food Company, which in turn sold the Company to ICI in 1985 (the
Company as operated from 1947 to October 6, 1995, herein defined as the
"Predecessor"). The Company manufactures its products in seven facilities
located in Delano, PA; Greenville, TX; Orange, CA; Tempe, AZ; and Winona, MN;
Oestringen, Germany; and Courcelles-les-Lens, France. The Company's principal
executive offices are located at 2055 East Technology Circle, Tempe, Arizona
85284, and the telephone number at that address is (602)730-2000.
RECENT ACQUISITIONS
In the past two years, the Company completed a series of acquisitions
designed to expand its range of products and enhance its technology base.
Through the acquisition of BP Chemicals (Hitco) Inc.'s ("BP Chemicals") Fibers
and Materials Division business in February 1995 (the "BP Acquisition"), the
Company established its position as the largest aerospace ablative material
supplier in the world. In addition, the BP Acquisition provided the Company with
additional proprietary resin formulas for use in the aerospace industry. In
April 1996, the Company entered into an agreement with Ligustica, a Swiss
corporation, to license technology and use equipment for the production of a
polyester/epoxy blend of continuous fiber products for use in the marine and
industrial markets, and in December 1996, the Company exercised its option to
acquire the Ligustica technology and equipment. The Ligustica material is
produced primarily at the Company's Tempe facility on a prototype basis. In May
1996, Fiberite acquired substantially all of the assets of Simmaco, a French
bulk molding compound company, thereby expanding its range of products for the
industrial market. The Company continues to operate the facility in France and
has begun manufacturing bulk molding compounds using the Simmaco technology at
the Winona facility.
USE OF PROCEEDS
The net proceeds to the Company from the sale of 3,000,000 shares of Common
Stock offered hereby by the Company at an assumed initial public offering price
of $16.00 per share are estimated to be approximately $43.6 million after
deducting the estimated underwriting discounts and commissions and other
expenses payable by the Company in connection with this Offering. The principal
use of the net proceeds of the Offering is to retire certain indebtedness. The
Company expects to use approximately $35.5 million of such net proceeds to
retire the entire principal amount outstanding under its 11.3% zero coupon
subordinated notes due 2002 and 2003 (together, the "11.3% Subordinated Discount
Notes") issued in connection with the Acquisition, together with interest
accrued thereon to the date of the closing of the Offering. The 11.3%
Subordinated Discount Notes are held by the DLJ Investors, Carlisle and certain
of the Company's other stockholders. See "Certain Transactions."
The Company plans to use an additional $4.0 million of such net proceeds to
repay amounts outstanding under a revolving credit facility (the "Revolving
Loan") and $4.0 million of such net proceeds to repay amounts outstanding under
a term credit facility (the "Term Loan"), both such facilities pursuant to the
Company's credit agreement dated as of October 6, 1995, with Bank of America
NT&SA (the "Credit Agreement") as agent for certain commercial lending
institutions. The Revolving Loan expires December 31, 2000, and the Term Loan is
due in quarterly installments through December 31, 2001. On December 31, 1996,
the average interest rates for borrowings under the Revolving Loan and the Term
Loan were 8.54% and 8.50%, respectively.
15
<PAGE> 17
DIVIDEND POLICY
The Company has not declared or paid any dividends on its Common Stock in
the past and does not anticipate paying dividends in the foreseeable future. The
Company currently intends to retain its earnings to repay debt and support its
growth strategy. Any future payment of dividends is within the discretion of the
Company's board of directors and will depend, among other factors, upon the
capital requirements, operating results and financial condition of the Company
from time to time. As a holding company, the ability of the Company to pay
dividends in the future is dependent upon the receipt of dividends or other
payments from its subsidiaries. In addition, the Company's ability to pay cash
dividends is limited by the terms of the Credit Agreement. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
16
<PAGE> 18
CAPITALIZATION
The following table sets forth the consolidated cash and cash equivalents,
short-term debt and capitalization of the Company as of December 31, 1996, and
as adjusted, to reflect the sale of the shares of Common Stock offered by the
Company hereby (at an assumed initial public offering price of $16.00 per share)
and the application of the net proceeds therefrom. This table should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto
included elsewhere in this Prospectus. See "Use of Proceeds."
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................................. $ 755 $ 755
======= =======
Short-term debt:
Current portion of long-term debt................................... $ 6,900 $ 6,900
======= =======
Long-term debt, less current portion:
Revolving Loan...................................................... $ 9,000 $ 4,956
Term Loan........................................................... 61,200 57,156
11.3% Subordinated Discount Notes................................... 35,502 --
------- -------
Total long-term debt............................................. 105,702 62,112
Stockholders' equity:
Preferred stock; $.01 par value; 2,000,000 shares authorized; no
shares outstanding............................................... -- --
Common stock; $.01 par value; 15,000,000 shares authorized;
11,088,657 shares issued and outstanding, actual; 14,088,657
shares issued and outstanding as adjusted........................ 111 141
Additional paid-in capital.......................................... 14,747 58,307
Foreign currency translation adjustment............................. (489) (489)
Retained deficit.................................................... (16,456) (18,647)
------- -------
Total stockholders' equity (deficit)............................. (2,087) 39,312
------- -------
Total capitalization.................................................. $103,615 $ 101,424
======= =======
</TABLE>
17
<PAGE> 19
DILUTION
At December 31, 1996, and as adjusted to reflect the exercise by Dr. James
E. Ashton of options for 406,000 shares of Common Stock on January 2, 1997, the
Company had pro forma net tangible book value of $(18,831,000) or $(1.64) per
share of Common Stock. "Pro forma net tangible book value" per share represents
the amount of total tangible assets of the Company reduced by the amount of its
total liabilities and divided by the total number of shares of Common Stock
outstanding. Without taking into account any other change in such pro forma net
tangible book value after December 31, 1996, other than to give effect to the
sale by the Company of 3,000,000 shares offered hereby at an assumed initial
public offering price of $16.00 per share and receipt of the estimated net
proceeds therefrom, the pro forma net tangible book value of the Company as of
December 31, 1996 would have been approximately $24,759,000, or $1.71 per share.
This represents an immediate increase in such net tangible book value of $3.35
per share to existing stockholders and an immediate dilution of $14.29 per share
to new investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................ $16.00
------
Pro forma net tangible book value per share before the Offering.......... $(1.64)
------
Increase attributable to new investors................................... 3.35
------
Pro forma net tangible book value per share after the Offering............. 1.71
------
Dilution per share to new investors........................................ $14.29
======
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1996, and as adjusted to reflect the exercise by Dr. Ashton of options for
406,000 shares of Common Stock on January 2, 1997, the differences between the
existing stockholders and the new investors with respect to the number of shares
of Common Stock purchased from the Company, the total consideration paid to the
Company and the average price per share paid:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
-------------------- --------------------- PRICE
NUMBER(1) PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders..................... 11,494,657 79.3% $ 5,747,329 10.7% $ 0.50
New investors............................. 3,000,000 20.7 48,000,000 89.3 16.00
------ ----- ------- -----
Total................................ 14,494,657 100.0% $53,747,329 100.0%
====== ===== ======= =====
</TABLE>
- ------------------------------
(1) Excludes options to purchase an aggregate of 403,000 shares of Common Stock
outstanding as of December 31, 1996, under the 1995 Long Term Incentive and
Share Award Plan, at an exercise price of $0.50 per share.
18
<PAGE> 20
SELECTED CONSOLIDATED FINANCIAL DATA
In October 1995, a group of financial investors led by the DLJ Investors
and Carlisle Group acquired all of the outstanding stock of ICI Composites, a
wholly owned subsidiary of ICI American, and substantially all of the assets of
Fiberite Europe, a wholly owned subsidiary of Deutsche ICI GmbH. Set forth below
are selected consolidated financial data for the Predecessor as of and for the
fiscal years ended December 27, 1992, December 26, 1993, and December 25, 1994,
and the nine months ended October 6, 1995. Also set forth below are selected
consolidated financial data of the Company as of and for the three months ended
December 31, 1995, and the year ended December 31, 1996. The capital structure
of the Predecessor and the accounting bases of the assets and liabilities of the
Predecessor prior to the Acquisition differ from those of the Company after the
Acquisition. Accordingly, the selected consolidated financial data presented
below for the Predecessor are not comparable to data for periods subsequent
thereto.
The selected consolidated financial data as of December 31, 1995 and 1996,
and for the three-month period ended December 31, 1995, and the year ended
December 31, 1996, are derived from consolidated financial statements of the
Company audited by Arthur Andersen LLP, which are included elsewhere in this
Prospectus. The selected consolidated financial data as of and for the fiscal
year ended December 25, 1994, and the nine months ended October 6, 1995, are
derived from consolidated financial statements of the Predecessor audited by
KPMG Peat Marwick LLP, which are included elsewhere in this Prospectus. The
selected consolidated financial data as of and for the fiscal years ended
December 27, 1992, and December 26, 1993, were derived from financial statements
of the Predecessor audited by KPMG Peat Marwick LLP, which are not included in
this Prospectus.
The following information should be read in conjunction with the
Consolidated Financial Statements of the Company and the Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
19
<PAGE> 21
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
--------------------------------------------------------- ---------------------------
PERIOD FROM PERIOD FROM
FISCAL YEAR FISCAL YEAR FISCAL YEAR DECEMBER 26, OCTOBER 6, FISCAL YEAR
ENDED ENDED ENDED 1994 TO 1995 TO ENDED
DECEMBER 27, DECEMBER 26, DECEMBER 25, OCTOBER 6, DECEMBER 31, DECEMBER 31,
1992(1) 1993(1) 1994(1) 1995(1) 1995(1) 1996(1)
------------ ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................ $164,530 $161,190 $172,970 $161,703 $ 45,622 $218,827
Cost of sales........................ 149,135 142,409 139,469 131,928 37,922 176,088
-------- -------- -------- -------- -------- --------
Gross profit......................... 15,395 18,781 33,501 29,775 7,700 42,739
Operating expenses:
Marketing, general and
administrative................... 13,984 17,871 10,315 16,628 6,707 20,495
Research and technology............ 10,858 10,655 8,134 7,089 2,913 8,890
Stock-based compensation(2)........ -- -- -- -- -- 9,678
Amortization....................... 1,600 -- -- 110 1,680 2,879
Other expense(3)................... 14,318 (--) -- -- -- --
-------- -------- -------- -------- -------- --------
Operating income (loss).............. (25,365) (9,745) 15,052 5,948 (3,600) 797
Interest (income) expense, net....... 769 (3) (127) (100) 2,878 10,775
-------- -------- -------- -------- -------- --------
Income (loss) before income taxes and
cumulative effect of accounting
change............................. (26,134) (9,742) 15,179 6,048 (6,478) (9,978)
Income tax expense (benefit)......... -- (3,100) 5,788 3,419 -- --
-------- -------- -------- -------- -------- --------
Income (loss) before cumulative
effect of accounting change........ (26,134) (6,642) 9,391 2,629 (6,478) (9,978)
Cumulative effect of accounting
change(4).......................... -- (9,390) -- -- -- --
-------- -------- -------- -------- -------- --------
Net income (loss).................... $(26,134) $(16,032) $ 9,391 $ 2,629 $ (6,478) $ (9,978)
======== ======== ======== ======== ======== ========
Net income (loss) per common and
common equivalent share:
Income (loss) before cumulative
effect of accounting change...... $ (2.60) $ (0.66) $ 0.93 $ 0.26 $ (0.58) $ (.90)
Cumulative effect of accounting
change........................... -- (0.93) -- -- -- --
-------- -------- -------- -------- -------- --------
Net income (loss) per share........ $ (2.60) $ (1.59) $ 0.93 $ 0.26 $ (0.58) $ (.90)
======== ======== ======== ======== ======== ========
Common and common equivalent
shares............................. 10,068 10,068 10,068 10,068 11,131 11,131
BALANCE SHEET DATA (END OF PERIOD):
Cash and cash equivalents............ $ 552 $ 1,082 $ 1,284 $ 753 $ 568 $ 755
Working capital...................... 20,224 16,096 36,192 20,874 17,680 17,764
Total assets......................... 121,807 117,407 133,017 121,015 165,429 161,188
Long-term debt, net of current
portion............................ -- -- -- -- 115,478 105,702
Stockholders' equity (deficit)....... 95,665 78,874 93,431 73,812 (1,478) (2,087)
OTHER DATA (UNAUDITED):
EBITDA(5)............................ $(13,325) $(11,406) $ 23,436 $ 12,118 $ 1,138 $ 16,662
Depreciation......................... 10,440 7,729 8,384 6,060 3,058 12,986
Capital expenditures................. 3,295 2,372 3,574 4,753 758 6,317
Net sales per average number of
employees.......................... 148 172 218 208 62 292
</TABLE>
- ------------------------------
(1) Prior to December 25, 1994, the Company's fiscal year coincided with ICI
American's fiscal year, which ended the last Sunday in December. Subsequent
to October 6, 1995, the Company adopted a calendar fiscal year.
(2) Stock-based compensation was $9.7 million in fiscal 1996, reflecting the
impact of an amendment to the Company's stock option plans which removed the
variable features related to certain performance criteria.
(3) Represents write-off of intangibles and other fixed assets.
(4) Cumulative effect of change in method of accounting for post-retirement
benefits other than pensions resulting from adoption of SFAS No. 106.
(5) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization. EBITDA is presented because it is a widely
accepted financial indicator used by certain investors and analysts to
analyze and compare companies on the basis of operating performance. EBITDA
is not intended to represent cash flows for the period, nor has it been
presented as an alternative to operating income as an indicator of operating
performance and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles. See the Consolidated Financial Statements and the
Notes thereto appearing elsewhere in this Prospectus.
20
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis relates to the financial condition
and results of operations of: (i) the Predecessor for the fiscal year ended
December 25, 1994; (ii) a combination of the Predecessor from December 26, 1994
to October 6, 1995 and the Company from October 6, 1995, to December 31, 1995,
for the year ended December 31, 1995; and (iii) the Company for the year ended
December 31, 1996. The discussion and analysis should be read in conjunction
with the Selected Consolidated Financial Data and the Consolidated Financial
Statements of the Company and the Predecessor and the Notes thereto appearing
elsewhere in this Prospectus.
GENERAL
The Company is a leading supplier of advanced composite materials to the
worldwide aerospace, industrial and recreational markets. The Company's advanced
composite materials are qualified to a broad range of specifications within the
commercial and military aerospace industries and are used in interior and
exterior aircraft structures, aircraft brakes, satellite and missile components
and solid rocket motor ablative insulation structures. The Company's composite
materials are also qualified to a wide range of industrial and recreational
specifications, including electronic and small engine components, under-the-hood
automotive applications, golf club shafts and fishing rods.
In October 1995, a group of financial investors led by DLJ Investors and
Carlisle Group acquired all of the outstanding stock of ICI Composites and
substantially all of the assets of Fiberite Europe, in exchange for $113.3
million in cash. The Company accounted for the Acquisition as a purchase. Upon
the closing of the Acquisition, the Company's net assets were written up to fair
market value, resulting in increased depreciation and amortization expense in
subsequent periods. The Company's results of operations from fiscal 1995 and
1996 reflected depreciation and amortization expense of $10.9 million and $15.9
million, respectively.
In connection with the Acquisition, the Company issued 10.0 million shares
of its Common Stock to the Financial Investors in exchange for $5.0 million. In
addition, the Company issued to the Financial Investors an aggregate principal
amount of $30.1 million of 11.3% Subordinated Discount Notes. The Company also
entered into the Credit Agreement pursuant to which the Company borrowed $75.0
million under the Term Loan and $15.0 million under the Revolving Loan. The
Company's results of operations for the fiscal 1995 and 1996 reflect interest
expense of $2.9 million and $10.8 million, respectively, associated with the
Credit Agreement and the 11.3% Subordinated Discount Notes.
The net proceeds to the Company from the sale of Common Stock in the
Offering are estimated to be approximately $43.6 million. The Company intends to
use approximately $35.5 million of such net proceeds to prepay in full the
outstanding principal and accrued interest under the 11.3% Subordinated Discount
Notes. Additionally, the Company intends to use approximately $4.0 million of
such net proceeds to reduce outstanding indebtedness under the Revolving Loan,
and $4.0 million of such net proceeds to prepay outstanding indebtedness under
the Term Loan. See "Use of Proceeds."
The Company has recently experienced growth in net sales resulting from
increased production of commercial aircraft, increased use of composite
materials on commercial and military aircraft, increased use of carbon-carbon
materials in commercial and military aircraft brakes and increased demand for
commercial satellites associated with telecommunication applications. The
Company's sales to the aerospace market were $118.2 million, $156.8 million and
$175.5 million in fiscal 1994, 1995 and 1996, representing 68.3%, 75.6% and
80.2% of net sales in these periods, respectively.
The Company's sales to the aerospace market primarily include sales for
commercial and military aircraft applications. Commercial aircraft applications
include interior and exterior structures and carbon-carbon brakes. Commercial
aircraft sales as a percentage of net sales (exclusive of carbon-carbon sales)
were 30.7%, 32.5% and 35.1% in fiscal 1994, 1995 and 1996, respectively.
Military aircraft applications include exterior structures and carbon-carbon
brakes. Military aircraft sales as a percentage of net sales (exclusive of
carbon-carbon sales) were 13.2%, 14.3% and 12.4% in fiscal 1994, 1995 and 1996,
respectively. Sales of carbon-carbon
21
<PAGE> 23
materials for use in commercial and military aircraft brakes were $13.8 million,
$19.9 million and $22.1 million in fiscal 1994, 1995 and 1996, respectively. The
Company believes the substantial majority of these sales were for commercial
aircraft applications.
The following table shows three year comparative sales and gross margin
information for the Company's primary markets:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------------------
DECEMBER 25, 1994 DECEMBER 31, 1995 DECEMBER 31, 1996
-------------------- -------------------- --------------------
(IN THOUSANDS, UNAUDITED)
GROSS GROSS GROSS
NET SALES MARGIN NET SALES MARGIN NET SALES MARGIN
--------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Aerospace....................... $ 118,156 20.5% $ 156,802 19.4% $ 175,508 22.4%
Industrial...................... 32,059 15.5 30,797 13.8 27,415 9.6
Recreational.................... 22,755 18.9 19,726 13.9 15,904 4.5
-------- -------- --------
Total...................... $ 172,970 19.4% $ 207,325 18.1% $ 218,827 19.5%
======== ======== ========
</TABLE>
RESULTS OF OPERATIONS
The following table sets forth certain Consolidated Statement of Operations
Data expressed as a percentage of net sales for the last three fiscal years:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------
DEC. 25, 1994 DEC. 31, 1995 DEC. 31, 1996
------------- ------------- -------------
<S> <C> <C> <C>
Net sales............................................. 100.0% 100.0% 100.0%
Cost of sales......................................... 80.6 81.9 80.5
----- ----- -----
Gross margin..................................... 19.4 18.1 19.5
Marketing, general and administrative................. 6.0 11.3 9.3
Research and technology............................... 4.7 4.8 4.1
Stock-based compensation.............................. -- -- 4.4
Amortization.......................................... -- 0.9 1.3
----- ----- -----
Operating income...................................... 8.7 1.1 0.4
Interest expense, net................................. -- 1.3 5.0
----- ----- -----
Income (loss) before income taxes................ 8.7 (0.2) (4.6)
Income taxes.......................................... 3.3 1.7 --
----- ----- -----
Net income (loss)................................ 5.4% (1.9)% (4.6)%
===== ===== =====
</TABLE>
FISCAL YEAR ENDED DECEMBER 31, 1996 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
1995
Net sales for fiscal 1996 were $218.8 million, an increase of $11.5
million, or 5.5%, compared to fiscal 1995. Aerospace sales during fiscal 1996
were $175.5 million, an increase of $18.7 million, or 11.9%, compared to fiscal
1995. Aerospace sales include sales to the aircraft, launch vehicle, aircraft
brake and satellite markets. Aircraft sales during fiscal 1996 were $103.9
million, an increase of $6.6 million, or 6.8%, compared to fiscal 1995. Such
increase was due primarily to increased commercial aircraft production and
increased use of composite materials on newer commercial aircraft models.
Increased aircraft sales were also attributable to increased demand for more
technically advanced, higher priced graphite materials for aircraft interiors.
Launch vehicle and missile sales during fiscal 1996 were $30.8 million, an
increase of $3.6 million, or 13.3%, compared to fiscal 1995. In addition, sales
of carbon-carbon materials for aircraft brake applications for fiscal 1996
increased $2.3 million, or 11.5%, to $22.1 million compared to fiscal 1995 as a
result of the increased use of carbon-carbon brakes on new wide body Boeing,
Airbus and McDonnell Douglas aircraft. Sales for satellite applications for
fiscal 1996 were $18.7 million, an increase of $6.2 million, or 49.7%, compared
to fiscal 1995. The increase in sales for satellite applications was due in
large part to increased demand for composite materials associated with
commercial telecommunications satellites.
22
<PAGE> 24
Industrial sales were $27.4 million in fiscal 1996, a decrease of $3.4
million, or 11.0%, compared to fiscal 1995. The decrease was primarily
attributable to the termination of a distribution agreement with Ciba-Geigy AG
("Ciba-Geigy"), because Ciba-Geigy ceased production of certain molding
compounds in 1995. Sales to the recreational market for fiscal 1996 were $15.9
million, a decrease of $3.8 million, or 19.4%, compared to fiscal 1995. The
decrease resulted primarily from lost sales to Aldila, Inc. ("Aldila"), a golf
club shaft manufacturer, which completed the process of transferring in-house
the manufacture of substantially all of its composite material requirements.
This decrease was partially offset by increased sales to other golf club shaft
manufacturers.
Overall gross margin for fiscal 1996 increased to 19.5% compared to 18.1%
in fiscal 1995 primarily as a result of increased aerospace production volumes
within existing plant capacity. Aerospace gross margin increased to 22.4% in
fiscal 1996 from 19.4% in fiscal 1995 as aerospace sales grew to $175.5 million
from $156.8 million without any significant increase in the Company's aerospace
manufacturing fixed costs. Increased aerospace gross margin was partially offset
by declines in industrial and recreational gross margin in fiscal 1996 compared
to fiscal 1995. Industrial gross margin in fiscal 1996 declined to 9.6% from
13.8% in fiscal 1995 due to reduced sales in this market. Recreational gross
margin in fiscal 1996 declined to 4.5% from 13.9% in fiscal 1995 due to reduced
sales in this market, increased raw material costs and costs associated with
converting production to an alternative material. Increased overall gross margin
in 1996 was also partially offset by $3.9 million in increased depreciation
expense associated primarily with the write up of assets to fair market value in
connection with the Acquisition.
Marketing, general and administrative expenses for fiscal 1996 were $20.5
million, a decrease of $2.8 million, or 12.2%, compared to fiscal 1995. This
decrease was primarily due to a $3.0 million charge in fiscal 1995 relating to a
change in the valuation of the Company's pension liability.
Research and technology expenses for fiscal 1996 were $8.9 million, a
decrease of $1.1 million, or 11.1%, compared to fiscal 1995. Fiscal 1995
research and technology expenses included $0.9 million of in-process research
and development costs written off in connection with the Acquisition. Fiscal
1996 research and technology expenses were partially offset by approximately
$0.4 million of revenues in excess of costs of research projects performed for
third parties.
Stock-based compensation was $9.7 million in fiscal 1996, reflecting the
impact of an amendment to the Company's stock option plans that removed the
variable features related to certain performance criteria.
Amortization expense for fiscal 1996 was $2.9 million, an increase of $1.1
million compared to $1.8 million in fiscal 1995. The increase is due to the
inclusion of three months of amortization expense in fiscal 1995, recorded in
connection with the Acquisition, compared to the inclusion of 12 months of such
expense in fiscal 1996.
Interest expense for fiscal 1996 was $10.8 million, an increase of $8.0
million compared to $2.8 million in fiscal 1995. The increase is due to the
inclusion of three months of interest expense in fiscal 1995, recorded in
connection with the Acquisition, compared to the inclusion of 12 months of such
expense in fiscal 1996. The Predecessor had no significant debt.
The Company has not recorded an income tax benefit in fiscal 1996 or 1995.
A deferred benefit was recorded in fiscal 1995 and 1996 to offset the current
provision because a majority of the taxes paid in those periods would be
refundable in the event of future tax losses. The Company's effective tax rate
in fiscal 1996 deviates from the federal statutory rate of 34.0%, due primarily
to the differences in the book and tax treatment of non-deductible stock-based
compensation.
FISCAL YEAR ENDED DECEMBER 31, 1995 COMPARED TO FISCAL YEAR ENDED DECEMBER 25,
1994
Net sales for fiscal 1995 were $207.3 million, an increase of $34.4
million, or 19.9%, compared to fiscal 1994. Aerospace sales for fiscal 1995 were
$156.8 million, an increase of $38.6 million, or 32.7%, compared to fiscal 1994.
Aircraft sales during fiscal 1995 were $97.3 million, an increase of $21.3
million, or 28.0%, compared to fiscal 1994. These increased sales were due
primarily to increased market share in Europe,
23
<PAGE> 25
increased military sales resulting from product lines acquired from BP Chemicals
and increased demand for composite materials for commercial aircraft. Launch
vehicle and missile sales were $27.2 million in fiscal 1995, an increase of $4.3
million, or 18.9%, compared to fiscal 1994. Carbon-carbon sales during fiscal
1995 increased $6.1 million, or 44.3%, to $19.9 million compared to fiscal 1994
primarily as a result of the commencement of the Company's participation on the
Boeing 767 program. In addition, sales for satellite applications were $12.5
million in fiscal 1995, an increase of $6.9 million, or 124.6%, compared to
fiscal 1994. Such increase in sales was primarily due to the Company's position
on a single government satellite program and to increased overall demand for
composites in the satellite market.
Industrial sales for fiscal 1995 were $30.8 million, a decrease of $1.3
million, or 3.9% compared to fiscal 1994. Sales to the recreational market for
fiscal 1995 were $19.7 million, a decrease of $3.0 million, or 13.3%, compared
to fiscal 1994. The decrease in recreational sales resulted primarily from lost
sales to Aldila, which began internal manufacture of its advanced composite
material requirements.
Overall gross margin for fiscal 1995 decreased to 18.1% compared to 19.4%
in fiscal 1994 primarily due to reduced aerospace margins on sales of certain
composite and ablative materials associated with the BP Acquisition in February
1995. For approximately six months following the BP Acquisition, the Company
purchased higher cost products from BP Chemical's Santa Ana facility to meet
customer requirements while the Company's manufacturing facilities were being
qualified. The decline in aerospace gross margin in fiscal 1995 compared to
fiscal 1994 was partially offset by improvements resulting from increased
aerospace production during the period within the Company's existing plant
capacity. Industrial and recreational gross margins declined during the period
due to reduced sales to those markets.
Marketing, general and administrative expenses, including charges from the
Company's former parent company, ICI American, were $23.3 million for fiscal
1995, an increase of $13.0 million compared to fiscal 1994. The increase was
primarily related to increased expenses resulting from an actuarial adjustment
in the Predecessor's pension liability assessed by ICI American, an expansion in
the marketing staff to support the BP Acquisition and sales growth in the
Company's satellite business.
Research and technology expenses for fiscal 1995 were $10.0 million, an
increase of $1.9 million, or 23.0%, compared to fiscal 1994. In fiscal 1995, in
conjunction with the BP Acquisition, additional costs were incurred to qualify
the Company's facilities and integrate the associated technology into existing
operations. The research and technology expense in fiscal 1995 included $0.9
million of costs expensed in connection with the Acquisition.
The Company has recorded a 100% valuation allowance against deferred tax
assets in fiscal 1995. The allowance was established due to the Company's lack
of historical operating profits. The Company's effective tax rate in fiscal 1995
deviates from the federal statutory rate of 34.0%, due primarily to the
differences in the book and tax treatment of state taxes and other permanent
differences.
24
<PAGE> 26
SELECTED QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly operating
information for each of the eight quarters ending with the quarter ended
December 31, 1996. This information has been prepared on the same basis as the
audited Consolidated Financial Statements contained elsewhere in this Prospectus
and includes, in the opinion of management, all adjustments consisting only of
normal recurring adjustments, necessary for the fair presentation of the
information for the periods presented. This information should be read in
conjunction with the Company's Consolidated Financial Statements and related
Notes thereto. Results of operations for any previous fiscal quarter are not
indicative of results for the full year or any future quarter.
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
------------------------------------ ------------------------------------------------------------------
QUARTER ENDED
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS, UNAUDITED)
---------------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, OCTOBER 6, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1995 1995 1995 1995 1996 1996 1996 1996
--------- -------- ------------- ------------ --------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. $53.8 $ 55.5 $ 52.4 $ 45.6 $53.9 $ 52.9 $ 56.3 $ 55.7
Cost of sales.......... 43.0 46.0 42.9 37.9 43.1 42.6 44.3 46.1
----- ----- ----- ----- ----- ------ ----- -----
Gross profit......... 10.8 9.5 9.5 7.7 10.8 10.3 12.0 9.6
Operating expenses:
Marketing, general
and
administrative..... 4.8 2.1 9.7 6.7 4.3 5.6 5.3 5.2
Research and
technology......... 2.2 2.3 2.6 2.9 2.4 2.4 2.4 1.7
Stock-based
compensation....... -- -- -- -- -- 3.7 3.1 2.9
Amortization......... -- -- 0.1 1.7 0.7 0.8 0.7 0.7
----- ----- ----- ----- ----- ------ ----- -----
Operating income
(loss)............. 3.8 5.1 (2.9) (3.6) 3.4 (2.2) 0.5 (0.9)
Interest (income)
expense, net......... -- -- (0.1) 2.9 2.9 2.8 2.7 2.4
----- ----- ----- ----- ----- ------ ----- -----
Income (loss) before
income taxes......... 3.8 5.1 (2.8) (6.5) 0.5 (5.0) (2.2) (3.3)
----- ----- ----- ----- ----- ------ ----- -----
Income tax expense..... 1.6 1.4 0.4 -- -- -- -- --
----- ----- ----- ----- ----- ------ ----- -----
Net income (loss).... $ 2.2 $ 3.7 $ (3.2) $ (6.5) $ 0.5 $ (5.0) $ (2.2) $ (3.3)
===== ===== ===== ===== ===== ====== ===== =====
Earnings (loss) per
common and common
equivalent share..... $0.22 $ 0.36 $ (0.32) $(0.58) $0.05 $(0.45) $ (0.20) $(0.30)
</TABLE>
The Company's quarterly operating results have varied and are expected to
vary in the future. These fluctuations may be caused by many factors, including
among others: the size and timing of individual orders, customer order
deferrals, market acceptance of new products, technological changes, competitive
pricing pressures, changes in the Company's operating expenses, personnel
changes, foreign currency exchanges rates, mix of products sold, quality control
of products sold, and general economic conditions. The Company plans its
operations and establishes operating budgets and personnel levels in advance of
customer orders based upon estimates of its customers' requirements. To the
extent estimated orders or revenues fail to materialize following advance
expenditures by the Company in anticipation of such orders or revenues, the
Company's business, operating results, prospects and financial condition may be
adversely affected. As a result of the foregoing and other factors, the Company
believes that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as indications of future
performance. See "Risk Factors -- Fluctuations in Quarterly Operating Results."
LIQUIDITY AND CAPITAL RESOURCES
In conjunction with the Acquisition, the Company was capitalized with a
$100.0 million Credit Agreement, consisting of a $25.0 million Revolving Loan
(of which $15.0 million was drawn upon the closing of the Acquisition) and a
$75.0 million Term Loan, $30.1 million of 11.3% Subordinated Discount Notes and
a capital contribution of $5.0 million from the Financial Investors in exchange
for 10,000,000 shares of Common Stock at a price of $0.50 per share.
The Company's primary source of liquidity has been cash provided by
operating activities, which generated $21.7 million, $11.9 million and $18.7
million in fiscal 1994, 1995 and 1996, respectively, and the Revolving Loan,
under which $16.0 million was available as of December 31, 1996.
25
<PAGE> 27
Cash used in investing activities was $5.3 million in fiscal 1996. Capital
expenditures were $3.6 million, $5.4 million and $6.2 million in fiscal 1994,
1995 and 1996, respectively. Fiscal 1996 capital expenditures included $2.8
million associated with the implementation of an integrated
manufacturing/accounting system. The Company expects capital expenditures for
fiscal 1997 to be approximately $7.5 million, including $1.8 million of
additional expenditures related to the manufacturing/accounting system.
Cash used in financing activities was $13.2 million in fiscal 1996. The
Company used $13.4 million to reduce the outstanding borrowings under the Credit
Agreement from $90.5 million as of December 31, 1995, to $77.1 million as of
December 31, 1996.
After completion of the Offering, management expects to negotiate a new
credit agreement with Bank of America NT&SA as agent for certain commercial
lending institutions. The Company believes its financial position at that time
will be sufficiently improved to qualify the Company for improved terms and
conditions; however, there can be no assurance that such improved terms and
conditions will be available to the Company or that the Company will
successfully complete the renegotiation of the Credit Agreement.
The net proceeds from the sale of Common Stock are to be used to prepay in
full the outstanding principal balance and accrued interest of the Company's
11.3% Subordinated Discount Notes and to repay a portion of the outstanding
borrowings under the Credit Agreement. See "Use of Proceeds."
Management believes that cash from operating activities and available
borrowings under the Credit Agreement should be sufficient to permit the Company
to fund its operations and meet its obligations under the agreements governing
the existing indebtedness for the next full fiscal year. The Company may require
financing for additional future acquisitions, if any, and there can be no
assurance that it would be able to obtain such financing on terms considered to
be favorable by management or at all.
26
<PAGE> 28
BUSINESS
GENERAL
The Company is a leading supplier of advanced composite materials to the
worldwide aerospace, industrial and recreational markets. The Company's
composite materials are comprised of carbon, glass or other fibers that are
"impregnated" with one of the Company's proprietary resin matrices, creating
materials with more favorable strength- and stiffness-to-weight, dimensional
stability and thermal insulative properties than those of many high performance
materials, including metals and alloys. The Company's final products are
principally sold in rolls, sheets or in granular or chopped forms and are
subsequently incorporated by the Company's customers into a manufactured
component. The Company's advanced composite materials are qualified to a broad
range of specifications within the commercial and military aerospace industries
and are used in interior and exterior aircraft structures, satellite and missile
components and solid rocket motor ablative insulation structures. The Company
also sells carbon-carbon materials for use in the manufacture of commercial and
military aircraft brakes. Additionally, the Company's composite materials are
also qualified to a wide range of industrial and recreational specifications,
including electronic and small engine components, under-the-hood automotive
applications, golf club shafts and fishing rods. The Company's strong position
in its markets resulted in an increase in net sales of approximately 36% from
fiscal 1993 to fiscal 1996.
Over the last two decades, there has been significant growth in the use of
composite materials as a result of improvements in applications engineering,
advances in composites technology and declining costs to the customer in
manufacturing its final products. In particular, the use of composite materials
on commercial aircraft has increased as a result of both the growth in
commercial aircraft deliveries and the increase in composites used on a
per-aircraft basis as manufacturers strive to reduce aircraft weight and to
maximize both fuel efficiency and payload capacity. Industry analysts believe
the demand for commercial aircraft will be favorably influenced by a significant
increase in air travel expected over the next decade, and the Company believes
its established position and broad range of qualifications in the commercial
aircraft market position it to capitalize on this trend. The Company's sales for
commercial aircraft interior and exterior applications were approximately 31%,
33% and 35% of net sales in fiscal 1994, 1995 and 1996, respectively. In
addition, sales of carbon-carbon materials, the substantial majority of which
are derived from commercial aircraft brakes were approximately 8%, 10% and 10%
of net sales in fiscal 1994, 1995 and 1996, respectively.
The Company is also a leading supplier of advanced composite materials for
military aircraft and satellite applications. The Company believes there will be
increased use of advanced composite materials in defense programs over the next
several years primarily as a result of military aircraft moving from the
development stage to the production phase. Sales for military aircraft exterior
applications were approximately 13%, 14% and 12% of net sales in fiscal 1994,
1995, and 1996, respectively. Recently there has also been a significant
increase in the use of advanced composite materials by the U.S. satellite market
due in large part to the growth in the telecommunications industry and the
associated need for commercial satellites.
In October 1995, a group of financial investors led by the DLJ Investors
and Carlisle Group acquired all of the outstanding stock of ICI Composites, a
wholly owned subsidiary of ICI American, and substantially all of the assets of
Fiberite Europe.
FIBERITE COMPETITIVE STRENGTHS
The Company believes it benefits from the following competitive strengths:
Strong Market Position and Reputation. The Company has been a leading
supplier of advanced composite materials for over 40 years, and management
believes the Company has established a reputation in its markets for high
quality products and excellent customer service. The Company has been integral
in the development of advanced composite materials for strategic missile
programs since 1955, has engineered materials for the space industry since the
early 1960s and has developed advanced composite materials for virtually every
major commercial and military aircraft program since the early 1970s. The
Company believes its established position and broad range of qualifications
position it to capitalize on emerging opportunities for composite applications
in new and existing markets.
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<PAGE> 29
Broad Range of Qualifications. Management believes Fiberite has one of the
broadest ranges of qualifications of any composite materials manufacturer. The
Company's materials are qualified and used by substantially all of the leading
aerospace prime contractors, including Airbus, AlliedSignal, Bell Helicopter
Textron Inc., Boeing, General Electric Company, Lockheed Martin Corporation
("Lockheed"), McDonnell Douglas, Northrop-Grumman Corporation and Thiokol. The
Company's industrial composite materials are sold to numerous blue chip
manufacturers such as International Business Machines Corporation and Motorola,
Inc. ("Motorola"). The Company's materials are also used by suppliers of
technologically advanced recreational products such as Callaway Golf Company and
Cobra Golf, Inc.
Favorable Operating Leverage. Over the past 10 years, the Company has
invested more than $75.0 million in updating and maintaining its equipment and
expanding its operating facilities. As a result, the Company believes it has the
manufacturing capacity to meet its anticipated growth for the next several
years. In addition, in recent years the Company has improved its manufacturing
processes, thereby reducing company-wide cycle time. Also, as a result of a
successful structure reorganization, the Company believes its operations are
among the most efficient in the industry, with net sales per employee of
$291,000 for fiscal 1996.
Technological Expertise. Fiberite has extensive experience in
manufacturing, materials science, process engineering, polymer chemistry and
textiles. The Company's chemists, technical service engineers, process
engineers, applications engineers and technically orientated sales force work
with customers to identify and engineer solutions to meet such customers'
material requirements. In addition, the Company's relationship with the Wilton
Centre, a research division of ICI, provides the Company with access to
substantial research facilities and expertise.
Experienced Management Team. Fiberite's management has extensive
experience in the composite and aerospace industries. James E. Ashton, Ph.D.,
Chief Executive Officer, has nearly 28 years of experience in the composites
industry and has led research in composites design and analysis and managed
significant commercial and military composites production programs. Carl W.
Smith, President and Chief Operating Officer, has over 25 years of experience in
the composites industry, including 11 years with large aerospace prime
contractors. Jon B. DeVault, Senior Vice President, Marketing, has over 30 years
of experience with composite materials and structures used in the aerospace
industry.
FIBERITE STRATEGY
The Company has adopted the following strategies to enhance its position as
a leading supplier of advanced composite materials:
Capitalize on Growth in the Commercial Aerospace Industry. Industry
analysts believe that the demand for commercial aircraft will be favorably
influenced by the projected increase in annual revenue passenger miles from
approximately 1.6 trillion in 1995 to approximately 4.3 trillion in 2015.
Additionally, the Company believes suppliers of advanced composite and
carbon-carbon materials will benefit from greater utilization of such materials
on modern aircraft. The Company also believes there will be an increase in the
use of composites as a result of growth in the telecommunications industry and
the associated need for commercial satellites. The Company's objective is to
capitalize on these trends by continuing to supply a wide variety of advanced
composite and carbon-carbon materials to the commercial aerospace market.
Maximize Growth Opportunities in the Defense Industry. The Company
believes there will be increased demand for advanced composite materials in
defense programs over the next several years primarily due to military aircraft
moving from the development stage into the production phase. As a result, the
Company's strategy is to increase sales to its military customers by
capitalizing on prior development activities and current qualifications and by
maximizing customer service. Additionally, the Company plans to continue working
with its defense customers to develop composite materials for next generation
military aircraft.
Pursue Opportunities for New Applications. The Company believes that
improvements in applications engineering and composites technology will result
in increased utilization of advanced composite materials
28
<PAGE> 30
both within the Company's existing markets and in new markets. The Company's
objective is to pursue new opportunities, focusing on applications where the
Company can add value through its composite development and applications
expertise.
Grow Through Strategic Acquisitions. Over the past two years the Company
has completed a series of acquisitions designed to extend and expand the range
of the Company's product offerings. Such acquisitions include the acquisition
of: (i) BP Chemicals' Fibers and Materials Division, which solidified the
Company's position as the world's leading supplier of aerospace ablative
materials; (ii) Ligustica's polyester/epoxy blend continuous fiber technology,
which provided entry into certain marine and industrial markets; and (iii)
Simmaco's polyester bulk molding compound business, which expanded the Company's
range of products for industrial markets. The Company intends to continue
pursuing strategic acquisitions that will complement or extend its product lines
or add new manufacturing and service capabilities.
INDUSTRY BACKGROUND
Advanced composite materials are used to satisfy a wide variety of
materials requirements in aerospace, industrial and recreational applications.
Advanced composite materials can be designed to have more favorable strength-,
and stiffness-to weight ratios and fatigue resistance properties than metals,
such as steel, aluminum, titanium or alloys, to have negligible dimensional
change across a broad temperature range and to have tailored electrical and
thermal conductivity characteristics. Composite materials can also be designed
with predictable thermal erosion, or "ablative," properties. Additionally,
certain advanced composites have extremely low smoke and toxicity attributes.
There has been significant growth in the use of composite materials and
increased substitution of advanced composite materials for such metals as a
result of improvements in applications engineering, advances in composites
technology and declining costs to the customer in manufacturing its final
products.
AEROSPACE
The substantial majority of advanced composite materials sold in the
aerospace markets are manufactured to specifications of aerospace original
equipment manufacturers ("OEMs"). These OEMs select and qualify a limited number
of advanced composite materials suppliers for particular programs or
specifications. The qualification for a particular specification generally
follows a lengthy evaluative process. Selection typically is based upon: (i) the
product's specific technical properties and ability to meet customers'
specifications; (ii) "shop floor" acceptance by customers; (iii) the raw
materials used; (iv) the capability and quality of the manufacturing process;
and (v) the reputation of the supplier. Within the aerospace industry, there are
four principal markets served: commercial, military, satellite and launch
vehicles.
29
<PAGE> 31
Commercial Aircraft
Because aircraft applications require the high performance characteristics
associated with advanced composite materials, the commercial aircraft market is
the leading consumer, both in sales and gross pounds purchased, of advanced
composite materials. As shown in the following diagram, advanced composites are
used in a variety of interior and exterior commercial aircraft applications:
[Illustration]
[picture of a typical commercial aircraft showing composite applications]
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<PAGE> 32
Industry analysts believe that the demand for commercial aircraft should be
favorably influenced by the projected increase in annual revenue passenger miles
from approximately 1.6 trillion in 1995 to approximately 4.3 trillion in 2015.
In addition to growth of aircraft deliveries, the use of advanced composite
materials has increased on a per-aircraft basis as manufacturers attempt to
reduce the weight of the aircraft, while maintaining structural integrity, in an
effort to maximize fuel efficiency and increase payload. As the chart below
shows, more recently introduced aircraft utilize advanced composite materials as
a greater percentage of their structural weight:
[GRAPH]
[chart summarizing the composite content on a typical commercial aircraft by
year of introduction and percent of structural weight]
- ------------------------------
31
<PAGE> 33
Military Aircraft
The defense market has historically been an innovator in, and significant
source of demand for, advanced composite materials. Defense and aerospace
applications include military aircraft exterior structural applications,
strategic and tactical missile components, rocket motor insulation, missile
radomes and satellite antennae dishes. The following diagram details typical
applications of advanced composites on military aircraft:
[ILLUSTRATION]
[picture of a military fighter aircraft showing composite applications]
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<PAGE> 34
Although the demand for military aircraft has declined as military budgets
have been reduced since the end of the Cold War, industry experts currently
expect defense procurement to remain stable through the year 2000. Additionally,
as demonstrated in the following chart, the use of advanced composite materials
as a percentage of military aircraft structural weight has grown:
[Graph]
[chart summarizing the composite content on a military fighter aircraft by year
of introduction and percent of structural weight]
- ------------------------------
Satellites
Advanced composites used for satellite applications typically exhibit very
high stiffness, extremely low weight, negligible dimensional change across a
wide temperature range and low moisture absorbing attributes. Satellite
applications include frame or "bus" structures, antennas, solar array panels and
other optical hardware. Recently, there has also been a significant increase in
the use of advanced composite materials by the U.S. satellite market due in
large part to the growth of the telecommunications industry and the associated
need for commercial satellite.
Launch Vehicles
Ablative composites offer unique thermal insulative qualities in
environments exceeding 6,000 degrees Fahrenheit, and are designed to resist
particle erosion from solid rocket propellant. As a result, these materials are
used to insulate rocket nozzles from the extreme temperatures associated with a
rocket and missile launch, as well as provide insulation for re-entry vehicle
components. Ablative composite materials are utilized in a broad range of U.S.
and European launch vehicles, including the Space Shuttle, Delta I and II, Titan
III and IV and Ariane IV programs.
INDUSTRIAL
Advanced composite materials for industrial applications can be designed to
offer rapid processing cycles, high temperature creep resistance, optical
clarity and high temperature resistance. Typical applications
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<PAGE> 35
include pumps, covers, transmission gears, brake pistons, transformer bushings,
opto-couplers, timing gears, insulators, connectors and certain electronic
components.
RECREATIONAL
Because advanced composite materials have favorable strength- and
stiffness-to-weight ratios and excellent fatigue resistant properties, they are
well suited for a variety of applications in the recreational market.
Specifically, advanced composites can be designed to meet the torque and bending
requirements of thin gauge tubular structures such as those utilized for golf
club shafts, fishing rods and bicycle frames.
MARKETS AND APPLICATIONS
The following table depicts the Company's sales by market and principal end
use of the Company's products as of December 31, 1996:
<TABLE>
<CAPTION>
APPROXIMATE %
MARKET OF NET SALES PRINCIPAL END USE
- --------------------------------------- ------------- -----------------------------------
<S> <C> <C>
AEROSPACE
Commercial aircraft............... 35% Interior and exterior structures
Military aircraft................. 12 Exterior structures
Commercial and military
aircraft brakes Aircraft brakes (primarily
(carbon-carbon).............. 10 commercial)
Launch vehicles and missiles...... 14 Solid rocket motor nozzles
Commercial and military Thermally stable structures,
satellites...................... 9 including bus structures, antennas,
solar array panels and other
optical hardware
---
Total aerospace.............. 80
INDUSTRIAL
Molding materials................. 13 Primarily automotive, computer and
electronic parts
RECREATIONAL
Sporting goods.................... 7 Golf clubs, fishing rods and
bicycle frames
</TABLE>
AEROSPACE
Commercial Aircraft Market. The Company offers products with high
strength- and stiffness-to-weight ratios and low smoke and toxicity attributes
that are used in a wide range of aircraft interior and exterior applications.
Typical interior applications include overhead luggage bins and sidewall panels.
Exterior applications include rudders, leading and trailing edge panels and
engine nacelles.
The Company is qualified to specifications used on every Boeing and
McDonnell Douglas commercial aircraft, as well as a majority of Airbus
commercial aircraft, in production. In addition, the Company is qualified to
specifications used on numerous regional commuter and business aircraft. The
Company believes it is the leading supplier to Boeing of advanced composite
materials for aircraft interior applications.
Military Aircraft Market. The Company offers a range of advanced composite
materials addressing the high performance requirements of military aircraft. In
addition to high strength- and stiffness-to-weight ratios, advanced composite
materials offer radar absorbing characteristics. The Company's materials are
used in a variety of military aircraft exterior components, including fuselage,
wings and tail sections. The Company's materials are qualified on virtually all
existing U.S. military aircraft programs, including the F-22, F-117, AV-8B,
F-16, V-22, B-2, F/A-18 C/D, F/A-18 E/F and C-17 programs.
Aircraft Brakes Market. The Company's advanced composite materials and dry
pre-form carbon-carbon products are used primarily to manufacture aircraft brake
rotors and stators. Carbon-carbon brakes are typically used on widebody aircraft
such as 767, 777, A330, A340 and MD11. The Company also supplies
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<PAGE> 36
advanced composite materials for carbon-carbon brakes for military aircraft such
as the F/A-18 C/D, F/A-18, E/F, F-22, F-117 and B-2.
The Company is the sole supplier of advanced carbon-carbon composite
materials and an alternate source of pre-form carbon-carbon products to
AlliedSignal, the second largest manufacturer of aircraft brakes in the United
States, and is a significant supplier of carbon-carbon materials to Aircraft
Braking Systems Corp., the third largest manufacturer in the U.S. aircraft
brakes industry.
Launch Vehicle and Missile Market. The Company believes it is the leading
worldwide manufacturer of ablatives for the aerospace market. Ablatives are high
temperature insulation materials used primarily in solid rocket motor nozzles.
The Company's largest customer in the ablatives market is Thiokol. Currently,
the majority of the Company's ablative sales to Thiokol are used in connection
with the Space Shuttle Program. Additionally, the Company sells ablatives for
use on Titan and Delta launch vehicles, which are used to place commercial and
military satellites into orbit. The Company also sells its ablative materials
for use on strategic defense missiles, such as the D-5 and the Minuteman as well
as on certain tactical missiles.
Satellite Market. Fiberite produces advanced composite materials for
military and commercial satellites. The satellite market utilizes advanced
composite materials primarily because of their high stiffness, low weight,
thermal stability and low moisture absorption attributes. The Company's
materials are used in low earth orbit satellites, such as Globalstar, and
geostationary orbit satellites, such as Intelsat. The Company's major U.S.
customers in this market include Hughes Electronic Corp., Lockheed, Motorola,
NASA and Space Systems/Loral.
INDUSTRIAL
The Company offers composite molding compounds based upon phenolic and
epoxy formulations augmented with the bulk molding compound formulations the
Company acquired in its May 1996 acquisition of certain assets of Simmaco.
Within the industrial market, the Company is concentrating its efforts on
several strategic areas including: electric motor commutators, passive
electronic components, small engines and under-the-hood automotive applications.
The Company also has innovative sheet molding materials that target new
applications in portable electronics cases and fuel cells.
RECREATIONAL
The Company's major products in this market are advanced composite
materials used in the manufacture of composite golf shafts, fishing rods and
bicycle frames. Sporting goods customers require a less rigorous qualification
process but demand high-quality products. This market is performance and
innovation driven as well as price sensitive.
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<PAGE> 37
MANUFACTURING PROCESS AND RAW MATERIALS
The Company manufactures its products using two manufacturing processes:
(i) impregnation of fiber with resin and (ii) dry fiber pre-forming.
[FLOW CHART]
[flow chart describing the Company's raw materials' manufacturing processes: (i)
impregnation of fiber with resin and (ii) dry fiber pre-forming]
For the impregnation process, numerous resin components are mixed at
various temperatures. The mixed resin is impregnated into the fibers using heat,
tension and pressure. The final product is typically sold in rolls, sheets, or
in granular or chopped forms. Documented process control specifications are
followed to ensure product consistency. The Company's materials are tested and
certified to ensure adherence to stringent customer requirements.
In the dry fiber pre-forming process, fibers are oriented in specific
directions and are entangled utilizing a needling process. The resulting carbon
sheets are cut into segments, assembled and stacked in an overlapping sequence,
typically in the shape of a donut. The Company's manufacturing process includes
stringent process control, testing and certification.
The Company believes that reduction of manufacturing cycle time -- the time
beginning upon the date on which the customer's order is accepted and ending
upon the date the customer receives the product -- is a competitive factor in
the industry. In recent years, the Company has improved its manufacturing
processes and reduced company-wide cycle time. For example, at the Company's
Tempe facility, cycle time has been reduced from 28 to 14 days.
There are a limited number of suppliers of carbon fiber, and certain grades
of carbon fiber are currently in short supply. The Company is currently on
allocation for certain carbon fiber materials used in a significant portion of
its products. The Company works closely with key suppliers to avoid shortages
of, or disruptions in its supply of, raw materials. In the event of any
disruption in the Company's supply of raw materials, if the Company were unable
to qualify alternative manufacturing sources for existing or new products in a
timely manner, the Company's business, operating results and prospects could be
materially and adversely affected. See "Risk Factors -- Limited Supply of Raw
Materials."
RESEARCH AND TECHNOLOGY
The Company emphasizes research projects that will lead to new products or
reduce manufacturing costs. In pursuit of this primary research objective, the
Company utilizes a combination of internal research and outside research
partnerships.
The Company's internal research and technology efforts are focused on
identifying new product opportunities, establishing research priorities, and
assisting customer application engineering efforts. The Company's research and
technology group has expertise with a broad range of advanced composite
materials and applications, including chemical formulation, resin mixing, hot
melt and solution impregnation, textile architecture, advanced composites
structures, process engineering, analysis and testing.
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<PAGE> 38
The Company maintains a research relationship with the Wilton Centre
through which the Company accesses Wilton's substantial research capabilities.
Additional research is conducted in affiliation with the University of
Minnesota, Stanford University and research organizations such as SRI
International. See "Risk Factors -- Research Capability."
SALES AND MARKETING
Due to the nature of its products, the Company maintains a technically
oriented and industry knowledgeable sales force. The Company's sales force is
located near key customers and has a proven ability to support its customers'
needs. The Company uses internal and external market specialists to identify
applications in new and existing markets. The Company focuses on both expanding
sales to existing customers for established applications and leveraging its
existing technical and manufacturing expertise in pursuit of new markets and
applications.
COMPETITION
The Company competes with numerous companies on a worldwide basis. The
broad markets for the Company's products are highly competitive. In addition to
competing directly with companies offering advanced composite materials, the
Company competes with companies offering substitute structural materials such as
high performance metals or alloys. Depending upon the material and markets,
relevant competitive factors include product quality, product performance,
customer service, cycle time, on-time delivery and price. The Company's primary
competitor in its major markets is Hexcel Corporation. Other competitors include
Cytec Industries, Inc., Toray Industries, Inc., Mitsubishi Chemical Corporation
and Culver City Composites Corporation. There can be no assurance that the
Company will be able to compete successfully with either existing or new
competitors or that competitive pressures faced by the Company or the loss of
sole source or limited source qualifications will not materially and adversely
affect its business, operating results, prospects and financial condition.
ENVIRONMENTAL MATTERS
The Company is subject to numerous federal, state, local and foreign
environmental laws and regulations that impose strict requirements for, among
other things, the control and abatement of discharges of air, water and soil
pollutants and the manufacturing, storage, handling, transport and disposal of
hazardous materials. These laws include, for example, the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Clean Air Act, as amended, the Clean Water Act, as amended, and
the Resource Conservation and Recovery Act of 1976, as amended. Management
believes the Company is in compliance with environmental laws and regulations.
The Company has made and intends to continue to make the necessary expenditures
for environmental remediation and compliance with environmental laws and
regulations. The costs of compliance, including capital costs, with such
requirements in the United States and in foreign jurisdictions may be
substantial. The Company's capital expenditures for environmental matters were
approximately $250,000 in 1996 and estimated to be $350,000-$360,000 for 1997.
The Company is not currently involved in, and has not received notice of, any
environmental investigation or remediation activities likely to result in any
substantial expenditures. However, the Company, along with many other parties,
has been identified as a potentially responsible party under CERCLA, with
respect to the PCB Treatment, Inc. Superfund Sites in Kansas City, Missouri, and
Kansas City, Kansas, based on the alleged shipment of certain materials from its
Winona facility. The Company believes that much of the potential liability
arising out of this matter will be covered by an indemnification agreement with
the former owner of the Winona facility and in any event should not be material.
There can be no assurance that the Company has identified all environmental
liabilities for which it may be responsible or that the cost of such liabilities
will not be material. Moreover, standards under environmental laws and
regulations have tended to become increasingly stringent over time and more
stringent requirements could have a material adverse effect on the Company's
business, operating results, propects and financial condition.
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<PAGE> 39
LEGAL PROCEEDINGS
The Company is one of the defendants in six lawsuits brought in California,
Illinois, New York and Texas alleging damages as a result of the plaintiffs'
exposure to hazardous materials, including asbestos formerly used in certain of
the Predecessor's products. One such plaintiff is seeking $10.0 million in
compensatory damages and punitive damages. The remaining plaintiffs seek
unspecified compensatory and punitive damages. Although the Company believes its
exposure in these matters is limited, due in part to the large number of
defendants in each lawsuit, certain of the plaintiffs' theories allege joint and
several liability on the part of each defendant. Furthermore, the Company
believes that it has insurance coverage and/or rights to indemnification from
third parties in connection with the aforementioned lawsuits. However, there can
be no assurance that the Company will not ultimately be found jointly and
severally liable for all damages in any or all of these claims, that these
claims or other claims related to materials used in the Company's products will
be covered by available insurance or that, if covered, the amount of insurance
will be sufficient to cover any potential adverse judgment. These lawsuits are
being vigorously defended.
From time to time, the Company is a party to other litigation and claims
arising in the ordinary course of its business. The Company believes that none
of these matters, either individually or in the aggregate, are likely to have a
material adverse effect on the Company's business, operating results, prospects
or financial condition.
FACILITIES
The Company owns and operates manufacturing facilities throughout the
United States as well as in Germany and France. The Company's corporate offices
and central research and technology laboratory are located in Tempe, AZ. The
Company owns all of its manufacturing facilities except for the French facility
and the real estate underlying the Tempe facility, both of which the Company
leases. The following table lists the
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<PAGE> 40
manufacturing facilities of the Company by geographic location, approximate
square footage, and principal products:
<TABLE>
- --------------------------------------------------------------------------------------------------------
<CAPTION>
APPROX. SQUARE
FACILITY LOCATION FEET PRINCIPAL PRODUCTS
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
WINONA, MN/DELANO, PA 273,000/125,000 - Woven ablative advanced composite materials used for
(i) military and commercial launch vehicles and (ii)
strategic and tactical missiles
- Chopped fiber advanced composite materials and dry
pre-forms for aircraft brakes
- Chopped fiber advanced composite materials used for
under-the-hood automotive components, electric motor
commutators and passive electronic components
- Milled fiber for industrial applications
- --------------------------------------------------------------------------------------------------------
GREENVILLE, TX 230,000 - Woven fabric and unidirectional advanced composite
materials for commercial and military aircraft
exteriors, satellites, missiles and sporting goods
- Dry woven fabric for a variety of aerospace and
recreational applications
- --------------------------------------------------------------------------------------------------------
TEMPE, AZ 123,000 - Woven fabric and unidirectional advanced composite
materials for satellites
- New product development
- --------------------------------------------------------------------------------------------------------
ORANGE, CA 92,000 - Woven fabric advanced composite materials for
commercial aircraft interiors, military and commercial
aircraft exteriors and satellites
- Unidirectional advanced composite thermoplastic
materials for military and industrial applications
- --------------------------------------------------------------------------------------------------------
OESTRINGEN, GERMANY 53,000 - Woven fabric and unidirectional advanced composite
materials for commercial aircraft interiors,
commercial and military aircraft exteriors,
satellites and sporting goods
- Woven ablative advanced composite materials for
commercial launch vehicles
- --------------------------------------------------------------------------------------------------------
COURCELLES-LES-LENS, FRANCE 15,000 - Discontinuous fiber advanced composite materials
used for a variety of commercial and industrial
applications
- --------------------------------------------------------------------------------------------------------
</TABLE>
EMPLOYEES
As of December 31, 1996, the Company had 788 employees, including 454 in
production, 79 in research and development, 48 in sales and marketing and 207 in
administration. Of these employees, 174 were located in Greenville, 256 in
Winona, 151 in Orange, 90 in Tempe, 42 in Delano, 63 in Oestringen and 12 in
Courcelles-les-Lens. Three of the Company's plants are unionized. Workers at the
Orange and Winona plants are represented by the Teamsters Union and workers at
the Delano plant are represented by the Steelworkers Union. The Winona union
contract is scheduled for renegotiation in 1997. The Orange and Delano union
contracts are scheduled for renegotiation in 1998. Employees at the German and
French facilities are represented by national collective bargaining
arrangements. There are currently seven grievances brought by former employees
of the Orange facility. The grievances will be arbitrated under the union
collective bargaining agreement. Management does not believe that the Company's
exposure in these arbitration proceedings is material. The Company considers its
relationships with its employees to be good.
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<PAGE> 41
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning each of the
Company's directors, executive officers and other key employees as of January
31, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------------- --- --------------------------------------------------
<S> <C> <C>
James E. Ashton............................. 54 Chief Executive Officer
Carl W. Smith............................... 48 President and Chief Operating Officer
Ronald M. Miller............................ 52 Vice President, Finance, Chief Financial Officer,
Treasurer and Secretary
Jon B. DeVault.............................. 58 Senior Vice President, Marketing
Peter R. Ciriscioli(1)...................... 43 Director of Research
Thompson Dean............................... 38 Director
Reid S. Perper.............................. 37 Director
Karl Wyss................................... 56 Director
David Canedo................................ 51 Director
</TABLE>
- ------------------------------
(1) Not a member of the Company's board of directors.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
Dr. James E. Ashton joined Fiberite in October 1995 as Chief Executive
Officer and a director. In January 1997, Dr. Ashton was also elected Chief
Executive Officer of the Company. From June 1994 until he joined Fiberite, Dr.
Ashton worked as an independent consultant for Carlisle Enterprises, L.P. and
other companies. Prior to joining Fiberite, from April 1989 to June 1994, Dr.
Ashton served as General Manager of the Armament Systems Division of United
Defense L.P., a defense contractor. From 1970 to 1985, Dr. Ashton served as a
consultant to Hercules, Incorporated ("Hercules"), a chemical and materials
manufacturing company. From 1982 to 1983, Dr. Ashton served as General Manager
of the Tulsa Division of Rockwell International Corporation, an aerospace
structures subcontractor. From 1967 to 1982 Dr. Ashton was employed by General
Dynamics Corporation ("General Dynamics") serving as Director of Structures at
General Dynamics' Convair Division (where he led pioneering research regarding
thermally stable satellite structures) and as Vice President of Production
(where he led the start-up of the F-16 manufacturing program). Dr. Ashton serves
as a director of Diametrics Medical Inc., Lokring Corporation, and Exactec
Corporation. Dr. Ashton received a Ph.D. in Materials Engineering from the
Massachusetts Institute of Technology and an M.B.A. from Harvard University. Dr.
Ashton is a limited partner of Carlisle - Fiberite Investors, L.P. ("Carlisle")
and Carlisle Group.
Carl W. Smith joined Fiberite in October 1995 as President and Chief
Operating Officer. In January 1997, Mr. Smith was also elected President and
Chief Operating Officer of the Company. In 1982, Mr. Smith joined the
Predecessor and, from 1982 through the Acquisition, served in different
capacities at ICI Composites, including President, Vice President and General
Manager of Composure Structures, Plant Manager, Director of Research and
Technology and Manager of Technical Service. From 1981 to 1982, Mr. Smith was
Manager of Non-Metals at Martin Marietta Aerospace. Prior to that, from 1978 to
1981, Mr. Smith was employed by General Dynamics where he served as Chief of
Organics and Composites for the Convair Division. From 1976 to 1977, Mr. Smith
was Director of Operations for Composite Optics, Inc., a leader in the design
and fabrication of thermally stable structures.
Ronald M. Miller joined Fiberite in April 1996 and was promoted to Chief
Financial Officer and Secretary in June 1996. In January 1997, Mr. Miller was
appointed to the additional positions of Vice President, Finance and Treasurer.
Also in January 1997, Mr. Miller was elected Vice President, Finance, Chief
Financial Officer, Treasurer and Secretary of the Company. From 1969 to 1996,
Mr. Miller served in various management positions at Rohr, Inc. ("Rohr"), an
aerospace manufacturing company. From 1991 until he resigned from Rohr, Mr.
Miller served as Vice President, Finance and Treasurer.
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<PAGE> 42
Jon B. DeVault joined Fiberite in the fall of 1995 as a consultant in the
areas of marketing and business development. In January 1997, Mr. DeVault was
elected as Fiberite's Senior Vice President, Marketing. Also in January 1997,
Mr. DeVault was elected Senior Vice President, Marketing of the Company. From
December 1992 to November 1995, Mr. DeVault was a Senior Scientist at the
Department of Defense's Advanced Research Projects Agency (ARPA), where he was
responsible for planning and implementing a strategy to reduce the cost of
polymer matrix composite structures. From January 1962 to November 1992, Mr.
DeVault held various management and executive level positions including
President of the Composite Products Group and Vice President and General Manager
of Graphite Materials and Composite Structures at Hercules.
Dr. Peter R. Ciriscioli has served as Fiberite's Director of Research since
October 1995. From August 1990 to October 1995, Dr. Ciriscioli served in various
capacities at ICI Composites, including Manager of Technical Services, Special
Projects Manager and Chief Scientist. Dr. Ciriscioli received a B.S. and an M.S.
in Materials Science and Engineering from the University of California at Davis
and a Ph.D. in Mechanical Engineering and Applied Mechanics from Stanford
University.
Thompson Dean has served as a director of the Company since October 1995
and has also served as a director of Fiberite since October 1995. Since
September 1988, Mr. Dean has been employed by DLJ Merchant Banking, Inc.
("DLJMB"), an affiliate of Donaldson, Lufkin & Jenrette Securities Corporation
("DLJSC"), where he serves as a Managing General Partner and a Managing
Director. Mr. Dean also serves on the boards of directors of Katz Media Group,
Inc., Phase Metrics Corp., Manufacturers' Services Ltd. and CommVault Systems,
Inc.
Reid S. Perper has served as a director of the Company since October 1995.
Since 1993, Mr. Perper has been employed by DLJMB, where he served as a Vice
President and currently serves as a Principal. From 1989 to 1993, Mr. Perper
served in various positions in the Investment Banking Group of DLJSC.
Karl Wyss has served as a director of the Company since October 1995 and
has also served as a director of Fiberite since March 1996. From 1993 to the
present, Mr. Wyss has been a Managing Director of DLJMB. From 1989 to October
1993, Mr. Wyss was employed by Lear Siegler, Inc., an aerospace company, and
served in various capacities, including Chairman, Chief Executive Officer,
President and Chief Operating Officer. Mr. Wyss presently serves on the boards
of directors of Brand Scaffold Services, Inc., IVAC Holdings, Inc., OSF
Holdings, Inc. and Mallory Limitada.
David Canedo has served as a director of the Company since January 1997.
From July 1996 to January 1997, Mr. Canedo served as Vice President of Fiberite.
From October 1995 to June 1996, Mr. Canedo served as Chief Financial Officer and
Secretary of Fiberite. From September 1994 to the present, Mr. Canedo has served
as a Managing Partner of Carlisle Enterprises, L.P., an affiliate of Carlisle
and Carlisle Group. From 1991 to 1994, Mr. Canedo served as Vice President and
General Manager of the Metal Bonding and Composite Bonding operations at Rohr.
Prior to 1991, Mr. Canedo held various senior management positions in finance,
quality control and operations at Rohr.
Currently all directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and qualified.
Officers are elected by and serve at the discretion of the Company's board of
directors (the "Board"). There are no family relationships among the directors
or officers of the Company.
NON-EMPLOYEE DIRECTOR COMPENSATION
Directors of the Company who are not employees of the Company ("Outside
Directors") receive compensation in the amount of $2,500 per meeting plus
expenses for services provided as a director. Additionally, a total of 150,000
shares of Common Stock have been reserved for issuance under the 1997 Outside
Directors Stock Option Plan (the "Directors Plan"). As of the date of the
Offering, no options have been granted under the Directors Plan. The Directors
Plan provides for the automatic granting of non-qualified stock options to
Outside Directors. Under the Directors Plan, each new Outside Director elected
after the date of this Offering will automatically be granted an option to
purchase 15,000 shares of Common
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Stock on the date of their election. Additionally, the Company's existing
Outside Directors shall be granted an option to purchase 15,000 shares of the
Company's Common Stock upon the closing of this Offering. All stock option
grants to Outside Directors shall be at the then existing fair market value of
the Company's Common Stock. The exercise price of the options in all cases will
be equal to the fair market value of the Common Stock on the date of grant.
Options granted under the Directors Plan vest over four years and must be
exercised within ten years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Compensation Committee of the Company's Board is comprised of
and . Neither of these individuals was at any time
during the 1996 fiscal year or at any other time, an officer or employee of the
Company. No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Company's Board or Compensation
Committee.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to provisions of the Delaware General Corporation Law ("DGCL"),
the Company has adopted provisions in its Amended and Restated Certificate of
Incorporation (the "Certificate"), which provide that directors of the Company
shall not be personally liable for monetary damages to the Company or its
stockholders for a breach of fiduciary duty as a director, except for liability:
(i) for any breach of the director's duty of loyalty to the Company or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) under Section 174 of
the DGCL; or (iv) for any transaction from which the director derived an
improper personal benefit. Such limitation of liability does not affect the
availability of equitable remedies such as injunctive relief or rescission.
The Certificate also authorizes the Company to indemnify its current and
former officers, directors, employees or agents against certain liabilities that
may arise or have arisen by reason of their status or service as directors,
officers, employees or agents of the Company (other than liabilities arising
from acts or omissions not in good faith or willful misconduct of a culpable
nature).
The Company's Bylaws authorize the Company to indemnify its officers,
directors, employees and agents to the extent permitted by the DGCL. Pursuant to
Section 145 of the DGCL, which empowers the Company to enter into
indemnification agreements with its officers, directors, employees and agents,
the Company has entered into separate indemnification agreements with its
directors and executive officers which may, in some cases, be broader than the
specific indemnification provisions contained in the DGCL. The indemnification
agreements may require the Company, among other things, to indemnify such
executive officers and directors against certain liabilities that may arise by
reason of their status or service as directors or officers (other than
liabilities arising from acts or omissions not in good faith or willful
misconduct of a culpable nature) and to advance expenses incurred as a result of
any proceeding against them as to which they could be indemnified. The Company
also maintains directors' and officers' liability insurance.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding that may result in a claim for such indemnification.
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<PAGE> 44
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation paid
to Fiberite's Chief Executive Officer and each of the other executive officers
whose salary and bonus for fiscal 1996 collectively exceeded $100,000 for
services rendered in all capacities to the Company and its subsidiaries for that
fiscal year. All of the executive officers named below are referred to herein as
the "Named Executive Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION/
AWARD
ANNUAL COMPENSATION ------------------
------------------------------------- SHARES OF
OTHER ANNUAL COMMON STOCK ALL OTHER
NAME AND PRINCIPAL POSITION(S) SALARY BONUS COMPENSATION UNDERLYING OPTIONS COMPENSATION(1)
- -------------------------------------- -------- ------- ------------ ------------------ ---------------
<S> <C> <C> <C> <C> <C>
James E. Ashton....................... $200,000 $37,500 $ -- -- $ 3,882
Chief Executive Officer
Carl W. Smith......................... 144,650 69,670 -- -- 3,882
President and Chief Operating
Officer
Ronald M. Miller...................... 100,167 -- 14,770(2) 40,000 2,593
Vice President, Finance Chief
Financial Officer, Secretary and
Treasurer
</TABLE>
- ------------------------------
(1) Represents the dollar value of premiums paid by the Company for term life
insurance on behalf of the Named Executive Officers and the Company's
matching 401(k) contributions.
(2) Represents a housing allowance for Mr. Miller.
OPTION GRANTS
The following table sets forth certain information concerning the grant of
options to purchase the Company's Common Stock made during fiscal 1996 to each
of the Named Executive Officers:
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES
PERCENT OF OF STOCK PRICE
NUMBER OF SHARES TOTAL APPRECIATION
OF COMMON STOCK OPTIONS GRANTED EXERCISE FOR OPTION
UNDERLYING TO EMPLOYEES OR BASE TERM(4)
OPTIONS IN FISCAL PRICE EXPIRATION -----------------
NAME AND PRINCIPAL POSITION(S) GRANTED(1) YEAR 1996(2) ($/SH)(3) DATE 5% 10%
- ----------------------------------------- ---------------- --------------- --------- ----------
---------------
<S> <C> <C> <C> <C> <C> <C>
James E. Ashton.......................... -- -- -- -- -- --
Chief Executive Officer
Carl W. Smith............................ -- -- -- -- -- --
President and Chief Operating Officer
Ronald M. Miller......................... 40,000 91% $0.50 5/15/2006 $12,580 $31,876
Vice President, Finance Chief Financial
Officer Secretary and Treasurer
</TABLE>
- ------------------------------
(1) Represents incentive stock options granted pursuant to a written
compensation arrangement and vest over no more than nine years.
(2) In 1996, the Company granted options to purchase an aggregate of 44,000
shares.
(3) In determining the fair market value of the Company's Common Stock, the
Board considered various factors, including the Company's financial
condition and business prospects, its operating results, the
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<PAGE> 45
absence of a market for its Common Stock and the risks normally associated with
manufacturing companies.
(4) Potential Realizable Value is based on certain assumed rates of appreciation
pursuant to rules prescribed by the Securities and Exchange Commission (the
"Commission"). Actual gains, if any, on stock option exercises are dependent
upon future performance of the stock price. There can be no assurance that
the amounts reflected in this table will be achieved. In accordance with the
rules promulgated by the Commission, Potential Realizable Value is based
upon the exercise price of the options, which is substantially less than the
expected initial public offering price. If the Potential Realizable Value is
calculated based on an assumed initial public offering price of $16.00 per
share at the assumed rates of appreciation over the ten-year term of the
options, the resulting gain at the end of the term would be $25.25 and
$40.25 per share, at 5% and 10%, respectively.
FISCAL YEAR-END VALUES OF STOCK OPTIONS
The following table sets forth certain information concerning the fiscal
year-end value of unexercised options held by the Named Executive Officers. None
of the Named Executive Officers exercised any options during fiscal 1996:
AGGREGATED OPTION EXERCISES
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT 12/31/96 12/31/96(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
James E. Ashton(2).............................. 200,000 206,000 $ 3,100,000 $ 3,193,000
Carl W. Smith................................... 14,850 39,150 230,175 606,825
Ronald M. Miller................................ 11,000 29,000 170,500 449,500
</TABLE>
- ------------------------------
(1) There was no public trading market for the Common Stock at December 31,
1996. Accordingly, these values have been calculated based on an initial
public offering price of $16.00 per share minus the exercise price of $0.50.
(2) On January 2, 1997, Dr. James E. Ashton exercised in full his stock option
to acquire 406,000 shares of the Company's Common Stock at an exercise price
of $0.50 per share. The shares issued upon exercise of Dr. Ashton's option
remain subject to the terms of a restricted stock purchase agreement. See
"Certain Transactions -- The Ashton Agreement."
No other compensation intended to serve as incentive for performance to
occur over a period longer than one fiscal year was paid pursuant to a long-term
incentive plan during the last fiscal year to any of the persons named in the
Summary Compensation Table.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Dr. Ashton. Under
the terms of the agreement, Dr. Ashton is to receive a base salary and a target
bonus, both of which are subject to annual review and adjustment by the Board.
For 1997, Dr. Ashton's base salary is $225,000 and his target bonus is 100% of
his salary. The actual bonus will be a multiple of the target bonus amount with
the multiple ranging from 0.0x to 2.0x. Under the terms of the agreement, if Dr.
Ashton is terminated other than for good cause, he will receive a total of
$175,000 in six monthly payments. Additionally, if there is a change of control
transaction involving the Company, and Dr. Ashton is terminated other than for
cause or is not offered an executive officer position in the post-transaction
organization, which position reports directly, or through no more than one
individual, to the board of directors of the ultimate parent entity, he shall
receive severance compensation equal to two years of the then applicable base
salary and target bonus.
The Company has entered into employment agreements with Ronald M. Miller
and Jon B. DeVault. Under the terms of the agreements, Messrs. Miller and
DeVault receive annual base salaries of $150,000 and
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<PAGE> 46
$120,000, respectively, and are eligible to receive annual target bonuses of
$60,000 and $50,000, respectively. Actual bonuses will be a multiple of the
target bonus amount with the multiple ranging from 0.0x to 2.0x. Pursuant to the
agreements, if Mr. Miller or Mr. DeVault is terminated other than for good
cause, then he shall receive six monthly payments each equal to one month's
worth of the then applicable base salary plus one-twelfth of his prior year's
bonus. Additionally, if there is a change of control transaction involving the
Company and Messrs. Miller or DeVault are terminated other than for cause or are
not offered an executive officer position in the post-transaction organization,
which position reports directly to the chief executive officer of Fiberite
immediately prior to the change of control, then he shall receive severance
compensation equal to two years of the then applicable base salary and target
bonus.
The Company has a severance agreement with Carl W. Smith pursuant to which,
if Mr. Smith is terminated other than for good cause, he shall receive the
product of 1.95 multiplied by his annualized base salary rate on the date of
termination of employment. The Board has set Mr. Smith's salary for fiscal 1997
at $151,000 and his target bonus at $60,400.
1995 LONG TERM INCENTIVE AND SHARE AWARD PLAN
The 1995 Long Term Incentive and Share Award Plan (the "Share Award Plan")
has a reserve of 1,300,000 shares of Common Stock. At January 15, 1997, 406,000
shares had been issued upon exercise of options, 403,000 shares were subject to
outstanding options at a weighted average exercise price of $0.50 and 491,000
shares remained available for future grant under the Share Award Plan. Options
may be granted to key employees, or to employees (including officers) who the
Board has determined will substantially contribute to the progress of the
Company. Both incentive and nonqualified stock options may be granted under the
Share Award Plan. The exercise price of such options must be no less than the
fair market value at the time of grant. Options granted under the Share Award
Plan are subject to individual vesting schedules but must be exercised within
ten years of the date of grant.
MANAGEMENT INCENTIVE COMPENSATION PLAN
The Company has adopted a management incentive compensation plan (the
"Management Plan") for certain management employees. Under the Management Plan,
covered employees may be paid a cash bonus if certain earnings targets are met
by the Company. The amount of the bonus depends upon the covered employee's
salary and pay grade and the percentage of the earnings target attained by the
Company (the maximum bonus is 200% of base salary). The amount of the bonus is
subject to review and adjustment by the Chief Executive Officer of the Company.
Any bonus due under the Management Plan for a given fiscal year is to be paid
within two and one-half months after the end of the fiscal year. The Management
Plan may be terminated or amended at any time by the Board. The Management Plan
is an unfunded plan and is not intended to be a qualified profit sharing plan
under the Internal Revenue Code of 1986, as amended.
1997 EMPLOYEE STOCK PURCHASE PLAN
A total of 150,000 shares of the Company's Common Stock has been reserved
for issuance under the Company's 1997 Employee Stock Purchase Plan (the
"Purchase Plan"), none of which has yet been issued. The Purchase Plan permits
eligible employees to purchase Common Stock at a discount, but only through
payroll deductions, during concurrent 24-month offering periods. Each offering
period will be divided into four consecutive 6-month purchase periods. The price
at which stock is purchased under the Purchase Plan is equal to 85% of the fair
market value of the Common Stock on the first day of the offering period or the
last day of the purchase period, whichever is lower. The initial offering period
will commence on the effective date of this Offering.
401(K) PROFIT SHARING PLANS
The Company has adopted two tax-qualified employee savings and profit
sharing plans (the "401(k) Plans") covering substantially all of the Company's
employees located in the United States, including officers, who have worked for
the Company for at least three months. Pursuant to the 401(k) Plans, employees
may elect to reduce their current compensation by up to the lesser of 15% of
eligible compensation or the annual
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<PAGE> 47
limit prescribed by law ($9,500 in 1996) and have the amount of such reduction
contributed to the 401(k) Plans on a pre-tax basis. The Plans also permit
after-tax employee contributions. The 401(k) Plan for non-union employees and
certain union employees at the Delano facility of the Company provides for a
Company matching contribution of 50% of deferrals, up to a maximum match of 2.5%
of compensation. No match is provided under the other 401(k) Plan. All
contributions are 100% vested when made. The trustee under the 401(k) Plans, at
the direction of each participant, invests the assets of the 401(k) Plans in
designated investment options. The 401(k) Plans qualify under section 401(a) and
(k) of the Internal Revenue Code of 1986, as amended (The "Internal Revenue
Code") so that contributions to the 401(k) Plans, and income earned on the
contributions, are not taxable to employees until distributed following
termination of employment, and so that the contributions are currently
deductible by the Company for income tax purposes.
PENSION PLANS
The Company has two qualified pension plans, both of which were originally
adopted by ICI Composites, covering substantially all of the Company's employees
located in the United States. The Fiberite, Inc. Service Related Pension Plan
(the "Service Related Plan") covers primarily hourly employees and provides
retirement benefits based upon the length of service completed by the employee
at retirement. Benefit levels differ for the various Company facilities. The
Fiberite, Inc. Pension Plan (the "Pension Plan" together with the Service
Related Plan, the "Pension Plans") maintained by the Company covers salaried
employees other than officers and key management employees of the Company who
are eligible to participate in the Share Award Plan. Retirement benefits are
determined by compensation and completed service at the time of retirement. The
Pension Plans are intended to qualify under Section 401(a) of the Internal
Revenue Code so that contributions are currently deductible by the Company and
benefits are not taxable to participants until received from the Pension Plans.
SPECIAL SECURITY AGREEMENT
Fiberite's business includes the research, design, development and
manufacture of defense and defense-related products for various U.S.
governmental agencies, including the Department of Defense. Accordingly, the
Department of Defense requires that Fiberite's offices and facilities have
facility security clearance issued under the Department of Defense Industrial
Security Program. The Department of Defense requires that all companies
maintaining facility security clearance be effectively insulated from foreign
ownership, control or influence. By virtue of their approximately 78% ownership
of the Company's Common Stock, the DLJ Investors currently control the Company.
The DLJ Investors are in turn approximately 80% controlled by The Equitable
Companies Incorporated which is approximately 60% owned by AXA S.A., a French
corporation. Thus, because Fiberite may be deemed to be controlled by a French
corporation, the Assistant Secretary of Defense for Command, Control,
Communications and Intelligence required Fiberite and its various corporate
owners to enter into the Security Agreement with the Department of Defense to
ensure the protection of classified information and controlled unclassified
information. The Security Agreement became effective April 9, 1996.
The Security Agreement provides that Fiberite shall, among other things, at
all times maintain policies and practices to ensure: (i) the safeguarding of
classified information and controlled unclassified information; (ii) the
performance of classified contracts; and (iii) participation in classified
programs in accordance with the Security Agreement. To help ensure such
compliance, the Security Agreement requires the board of directors of Fiberite
be composed of at least two persons with no prior relationship with Fiberite or
any of its affiliates (each an "Outside Director); two directors of Fiberite
(each an "Inside Director"); and an officer of Fiberite who has received the
requisite security clearance (the "Officer Director"). The Chairman of the Board
shall not be an Inside Director. Currently, the Outside Directors are Winchell
M. Craig and Richard C. Yancey, the Inside Directors are Thompson Dean and Karl
R. Wyss and the Officer Director is James E. Ashton. The total number of Outside
Directors and Officer Directors must be greater than the number of Inside
Directors. The Security Agreement also requires Fiberite to form a permanent
committee of Fiberite's Board of Directors to be known as the Defense Security
Committee (the "DSC"), consisting of all Outside Directors and Officer
Directors. DSC members are to use their best efforts to ensure, among other
things,
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<PAGE> 48
Fiberite's implementation of all procedures and other matters relating to the
security and safeguarding of classified and controlled unclassified information
and compliance with the Agreement.
Fiberite is required to notify the Defense Investigative Service of any
intention to form a new subsidiary or to acquire ownership or control of another
company. Additionally, pursuant to the Security Agreement, Fiberite is required
to exclude the Company from access to classified and controlled unclassified
information entrusted to Fiberite. In the event Fiberite commits a material
breach of the Security Agreement, the U.S. Government may, among other things,
revoke Fiberite's facility security clearance, terminate any classified
contracts pursuant to which Fiberite is a party and suspend Fiberite from
participating in any federal government contract.
CERTAIN TRANSACTIONS
THE ACQUISITION
In connection with the Acquisition, the Company sold a total of 10,000,000
shares of Common Stock, of which 8,971,822, 928,530 and 99,648 were sold to the
DLJ Investors, Carlisle and Steeple International, Inc. ("Steeple"),
respectively, at a purchase price of $0.50 per share. Also in connection with
the Acquisition, the Company sold $27,014,091, $2,795,735 and $300,176 of the
11.3% Subordinated Discount Notes to the DLJ Investors, Carlisle and Steeple,
respectively. The entire principal and accrued interest under the 11.3%
Subordinated Discount Notes will be repaid with the net proceeds from the
Offering. See "Use of Proceeds."
THE SHAREHOLDERS AGREEMENT
In connection with the Acquisition, the DLJ Investors, and subsequently all
stockholders of the Company (individually a "Stockholder" and collectively, the
"Stockholders"), entered into a shareholders agreement dated as of October 6,
1995 (the "Shareholders Agreement"), which provides that the Board shall consist
of four directors (or such smaller or larger number as may be agreed to by the
DLJ Investors and Carlisle), one of whom shall be nominated by Carlisle, and the
remaining number of whom shall be designated from time to time by certain of the
DLJ Investors. Each Stockholder entitled to vote on the election of directors to
the Board agreed to vote their respective shares to ensure the composition of
the Board as set forth therein.
The Shareholders Agreement imposes certain restrictions on the rights of
its Stockholders to sell or otherwise dispose of Common Stock. Pursuant to the
Shareholders Agreement, each Stockholder has agreed that it will not, directly
or indirectly, sell, assign, transfer, grant a participation in, pledge or
otherwise dispose any shares except in compliance with federal and state
securities laws and the terms and conditions of the Shareholders Agreement. The
Board has the absolute right in its discretion to refuse to permit or
acknowledge any transfer (i) to any person considered by the Board to be a
competitor or potential competitor of the Company or a person whose interests
are otherwise adverse to the Company or any of the Stockholders or (ii) if such
transfer could have adverse consequences for the Company or its Stockholders. A
Stockholder may transfer shares to certain permitted transferees during the
period commencing October 6, 1995 and ending on the date that is later to occur
of (a) the third anniversary of the effective date of the Offering and (b)
October 6, 2000 (the "Initial Restriction Period") to any third party, provided
that, the transfer complies with the various restrictions described in the
Shareholders Agreement. After the Initial Restriction Period, certain of these
restrictions lapse. In certain circumstances, the DLJ Investors, Carlisle and
other institutional investors (the "Institutional Stockholders") and their
respective permitted transferees have tag-along rights to participate in sales
by other Institutional Stockholders. Additionally, the DLJ Investors have
drag-along rights pursuant to which other Stockholders may be required to
participate in certain transactions. The Company has the right to repurchase all
shares owned by any employee of the Company who has become party to and agreed
to be bound by the Shareholders Agreement (the "Management Stockholders") and
its permitted transferees upon the termination of such Management Stockholder's
employment, which right shall terminate at the one year anniversary of the
effective date of this Offering, unless the Management Stockholder is terminated
for cause.
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<PAGE> 49
Upon the request of one or more of the DLJ Investors, the Company shall
effect the registration under the Securities Act of 1933, as amended (the
"Securities Act") of such entity's shares. The Company will give written notice
of such request (a "Demand Registration") to all other stockholders, and
thereupon use its best efforts to effect a registration under the Securities Act
of (i) the shares that the Company has been requested to register by the DLJ
Investors and (ii) all other shares that any other Institutional Stockholder
requests the Company to register; provided that the Company shall not be
obligated to effect more than five Demand Registrations in total. The Company
will pay registration expenses, including all registration and filing fees,
among other expenses and fees, in connection with any Demand Registration. In
addition, in certain circumstances, as described in the Shareholders Agreement,
if the Company registers shares of its Common Stock, certain of the Company's
stockholders are entitled to include their shares of Common Stock in such
registration ("Piggyback Registration") subject to the ability of the
underwriters to limit the number of shares included in the Offering. Such
Piggyback Registration rights are not available in connection with this
Offering.
Pursuant to the Shareholders Agreement, the Company has retained DLJSC as
its exclusive financial and investment banking advisor for a period of ten years
from the date of the Acquisition. Additionally, until the closing of this
Offering, both DLJMB and Carlisle Group are each to be paid management advisory
fees of $250,000 per year.
THE CARLISLE AGREEMENT
In connection with the Acquisition, in October 1995, the Company agreed to
enter into a restricted stock purchase agreement with Carlisle Group (the
"Carlisle Agreement"). On July 17, 1996, the Company entered into the Carlisle
Agreement, which was subsequently amended and restated on December 31, 1996.
Pursuant to the Carlisle Agreement, Carlisle Group purchased 741,957 shares of
the Common Stock at a purchase price of $0.50 per share for an aggregate of
$370,979 (the "Carlisle Shares") and paid the Company $7,420 cash and issued a
recourse secured promissory note in principal amount of $363,559 (the "Carlisle
Recourse Note"). The Carlisle Recourse Note bears an interest rate of 8.25%. The
unpaid principal amount of the Carlisle Recourse Note, together with all accrued
and unpaid interest, is payable in full on October 6, 2003. Carlisle Group's
payment and performance obligations under the Carlisle Recourse Note and the
Carlisle Agreement are secured by a pledge agreement by and between the Company
and Carlisle Group, dated July 17, 1996 (the "Carlisle Pledge Agreement"),
pursuant to which Carlisle Group assigns, transfers, pledges and grants a
continuing first priority security interest in: (i) the Carlisle Shares; (ii)
all dividends, cash, options, warrants, shares of stock or other property issued
in respect of or in exchange for any or all of the Carlisle Shares; and (iii)
all proceeds of any of the foregoing to the Company.
THE ASHTON AGREEMENT
In October 1995, the Company granted Dr. Ashton a stock option to purchase
406,000 shares (the "Ashton Shares") of Common Stock at a price of $0.50 per
share (the "Ashton Option"). Dr. Ashton exercised the Ashton Option was
exercised on January 2, 1997, in full, and all of the Ashton Shares were issued
in exchange for a cash payment of $4,060 and a recourse secured promissory note
in principal amount of $198,940 (the "Ashton Recourse Note"). The Ashton
Recourse Note bears an interest rate of 8.25%. The unpaid principal amount of
the Ashton Recourse Note, together with all accrued and unpaid interest, is
payable in full on October 6, 2003.
In accordance with the Ashton Option, the Ashton Shares were purchased
pursuant to, and governed by, the terms and provisions of the restricted stock
purchase agreement dated as of January 2, 1997 (the "Ashton Agreement"). Dr.
Ashton's payment and performance obligations under the Ashton Recourse Note and
the Ashton Agreement are secured by a pledge agreement by and between the
Company and Dr. Ashton, dated January 2, 1997, pursuant to which Dr. Ashton
assigns, transfers, pledges and grants a continuing first priority security
interest in: (i) the Ashton Shares; (ii) all dividends, cash, options, warrants,
shares of stock or other property issued in respect of or in exchange for any
and all of the Ashton Shares; and (iii) all proceeds of any of the foregoing to
the Company.
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<PAGE> 50
MANAGEMENT SECURITIES PURCHASE AGREEMENTS
In October 1995, the Company agreed to enter into securities purchase
agreements with Carl W. Smith and Jon B. DeVault. In April 1996, the Company
agreed to enter into a securities purchase agreement with Ronald M. Miller.
Pursuant to the agreements, Mr. Smith purchased 43,000 shares of Common Stock
and Messrs. Miller and DeVault each purchased 25,000 shares of Common Stock, all
at a purchase price of $0.50 per share (the "Shares"). Additionally, Messrs.
DeVault, Miller and Smith each purchased 11.3% Subordinated Discount Notes at a
purchase price of $47.2644 per $100 principal amount thereof. Mr. DeVault paid
the Company a total of $87,500 in cash, $12,500 in payment for his Shares and
$75,000 to purchase his 11.3% Subordinated Discount Notes. Mr. Miller paid the
Company $43,750 in cash and issued a promissory note to the Company in the
amount of $43,750 for an aggregate of $87,500, $12,500 in payment for his Shares
and $75,000 to purchase his 11.3% Subordinated Discount Notes. Mr. Smith paid
the Company $75,250 in cash and issued a promissory note to the Company in the
amount of $75,250 for an aggregate of $150,500, $21,500 in payment for his
Shares and $129,000 to purchase his 11.3% Subordinated Discount Notes. The
aforementioned promissory notes bear an interest rate of 11.3% per annum and
principal and interest are payable in four equal yearly installments with the
final payment due on July 1, 2000. The Shares and 11.3% Subordinated Discount
Notes represent the pledged collateral under the promissory notes of each of
Messr. Smith and Miller.
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<PAGE> 51
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of January 15, 1997, and as adjusted
to reflect the sale of the shares offered hereby, assuming no exercise of the
Underwriters' over-allotment option, by: (i) each person who is known by the
Company to be the beneficial owner of more than five percent of the Company's
Common Stock; (ii) each of the Named Executive Officers; (iii) each director of
the Company; (iv) all executive officers and directors of the Company as a
group; and (v) each of the Selling Stockholders. Except pursuant to applicable
community property laws or as indicated in the footnotes to this table, the
Company believes that each stockholder identified in the table possesses sole
voting and investment power with respect to all shares of Common Stock shown as
beneficially owned by such stockholder.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO THE NUMBER AFTER THE
OFFERING(1) OF SHARES OFFERING
-------------------- BEING --------------------
BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------- --------- ------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
5% Stockholders:
DLJ Merchant Banking Partners, L.P. and
related investors(2)..................... 8,971,822 78.1% 1,794,364 7,177,458 49.5%
Carlisle Group, L.P.(3).................... 1,670,487 14.5 185,706 1,484,781 10.2
Officers and Directors:
James E. Ashton(4)......................... 406,000 3.5 -- 406,000 2.8
Carl W. Smith.............................. 59,200 * -- 59,200 *
Ronald M. Miller........................... 37,000 * -- 37,000 *
Thompson Dean(5)........................... -- -- -- -- --
Reid S. Perper(5).......................... -- -- -- -- --
Karl Wyss(5)............................... -- -- -- -- --
David L. Canedo(6)......................... -- -- -- -- --
All officers and directors as a group
(6 persons).............................. 502,200 4.4 502,200 3.5
Other Selling Stockholders:
Steeple International, Inc. ............... 99,648 * 19,930 79,718 *
</TABLE>
- ------------------------------
* Less than one percent.
(1) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended
("Exchange Act"), a person has beneficial ownership of any securities over
which such person directly or indirectly, through any contract, arrangement,
undertaking, relationship or otherwise has or shares voting power and/or
investment power and as to which such person has the right to acquire such
voting and/or investment power within 60 days. Percentage of beneficial
ownership as to any person as of a particular date is calculated by dividing
the number of shares beneficially owned by such person by the sum of the
number of shares outstanding as of such date and the number of shares as to
which such person has the right to acquire voting and/or investment power
within sixty (60) days of such date.
(2) Consists of 8,971,822 shares held directly by the following related
investors, each of whom is affiliated with DLJSC: DLJ Merchant Banking
Partners, L.P. ("DLJMBLP"), 4,226,157 shares; DLJ International Partners,
C.V. ("DLJIP"), 1,889,701 shares; DLJ Merchant Banking Funding, Inc.
("DLJMBF"), 1,778,584 shares; DLJ Offshore Partners, C.V., ("DLJOP") 109,566
shares; and DLJ First ESC L.L.C. ("DLJ ESC"), 967,814 shares. See "Certain
Transactions." The address of each of DLJMBLP, DLJMBF and DLJ ESC is 277
Park Avenue, New York, New York 10172. The address of each of DLJIP and
DLJOP is John B. Gorsiraweg 6, Willemstad, Curacao, Netherlands Antilles. As
a general partner of each of DLJMBLP, DLJIP and DLJOP, DLJ Merchant Banking,
Inc. ("DLJMB") may be deemed to beneficially own indirectly all of the
shares held directly by DLJMBLP, DLJIP and DLJOP, and as the parent of each
of DLJMB, DLJMBF and DLJ LBO Plans Management Corporation (the manager of
DLJ ESC), Donaldson, Lufkin & Jenrette, Inc. ("DLJ") may be deemed to
beneficially
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<PAGE> 52
own indirectly all of the shares held by DLJMBLP, DLJIP, DLJMBF, DLJOP and
DLJ ESC. DLJ is an indirect, 80% owned subsidiary of The Equitable Companies
Incorporated. The address of DLJMB and DLJ is 277 Park Avenue, New York, New
York 10172.
(3) Consists of 741,957 shares held by Carlisle Group and 928,530 shares held by
Carlisle. The address of each of Carlisle Group and Carlisle is 7777 Fay
Avenue, Suite 200, La Jolla, CA 92037. As a general partner of Carlisle,
Carlisle Group may be deemed to beneficially own all of the shares held
directly by Carlisle.
(4) Dr. Ashton is a limited partner of Carlisle and Carlisle Group.
(5) The business address of the named person is c/o DLJ Merchant Banking, 277
Park Avenue, New York, New York. Mr. Dean, Mr. Wyss and Mr. Perper are
Managing General Partner, Managing Director and Principal, respectively, of
DLJMB. In such capacities, Messrs. Dean, Wyss and Perper may be deemed to
have beneficial ownership over the 8,971,822 shares held directly by the
entities described in footnote 2 above; however, they disclaim any
beneficial ownership, except to the extent of their pecuniary interest
therein.
(6) The business address of the named person is c/o Carlisle Enterprises, L.P.,
7777 Fay Avenue, Suite 200, La Jolla, CA 92037. Mr. Canedo is a Managing
Partner of Carlisle Enterprise, L.P., the General Partner of Carlisle Group,
which in turn is the General Partner of Carlisle. In such capacity, Mr.
Canedo may be deemed to have beneficial ownership with respect to the
1,670,487 shares owned by the entities described in footnote 3 above;
however, he disclaims beneficial ownership, except to the extent of his
pecuniary interest therein.
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and certain
provisions of the Company's Certificate and Bylaws is a summary and is qualified
in its entirety by the provisions of the Certificate and Bylaws, which have been
filed as exhibits to the Company's Registration Statement, of which this
Prospectus is a part.
Upon the closing of this Offering, the authorized Capital Stock of the
Company will consist of 25,000,000 shares of Common Stock, $0.01 par value and
2,000,000 shares of Preferred Stock, $0.01 par value.
COMMON STOCK
As of December 31, 1996, there were 11,088,657 shares of Common Stock
outstanding held of record by thirty-one (31) stockholders. The holders of
Common Stock are entitled to one vote for each share held of record on all
matters submitted to a vote of the holders of Common Stock. All outstanding
shares of Common Stock are fully paid and nonassessable, and the shares of
Common Stock to be issued upon completion of the Offering will be fully paid and
nonassessable. The Certificate provides that the Board is vested with the
authority to determine (i) rights, preferences and privileges of holders of
Common Stock subject to the rights of the holders of any shares of any series of
Preferred Stock that the Company may issue in the future and (ii) the amount or
amounts payable upon the shares in the event of liquidation, dissolution or
winding up of the Company. The Certificate does not provide for cumulative
voting, and accordingly, the holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election.
Pursuant to the Shareholders Agreement, all Stockholders who are a party to
that agreement and who are entitled to vote for the election of directors to the
Board are contractually obligated to vote their respective shares for the
Carlisle designated director and for the remaining directors as designated by
the DLJ Investors.
PREFERRED STOCK
The Board has the authority, without action by the stockholders, to
designate and issue Preferred Stock in one or more series and to designate the
dividend rate, voting rights and other rights, preferences and
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<PAGE> 53
restrictions of each series, any or all of which may be greater than the rights
of the Common Stock. It is not possible to state the actual effect of the
issuance of any shares of Preferred Stock on the rights of holders of the Common
Stock until the Board determines the specific rights of the holders of such
Preferred Stock. However, the effects might include, among other things,
restricting dividends on the Common Stock, diluting the voting power of the
Common Stock, impairing the liquidation rights of the Common Stock and delaying
or preventing a change in control of the Company without further action by the
stockholders. The Company has no present plans to issue any shares of Preferred
Stock.
REGISTRATION RIGHTS
Certain holders of shares of Common Stock of the Company have rights to
register those shares under the Securities Act. These rights are set forth in
the Shareholders Agreement among the Company and its current Stockholders.
Subject to certain limitations in the Shareholders Agreement, any of the DLJ
Investors may require, on up to five occasions Demand Registrations. In certain
circumstances, as set forth in the Shareholders Agreement, if the Company
registers shares of its Common Stock, certain of the Company's Stockholders are
entitled to Piggyback Registration rights, subject to the ability of the
underwriters to limit the number of shares included in the Offering. The Company
is responsible for paying all fees, costs and expenses associated with Demand
and Piggyback Registrations, other than underwriting discounts and commissions.
ANTI-TAKEOVER PROVISIONS
General. Certain provisions of the DGCL and the Company's Certificate and
Bylaws may discourage or make it more difficult for a third party to acquire
control of the Company. Such provisions may limit the price that certain
investors are willing to pay in the future for shares of the Company's Common
Stock. These certain provisions may also have the effect of discouraging or
preventing certain types of transactions involving an actual or threatened
change of control of the Company (including unsolicited takeover attempts), even
though such a transaction may offer the Company's stockholders the opportunity
to sell their stock at a price above the prevailing market price. The
Certificate allows the Company to issue Preferred Stock with rights senior to
those of the Common Stock and other rights that could adversely affect the
interests of holders of shares of Common Stock without any further vote or
action by the stockholders. The issuance of Preferred Stock, for example, could
decrease the amount of earnings or assets available for distribution to the
holders of shares of Common Stock or could adversely affect the rights and
powers, including voting rights, of the holders of shares of Common Stock. In
certain circumstances, such issuance could have the effect of decreasing the
market price of the Common Stock, as well as having the anti-takeover effect
discussed above.
Delaware Takeover Statute. The Company is subject to Section 203 of the
DGCL, which prohibits a Delaware corporation from engaging in a "business
combination" with certain persons ("Interested Stockholders") for three years
following the time any such person becomes an Interested Stockholder. Interested
Stockholders generally include (i) persons who are the beneficial owners of 15%
or more of the outstanding voting stock of the corporation, and (ii) persons who
are affiliates or associates of the corporation and who hold 15% or more of the
corporation's outstanding voting stock at any time within three years before the
date on which such person's status as an Interested Stockholder is determined.
Subject to certain exceptions, a business combination includes, among other
things: (i) mergers or consolidations; (ii) the sale, lease, exchange, mortgage,
pledge, transfer or other disposition of assets having an aggregate market value
equal to 10% or more of either the aggregate market value of all assets of the
corporation determined on a consolidated basis or the aggregate market value of
all the outstanding stock of the corporation; (iii) transactions that result in,
among other things, the issuance or transfer by the corporation of any stock of
the corporation to the Interested Stockholder, except pursuant to a transaction
that effects a pro rata distribution to all stockholders of the corporation;
(iv) any transaction involving the corporation that has the effect of increasing
the proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation that is
owned directly or indirectly by the Interested Stockholder; or (v) any receipt
by the Interested Stockholder of the benefit (except proportionately as a
stockholder) of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation.
52
<PAGE> 54
Section 203 does not apply to a business combination if: (i) before a
person becomes an Interested Stockholder, the board of directors of the
corporation approved either the business combination or the transaction which
resulted in the Interested Stockholder becoming an Interested Stockholder; (ii)
upon consummation of the transaction which resulted in the stockholder becoming
an Interested Stockholder, the Interested Stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, other than certain excluded shares; or (iii) at or subsequent to such
time the business combination is (a) approved by the board of directors of the
corporation and (b) authorized at a regular or special meeting of stockholders,
and not by written consent, by the affirmative vote of the holders of at least
two-thirds of the outstanding voting stock of the corporation not owned by the
Interested Stockholder.
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS
The Company's Bylaws provide that special meetings of the stockholders of
the Company may be called only by the President of the Company, and shall be
called by the President or Secretary of the Company at the written request of a
majority of the Board or by any person or persons holding shares representing a
majority of the outstanding capital stock entitled to vote. The Company's Bylaws
also require advance written notice of a special meeting to each stockholder of
the Company entitled to vote at such meeting not less than 10, nor more than 60,
days prior to the meeting. The Company's Certificate does not include a
provision for cumulative voting in the election of directors. Under cumulative
voting, a minority stockholder holding a sufficient number of shares may be able
to ensure the election of one or more directors. The absence of cumulative
voting may have the effect of limiting the ability of minority stockholders to
effect changes in the Board and, as a result, may have the effect of deterring
hostile takeover or delaying or preventing changes in control or management of
the Company.
The Company's Bylaws provide that the authorized number of directors may be
changed by an amendment to the Bylaws adopted by the Board or by the
stockholders. Vacancies in the Board may be filled either by holders of a
majority of the Company's directors then in office, though less than a quorum,
or by a sole remaining director, or if there are no directors in office, in the
manner provided by statute. If the directors then in office constitute less than
a majority of the whole board, any stockholder or stockholders holding at least
ten percent (10%) of the outstanding capital stock entitled to vote may apply to
the Court of Chancery to order an election.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common
Stock. Future sales of substantial amounts of Common Stock in the public market
could adversely affect market prices prevailing from time to time. Furthermore,
because only a limited number of shares will be available for sale shortly after
this Offering due to of certain contractual and legal restrictions on resale
described below, sales of substantial amounts of Common Stock in the public
market after such restrictions lapse could adversely affect the prevailing
market price at such time and the ability of the Company to raise equity capital
in the future.
Upon completion of this Offering, the Company will have outstanding an
aggregate of 14,494,657 shares of Common Stock assuming no exercise of
outstanding options to purchase Common Stock. Of these shares, the 5,000,000
shares of Common Stock sold in this Offering will be freely tradable without
restriction or further registration under the Securities Act, unless such shares
are held by "affiliates" of the Company, as that term is defined in Rule 144
under the Securities Act ("Affiliates"). The remaining 9,494,657 shares were
sold by the Company in reliance on exemptions from the registration requirements
of the Securities Act and are "restricted" securities within the meaning of Rule
144 under the Securities Act (the "Restricted Shares"). Restricted Shares may be
sold in the public market only if registered or if they qualify for an exemption
from registration under Rules 144 or 701 promulgated under the Securities Act.
The DLJ Investors, Carlisle and certain other stockholders holding an aggregate
of 8,741,957 shares of Common Stock have agreed pursuant to
53
<PAGE> 55
certain agreements with the Company and among one another that they will not
sell such Common Stock for a period ending 180 days from the effective date of
the Offering without the prior written consent of the Representatives of the
Underwriters. Holders of an additional 752,700 shares of Common Stock have
agreed pursuant to such agreements that they will not sell such Common Stock for
a period ending one year from the effective date of the Offering without the
prior written consent of the Representatives of the Underwriters. The
Representatives may agree upon request to release some or all of the shares
subject to lock-up agreements for resale. When determining whether to release
shares from the lock-up agreements, the Representatives will consider, among
other factors, the stockholder's reasons for requesting the release, the number
of shares for which the release is being requested and market conditions at the
time. Following expiration of the foregoing lock-up agreements, all such
Restricted Shares will be available for sale in the public market subject to
compliance with Rule 144 or Rule 701.
In general, under the amendment to Rule 144, which becomes effective as of
April 1997, a person (or persons whose shares are aggregated), including an
Affiliate, who has beneficially owned shares for at least one year is entitled
to sell, within any three-month period commencing 90 days after the
effectiveness of the Offering, a number of shares that does not exceed the
greater of (i) 1% of the then outstanding shares of Common Stock (144,947 shares
immediately after this offering) or (ii) the average weekly trading volume of
the Common Stock on The New York Stock Exchange during the four calendar weeks
preceding such sale, subject to the filing of a Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about the Company. In addition, a person who is not deemed to have been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two
years, would be entitled to sell such shares under Rule 144(k) without regard to
the requirements described above. In general, under Rule 701 of the Securities
Act as currently in effect, any employee, consultant or advisor of the Company
who purchased shares from the Company in connection with a compensatory stock or
option plan or written employment agreement is eligible to resell such shares 90
days after the effective date of this Offering in reliance on Rule 144, but
without compliance with certain restrictions, including the holding period,
contained in Rule 144.
Upon completion of this Offering, the DLJ Investors will be entitled to
certain rights to request registration of up to 7,177,458 Restricted Shares
under the Securities Act, and the remaining parties to the Shareholders
Agreement, including Carlisle and the remaining Stockholders, have certain
rights to include up to 2,317,199 Restricted Shares in a registration initiated
by the Company or the DLJ Investors. See "Description of Capital
Stock -- Registration Rights." Registration of such shares under the Securities
Act would result in such shares becoming freely tradable without restriction
under the Securities Act (except for shares purchased by Affiliates) immediately
upon the effectiveness of such registration.
Within 90 days of the date of this Prospectus, the Company intends to file
a registration statement under the Securities Act to register shares of Common
Stock reserved for issuance under its equity incentive plans, thus permitting
the resale of such shares by non-affiliates in the public market without
restriction under the Securities Act. See "Management -- 1997 Employee Stock
Purchase Plan, -- 1995 Long Term Incentive and Share Award Plan." Such
registration statements will become effective immediately upon filing. As of
January 15, 1997 403,000 options to purchase shares of Common Stock were
outstanding under the Company's stock option plans and agreements, all of which
are subject to the lock-up agreements described above.
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<PAGE> 56
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement
(the form of which is filed as an exhibit to this Registration Statement, of
which this Prospectus is a part), the underwriters named below (the
"Underwriters"), for whom DLJSC, Cowen & Company and Salomon Brothers Inc are
acting as representatives (collectively, the "Representatives"), have severally
agreed to purchase from the Company and the Selling Stockholders an aggregate of
5,000,000 shares of Common Stock. The number of shares of Common Stock that each
Underwriter has agreed to purchase is set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.......................
Cowen & Company...........................................................
Salomon Brothers Inc......................................................
Total........................................................... 5,000,000
----------
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company, the Selling
Stockholders and their counsel and independent auditors. The Underwriters are
obligated to take and pay for all the shares of Common Stock offered hereby
(other than shares of Common Stock covered by the over-allotment option) if any
are taken.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow and such dealers may
reallow a concession not in excess of $ per share to certain other dealers.
After the initial public offering of the shares, the offering price and other
selling terms may be changed by the Representatives of the Underwriters. The
Underwriters do not intend to sell any of the shares of Common Stock offered
hereby to any accounts over which they exercise discretionary authority.
Certain of the Selling Stockholders, and under certain circumstances the
Company, have granted to the Underwriters an option, exercisable no later than
30 days after the date of this Prospectus, to purchase up to 750,000 additional
shares of Common Stock at the initial public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus. To the
extent that the Underwriters exercise this option, each of the Underwriters will
be committed, subject to certain conditions, to purchase such additional shares
in approximately the same proportion as set forth in the above table. Such
Selling Stockholders, and the Company, as the case may be, will be obligated,
pursuant to the option, to sell shares to the Underwriters to the extent the
option is exercised. The Underwriters may exercise such option only to cover
over-allotments made in connection with the Offering.
The Offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the Offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
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<PAGE> 57
The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the Underwriters against certain liabilities,
including civil liabilities under the Securities Act, or will contribute to
payments the Underwriters may be required to make in respect thereof.
The Company, certain members of management and other security holders have
agreed with the Representatives not to directly or indirectly offer, pledge,
sell, contract to sell, grant any option to purchase, sell any option or
contract to purchase, grant any right or warrant for the sale of or otherwise
dispose of any Common Stock or any securities convertible into or exercisable or
exchangeable for such Common Stock or in any manner transfer all or a portion of
the economic consequences or ownership of Common Stock without the prior written
consent of DLJSC, for a period of 180 days after the effective date of this
Offering.
Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company, the Selling Stockholders and the
Representatives. Among the factors to be considered in determining the initial
public offering price are prevailing market conditions, revenues and earnings of
the Company, market valuations of other companies engaged in activities similar
to the Company, estimates of the business potential and prospects of the
Company, the present state of the Company's business operations, the Company's
management and other factors deemed relevant. The estimated initial public
offering price range set forth on the cover of this preliminary prospectus is
subject to change as a result of market conditions and other factors.
This Offering is being conducted in accordance with the applicable
provisions of Schedule E ("Schedule E") to the Bylaws of the National
Association of Securities Dealers, Inc. (the "NASD") because DLJSC may be deemed
to be an "affiliate" of the Company, as such term is defined in Schedule E, by
virtue of the fact that affiliates of DLJSC may be deemed to beneficially own
greater than 10% of the voting stock of the Company. Under Schedule E, when a
member of the NASD, such as DLJSC, proposes to underwrite or otherwise assist in
the distribution of an affiliate's securities in a public offering, the price at
which such securities are to be distributed to the public must not be higher
than that recommended by a "qualified independent underwriter," as defined in
Section 2(o) of Schedule E, who must participate in the preparation of the
registration statement and the prospectus and who must exercise the usual
standards of due diligence with respect thereto. The NASD Directed Proceeds
Provision provides generally that, if more than 10% of the net proceeds from the
sale of securities, not including underwriting compensation, is paid to any
underwriter of such securities or its affiliates, the price at which such
securities are to be distributed to the public must be established by a
qualified independent underwriter as described above. In accordance with such
requirements, Salomon Brothers Inc has agreed to act as the qualified
independent underwriter in connection with the Offering, has participated in the
preparation of this Prospectus and the Registration Statement of which this
Prospectus forms a part and has exercised the usual standard of due diligence
with respect thereto.
ERISA MATTERS FOR PENSION PLANS AND INSURANCE COMPANIES
The Company and certain affiliates of the Company, including DLJSC and the
Equitable Companies Incorporated, may each be considered a "party in interest"
within the meaning of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or a "disqualified person" within the meaning of the Internal
Revenue Code with respect to many employee benefit plans. Prohibited
transactions within the meaning of ERISA or the Internal Revenue Code may arise,
for example, if the shares of Common Stock are acquired by or with the assets of
a pension or other employee benefit plan with respect to which DLJSC or certain
of its affiliates, including The Equitable Companies Incorporated, is a service
provider, unless such shares of Common Stock are acquired pursuant to an
exemption for transactions effected on behalf of such plan by a "qualified
professional asset manager" or pursuant to any other available exemption. The
assets of a pension or other employee benefit plan may include assets held in
the general account of an insurance company that are deemed to be "plan assets"
under ERISA. Any insurance company or pension or employee benefit plan proposing
to invest in the shares of Common Stock should consult with its legal counsel.
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<PAGE> 58
LEGAL MATTERS
The validity of the securities offered hereby has been and general
corporate legal matters will be passed upon for the Company by Gray Cary Ware &
Freidenrich, A Professional Corporation, San Diego, California. Cahill Gordon &
Reindel, a partnership including a professional corporation, New York, New York,
is acting as counsel for the Underwriters in connection with certain legal
matters relating to the sale of the Common Stock offered hereby. Additionally,
Cahill Gordon & Reindel served as counsel to management and the
DLJ Investors, and Gray Cary Ware & Freidenrich served as counsel to Carlisle,
in connection with the Acquisition.
EXPERTS
The Consolidated Financial Statements and schedule for the period from
October 6, 1995 to December 31, 1995 and the year ended December 31, 1996,
included in this Prospectus and elsewhere in the Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are included herein and
incorporated by reference in reliance upon the authority of said firm as experts
in giving said reports.
The Consolidated Financial Statements and schedules for the fiscal year
ended December 25, 1994 and the nine-month period ended October 6, 1995 included
in this Prospectus and elsewhere in this Registration Statement have been
audited by KPMG Peat Marwick LLP, independent public accountants, as indicated
in their reports with respect thereto, and are included and incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement (which
term shall include any amendments thereto) on Form S-1 under the Securities Act
with respect to the Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement. As used herein, the term
"Registration Statement" means the initial Registration Statement (including the
exhibits, schedules, financial statements and notes filed as part thereof) and
any and all amendments thereto. This Prospectus omits certain information
contained in the Registration Statement as permitted by the rules and
regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement. Statements herein concerning the contents of any
contract or other document are not necessarily complete and in each instance
references made to such contract or other document filed with the Commission as
an exhibit to the Registration Statement, each such statement being qualified by
and subject to such reference in all respects. With respect to each such
document filed with the Commission as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved.
As a result of the Offering, the Company will become subject to the
informational requirements of the Exchange Act, and in accordance therewith,
will file reports and other information with the Commission. Reports,
Registration Statements, Proxy Statements, and other information filed by the
Company with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549 and at the Commission's Regional
Offices: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7
Trade Center, New York, New York 10048. Copies of such material can be obtained
at prescribed rates from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549. The Commission maintains
a World Wide Web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. The address of the site is http://www.sec.gov.
The Company intends to furnish holders of the Common Stock with annual
reports containing, among other information, audited consolidated financial
statements certified by an independent audited accounting firm and quarterly
reports containing unaudited condensed financial information for the first three
quarters of each fiscal year. The Company intends to furnish such other reports
as it may determine or as may be required by law.
57
<PAGE> 59
FIBERITE HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Public Accountants
KPMG Peat Marwick LLP............................................................. F-2
Arthur Andersen LLP............................................................... F-3
Consolidated Balance Sheets -- As of December 31, 1995 and 1996..................... F-4
Consolidated Statements of Operations -- For the Fiscal Year ended December 25,
1994, the Period From December 26, 1994 to October 6, 1995, the Period From
October 6, 1995 to December 31, 1995 and for the Year ended December 31, 1996..... F-5
Consolidated Statements of Stockholders' Deficit -- For the Fiscal Year ended
December 25, 1994, the Period From December 26, 1994 to October 6, 1995, the
Period From October 6, 1995 to December 31, 1995 and the Year ended December 31,
1996.............................................................................. F-6
Consolidated Statements of Cash Flows -- For the Fiscal year ended December 25,
1994, the Period From December 26, 1994 to October 6, 1995, the Period From
October 6, 1995 to December 31, 1995 and for the Year ended December 31, 1996..... F-7
Notes to Consolidated Financial Statements.......................................... F-8
</TABLE>
F-1
<PAGE> 60
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholder
ICI Composites, Inc.
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of ICI Composites Inc. (a wholly-owned
subsidiary of ICI American Holdings Inc.) (the Predecessor) for the fiscal year
ended December 25, 1994 and the nine-month period ended October 6, 1995. These
consolidated financial statements are the responsibility of the Predecessor's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of ICI
Composites Inc. (a wholly-owned subsidiary of ICI American Holdings Inc.) for
the fiscal year ended December 25, 1994 and the nine-month period ended October
6, 1995 in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Phoenix, Arizona
January 17, 1997
F-2
<PAGE> 61
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Fiberite Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of Fiberite
Holdings, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1995
and 1996 and the related consolidated statements of operations, stockholders'
equity and cash flows for the period from October 6, 1995 to December 31, 1995
and the year ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Fiberite Holdings, Inc. and
subsidiaries as of December 31, 1995 and 1996 and the results of its operations
and its cash flows for the period from October 6, 1995 to December 31, 1995 and
the year ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ Arthur Andersen LLP
Phoenix, Arizona
February 19, 1997
F-3
<PAGE> 62
FIBERITE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 568 $ 755
Accounts receivable, net...................................... 29,166 27,664
Inventories................................................... 20,470 24,402
Prepaid expenses.............................................. 1,125 737
Deferred tax asset............................................ 455 2,181
-------- --------
Total current assets..................................... 51,784 55,739
-------- --------
Deferred tax asset................................................. -- 179
Property, plant and equipment, net................................. 95,077 88,526
Intangible assets.................................................. 12,659 11,998
Deferred financing costs........................................... 5,909 4,746
-------- --------
Total assets............................................. $165,429 $161,188
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable.............................................. $ 16,213 $ 19,864
Accrued payroll and benefits.................................. 3,652 4,752
Accrued liabilities and other................................. 5,530 5,459
Current portion of pension and post-retirement benefits....... 1,809 1,000
Current portion of long-term debt............................. 6,900 6,900
-------- --------
Total current liabilities................................ 34,104 37,975
-------- --------
Accrued pension benefits, net of current portion................... 4,579 6,363
Accrued post-retirement benefits, net of current portion........... 11,746 12,485
Long-term debt, net of current portion............................. 115,478 105,702
Other non-current liabilities...................................... 1,000 750
-------- --------
Total liabilities........................................ 166,907 163,275
-------- --------
Commitments and contingencies
Stockholders' deficit:
Preferred stock, $.01 par value, 2.0 million shares
authorized, no shares issued or outstanding.................. -- --
Common stock, $.01 par value, 15.0 million shares authorized,
11.1 million shares issued and outstanding................... 111 111
Additional paid-in capital.................................... 4,889 14,747
Accumulated deficit........................................... (6,478) (16,456)
Foreign currency translation adjustment....................... -- (489)
-------- --------
Total stockholders' deficit.............................. (1,478) (2,087)
-------- --------
Total liabilities and stockholders' deficit.............. $165,429 $161,188
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 63
FIBERITE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREDECESSOR
------------------------------------- THE COMPANY
FOR THE PERIOD ----------------------------------------
FISCAL YEAR DECEMBER 26, 1994 FOR THE PERIOD
ENDED TO OCTOBER 6, OCTOBER 6, 1995 TO YEAR ENDED
DECEMBER 25, 1994 1995 DECEMBER 31, 1995 DECEMBER 31, 1996
----------------- ----------------- -------------------- -----------------
<S> <C> <C> <C> <C>
Net sales.................... $ 172,970 $ 161,703 $ 45,622 $ 218,827
Cost of sales................ 139,469 131,928 37,922 176,088
-------- -------- ------- --------
Gross profit....... 33,501 29,775 7,700 42,739
Operating expenses:
Marketing, general and
administrative.......... 10,315 16,628 6,707 20,495
Research and technology.... 8,134 7,089 2,913 8,890
Stock-based compensation... -- -- -- 9,678
Amortization............... -- 110 1,680 2,879
-------- -------- ------- --------
Operating income
(loss)................ 15,052 5,948 (3,600) 797
Interest (income) expense,
net........................ (127) (100) 2,878 10,775
-------- -------- ------- --------
Income (loss) before
income taxes.......... 15,179 6,048 (6,478) (9,978)
-------- -------- ------- --------
Income tax expense........... 5,788 3,419 -- --
-------- -------- ------- --------
Net income (loss)....... $ 9,391 $ 2,629 $ (6,478) $ (9,978)
======== ======== ======= ========
Net income (loss) per common
and common equivalent
share...................... $ 0.93 $ 0.26 $ (0.58) $ (0.90)
======== ======== ======= ========
Common and common equivalent
shares..................... 10,068 10,068 11,131 11,131
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 64
FIBERITE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ADJUSTMENT FOR FOREIGN
ADDITIONAL MINIMUM CURRENCY
COMMON PAID-IN ACCUMULATED PENSION TRANSLATION STOCKHOLDERS'
STOCK CAPITAL DEFICIT LIABILITY ADJUSTMENT EQUITY (DEFICIT)
------ ---------- ----------- -------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR:
Balance, December 26, 1993..... $ 1 $ 203,834 $(124,203) $ (624) $ (134) $ 78,874
Capital contribution......... -- 3,700 -- -- -- 3,700
Net income................... -- -- 9,391 -- -- 9,391
Foreign currency translation
adjustment................ -- -- -- -- 1,160 1,160
Minimum pension liability
adjustment................ -- -- -- 306 -- 306
--- --------- --------- ----- ------ --------
Balance, December 25, 1994..... 1 207,534 (114,812) (318) 1,026 93,431
Capital contribution......... -- 4,200 -- -- -- 4,200
Net income................... -- -- 2,629 -- -- 2,629
Foreign currency translation
adjustment................ -- -- -- -- 1,173 1,173
Minimum pension liability
adjustment................ -- -- -- 318 -- 318
Forgiveness of receivable
from parent............... -- (27,939) -- -- -- (27,939)
Close-out of ICI Composites
Inc. and sale of stock on
October 6, 1995........... (1) (183,795) 112,183 -- (2,199) (73,812)
--- --------- --------- ----- ------ --------
Balance, October 6, 1995....... $ -- $ -- $ -- $ -- $ -- $ --
=== ========= ========= ===== ====== ========
THE COMPANY:
Balance, October 6, 1995....... $ -- $ -- $ -- $ -- $ -- $ --
Issuance of common stock..... 111 4,889 -- -- -- 5,000
Net loss..................... -- -- (6,478) -- -- (6,478)
--- --------- --------- ----- ------ --------
Balance, December 31, 1995..... 111 4,889 (6,478) -- -- (1,478)
Issuance of common stock..... -- 180 -- -- -- 180
Net loss..................... -- -- (9,978) -- -- (9,978)
Stock-based compensation..... -- 9,678 -- -- -- 9,678
Foreign currency translation
adjustment................ -- -- -- -- (489) (489)
--- --------- --------- ----- ------ --------
Balance, December 31, 1996..... $111 $ 14,747 $ (16,456) $ -- $ (489) $ (2,087)
=== ========= ========= ===== ====== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 65
FIBERITE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR THE COMPANY
------------------------------------- -------------------------------------
FOR THE PERIOD FOR THE PERIOD
DECEMBER 26, 1994 OCTOBER 6, 1995
FISCAL YEAR ENDED TO OCTOBER 6, TO YEAR ENDED
DECEMBER 25, 1994 1995 DECEMBER 31, 1995 DECEMBER 31, 1996
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................... $ 9,391 $ 2,629 $ (6,478) $ (9,978)
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation and amortization................. 8,384 6,170 4,738 15,865
Accreted interest on notes.................... -- -- 803 3,548
(Gain) loss on sale of property, plant and
equipment................................... (164) (305) -- 128
Write-off of purchased research and
development................................. -- -- 940 --
Stock-based compensation...................... -- -- -- 9,678
Changes in assets and liabilities, net of
effects of acquisitions:
Accounts receivable, net.................... (2,407) (519) (2,505) (276)
Inventories................................. (2,175) (4,552) 3,009 (3,712)
Prepaid expenses and other.................. 2,862 (923) (1,007) 388
Deferred taxes.............................. -- -- (455) (1,905)
Accounts payable............................ 1,194 5,076 (1,798) 3,512
Accrued payroll and benefits................ -- -- 397 1,100
Accrued liabilities and other............... 6,902 (1,687) 2,557 (1,151)
Other non-current liabilities............... -- -- 1,000 (250)
Accrued pension benefits.................... (1,585) 2,654 254 475
Accrued post-retirement benefits............ (737) 1,792 144 1,239
-------- --- --------- --------
Net cash provided by operating activities... 21,665 10,335 1,599 18,661
-------- --- --------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment...... (3,574) (4,753) (641) (6,222)
Payments for acquisitions, net of refunds....... -- -- (120,091) 968
Proceeds from the sale of property, plant and
equipment..................................... 424 138 -- --
-------- --- --------- --------
Net cash used in investing activities....... (3,150) (4,615) (120,732) (5,254)
-------- --- --------- --------
Cash flows from financing activities:
Proceeds from the issuance of long term debt.... -- -- 118,201 --
Repayments for long term debt................... -- -- (3,500) (13,400)
Proceeds from the issuance of common stock...... -- -- 5,000 180
Foreign currency translation adjustment......... 1,160 1,173 -- --
Capital contribution............................ 3,700 4,200 -- --
Borrowings and repayments from/to parent
company....................................... (23,173) (11,624) -- --
-------- --- --------- --------
Net cash provided by (used in) financing
activities............................... (18,313) (6,251) 119,701 (13,220)
-------- --- --------- --------
Increase (decrease) in cash and cash
equivalents..................................... 202 (531) 568 187
Cash and cash equivalents at beginning of
period.......................................... 1,082 1,284 -- 568
-------- --- --------- --------
Cash and cash equivalents at end of period........ $ 1,284 $ 753 $ 568 $ 755
======== === ========= ========
Supplemental cash flow information:
Income taxes paid............................... $ -- $ -- $ -- $ 1,901
======== === ========= ========
Interest paid................................... $ -- $ -- $ 1,053 $ 7,522
Noncash transactions:
Debt obligations for the purchase of property
and equipment................................. $ -- $ -- $ -- $ 1,080
======== === ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 66
FIBERITE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Fiberite Holdings, Inc. (Holdings) was formed by D.L.J. Merchant Banking
Partners, L.P. (DLJ), 90% owner, Carlisle Group, L.P. (Carlisle), 9% owner and
Steeple International, 1% owner to purchase the common stock of Fiberite, Inc.
(Fiberite). On October 6, 1995, Fiberite acquired all the outstanding stock of
ICI Composites Inc. (ICI) and all of the assets of an affiliated German company
in a transaction accounted for as a purchase. For tax purposes, the transaction
was accounted for as an asset purchase under Section 338(h)(10) of the Internal
Revenue Code. Prior to its purchase by Fiberite, ICI Composites Inc. was a
wholly-owned subsidiary of ICI American Holdings Inc. (ICI American), the
ultimate parent of which is Imperial Chemical Industries PLC, headquartered in
the United Kingdom.
Fiberite manufactures advanced composite materials which combine high
performance reinforcement fibers with resins. Sales are made to commercial
entities and to prime contractors with the United States Government. The
commercial entities and prime contractors use the composite materials as raw
materials in their production process.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRINCIPLES OF CONSOLIDATION AND CHANGE IN BASIS OF ACCOUNTING
The consolidated financial statements include the accounts of Holdings,
Fiberite (and its predecessor ICI), and its wholly owned subsidiaries, Fiberite
Europe-GmbH (and its predecessor), and Fiberite France (all of which taken
together are hereinafter referred to as the Company.) The predecessor of
Fiberite Europe-GmbH has been consolidated as if it had been a subsidiary of
Fiberite during the periods in which it was an affiliated company. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
In accordance with Accounting Principles Board Opinion (APB) No. 16, and as
discussed in Notes 1 and 3, Fiberite followed the purchase method of accounting
for its acquisition of ICI on October 6, 1995. Pursuant to APB No. 16, the
recorded amounts of assets and liabilities on the books of ICI as of the
acquisition date were adjusted to fair market value on such date. The Company's
accounting since that date has been based on these adjusted amounts. As a
result, the basis of accounting for results of operations and cash flows for
periods prior to October 6, 1995 is not consistent with the basis of accounting
used to report results of operations subsequent to October 6, 1995. Accordingly,
the consolidated statements of operations, cash flows and stockholders' deficit
for 1995 and the related Notes are divided between the pre- and post-acquisition
date.
B. FISCAL YEAR
Prior to December 25, 1994, the Company's fiscal year coincided with ICI
American's fiscal year, which ended the last Sunday in December. Subsequent to
October 6, 1995, the Company adopted a calendar fiscal year.
C. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid instruments purchased with original
maturities of three months or less to be cash equivalents.
D. INVENTORIES
Inventories are stated at the lower of cost or market. Cost includes labor,
materials and production overhead. Cost is determined using the average cost
method. Market is based upon current sales price less distribution and selling
costs. Provisions are made currently for obsolete and slow-moving inventory.
F-8
<PAGE> 67
FIBERITE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
E. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost, which includes interest to
finance the acquisition and construction of major capital additions during the
construction and development stage. Interest capitalized in the year ended
December 31, 1996 was $209,000. For financial statement purposes, depreciation
is recorded on the straight-line basis, without any residual value, based on
useful lives of 20 years for buildings and 3 to 10 years for machinery and
equipment. For tax reporting purposes, depreciation is computed on both
accelerated and straight-line methods.
Expenditures for major renewals and betterments are capitalized, while
expenditures for maintenance and repairs which do not improve assets or extend
their useful lives are charged to expense as incurred. Repair and maintenance
expenses charged to cost of operations were $2.6 million, $2.5 million, $0.8
million and $3.3 million in fiscal 1994, the period from December 26, 1994 to
October 6, 1995, the period from October 6, 1995 to December 31, 1995 and fiscal
1996, respectively. Gains or losses on the disposition of fixed assets are
included in operations as incurred.
F. INTANGIBLE ASSETS
Intangible assets are amortized on a straight-line basis over the estimated
useful lives of the assets, and consist of backlog (1 year), assembled workforce
(12 years), and patents, technology and other assets (3-32 years) acquired in
connection with business acquisitions. The Company reviews intangible and other
long lived assets for impairment whenever events or circumstances indicate that
the carrying amount of the asset may not be recoverable. If the sum of the
expected future cash flows (undiscounted and without interest charges) from an
asset to be held and used in operations is less than the carrying value of the
asset, an impairment loss is recognized in the amount of the difference between
the carrying value and the fair value. Amortization expense of $0, $110,000,
$1,440,000 and $1,865,000 was recorded in fiscal 1994, the period from December
26, 1994 to October 6, 1995, the period from October 6, 1995 to December 31,
1995 and fiscal 1996, respectively. Accumulated amortization was $1,440,000 and
$3,305,000 at December 31, 1995 and 1996, respectively.
G. DEFERRED FINANCING COSTS
Costs totaling $5.9 million associated with the issuance of the Company's
debt in October 1995 (see Note 10), were capitalized and are being amortized
over the terms of the debt on a straight-line basis. Amortization of these debt
issuance costs amounted to $240,000 and $1,014,000 in the period from October 6,
1995 to December 31, 1995 and fiscal 1996, respectively. Approximately $2.2
million of deferred financing costs will be written off in 1997 in connection
with the repayment of debt from the proceeds of the anticipated initial public
offering. See Note 17.
H. FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign operations, where the functional currency
is the local currency, are translated into U.S. dollars at the fiscal year end
exchange rate. The related translation adjustments are recorded as cumulative
translation adjustments, a separate component of stockholders' deficit. Revenues
and expenses are translated using average exchange rates prevailing during the
year. Foreign currency transaction gains and losses are included in net income
(loss).
I. REVENUE RECOGNITION
Sales are recorded when products are shipped and title passes to the
customer. Provisions are made currently for estimated product returns.
F-9
<PAGE> 68
FIBERITE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
J. INCOME TAXES
The Company uses the asset and liability method of accounting for income
taxes prescribed by Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes." Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amount of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
SFAS No. 109, the effect on deferred tax assets and liabilities of a change in
tax rates is recognized in the period that includes the enactment date.
K. POST-RETIREMENT HEALTHCARE AND LIFE INSURANCE BENEFITS
The Company provides certain healthcare and life insurance benefits for
retired employees. Employees covered by Company sponsored plans become eligible
for those benefits when they reach normal or early retirement age while working
for the Company. These benefits are subject to deductibles, copayment
provisions, and other limitations. The Company reserves the right to change or
terminate benefit plans at any time (see Note 9).
L. STOCK-BASED COMPENSATION PLANS
The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion (APB) No. 25. Effective January 1, 1996, the
Company adopted the disclosure option of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," (SFAS No. 123)
which requires that companies which do not elect to account for stock-based
compensation through the statement of operations as prescribed by the statement,
shall disclose the pro forma effects on net income (loss) and net income (loss)
per share as if SFAS No. 123 had been adopted. (See note 14).
M. 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,
disclosure of contingent assets and liabilities, and the reported amounts of
revenues and expenses during the periods reported. Actual results could differ
from those estimates.
N. NET INCOME (LOSS) PER COMMON AND EQUIVALENT SHARE
Net income (loss) per common and equivalent share is based on the weighted
average number of shares outstanding during the periods presented. Shares,
options and warrants issued at prices below the anticipated initial public
offering price during the twelve-month period immediately preceding the initial
public offering were treated as if they had been outstanding for all periods.
The Company's initial capitalization of common shares at October 6, 1995
was substituted for the actual common shares outstanding for periods prior to
October 6, 1995 to enhance comparability.
(3) PURCHASE ACCOUNTING
PURCHASE OF FIBERITE
On October 6, 1995, Holdings acquired all of the outstanding stock of
Fiberite, a U.S. advanced composite materials manufacturer and all of the assets
of an affiliated German company, for cash of $113.3 million plus $5.0 million in
acquisition costs.
F-10
<PAGE> 69
FIBERITE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The acquisitions have been accounted for using the purchase method of
accounting and, accordingly, the purchase price has been allocated to the
tangible and separately identifiable intangible assets purchased and the
liabilities assumed based upon their fair values at the date of acquisition. In
connection with the purchase price allocation, the Company determined that
$940,000 of the acquired intangible assets consisted of in-process product
development. Because there can be no assurance that the Company will be able to
successfully complete the development and integration of the product or that the
acquired technology has any alternative use, the acquired in-process product
development was charged to research and technology expense in 1995.
The purchase price plus acquisition costs was allocated as follows (in
thousands):
<TABLE>
<S> <C>
Working capital........................................... $ 22,757
Property, plant and equipment............................. 97,494
Assembled workforce....................................... 3,135
Patents, technology and other............................. 8,535
In-process product development............................ 940
Backlog................................................... 2,444
Other noncurrent, net..................................... (16,992)
--------
Total........................................... $118,313
========
</TABLE>
PURCHASE OF SIMMACO
In May 1996, the Company completed the purchase of equipment, formulations,
and other specific assets of Simmaco SARL (Simmaco) for approximately $2.0
million. The excess of the purchase price over the fair value of the tangible
assets acquired of $1.2 million was allocated to the intangible assets acquired.
Simmaco, located in Courcelles Les-Lens, France, manufactures and markets
engineering grade bulk molding compounds produced from vinyl ester, polyester
resins and fiberglass reinforcement.
(4) RELATED PARTY TRANSACTIONS
Under the terms of a management contract with DLJ and Carlisle, the Company
pays each entity annual management fees of $250,000. Aggregate 1995 and 1996
management fees earned by DLJ and Carlisle were $116,848 and $500,000,
respectively. Upon completion of the anticipated initial public offering, the
fees related to the management contract will be terminated. In addition, the
Company paid DLJ and Carlisle $2.2 million for services rendered in connection
with the acquisition of ICI.
Prior to October 6, 1995, the Company paid for various administrative
services provided by ICI American Holdings, its parent company at that time.
Payments for services in 1994 and through October 6, 1995 were $7.0 million and
$2.0 million, respectively.
F-11
<PAGE> 70
FIBERITE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) ACCOUNTS RECEIVABLE
Accounts receivable, net as of December 31 consists of the following (in
thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Trade receivables........................................ $26,125 $28,129
Receivables from employees............................... 1,432 733
Other receivables........................................ 2,725 178
------- -------
30,282 29,040
Less: allowance for doubtful accounts.................... (275) (341)
Less: allowance for returns and allowances............... (841) (1,035)
------- -------
$29,166 $27,664
======= =======
</TABLE>
The Company performs ongoing credit evaluations of its customers' financial
condition but does not require collateral to support trade receivables. The
allowance for doubtful accounts is based on factors pertaining to the credit
risk of specific customers, historical trends and other information. The
allowance for returns and allowances is based on the Company's knowledge of
specific potential returns, historical trends and other information.
(6) INVENTORIES
Inventories as of December 31 consists of the following (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- --------
<S> <C> <C>
Raw Materials........................................... $11,034 $ 13,978
Work-in-process......................................... 2,453 3,300
Finished goods.......................................... 6,983 7,124
------- -------
$20,470 $ 24,402
======= =======
</TABLE>
(7) PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net as of December 31 consists of the
following (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- --------
<S> <C> <C>
Land.................................................... $ 3,861 $ 3,836
Buildings and site improvements......................... 36,438 36,802
Machinery and equipment................................. 56,322 59,036
Construction in progress................................ 1,514 4,662
------- --------
98,135 104,336
Less: accumulated depreciation.......................... (3,058) (15,810)
------- --------
$95,077 $ 88,526
======= ========
</TABLE>
F-12
<PAGE> 71
FIBERITE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(8) INCOME TAXES
The Company files a consolidated federal income tax return. Prior to
October 6, 1995, the Company's operations were included in the consolidated tax
returns of ICI American Holdings. Income tax expense consists of the following
(in thousands):
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FISCAL YEAR ENDED DECEMBER 26, 1994 OCTOBER 6, 1995 TO YEAR ENDED
DECEMBER 25, 1994 TO OCTOBER 6, 1995 DECEMBER 31, 1995 DECEMBER 31, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Current provision
Federal..................... $4,594 $4,152 $ 261 $ 1,429
State....................... 546 651 194 471
Foreign..................... (1,942) -- -- --
------ ------ ----- -------
Total current
provision.............. 3,198 4,803 455 1,900
------ ------ ----- -------
Deferred provision (benefit)
Federal..................... 2,133 (1,245) (261) (1,429)
State....................... 457 (139) (194) (471)
Foreign..................... -- -- -- --
------ ------ ----- -------
Total deferred provision
(benefit).............. 2,590 (1,384) (455) (1,900)
------ ------ ----- -------
Total............... $5,788 $3,419 $ -- $ --
====== ====== ===== =======
</TABLE>
Deferred income taxes result from provisions of the tax laws that either
require or permit certain items of income or expense to be reported in different
periods for tax purposes than for financial reporting.
The following is a summary of the Company's deferred income taxes as of
December 31 (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Deferred tax assets:
Reserves and accruals.......................................... $ 2,192 $ 2,782
Liability related to pension and post-retirement benefits...... 7,075 7,735
Other.......................................................... 474 1,913
------- -------
Total gross deferred tax assets............................. 9,741 12,430
Less-valuation allowance....................................... (2,365) (2,243)
------- -------
Deferred tax asset.......................................... 7,376 10,187
------- -------
Deferred tax liabilities:
Property, plant and equipment.................................. (300) (1,972)
Intangible assets.............................................. (6,621) (5,855)
------- -------
Deferred tax liability...................................... (6,921) (7,827)
------- -------
Deferred tax asset............................................... $ 455 $ 2,360
======= =======
</TABLE>
Recognition of the net deferred tax asset at December 31, 1995 and 1996 has
been limited to taxes paid and payable, which would be refundable if future tax
losses were to occur.
F-13
<PAGE> 72
FIBERITE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's effective rate for income taxes varies from the statutory
U.S. Federal rate as follows:
<TABLE>
<CAPTION>
PERIOD FROM
FISCAL DECEMBER 26, 1994
1994 TO OCTOBER 6, 1995 1995 1996
------ ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Statutory U.S. Federal rate............ 34.0% 34.0% (34.0)% (34.0)%
Foreign taxes.......................... (1.8) 15.5 -- --
State taxes............................ 2.3 7.0 (5.5) 1.2
Permanently nondeductible items........ -- -- 0.2 0.9
Nondeductible compensation............. -- -- -- 34.9
Change in valuation allowance.......... -- -- 36.5 (1.2)
Other.................................. 3.6 -- 2.8 (1.8)
----- ---- ----- -----
38.1% 56.5% --% --%
===== ==== ===== =====
</TABLE>
(9) EMPLOYEE BENEFITS
The following describes employee benefits provided by the Company in the
United States. The Company does not provide retirement benefit plans for its
employees in Germany and France.
DEFINED CONTRIBUTION 401(K) PLANS
The Company sponsors two 401(k) plans, the Fiberite, Inc. 401(k) Plan I
(Plan I) and the Fiberite, Inc. 401(k) Plan II (Plan II). Except for union
employees at the Winona and Orange plants, all remaining eligible employees
participate in Plan I. The eligible Winona union employees participate in Plan
II and the Orange union employees are not eligible to participate in either
plan.
Both Plan I and Plan II provide that employees are 100% vested at all
times. There is no minimum age requirement and eligibility begins after three
months service time.
Plan I allows discretionary employer contributions. Unless otherwise
determined by a resolution of the board of directors, the employer contribution
is 50% of each participant's pre-tax deferrals, limited to a total employer
contribution for each employee of 2.5% of the employee's annual compensation.
For fiscal 1994, the period from December 26, 1994 to October 6, 1995, the
period from October 6, 1995 through December 31, 1995 and 1996, employer
contributions to this plan (or the plan provided by the predecessor) were
$385,000, $268,000, $90,000 and $384,000, respectively. Plan II does not permit
employer contributions.
FIBERITE, INC. PENSION PLAN
With the exception of certain management personnel, all salaried employees
of the Company and all hourly employees not covered by union plans or the
Fiberite, Inc. Service Related Pension Plan described below are covered under
the Fiberite, Inc. Pension Plan, which is a defined benefit pension plan. The
plan provides full benefits to all employees who retire either at age 62 after
10 years of service or age 55 with 25 years of service. Employees have no vested
right to plan benefits prior to five years of service with the Company. The plan
is funded, on a current basis, to meet the requirements of the Employee
Retirement Income Security Act of 1974. Prior to June 1995, the Company's
salaried employees participated in a pension plan sponsored by ICI American
Holdings, Inc. The fiscal 1994 net periodic pension cost is not determinable and
therefore is not presented.
F-14
<PAGE> 73
FIBERITE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net periodic pension cost included the following components (in thousands):
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
DECEMBER 26, 1994 OCTOBER 6, 1995 TO FISCAL
TO OCTOBER 6, 1995 DECEMBER 31, 1995 1996
------------------ ------------------ -------
<S> <C> <C> <C>
Service cost.................................. $ 487 $ 162 $ 675
Interest cost................................. 721 240 979
Net deferral.................................. 673 224 267
Less: Return on assets........................ (1,273) (424) (1,100)
---- ------- -----
Periodic pension cost......................... $ 608 $ 202 $ 821
==== ======= =====
Discount rate................................. 7.25% 7.25% 7.25%
Rate of increase in compensation levels....... 6.50% 6.50% 6.50%
Expected long-term rate of return on assets... 8.00% 8.00% 8.00%
</TABLE>
On December 31, 1995 and 1996 the plan's assets were invested primarily in
stocks and bonds. The following table sets forth the plan's funded status and
amounts recognized in the Company's Consolidated Balance Sheets as of December
31, calculated at the end of each period (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit................................................. $ 9,721 $11,248
------- -------
Accumulated benefit obligation................................. 9,750 11,297
------- -------
Projected benefit obligation for services rendered to date....... 13,743 15,032
Plan assets at estimated fair value.............................. 10,382 11,536
------- -------
Projected benefit obligation in excess of plan assets............ 3,361 3,496
Unrecognized net gain............................................ 206 492
------- -------
Accrued pension benefits......................................... $ 3,567 $ 3,988
======= =======
</TABLE>
FIBERITE, INC. SERVICE RELATED PENSION PLAN
Union employees at the Winona and Delano plants are covered under the
Fiberite, Inc. Service Related Pension Plan, which is a defined benefit pension
plan. The plan provides full benefits to all employees who retire either at age
62 after 10 years of service or age 55 with 25 years of service. Employees have
no vested right to plan benefits prior to five years of service with the
Company. The plan is funded, on a current basis, to meet the requirements of the
Employee Retirement Income Security Act of 1974.
Net periodic pension cost included the following components (in thousands):
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
FISCAL DECEMBER 26, 1994 OCTOBER 6, 1995 TO FISCAL
1994 TO OCTOBER 6, 1995 DECEMBER 31, 1995 1996
-------------- ------------------ ------------------ --------------
<S> <C> <C> <C> <C>
Service cost............... $ 126 $ 140 $ 21 $ 120
Interest cost.............. 259 279 70 275
Net deferral............... (162) 127 43 80
Less: Return on assets..... 44 (257) (86) (255)
---- ------ ---- ----
Periodic pension cost...... $ 267 $ 289 $ 48 $ 220
==== ====== ==== ====
Discount rate................ 8.50% 7.25% 7.25% 7.25%
Rate of increase in
compensation levels........ Not applicable Not applicable Not applicable Not applicable
Expected long-term rate of
return on assets........... 10.00% 8.00% 8.00% 8.00%
</TABLE>
F-15
<PAGE> 74
FIBERITE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On December 31, 1995 and 1996 the plan's assets were invested primarily in
stocks and bonds. The following table sets forth the plan's funded status and
amounts recognized in the Company's Consolidated Balance Sheets as of December
31, 1995 and 1996 (in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation...................................... $ 3,942 $ 4,264
------- -------
Accumulated benefit obligation................................. 3,949 4,284
------- -------
Projected benefit obligation for services rendered to date....... 3,949 4,284
Plan assets at estimated fair value.............................. 2,232 2,440
------- -------
Projected benefit obligation in excess of plan assets............ 1,717 1,844
Unrecognized net gain............................................ 19 --
------- -------
Accrued pension benefits......................................... $ 1,736 $ 1,844
======= =======
</TABLE>
POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
The Company offers medical, dental and life insurance benefits to retired
employees and eligible dependents of the retired employees of the Company.
Retirees pay insurance premiums based on their years of service with the Company
and their age. The Company funds the post-retirement costs on a current basis.
The net periodic post-retirement cost included the following components (in
thousands):
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
FISCAL DECEMBER 26, 1994 OCTOBER 6, 1995 TO FISCAL
1994 TO OCTOBER 6, 1995 DECEMBER 31, 1995 1996
------ ------------------ ------------------ ------
<S> <C> <C> <C> <C>
Service cost................................ $ 333 $ 410 $137 $ 524
Interest cost............................... 683 634 211 767
Amortization of gain........................ -- -- -- (20)
---- ------ ---- ----
$1,016 $1,044 $348 $1,271
==== ====== ==== ====
</TABLE>
The following table sets forth post-retirement amounts recognized in the
Company's Consolidated Balance Sheets as of December 31(in thousands):
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Accumulated post-retirement benefit obligations:
Retirees....................................................... $ 2,545 $ 2,258
Fully eligible actives......................................... 2,767 2,690
Other actives.................................................. 6,657 6,691
Unrecognized net gain (loss)................................... (63) 1,346
------- -------
Accrued post-retirement benefits................................. $11,906 $12,985
======= =======
</TABLE>
The 1995 and 1996 amounts assume a healthcare cost trend rate for pre-age
65 benefits of 9.5% for indemnity insurance and 7.5% for HMO coverage and
post-age 65 benefits of 8.5% for indemnity insurance and 7.5% for HMO coverage.
These rates were assumed to decrease each year to 5.0% by 2035 and remain at
that level thereafter. The assumed discount rate and rate of increase in
compensation levels was 7.25% and 6.50%, respectively, in both years. The effect
of a one percentage point increase in the assumed healthcare cost trend rates
for each future year would increase the accumulated post-retirement benefit
obligation as of December 31, 1996 by $483,000. The effect of this change on the
aggregate of the service and interest cost components of the net periodic
post-retirement cost would have been an increase of $53,000 for 1996.
F-16
<PAGE> 75
FIBERITE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER BENEFITS
The Company offers its employees several standard benefits including
medical insurance through either an indemnity plan or a Health Maintenance
Organization, dental and life insurance. A large portion of the Company's
employees participate in the indemnity and dental insurance plans, for which the
Company has purchased stop loss insurance covering any individual claims over
$200,000 and aggregate claims over $850,000 in any one year. For claims under
these stop loss limits, the Company is self-insured. The Company recorded
$414,000 and $460,000 as reserves for medical and dental claims which were
incurred but not paid as of December 31, 1995 and 1996, respectively. These
estimates are based on the claims history of the plans and specific knowledge of
outstanding claims.
1994 PENSION ADJUSTMENT
Marketing, general and administrative expenses for 1994 includes a $5.1
million non-cash credit which represents a change in the allocation of pension
and post-retirement benefits between ICI American Holdings Inc. and its
affiliates. These changes resulted from additional actuarial information that
became available in 1994.
(10) LONG-TERM DEBT
Long-term debt as of December 31 consists of (in thousands):
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Secured Term A note payable, interest payable monthly at
various rates, maturing December 31, 2000 (see below)........ $ 40,000 $ 33,600
Secured Term B note payable, interest payable monthly at
various rates, maturing December 31, 2001 (see below)........ 35,000 34,500
Secured revolving line of credit of $25,000, interest payable
monthly at various rates, due December 31, 2000 (see
below)....................................................... 15,500 9,000
11.3% subordinated notes (see below)........................... 31,878 35,502
-------- --------
122,378 112,602
Less current portion...................................... (6,900) (6,900)
-------- --------
$115,478 $105,702
======== ========
</TABLE>
In October 1995, Fiberite entered into a financing arrangement with a
consortium of banks which consisted of a $40.0 million term note, a $35.0
million term note, and a $25.0 million revolving line of credit (LOC) which may
be used for cash borrowings and letters of credit. These loans are
collateralized by substantially all the assets of Fiberite and guaranteed by
Holdings. The term notes and the LOC provide for various borrowing rate options
including borrowing rates based on a fixed spread over the Bank of America
Illinois reference rate (as defined in the term note agreement). A commitment
fee of .5% per annum is paid on the unused portion of the LOC. The weighted
average interest rate for the period from October 6, 1995 to December 31, 1995
and fiscal 1996 for these borrowings was 9.41% and 8.51%, respectively. For the
period from October 6, 1995 to December 31, 1995 and fiscal 1996, the average
daily balance of the LOC was $17.1 million and $12.3 million, respectively, and
the highest outstanding balance was $19.0 million and $16.5 million,
respectively.
On October 6, 1995, Holdings issued $31.2 million of 11.3% Subordinated
Notes with a scheduled maturity of October 6, 2002.
The terms of the term notes, LOC, and subordinated notes contain, among
other provisions, restrictions on the transfer of funds from Fiberite to
Holdings, requirements for maintaining defined levels of working capital, net
worth, capital expenditures, and other financial ratios. At December 31, 1996,
the Company received from the consortium of banks waivers related to
noncompliance with certain covenants. The notes become immediately due and
payable in the event of any change in control of the Company.
F-17
<PAGE> 76
FIBERITE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Maturities of long-term debt as of December 31, 1996 are as follows (in
thousands):
<TABLE>
<S> <C>
1997...................................................... $ 6,900
1998...................................................... 8,500
1999...................................................... 10,100
2000...................................................... 19,600
2001...................................................... 32,000
Thereafter................................................ 35,502
--------
$112,602
========
</TABLE>
(11) COMMITMENTS AND CONTINGENCIES
The Company is involved in legal proceedings of a character normally
incidental to its business, including substantial claims and pending actions
against the Company seeking recovery of alleged damages for asbestos related
claims. The Company is indemnified by ICI American Holdings Inc. for a
percentage of these claims. As of December 31, 1995 and 1996, the Company has
accrued liabilities of $1.0 million to reflect potential losses in conjunction
with various legal proceedings. The outcome of these proceedings is not
determinable at this time although the Company intends to vigorously defend
these actions. It is the opinion of management that the legal proceedings will
not result in a liability greater than the amount recorded.
RAW MATERIALS
Fiberite purchases most of the raw materials used in production. Several
key materials are available from relatively few sources, and in many cases the
cost of product qualification makes it impractical to develop multiple sources
of supply. The unavailability of these materials, which the Company does not
anticipate, could have a material adverse effect on sales and earnings.
LEASES
The Company has various noncancelable operating leases, primarily for real
estate, vehicles, and office equipment. Total lease expense for fiscal 1994, the
period from December 26, 1994 to October 6, 1995, the period from October 6,
1995 to December 31, 1995 and fiscal 1996 was $624,000, $370,000, $136,000 and
$686,000, respectively. Future minimum lease payments under noncancelable
operating leases as of December 31, 1996, are as follows (in thousands):
<TABLE>
<S> <C>
1997.......................................................... $255
1998.......................................................... 236
1999.......................................................... 183
2000.......................................................... 55
----
$729
====
</TABLE>
U.S. GOVERNMENT CLAIMS
The Company performs on a variety of defense subcontracts and is subject to
U.S. Government audits and reviews of negotiations, subcontract performance,
cost classifications, accounting and general practices relating to government
contracts. The Defense Contract Audit Agency reviews cost accounting and
business practices of the Company. There are currently no outstanding claims or
assessments against the Company.
F-18
<PAGE> 77
FIBERITE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(12) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, receivables, accounts payable and accrued
liabilities and other payables approximate fair value because of the short
maturity of these financial instruments. The term notes and the revolving line
of credit bear interest at a rate indexed to variable market rates, therefore,
the carrying amounts of the outstanding borrowings approximate fair value. The
fair value of the 11.3% Subordinated Notes approximates historical cost because
of their anticipated maturity in connection with the anticipated offering
discussed in Note 17.
Fair value estimates are made at a specific point in time based on relevant
market information and information about the financial instruments. These
estimates are subjective in nature and involve uncertainties and judgment and
therefore cannot be determined with precision. Changes in assumptions could
significantly affect these estimates.
(13) COLLECTIVE BARGAINING AGREEMENTS
Of the Company's approximately 713 active United States employees as of
December 31, 1996, 5% are covered under a collective bargaining agreement
negotiated with the Teamster's Union and 37% are covered under a collective
bargaining agreement negotiated with the United Steel Workers Union. Agreements
with the Teamster's Union expire in December, 1997 and October, 1998, and the
agreement with the United Steel Workers Union expires in March, 1998. Employees
in Germany are covered under a collective bargaining agreement with the Chemical
Industries Union which expires in February, 1998.
(14) STOCK OPTIONS
The Company granted incentive stock options to certain key management
employees pursuant to the Company's 1995 Long Term Incentive and Share Award
Plan (the Option Plan). Options granted under the Option Plan are subject to
individual vesting schedules, but must be exercised within ten years of the date
of grant. Certain of these options would only have been exercisable based on
defined performance criteria. During 1996, the individual incentive options were
amended to remove the defined performance criteria, resulting in a new
measurement date. In 1995 and 1996, 765,000 and 44,000 shares, respectively, of
the 906,000 shares available under the plan were issued. In the absence of a
market for the Company's common stock in 1996, the fair value of the Company's
common stock at the grant date was determined by using price methodology
consistent with those applied by investment banking companies. Consistent with
APB Opinion No. 25, compensation expense of approximately $3,561,000 has been
recognized during fiscal 1996 related to the variable features of these options.
During 1995, the Company sold restricted stock at the fair market value to
Carlisle pursuant to the Company's Restricted Stock Purchase Agreement (the
Restricted Stock Plan). These shares were subject to vesting provisions based on
defined performance criteria. During 1996, the Restricted Stock Plan was amended
to remove the defined performance criteria, resulting in a new measurement date.
In the absence of a market for the Company's common stock in 1996, the fair
value of the Company's common stock was determined by using a valuation
methodology consistent with those applied by investment banking companies.
Consistent with APB Opinion No. 25, compensation expense has been recognized in
the amount of $6.0 million during fiscal 1996 related to the variable features
of these restricted shares.
The Company adopted SFAS No. 123 for disclosure purposes in 1996. The fair
value of each option grant estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for the option grants in 1995 and 1996, respectively: risk-free
interest rates of 5.80% and 6.16%; expected dividend yields of 0.00 percent;
expected life of 3.6 and 2.3 years; expected volatility of 44.51%. Had
compensation costs been determined consistent with SFAS No. 123, utilizing
F-19
<PAGE> 78
FIBERITE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the assumptions detailed above, the effect on the Company's net loss and loss
per share would not have been material.
A summary of options granted under the Option Plan as of December 31, 1995
and 1996 and changes during the year is presented below:
<TABLE>
<CAPTION>
1995 1996
---------------------------------- ----------------------------------
OPTIONS WEIGHTED AVERAGE OPTIONS WEIGHTED AVERAGE
(IN THOUSANDS) EXERCISE PRICE (IN THOUSANDS) EXERCISE PRICE
-------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of
year............................ 0.0 -- 765.0 $ .50
Granted........................... 765.0 $ .50 44.0 .50
Exercised......................... 0.0 -- 0.0 --
Forfeited......................... 0.0 -- 0.0 --
Expired........................... 0.0 -- 0.0 --
Canceled.......................... 0.0 -- 0.0 --
----- -----
Outstanding at end of year........ 765.0 .50 809.0 --
===== === ===== ===
Exercisable at year end........... 106.6 .50 386.8 .50
Weighted average fair value of
options granted................. $ 0.50 $ 7.21
</TABLE>
In the event the offering described in Note 17 is successful, it is
expected that a Directors' stock option plan and an employee stock purchase plan
will be implemented.
(15) MAJOR CUSTOMERS
The majority of the Company's operations are conducted within one business
segment. Sales made to the commercial and military aerospace markets comprised
68.3%, 75.5% and 80.2% of the Company's total sales in 1994, 1995 and 1996,
respectively. Net sales to one group of related companies exceeded 10% of the
Company's total net sales. Sales to this group in fiscal 1994, the period from
December 26, 1994 to October 6, 1995, the period from October 6, 1995 to
December 31, 1995 and fiscal 1996 were $19.5 million, $16.0 million, $20.6
million and $32.4 million, respectively. Aggregate receivables from this group
at December 31, 1995 and 1996 were $2.2 million and $4.9 million, respectively.
The Company is a subcontractor to various U.S. Government prime contractors
such as Bell Helicopter, Lockheed Martin, Thiokol, and McDonnel Douglas. Net
sales under these contracts in fiscal 1994, 1995 and 1996 were $49.6 million,
$62.5 million, and $71.4 million, respectively.
F-20
<PAGE> 79
FIBERITE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(16) FOREIGN OPERATIONS
The following table sets forth information about the relative size of the
Company's operations in the United States and Europe (in thousands):
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
FISCAL YEAR ENDED DECEMBER 26, 1994 OCTOBER 6, 1995 TO YEAR ENDED
DECEMBER 25, 1994 TO OCTOBER 6, 1995 DECEMBER 31, 1995 DECEMBER 31, 1996
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Sales to unaffiliated
customers:
United States............... $158,850 $144,803 $ 40,229 $195,263
Europe...................... 14,120 16,900 5,393 23,564
------ ------ ------ ------
Transfers between geographic
areas:
United States............... 7,308 8,094 2,205 7,214
Europe...................... -- -- -- --
------ ------ ------ ------
Eliminations:
United States............... (7,308) (8,094) (2,205) (7,214)
Europe...................... -- -- -- --
------ ------ ------ ------
(7,308) (8,094) (2,205) (7,214)
------ ------ ------ ------
Total Sales.............. $172,970 $161,703 $ 45,622 $218,827
====== ====== ====== ======
Operating Income:
United States............... $ 18,813 $ 8,348 $ (3,251) $ 857
Europe...................... (3,761) (2,400) (349) (60)
------ ------ ------ ------
Total operating income... $ 15,052 $ 5,948 $ (3,600) $ 797
------ ------ ------ ------
Identifiable assets, at end of
period:
United States............... $163,612 $159,447
Europe...................... 13,365 14,391
------ ------
Eliminations:
United States............... (11,548) (12,650)
Europe...................... -- --
------ ------
(11,548) (12,650)
------ ------
Total assets............. $165,429 $161,188
====== ======
</TABLE>
(17) SUBSEQUENT EVENTS
Subsequent to December 31, 1996, the Company is planning an initial public
offering of its Common Stock. The Company plans to issue approximately 3.0
million shares at an estimated initial public offering price between $15 and $17
per share. There can be no assurance, however, that the offering will be
completed at a per share price within the estimated range, or at all.
F-21
<PAGE> 80
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER
OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
The Company........................... 15
Recent Acquisitions................... 15
Use of Proceeds....................... 15
Dividend Policy....................... 16
Capitalization........................ 17
Dilution.............................. 18
Selected Consolidated Financial
Data................................ 19
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 21
Business.............................. 27
Management............................ 40
Certain Transactions.................. 47
Principal and Selling Stockholders.... 50
Description of Capital Stock.......... 51
Shares Eligible for Future Sale....... 53
Underwriting.......................... 55
Legal Matters......................... 57
Experts............................... 57
Additional Information................ 57
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
5,000,000 SHARES
FIBERITE LOGO
FIBERITE HOLDINGS, INC.
COMMON STOCK
--------------------
PROSPECTUS
--------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
COWEN & COMPANY
SALOMON BROTHERS INC
, 1997
======================================================
<PAGE> 81
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. The Company is paying all of the expenses
incurred on behalf of the Selling Stockholders (other than underwriting
discounts and commissions). All amounts shown are estimates except for the
registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee......................................................... $ 29,622
NASD filing fee.......................................................... 10,275
New York Stock Exchange fee.............................................. 87,250
Blue sky qualification fees and expenses................................. 5,000
Printing and engraving expenses.......................................... 150,000
Legal fees and expenses.................................................. 500,000
Accounting fees and expenses............................................. 205,000
Transfer agent and registrar fees........................................ 5,000
Fee for Custodian for Selling Stockholders............................... 5,000
Miscellaneous............................................................ 52,853
--------
Total.......................................................... $1,050,000
========
</TABLE>
- ------------------------------
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the DGCL permits indemnification of officers, directors, and
other corporate agents under certain circumstances and subject to certain
limitations. The Company's Certificate, and Bylaws provide that the Registrant
shall indemnify its directors, officers, employees and agents to the full extent
permitted by the DGCL, including circumstances in which indemnification is
otherwise discretionary under Delaware law. In addition, the Registrant has
entered into separate indemnification agreements with its directors and
executive officers which require the Registrant, among other things, to
indemnify them against certain liabilities which may arise by reason of their
status or service (other than liabilities arising from acts or omissions not in
good faith or willful misconduct of a culpable nature).
These indemnification provisions and the indemnification agreements entered
into between the Registrant and its executive officers and directors may be
sufficiently broad to permit indemnification of the Registrant's executive
officers and directors for liabilities (including reimbursement of expenses
incurred) arising under the Securities Act.
The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Securities
Act, or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since October 6, 1995, the Registrant has sold and issued the following
unregistered securities:
(A) ISSUANCES OF SHARES OF COMMON STOCK.
On October 6, 1995, the Company issued a total of 10,000,000 shares of
Common Stock: 8,971,822 to the DLJ Investors; 928,530 to Carlisle; and 99,648 to
Steeple in exchange for an aggregate of $5,000,000 cash at a purchase price of
$0.50 per share.
II-1
<PAGE> 82
In addition, since October 6, 1995, the Registrant also issued a total of
346,700 shares of Common Stock at $0.50 per share to 23 employees and 741,957 to
the Carlisle Group in exchange for Promissory Notes executed by the Company and
cash. See "Certain Transactions."
(B) OPTION ISSUANCES TO, AND EXERCISES BY, EMPLOYEES AND DIRECTORS. From
October 6, 1995 to December 31, 1996, the Registrant issued options to purchase
a total of 809,000 shares of Common Stock at an exercise price of $0.50 per
share to 37 employees. No consideration was paid to the Registrant by any
recipient of any of the foregoing options for the grant of any such options. As
of December 31, 1996, no employees had exercised their options.
There were no underwriters employed in connection with any of the
transactions set forth in Item 15.
The issuances described in Items 15(a) were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as transactions by an issuer not involving a public offering. In
addition, the issuances described in Item 15(b) were deemed exempt from
registration under the Securities Act in reliance on Rule 701 promulgated
thereunder as transactions pursuant to compensatory benefit plans and contracts
relating to compensation. The recipients of securities in each such transaction
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and other instruments
issued in such transactions. All recipients either received adequate information
about the Registrant or had access, through employment or other relationships,
to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Amended and Restated Certificate of Incorporation of the Company.
3.2* Bylaws.
4.1* Specimen Common Stock Certificate.
4.2 Securities Purchase Agreement among the Company and Certain Purchasers dated October
6, 1995.
4.3 Amended and Restated Restricted Stock Purchase Agreement between the Company and
Carlisle Group, L.P. dated as of December 31, 1996.
4.4 Restricted Stock Purchase Agreement between the Company and James E. Ashton dated as
of January 2, 1997.
4.5 Purchase Agreement among the Company, Fiberite, Inc. and ICI American Holdings Inc.
dated October 6, 1995.
4.6 Shareholders' Agreement among the Company, DLJ Merchant Banking Partners, L.P., DLJ
International Partners, C.V., DLJ Offshore Partners, C.V., DLJ Merchant Banking
Funding, Inc., Carlisle-Fiberite Investors, L.P., and Steeple International, Inc.
dated October 6, 1995, as amended.
5.1* Opinion of Gray Cary Ware & Freidenrich, A Professional Corporation.
10.1 Form of Indemnification Agreement for directors and executive officers.
10.2 1995 Long Term Incentive and Share Award Plan, as amended.
10.3 1997 Outside Directors Stock Option Plan and forms of agreement thereunder.
10.4 1997 Employee Stock Purchase Plan and forms of agreement thereunder.
10.5 Management Incentive Compensation Plan, as amended.
10.6 Amended and Restated Employment Agreement between James E. Ashton and Fiberite, Inc.
effective December 9, 1996.
</TABLE>
II-2
<PAGE> 83
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
<C> <S>
10.7* Severance Agreement between Carl W. Smith and ICI Composites, Inc. dated September
25, 1995.
10.8 Employment Agreement between Ronald M. Miller and Fiberite, Inc. effective January
29, 1997.
10.9 Employment Agreement between Jon DeVault and Fiberite, Inc. effective February 1,
1997.
10.10 Credit Agreement among the Company and Bank of America National Trust and Savings
Association and other parties dated October 6, 1995, as amended.
10.11 Business Purchase Agreement among the Company, Dalia Verwaltungsgesellschaft mbH,
and Fiberite Europe GmbH dated October 6, 1995.
10.12** Agreement between Imperial Chemical Industries PLC and ICI Composites Inc. regarding
Research and Development work, dated January 1, 1994.
10.13 Special Security Agreement between AXA, The Equitable Companies Incorporated,
Donaldson, Lufkin & Jenrette, Inc., DLJ Capital Investors, Inc., DLJ Merchant
Banking, Inc., Fiberite Holdings, Inc., Fiberite Inc. and the United States
Department of Defense effective April 9, 1996.
21.1 Subsidiaries of the Registrant
23.1 Consent of Independent Public Accountants (see page II-6).
23.2 Consent of Independent Certified Public Accountants (see page II-7).
23.3 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------------
* To be filed by amendment.
** Confidential treatment requested as to part of this Exhibit.
(B). FINANCIAL STATEMENT SCHEDULES.
Schedule II -- Valuation and Qualifying Accounts and Reserves.
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, employee or agent of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, employee or agent in connection with the securities being
registered hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
II-3
<PAGE> 84
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 85
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Tempe,
County of Maricopa, State of Arizona, on the 21st day of February, 1997.
Fiberite Holdings, Inc.
By: /s/ JAMES E. ASHTON
------------------------------------
James E. Ashton
Chief Executive Officer
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints James E. Ashton and Carl W. Smith,
or either of them, as his attorney-in-fact, each with full power of
substitution, for him in any and all capacities, to sign any and all amendments
to this Registration Statement, including post-effective amendments and any and
all new registration statements filed pursuant to Rule 462 under the Securities
Act in connection with or related to the Offering contemplated by this
Registration Statement, as amended, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each said attorney-in-fact
or his substitute or substitutes may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <S> <C>
/s/ JAMES E. ASHTON Chief Executive Officer February 21, 1997
- ------------------------------------------ (Principal Executive Officer)
James E. Ashton
/s/ CARL W. SMITH President and Chief Operating February 21, 1997
- ------------------------------------------ Officer
Carl W. Smith
/s/ RONALD M. MILLER Vice President, Finance, Chief February 21, 1997
- ------------------------------------------ Financial Officer, Treasurer
Ronald M. Miller and Secretary
(Principal Financial and
Accounting Officer)
/s/ THOMPSON DEAN Director February 21, 1997
- ------------------------------------------
Thompson Dean
/s/ REID S. PERPER Director February 21, 1997
- ------------------------------------------
Reid S. Perper
/s/ KARL WYSS Director February 21, 1997
- ------------------------------------------
Karl Wyss
/s/ DAVID CANEDO Director February 21, 1997
- ------------------------------------------
David Canedo
</TABLE>
II-5
<PAGE> 86
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Phoenix, Arizona
February 19, 1997
II-6
<PAGE> 87
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Fiberite, Inc.:
The audits referred to in our report dated January 17, 1997 included the
related financial statement schedules as of and for the year ended December 25,
1994 and as of and for the nine-month period ended October 6, 1995, included in
the Registration Statement. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statement schedules based on our audits. In our
opinion, such financial statement schedules, when considered in relation to the
basic consolidated financial statements taken as a whole, present fairly in all
material respects, the information set forth therein.
We consent to the use of our reports included herein and to the reference
to our firm under the heading "Experts" in the Prospectus.
/s/ KPMG Peat Marwick LLP
Phoenix, Arizona
February 20, 1997
II-7
<PAGE> 88
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO FIBERITE HOLDINGS, INC.:
We have audited in accordance with generally accepted auditing standards
the consolidated financial statements of Fiberite Holdings, Inc. and
subsidiaries included in this Form S-1 and have issued our report thereon dated
February 19, 1997. Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. Schedule II is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
/S/ ARTHUR ANDERSEN LLP
Phoenix, Arizona
February 19, 1997.
<PAGE> 89
SCHEDULE II
FIBERITE HOLDINGS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- --------------------------------------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
For the fiscal year ended December 25,
1994
Allowance for doubtful accounts...... $ 503 $ 40 $ -- $ (321) $ 222
Allowance for returns and
allowances........................ 805 2,686 -- (2,606) 885
Deferred tax asset valuation
allowance......................... 10,397 (2,163) -- -- 8,234
For the period from December 26, 1994
to October 6, 1995
Allowance for doubtful accounts...... 222 112 -- (79) 255
Allowance for returns and
allowances........................ 885 1,463 -- (1,224) 1,124
Deferred tax asset valuation
allowance......................... 8,234 1,448 -- -- 9,682
For the period from October 6, 1995 to
December 31, 1995
Allowance for doubtful accounts...... 255 83 -- (63) 275
Allowance for returns and
allowances........................ 1,124 35 -- (318) 841
Deferred tax asset valuation
allowance......................... -- 2,365 -- -- 2,365
For the fiscal year ended December 31,
1996
Allowance for doubtful accounts...... 275 113 -- (47) 341
Allowance for returns and
allowances........................ 841 3,108 -- (2,914) 1,035
Deferred tax asset valuation
allowance......................... $ 2,365 $ (122) $ -- $ -- $2,243
</TABLE>
<PAGE> 90
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGES
- ------- -------------------------------------------------------------------------- ------------
<C> <S> <C>
1.1* Form of Underwriting Agreement............................................
3.1* Amended and Restated Certificate of Incorporation of the Company..........
3.2* Bylaws....................................................................
4.1* Specimen Common Stock Certificate.........................................
4.2 Securities Purchase Agreement among the Company and Certain Purchasers
dated October 6, 1995.....................................................
4.3 Amended and Restated Restricted Stock Purchase Agreement between the
Company and Carlisle Group, L.P. dated as of December 31, 1996............
4.4 Restricted Stock Purchase Agreement between the Company and James E.
Ashton dated as of January 2, 1997........................................
4.5 Purchase Agreement among the Company, Fiberite, Inc. and ICI American
Holdings Inc. dated October 6, 1995.......................................
4.6 Shareholders' Agreement among the Company, DLJ Merchant Banking Partners,
L.P., DLJ International Partners, C.V., DLJ Offshore Partners, C.V., DLJ
Merchant Banking Funding, Inc., Carlisle-Fiberite Investors, L.P., and
Steeple International, Inc. dated October 6, 1995, as amended.............
5.1* Opinion of Gray Cary Ware & Freidenrich, A Professional Corporation.......
10.1 Form of Indemnification Agreement for directors and executive officers....
10.2 1995 Long Term Incentive and Share Award Plan, as amended.................
10.3 1997 Outside Directors Stock Option Plan and forms of agreement
thereunder................................................................
10.4 1997 Employee Stock Purchase Plan and forms of agreement thereunder.......
10.5 Management Incentive Compensation Plan, as amended........................
10.6 Amended and Restated Employment Agreement between James E. Ashton and
Fiberite, Inc. effective December 9, 1996.................................
10.7* Severance Agreement between Carl W. Smith and ICI Composites, Inc. dated
September 25, 1995........................................................
10.8 Employment Agreement between Ronald M. Miller and Fiberite, Inc. effective
January 29, 1997..........................................................
10.9 Employment Agreement between Jon DeVault and Fiberite, Inc. effective
February 1, 1997..........................................................
10.10 Credit Agreement among the Company and Bank of America National Trust and
Savings Association and other parties dated October 6, 1995, as amended...
10.11 Business Purchase Agreement among the Company, Dalia
Verwaltungsgesellschaft mbH, and Fiberite Europe GmbH dated October 6,
1995......................................................................
10.12** Agreement between Imperial Chemical Industries PLC and ICI Composites Inc.
regarding Research and Development work, dated January 1, 1994............
10.13 Special Security Agreement between AXA, The Equitable Companies
Incorporated, Donaldson, Lufkin & Jenrette, Inc., DLJ Capital Investors,
Inc., DLJ Merchant Banking, Inc., Fiberite Holdings, Inc., Fiberite Inc.
and the United States Department of Defense effective April 9, 1996.......
21.1 Subsidiaries of the Registrant............................................
23.1 Consent of Independent Public Accountants (see page II-6).................
</TABLE>
<PAGE> 91
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF DOCUMENT PAGES
- ------- -------------------------------------------------------------------------- ------------
<C> <S> <C>
23.2 Consent of Independent Certified Public Accountants (see page II-7).......
23.3 Consent of Counsel (included in Exhibit 5.1)..............................
24.1 Power of Attorney (see page II-5).........................................
27.1 Financial Data Schedule...................................................
</TABLE>
- ------------------------------
* To be filed by amendment.
** Confidential treatment requested as to part of this Exhibit.
<PAGE> 1
Exhibit 4.2
SECURITIES PURCHASE AGREEMENT
dated as of
October 6, 1995
between
FIBERITE HOLDINGS, INC.
and
THE PURCHASERS LISTED ON THE
SIGNATURE PAGES HERETO
<PAGE> 2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions................................................. 1
SECTION 1.2. Accounting Terms and Determinations......................... 7
ARTICLE II
PURCHASE AND SALE OF SECURITIES
SECTION 2.1. Commitments to Purchase..................................... 8
SECTION 2.2. The Closing................................................. 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Corporate Existence and Power............................... 9
SECTION 3.2. Authorization and Execution................................. 9
SECTION 3.3. Capitalization.............................................. 9
SECTION 3.4. Governmental Authorization..................................10
SECTION 3.5. Non-Contravention...........................................10
SECTION 3.6. Litigation..................................................10
SECTION 3.7. Not an Investment Company; Not a
Real Property Holding Company.............................10
SECTION 3.8. Solicitation; Access to Information.........................11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
SECTION 4.1. Purchase for Investment; Authority;
Binding Agreement.........................................11
SECTION 4.2. Private Placement...........................................12
SECTION 4.3. Solicitation by Purchaser...................................13
ARTICLE V
COVENANTS
SECTION 5.1. Information.................................................13
SECTION 5.2. Payment of Obligations......................................15
SECTION 5.3. Conduct of Business and Maintenance
of Existence..............................................15
SECTION 5.4. Compliance with Laws........................................15
<PAGE> 3
Page
----
SECTION 5.5. Inspection of Property, Books and
Records..................................................15
SECTION 5.6. Investment Company Act.....................................16
ARTICLE VI
SUBORDINATION
SECTION 6.1. Notes Subordinated to Senior Debt..........................16
SECTION 6.2. No Payment on Notes in Certain
Circumstances............................................16
SECTION 6.3. Payment Over of Proceeds Upon
Dissolution, Etc.........................................16
SECTION 6.4. Limitation on Exercise of Remedies.........................18
SECTION 6.5. Renewals, Extensions, etc. of
Senior Debt..............................................19
SECTION 6.6. Obligation of Holdings
Unconditional............................................19
SECTION 6.7. This Article Not to Prevent Events
of Default...............................................19
SECTION 6.8. General....................................................19
ARTICLE VII
LIMITATION ON TRANSFERS
SECTION 7.1. Restrictions on Transfer...................................20
SECTION 7.2. Restrictive Legends........................................20
SECTION 7.3. Notice of Proposed Transfers...............................21
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Notices....................................................22
SECTION 8.2. No Waivers; Amendments.....................................22
SECTION 8.3. Expenses; Documentary Taxes................................23
SECTION 8.4. Successors and Assigns.....................................23
SECTION 8.5. Brokers....................................................23
SECTION 8.6. New York Law; Submission to
Jurisdiction; Waiver of Jury
Trial....................................................24
SECTION 8.7. Severability...............................................24
SECTION 8.8. Counterparts...............................................24
Exhibit A Form of Note
<PAGE> 4
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of October 6, 1995, is
entered into between Fiberite Holdings, Inc., a Delaware corporation
("Holdings"), and the Purchasers listed on the signature pages hereto.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as used herein, have
the following meanings:
"Accreted Amount" with respect to any Note shall be determined in
the manner set forth on Annex I to such Note.
"Acquisition Co." means Fiberite, Inc., a wholly-owned subsidiary of
Holdings to be merged with and into Composites at Closing (and upon consummation
of such merger, means Composites, as the survivor of such merger) and to acquire
and hold all the outstanding capital stock of GmbH at Closing.
"Acquisition Documents" means this Agreement, the Composites
Purchase Agreement, the GmbH Purchase Agreement and the Finance Documents.
"Acquisition GmbH" means Dalia Verwaltungsgesellschaft MbH (to be
renamed Fiberite Europe GmbH), a wholly-owned subsidiary of Acquisition Co.
which is to acquire all of the business currently conducted by GmbH.
"Affiliate" means, with respect to any Person, any other Person
that, directly or indirectly, controls, is controlled by or is under common
control with such Person. For purposes of this definition, "control" (including,
with correlative meanings, the terms "controlling", "controlled by" and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
<PAGE> 5
-2-
"Agent" means the agent under the Credit Agreement.
"Agreement" means this agreement, as amended, supplemented or
otherwise modified from time to time in accordance with its terms.
"Business Day" means any day except a Saturday, Sunday or other day
on which commercial banks in the City of New York are authorized or required by
law to close.
"Change of Control" means that (i) DLJ Merchant Banking and its
Affiliates and Carlisle-Fiberite Investors, L.P. collectively cease to own,
beneficially and of record, at least 51% of each class of capital stock of
Holdings; (ii) any Person, or two or more Persons acting in concert, acquires
the beneficial ownership of 15% or more of any class of capital stock of
Acquisition Co.; or (iii) Holdings ceases to own, beneficially and of record,
100% of each class of capital stock of Acquisition Co.
"Closing" has the meaning set forth in Section 2.2(a).
"Co-Investor Purchasers" means Carlisle-Fiberite Investors, L.P.
and Steeple International, Inc.
"Commission" means the Securities and Exchange Commission.
"Composites" means ICI Composites Inc., a Delaware corporation .
"Composites Purchase Agreement" means the Purchase Agreement dated
as of October , 1995, among Fiberite, Inc. and ICI American Holdings Inc. and
shall include the exhibits and schedules thereto.
"Credit Agreement" means the Credit Agreement of even date herewith,
among Holdings, Acquisition Co., the lenders listed therein and Bank of America
National Trust and Savings Association, as Agent (in such capacity, the
"Agent"), as amended, supplemented or otherwise modified from time to time.
References to the Credit Agreement shall also include any credit agreement or
agreements entered into by Holdings and/or Acquisition Co. to replace, extend,
increase, renew, refund or refinance all or a portion of the Debt under the
Credit Agreement.
<PAGE> 6
-3-
"Debt" of any Person means at any date, (a) all indebtedness of such
Person for borrowed money or for the deferred purchase price of property or
services (other than trade payables incurred in the ordinary course of business
on ordinary terms), or which is evidenced by a note, bond, debenture or similar
instrument, (b) all obligations of such Person under Financing Leases, (c) all
Debt of the types described in the foregoing clauses (a) and (b) of any other
Person secured by any Lien on any property owned by such Person, whether or not
such Person has assumed or otherwise become liable for the payment thereof, and
(d) to the extent not otherwise included, any Guaranty by such Person of any
Debt of any other Person.
"Default" means any Event of Default or any event or condition
which, with the giving of notice or lapse of time or both, would, unless cured
or waived, become an Event of Default.
"DLJ Affiliate" means DLJSC and/or any of their respective
Subsidiaries and Affiliates, excluding, however, Holdings, its other
shareholders and its Subsidiaries.
"DLJMB" or "DLJMB Purchaser" means, collectively, or individually in
the case of DLJMB Purchaser, DLJ Merchant Banking Partners, L.P., DLJ
International Partners, C.V., DLJ Offshore Partners, C.V. and DLJ Merchant
Banking Funding, Inc. and their respective successors.
"DLJSC" means Donaldson, Lufkin & Jenrette Securities Corporation, a
Delaware corporation, and its successors.
"Event of Default" means any event or condition specified as such in
the Notes which shall have continued for the period of time, if any, therein
designated after the giving of notice, if any, therein designated.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Finance Documents" means the Credit Agreement together with all
notes, collateral and security documents, guaranties (including the Guaranty of
Holdings thereunder) and other documents delivered at any time in connection
therewith, all as amended, supplemented or otherwise modified from time to time
in accordance with their respective terms.
<PAGE> 7
-4-
"Financing Lease" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
generally accepted accounting principles to be capitalized on a balance sheet of
the lessee.
"GmbH" means Fiberite Europe GmbH, a German GmbH and which is to
transfer its entire business as currently conducted by means of the transfer of
substantially all its assets and liabilities to Acquisition GmbH, a wholly-owned
subsidiary of Acquisition Co.
"GmbH Purchase Agreement" means the Business Purchase Agreement
dated as of October 6, 1995 between Acquisition GmbH and GmbH and shall
include the exhibits and schedules thereto.
"Guaranty" of a person means any agreement by which such Person
assumes, guarantees, endorses, contingently agrees to purchase or provide funds
for the payment of, or otherwise becomes liable upon, the obligation of any
other Person, or agrees to maintain the net worth or working capital or other
financial condition of any other Person or otherwise assures any creditor of
such other Person against loss, including, without limitation, any comfort
letter, operating agreement or take-or-pay contract and shall include, without
limitation, the contingent liability of such Person in connection with any
application for a letter of credit or letter of guaranty.
"Holder" means any holder from time to time of any Securities.
"Holdings" means Fiberite Holdings, Inc., a Delaware corporation
which owns 100% of the issued and outstanding capital stock of Acquisition Co.
"Holdings Corporate Documents" means the certificate of
incorporation and by-laws of Holdings.
"Lenders" means the banks and other financial institutions from time
to time parties to the Credit Agreement.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement
<PAGE> 8
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and any Financing Lease having substantially the same economic effect as any of
the foregoing).
"Majority Holders" means the holders of voting rights with respect
to waivers, amendments and other actions permitted or required to be taken by
holders of the Notes under the terms thereof constituting a majority of such
voting rights attributable to the aggregate outstanding Accreted Amount of the
Notes at such time.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations or financial condition of Holdings and its Subsidiaries
taken as a whole or (b) the enforceability of any of the Securities Documents.
"Note Documents" means this Agreement and the Notes.
"Notes" means Holdings' 11.30% Subordinated Notes due 2002
substantially in the form set forth as Exhibit A hereto.
"Permits" means all licenses, permits and approvals required for the
full operation of Composites and GmbH and city and county permits and approvals.
"Permitted Transferee" means:
(i) in the case of any DLJMB Purchaser, (A) any other DLJMB
Purchaser, (B) any general or limited partner of any such entity (a "DLJ
Partner"), and any corporation, partnership, affiliated employee benefit
trust or other entity which is an Affiliate of any DLJ Partner
(collectively, the "DLJ Affiliates"), (C) any managing director, general
partner, director, limited partner, officer or employee of such DLJMB
Purchaser or a DLJ Affiliate, or the heirs, executors, administrators,
testamentary trustees, legatees or beneficiaries of any of the foregoing
Persons referred to in this clause (C) (collectively, "DLJ Associates"),
(D) any trust, the beneficiaries of which, or any corporation, limited
liability company or partnership, the stockholders, members or general or
limited partners of which, include only such DLJMB Purchaser, DLJ
Affiliates, DLJ Associates, their spouses or their lineal descendants and
(E) a voting trustee for one or more DLJMB Purchasers, DLJ Affiliates or
DLJ Associates under the terms of a voting trust designed to conform with
the requirements of the insurance law of the State of New York;
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(ii) in the case of any Co-Investor Purchaser, any Affiliate,
general partner or limited partner of such Co-Investor Purchaser; and
(iii) in the case of any other Purchaser, (A) Holdings, and, if such
other Purchaser is an individual, (B) (x) such Purchaser's spouse or (y)
such Purchaser's siblings or lineal descendants, so long as such Purchaser
retains the right to vote such Securities, (C) a Person who acquires
Securities from any such Purchaser pursuant to a will or the laws of
descent and distribution, and (D) any trust the beneficiaries of which
consist only of such Purchaser and/or such Purchaser's spouse, siblings
and lineal descendants.
"Person" means an individual or a corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or any agency or political subdivision
thereof) or other entity of any kind.
"Securities" means the Notes and the Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Documents" means this Agreement, the Shareholders
Agreement, the Notes and the Shares.
"Senior Debt" means all obligations of Holdings with respect to (i)
all principal of, premium and interest payable under the Finance Documents
including under the Guaranty of Holdings under the Credit Agreement, (ii) any
replacements, renewals, refinancings or extensions of any of the foregoing (or
any portion thereof), and (iii) all fees, expenses, indemnities and all other
amounts payable by Holdings or Acquisition Co. under any of the foregoing or
with respect thereto; provided that the term Senior Debt shall not include (a)
any Debt of Holdings which when incurred was without recourse to Holdings, (b)
any Debt to any employee of Holdings and (c) Trade Payables.
"Shareholders Agreement" means the Shareholders Agreement of even
date herewith, among Holdings and the shareholders listed therein.
<PAGE> 10
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"Shares" means shares of common stock of Holdings, par value $0.01
per share.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person.
"Time of Purchase" has the meaning set forth in Section 2.2(a).
"Trade Payables" means accounts payable or any other indebtedness or
monetary obligations to trade creditors created or assumed by Holdings in the
ordinary course of business in connection with the obtaining of materials or
services.
"Transaction" means the acquisition of Composites and the Included
ICI Assets (as defined in the Composites Purchase Agreement) and the acquisition
of GmbH, pursuant to the Composites Purchase Agreement and the GmbH Purchase
Agreement, respectively.
"Transfer" means any disposition of Securities that would constitute
a sale thereof under the Securities Act.
SECTION 1.2. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a consistent basis (except for changes concurred in by Holdings' independent
public accountants). For purposes of this Agreement, references to assets,
liabilities, revenues, costs or other similar items relating to Holdings,
Acquisition Co. or any of their Subsidiaries shall be deemed to include, with
respect to any joint operating agreement or partnership agreement to which
Holdings, Acquisition Co. or such Subsidiary is a party, such portion, but only
such portion, of the assets, liabilities, revenues, costs or other similar items
covered by such joint operating agreement or partnership agreement as shall
equal the then proportional interest of Holdings, Acquisition Corp. or such
Subsidiary under such joint operating agreement or partnership agreement,
determined, where applicable, in accordance with the rules for proportionate
<PAGE> 11
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consolidation in accordance with generally accepted accounting principles.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
SECTION 2.1. Commitments to Purchase. Holdings agrees to issue and
sell and, subject to the terms and conditions set forth herein and in reliance
on the representations and warranties of Holdings contained herein, each
Purchaser agrees to purchase the aggregate principal amount of Notes and number
of Shares set forth opposite the name of such Purchaser on the signature pages
hereto. The purchase price for the Notes shall be $47.2644 per $100 principal
amount thereof and the purchase price for the Shares shall be $0.50 per Share.
The Shares purchased hereunder are subject to the rights, obligations,
restrictions and other terms and provisions of the Shareholders Agreement.
SECTION 2.2. The Closing. (a) The purchase and sale of the
Securities will take place at a closing (the "Closing") at the offices of Cahill
Gordon & Reindel in New York City at such date as the Purchasers and Holdings
may agree. The date and time of Closing is referred to herein as the "Time of
Purchase".
(b) Not later than the Time of Purchase, each Purchaser shall
deliver by wire transfer to the account number of Holdings specified by Holdings
immediately available funds in an amount equal to the aggregate purchase price
of the Securities to be purchased by such Purchaser hereunder.
(c) At the Closing, against payment as set forth in subsection (b)
above, Holdings shall deliver to each Purchaser (i) a single Note representing
the aggregate principal amount of Notes to be purchased by such Purchaser at the
Closing registered in the name of such Purchaser, or, if requested by such
Purchaser, separate Notes in such other denominations and registered in such
name or names as shall be designated by such Purchaser and (ii) a certificate
representing the number of Shares to be purchased by such Purchaser.
<PAGE> 12
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Holdings represents and warrants to each Purchaser, as of the Time
of Purchase, as set forth below:
SECTION 3.1. Corporate Existence and Power. Holdings is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the state of Delaware and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its businesses as now conducted and as proposed to be conducted and is fully
qualified and in good standing as a foreign corporation registered to do
business in each jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification except where the
failure to be so qualified or to be in good standing would not reasonably be
expected to have a Material Adverse Effect.
SECTION 3.2. Authorization and Execution. The execution, delivery
and performance by each of Holdings and Acquisition Co. of each of the
Securities Documents and Acquisition Documents to which it is a party and the
issuance by Holdings of the Securities have been duly and validly authorized and
are within the corporate powers of Holdings or Acquisition Co., as the case may
be. Each of the Securities Documents and Acquisition Documents to which Holdings
or Acquisition Co. is a party has been duly executed and delivered by it and
constitutes its valid and binding agreement. When executed and delivered by
Holdings against payment therefor in accordance with the terms hereof, the Notes
will constitute valid and binding obligations of Holdings.
SECTION 3.3. Capitalization. The authorized capital stock of
Holdings consists of 15,000,000 shares of common stock, par value $0.01 per
share (of which 10,000,000 shares are issued and outstanding). All of the
issued and outstanding capital stock of Holdings has been duly authorized and
validly issued, is fully paid and nonassessable, and free of pre-emptive rights.
The authorized capital stock of Acquisition Co. consists of 1,000 shares of
common stock, par value $0.01 per share (of which 1,000 shares are issued and
outstanding). All of the issued and outstanding capital stock of Acquisition
Co. is owned by Holdings free and clear of any Lien other than the Lien of the
lenders pursuant to the Credit Agreement.
<PAGE> 13
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SECTION 3.4. Governmental Authorization. The execution and delivery
by each of Holdings and Acquisition Co. of each of the Securities Documents and
the Acquisition Documents to which it is a party did not and will not, the
issuance and sale by Holdings of the Securities will not, and the consummation
of the transactions contemplated hereby and thereby will not, require any action
by or in respect of, or filing with, any governmental body, agency or
governmental official except (a) such actions or filings as have been undertaken
or made prior to the Time of Purchase and that will be in full force and effect
on and as of the Time of Purchase or which are not required to be filed on or
prior to the Time of Purchase (but will be filed within the applicable time
periods therefor) and (b) such actions or filings that, if not taken or made,
would not in the aggregate impose materially adverse conditions upon the
Transaction or the Securities Documents.
SECTION 3.5. Non-Contravention. The execution and delivery by
Holdings of the Securities Documents or any of the Acquisition Documents to
which it is a party did not and will not, the issuance and sale by Holdings of
the Securities will not, and the consummation of the transactions contemplated
hereby and thereby will not, contravene or constitute a default under or
violation of (i) assuming the filings referred to in Section 3.4 have been
undertaken or made, any provision of applicable law or regulation the violation
of which would have a Material Adverse Effect, (ii) its certificate of
incorporation or by-laws, or (iii) any agreement, judgment, injunction, order,
decree or other instrument binding upon it or any of its assets, the violation
of which would have a Material Adverse Effect or result in the creation or
imposition of any Lien on any asset of Holdings or any of its Subsidiaries,
except pursuant to or as permitted or contemplated by the terms hereof or of the
Finance Documents.
SECTION 3.6. Litigation. There is no action, suit or proceeding
pending to which Holdings, Acquisition Co., Composites or GmbH is a party, or to
the knowledge of Holdings, which is threatened against Holdings, Acquisition
Co., Composites or GmbH, before any court or arbitrator or any governmental
body, agency or official that would reasonably be expected to result in a
Material Adverse Effect.
SECTION 3.7. Not an Investment Company; Not a Real Property Holding
Company. Holdings is not an "investment company" within the meaning of the
Investment Company Act of 1940,
<PAGE> 14
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as amended. Holdings is not a United States real property holding company (as
that term is defined in Section 897(c)(2) of the United States Internal Revenue
Code of 1986, as amended).
SECTION 3.8. Solicitation; Access to Information. No form of general
solicitation or general advertising was used by Holdings or, to the best of its
knowledge, any other Person acting on behalf of Holdings, in respect of the
Securities or in connection with the offer and sale of the Securities. Neither
Holdings nor any Person acting on behalf of Holdings has, either directly or
indirectly, sold or offered for sale to any Person any of the Securities or any
other similar securities of Holdings except as contemplated by this Agreement,
and Holdings represents that neither Holdings nor any Person acting on its
behalf will sell or offer for sale to any Person any such security to, or
solicit any offers to buy any such security from, or otherwise approach or
negotiate in respect thereof with, any Person or Persons so as thereby to bring
the issuance or sale of any of the Securities within the provisions of Section 5
of the Securities Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
SECTION 4.1. Purchase for Investment; Authority; Binding Agreement.
Each Purchaser represents and warrants to Holdings that:
(a) Except as previously disclosed in writing to Holdings, such
Purchaser is an "accredited investor" within the meaning of Rule 501(a)
under the Securities Act and the Securities to be acquired by such
Purchaser pursuant to this Agreement are being acquired for its own
account and such Purchaser will not offer, sell, transfer, pledge,
hypothecate or otherwise dispose of the Securities unless pursuant to a
transaction either registered under, or exempt from registration under,
the Securities Act;
(b) the execution, delivery and performance of this Agreement and
the purchase of the Securities pursuant hereto are within its or his or
her power and have been duly and validly authorized by all requisite
action;
<PAGE> 15
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(c) this Agreement has been duly executed and delivered by such
Purchaser;
(d) this Agreement constitutes a valid and binding agreement of
such Purchaser; and
(e) such Purchaser has such knowledge and experience in financial
and business matters so as to be capable of evaluating the merits and
risks of its investment in the Securities and is capable of bearing the
economic risks of such investment or such Purchaser has been advised by a
representative possessing such knowledge and experience.
SECTION 4.2. Private Placement. Each Purchaser (other than a DLJMB
Purchaser) represents and warrants to Holdings that:
(a) such Purchaser understands that (i) the offering and sale of the
Securities hereby is intended to be exempt from registration under the
Securities Act and (ii) there is no existing public or other market for
any of the Securities and there can be no assurance that any Purchaser
will be able to sell or dispose of the Securities to be purchased by such
Purchaser;
(b) such Purchaser's financial situation is such that such Purchaser
can afford to bear the economic risk of holding the Securities acquired
hereunder for an indefinite period of time, such Purchaser has adequate
means for providing for such Purchaser's needs and contingencies and can
afford to suffer the complete loss of the investment in the Securities;
(c) such Purchaser understands that the Securities acquired
hereunder are a speculative investment which involves a high degree of
risk of loss of the entire investment therein, that there are substantial
restrictions on the transferability of the Securities as set forth herein,
and that for an indefinite period following the date hereof there will be
no public market for any of the Securities and that, accordingly, it may
not be possible for such Purchaser to sell the Securities in case of
emergency or otherwise;
(d) such Purchaser and his or her representatives, including his or
her professional, financial, tax and other advisors, have carefully
reviewed all documents
<PAGE> 16
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available to them in connection with the investment in the Securities, and
such Purchaser understands and has taken cognizance of all the risks
related to such investment;
(e) such Purchaser and his or her representatives have been given
the opportunity to examine all documents and to ask questions of, and to
receive answers from, Holdings and its representatives concerning the
terms and conditions of the acquisition of the Securities, the
Transaction, the financing thereof and related matters and to obtain all
additional information which such Purchaser or his or her representatives
deem necessary; and
(f) all information which such Purchaser has provided to Holdings
and its representatives concerning such Purchaser and such Purchaser's
financial position is true, complete and correct.
SECTION 4.3. Solicitation by Purchaser. Each Purchaser represents
and warrants to Holdings that no form of general solicitation or general
advertising was used by Purchaser or, to the best of its knowledge, any other
Person acting on behalf of Purchaser, in respect of the Securities or in
connection with the purchase of the Securities. Neither such Purchaser nor any
Person acting on its behalf has, either directly or indirectly, sold or offered
for sale to any Person any of the Securities or any other similar security of
Holdings except as contemplated by this Agreement.
ARTICLE V
COVENANTS
Holdings hereby agrees that, from and after the Time of Purchase and
so long as (i) any Notes remain outstanding and unpaid or any other amount is
owing to the Holders from time to time of the Notes or (ii) with respect to
Section 5.1, any Shares are owned by the Purchasers or their Permitted
Transferees, and for the benefit of such Holders:
SECTION 5.1. Information.1 Holdings shall deliver to each Holder:
(a) as soon as available and in any event within 120 days after the
end of each fiscal year of Holdings, a
<PAGE> 17
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consolidated balance sheet of Holdings and its Subsidiaries as of the end
of such fiscal year and the related consolidated and consolidating
statements of income or operations, cash flows and stockholders' equity
(deficit) for such year, setting forth in each case in comparative form
the figures for the previous fiscal year and accompanied by the opinion of
Arthur Andersen LLP or another nationally recognized independent public
accounting firm ("Independent Auditor") which report (x) shall state that
such consolidated financial statements present fairly the consolidated
financial position of Holdings and its Subsidiaries for the persons
indicated in conformity with GAAP applied on a basis consistent with prior
years and (y) shall not be qualified or limited because of a restricted or
limited explanation by the Independent Auditor of any material portion of
Holdings' or any Subsidiary's Records;
(b) as soon as available and in any event within 60 days after the
end of each of the first three quarters of each fiscal year of Holdings, a
consolidated balance sheet of Holdings and its Subsidiaries as of the end
of such quarter and the related consolidated and consolidating statements
of income and consolidated statements of cash flows and stockholders'
equity (deficit) for such quarter and for the portion of Holdings' fiscal
year ended at the end of such quarter, setting forth in each case in
comparative form the figures for the corresponding quarter and the
corresponding portion of Holdings' previous fiscal year, all certified
(subject to footnote presentation and normal year-end adjustments) as to
fairness of presentation, generally accepted accounting principles and
consistency by the chief financial officer or the chief accounting officer
of Holdings;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the chief accounting officer of Holdings
stating whether any Default exists on the date of such certificate and, if
any Default then exists, setting forth other details thereof and the
action which Holdings is taking or proposes to take with respect thereto;
(d) within 5 days after any officer of Holdings obtains knowledge of
any Default, if such Default is then continuing, a certificate of the
chief financial officer or the chief accounting officer of Holdings
setting forth
<PAGE> 18
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the details thereof and the action which Holdings is taking or proposes to
take with respect thereto;
(e) promptly upon the mailing thereof to the stockholders of
Holdings in their capacity as such, copies of all financial statements,
reports, proxy statements and other information so mailed; and
(f) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q
and 8-K that Holdings or its Subsidiaries shall have filed with the
Commission.
SECTION 5.2. Payment of Obligations. Holdings shall pay and
discharge at or before maturity of the Notes all its material obligations and
liabilities, including, without limitation, tax liabilities, except where the
same may be contested in good faith by appropriate proceedings, and shall
maintain, in accordance with generally accepted accounting principles,
appropriate reserves for the accrual of any of the same.
SECTION 5.3. Conduct of Business and Maintenance of Existence.
Holdings and its Subsidiaries shall continue to engage in business of the same
general type as now conducted by them, and Holdings shall and shall cause its
Subsidiaries to, preserve, renew and keep in full force and effect its
respective corporate existence and all material rights, privileges and
franchises necessary or desirable in the normal conduct of business, except
where the failure to do so would not reasonably be expected to have a Material
Adverse Effect.
SECTION 5.4. Compliance with Laws. Holdings and its Subsidiaries
shall comply in all material respects with all applicable laws, ordinances,
rules, regulations, and requirements of governmental authorities, except where
compliance therewith is contested in good faith by appropriate proceedings or
where the failure to do so would not reasonably be expected to have a Material
Adverse Effect.
SECTION 5.5. Inspection of Property, Books and Records. Each of
Holdings and its Subsidiaries shall keep proper books of record and account in
which full, true and correct entries shall be made of all dealings and
transactions in relation to its business and activities, and shall permit
representatives of DLJMB at the expense of Holdings to visit and
<PAGE> 19
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inspect any of its properties, to examine and make abstracts from any of its
books and records and to discuss its affairs, finances and accounts with its
executive officers and independent public accountants, all at such reasonable
times and as often as may reasonably be desired.
SECTION 5.6. Investment Company Act. Neither Holdings nor any of its
Subsidiaries will be or become an investment company, open-end investment trust,
unit investment trust or face-amount certificate company that is or is required
to be registered under Section 8 of the Investment Company Act of 1940, as
amended.
ARTICLE VI
SUBORDINATION
SECTION 6.1. Notes Subordinated to Senior Debt. Holdings covenants
and agrees and each Holder (whether upon original issue or upon transfer,
assignment or exchange of any Note) accepts and agrees, that the payment of
amounts owing under any Note by Holdings shall, to the extent and in the manner
herein set forth, be subordinated in right of payment to the prior payment and
satisfaction in full of all Senior Debt.
SECTION 6.2. No Payment on Notes in Certain Circumstances. (a) If
any event of default shall have occurred and be continuing (or if such an event
of default would occur upon any payment in respect of the Note) with respect to
any Senior Debt (as such event of default is defined in such Senior Debt), no
payment (other than the accrual of original issue discount) shall be made by
Holdings with respect to amounts owing under the Notes.
(b) If, notwithstanding the foregoing, any payment shall be received
by any Holder when such payment is prohibited by Section 6.2, such payment shall
be held in trust for the benefit of the holders of Senior Debt, and shall be
paid over or delivered to the Agent on behalf of the holders of Senior Debt (pro
rata to such holders on the basis of the respective amounts of Senior Debt then
held by such holders).
SECTION 6.3. Payment Over of Proceeds Upon Dissolution, Etc. (a)
Upon any distribution of assets of, or payments by, Holdings of any kind or
character (whether in cash,
<PAGE> 20
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property or securities) to creditors upon any dissolution or winding-up or total
or partial liquidation or reorganization of Holdings (whether voluntary or
involuntary or in bankruptcy,insolvency, receivership or other proceedings), all
amounts due or to become due upon all Senior Debt (including, without
limitation, interest accruing after the filing of a petition under any
bankruptcy law at the rate provided for in the documents governing such Senior
Debt, whether or not allowable as a claim under such bankruptcy law) shall first
be paid in full in cash, or duly provided for, before any payment or
distribution is made on account of any amount owing under the Notes and before
Holdings shall, directly or indirectly, prepay, repay, redeem, purchase,
exchange or acquire any Notes. Upon any such dissolution, winding-up,
liquidation or reorganization, any payment or distribution of assets of, or
payments by, Holdings of any kind or character (whether in cash, property or
securities) to which the Holder would be entitled except for the provisions
hereof, shall be paid by Holdings or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other person making such payment or distribution,
or by the Holders if received by them, directly to the Agent on behalf of the
holders of Senior Debt (pro rata to such holders on the basis of the respective
amounts of Senior Debt then held by such holders) for application to the payment
of Senior Debt remaining unpaid until all such Senior Debt has been paid in full
in cash after giving effect to any concurrent payment, distribution or provision
therefor to or for the holders of such Senior Debt.
(b) If, notwithstanding the foregoing, any distribution of assets
of, or payments by, Holdings of any kind or character (whether in cash, property
or securities) shall be received by the Holders when such payment or
distribution is prohibited by Section 6.3(a), such payment or distribution shall
be held in trust for the benefit of the holders of Senior Debt, and shall be
paid over or delivered to Agent on behalf of the holders of Senior Debt (pro
rata to such holders on the basis of the respective amounts of Senior Debt then
held by such holders), for application to the payment of Senior Debt remaining
unpaid until all such Senior Debt has been paid in full in cash, after giving
effect to any concurrent payment, distribution or provision therefor to or for
the holders of Senior Debt.
(c) Upon the payment in full in cash of all Senior Debt, the Holders
shall be subrogated to the rights of the holders of Senior Debt to receive
payments or distributions of cash, property or securities of Holdings applicable
to the
<PAGE> 21
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Senior Debt until all amounts owing under the Notes shall be paid in full; and,
for the purposes of such subrogation, (i) no payments or distributions to the
holders of the Senior Debt of any cash, property or securities to which the
Holders would be entitled except for the provisions of this Article VI, and no
payment over pursuant to the provisions of this Article VI to the holders of
Senior Debt by the Holders shall, as between Holdings, its creditors other than
holders of Senior Debt, and the Holders, be deemed to be a payment by Holdings
to or on account of the Senior Debt, and (ii) no payment or distributions of
cash, property or securities to or for the benefit of the Holders pursuant to
the subrogation provision of this paragraph (c) which would otherwise have been
paid to the holders of Senior Debt shall be deemed to be a payment by Holdings
to or for the account of the Notes.
(d) If any payment or distribution of assets of Holdings of any kind
or character (whether in cash, property or securities) to which the Holders
would otherwise be entitled but for the provisions of this Article VI shall be
received by the holders of Senior Debt, any portion of such payment or
distribution that is in excess of the amount which results in the payment and
satisfaction in full in cash of all Senior Debt shall be held in trust for the
benefit of, and shall be paid over or delivered to, in accordance with and to
the extent permitted by applicable law, the Holders (pro rata to such Holders on
the basis of the respective amounts of Notes then held by such Holders), for
application to the payment of all amounts remaining unpaid under the Notes.
SECTION 6.4. Limitation on Exercise of Remedies. Each Purchaser (and
each subsequent Holder) by its acceptance of delivery of any Note hereby agrees
that it will not at any time (i) attempt to enforce or collect on any Note or
enforce any other rights in respect of such Note (provided, however, that each
Purchaser (and each subsequent Holder) shall be entitled to declare the
indebtedness represented by the Notes to be due and payable if any indebtedness
under the Senior Debt shall have been declared to be due and payable) or (ii)
commence, or join with any other creditor in commencing, any bankruptcy,
reorganization or insolvency proceedings with respect to Holdings (provided,
however, that each Purchaser (and each subsequent Holder) shall be entitled to
file a proof of claim in respect of the Notes in any such proceeding so long as
such proof of claim shall state that the Notes are subordinated to the extent
and in the manner set forth in this Article VI; provided, further, that if any
such Purchaser or subsequent Holder
<PAGE> 22
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has not filed such proof of claim prior to five Business Days before the last
date that such proofs of claim are permitted to be filed, the Agent may file
such proofs of claim on behalf of such Purchaser or subsequent Holder).
SECTION 6.5. Renewals, Extensions, etc. of Senior Debt. Each
Purchaser (and each subsequent Holder) by its acceptance of delivery of any Note
hereby agrees and consents that the obligations and liabilities of Holdings or
any other party or parties for or upon the Senior Debt (or any promissory note,
security document or guaranty evidencing or securing the same) may, from time to
time, in whole or in part, be renewed, extended, increased, modified, amended,
accelerated, compromised, supplemented, terminated, sold, exchanged, waived or
released as holders of the Senior Debt (or any representative or agent acting on
their behalf) may deem advisable without impairing, abridging, diminishing,
releasing or affecting the subordination of the Notes to the Senior Debt
provided for herein.
SECTION 6.6. Obligation of Holdings Unconditional. Nothing contained
in this Article VI (other than as set forth in Section 6.4) or any Note is
intended to or shall impair, as between Holdings and the Holders, the obligation
of Holdings, which is absolute and unconditional, to pay to the Holders amounts
owing under the Notes as and when the same shall become due and payable in
accordance herewith, or is intended to or shall affect the relative rights of
the Holders and creditors of Holdings other than the holders of Senior Debt, nor
shall anything herein or therein prevent the Holders from exercising all
remedies otherwise permitted by applicable law upon default under the Notes,
subject to the rights, if any, under this Article VI of the holders of the
Senior Debt in respect of cash, property or securities of Holdings received upon
the exercise of any such remedy.
SECTION 6.7. This Article Not to Prevent Events of Default. The
failure to make a payment on account of principal of or interest on the Notes by
reason of any provision of this Article VI will not be construed as preventing
the occurrence of an Event of Default.
SECTION 6.8. General. (a) Each Purchaser (and each subsequent
Holder) by its acceptance of delivery of any Note hereby acknowledges and agrees
that the holders of the Senior Debt have relied upon and will continue to rely
upon the
<PAGE> 23
-20-
provisions of this Article VI in entering into the agreements relating to Senior
Debt and in extending credit to Holdings pursuant thereto.
(b) No right of any current or future holder of any Senior Debt to
enforce the provisions of this Article VI shall at any time in any way be
prejudiced or impaired by any act or failure to act by any such holder, or by
any noncompliance by Holdings with the terms and provisions and covenants
herein, regardless of any knowledge thereof any such holder may have or
otherwise be charged with or by any action or failure to act on the part of
Holdings.
(c) The provisions of this Article VI are intended to be for the
benefit of, and shall be enforceable directly by, the holders of the Senior
Debt, without any act or notice of acceptance hereof by such holders.
ARTICLE VII
LIMITATION ON TRANSFERS
SECTION 7.1. Restrictions on Transfer. (a) From and after the Time
of Purchase, none of the Notes shall be transferable except to Permitted
Transferees or upon the conditions specified in this Article VII which
conditions are intended to ensure compliance with the provisions of the
Securities Act in respect of the Transfer of any of such Securities or any
interest therein. Each Purchaser agrees to cause any proposed transferee of any
Notes (or any interest therein) held by it to agree to take and hold such Notes
(or any interest therein) subject to the provisions and upon the conditions
specified in this Article VII.
(b) From and after the Time of Purchase, none of the Shares shall be
transferable except as contemplated by the Shareholders Agreement.
SECTION 7.2. Restrictive Legends. (a) Each certificate for the Notes
issued to any Purchaser or to any Permitted Transferee shall include a legend in
substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE
<PAGE> 24
-21-
SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD, UNLESS IT HAS BEEN
REGISTERED UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS
AN EXEMPTION FROM REGISTRATION IS AVAILABLE AND THEN ONLY IN COMPLIANCE
WITH THE RESTRICTIONS ON TRANSFER SET FORTH IN THE SECURITIES PURCHASE
AGREEMENT DATED AS OF OCTOBER 6, 1995 RELATING TO THIS SECURITY, A COPY OF
WHICH MAY BE OBTAINED FROM FIBERITE HOLDINGS, INC. AT ITS PRINCIPAL
EXECUTIVE OFFICE.
(b) Any Holders of Notes registered pursuant to the Securities Act
and qualified under applicable state securities laws may exchange such Notes on
transfer for new securities that shall not bear the legend set forth in
paragraph (a) of this Section 7.2.
SECTION 7.3. Notice of Proposed Transfers. Five Business Days prior
to any proposed Transfer of any Notes (other than Transfers of Notes (i)
registered under the Securities Act of (ii) to a Permitted Transferee), the
Holder thereof shall give written notice to Holdings of such Holder's intention
to effect such Transfer, setting forth the manner and circumstances of the
proposed Transfer, and shall be accompanied by (A) an opinion of counsel
reasonably satisfactory to Holdings addressed to Holdings to the effect that the
proposed Transfer of such Notes may be effected without registration under the
Securities Act, (B) such representation letters in form and substance reasonably
satisfactory to Holdings to ensure compliance with the provisions of the
Securities Act, and (C) such letters in form and substance reasonably
satisfactory to Holdings from each such transferee stating such transferee's
agreement to be bound by the terms of this Agreement. Such proposed Transfer may
be effected only if Holdings shall have received such notice of transfer,
opinion of counsel, representation letters and other letters referred to in the
immediately preceding sentence, whereupon the holder of such Notes shall be
entitled to Transfer such Notes in accordance with the terms of the notice
delivered by the holder to Holdings. Each certificate evidencing the Notes
transferred as above provided shall bear the legend set forth in Section 7.2(a)
except that such certificate shall not bear such legend if the opinion of
counsel referred to above is to the further effect that neither such legend nor
the restrictions on Transfer in this Article VII are required in order to ensure
compliance with the provisions of the Securities Act.
<PAGE> 25
-22-
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Notices. All notices, demands and other communications
to any party hereunder shall be in writing (including telecopier or similar
writing) and shall be given to such party at its address set forth on the
signature pages hereof, or such other address as such party may hereinafter
specify for the purpose. Each such notice, demand or other communication shall
be effective (i) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified on the signature page hereof, (ii) if given by mail,
four days after such communication is deposited in the mail with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means,
when delivered at the address specified in this Section 8.1.
SECTION 8.2. No Waivers; Amendments. (a) No failure or delay on the
part of any party in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, power or remedy. The remedies provided for herein and in the other
Note Documents are cumulative and are not exclusive of any remedies that may be
available to any party at law or in equity or otherwise.
(b) Any provision of this Agreement may be amended, supplemented or
waived if, but only if, such amendment, supplement or waiver is in writing and
is signed by Holdings and the Majority Holders; provided that without the
consent of each Holder of any Notes affected thereby, an amendment, supplement
or waiver may not (a) reduce the aggregate Accreted Amount of Notes whose
holders must consent to an amendment, supplement or waiver, (b) reduce the rate
or extend the time for payment of interest on any Notes, (c) reduce the Accreted
Amount of or extend the stated maturity of any Notes or permit any amount
payable in respect of the Notes to be paid in money or property other than as
stated in the Notes. In determining whether the holders of the requisite
principal amount of Notes have concurred in any direction, consent, or waiver as
provided in this Agreement or in the Notes, Notes which are owned by Holdings or
any other obligor on the Notes, or by any Person (other than a DLJ Affiliate)
controlling, controlled by, or under common control with any of the foregoing,
shall be disregarded and deemed not to be outstanding for the purpose of any
such
<PAGE> 26
-23-
determination; and provided further that no such amendment, supplement or waiver
which affects the rights of DLJMB, otherwise than solely in its capacity as a
holder of the Notes, shall be effective with respect to it without its prior
written consent. For so long as the Guaranty of Holdings under the Credit
Agreement is outstanding, no amendment to this Agreement which modifies the
provisions of Article VI hereof, this sentence or the definitions of defined
terms used therein (to the extent used therein) shall be effective without the
prior written consent of the Agent.
SECTION 8.3. Expenses; Documentary Taxes. Holdings agrees to pay all
reasonable out-of-pocket costs, expenses and other payments in connection with
the purchase and sale of the Securities as contemplated by this Agreement
including without limitation (i) fees and disbursements of special counsel for
DLJMB incurred in connection with the preparation of this Agreement, (ii) all
out-of-pocket expenses of DLJMB, including fees and disbursements of counsel, in
connection with any waiver or consent hereunder or any amendment hereof or any
Default or alleged Default hereunder and (iii) if an Event of Default occurs,
all out-of-pocket expenses incurred by DLJMB and each Holder of Notes, including
fees and disbursements of counsel, in connection with such Event of Default and
collection, bankruptcy, insolvency and other enforcement proceedings resulting
therefrom. In addition, Holdings agrees to pay any and all stamp, transfer and
other similar taxes, assessments or charges payable in connection with the
execution and delivery of this Agreement or the issuance of the Securities.
SECTION 8.4. Successors and Assigns. This Agreement shall be binding
upon Holdings and each Purchaser and its successors and assigns. Holdings may
not assign or otherwise transfer its rights or obligations under this Agreement
to any other Person without the prior written consent of all of the Holders. All
provisions hereunder purporting to give rights to DLJ and its Affiliates or to
holders of Notes or Shares are for the express benefit of such Persons.
SECTION 8.5. Brokers. Holdings represents and warrants that, except
for DLJSC and, solely in connection with the Transaction, Valufinder Group,
Inc., it has not employed any broker, finder, financial advisor or investment
banker who might be entitled to any brokerage, finder's or other fee or
commission in connection with the Transaction or the sale of Notes or the
Shares.
<PAGE> 27
-24-
SECTION 8.6. New York Law; Submission to Jurisdiction; Waiver of
Jury Trial. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW
PRINCIPLES THEREOF. EACH PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
NOTES, THE SHARES OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY
HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY
HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 8.7. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
SECTION 8.8. Counterparts. This Agreement may be executed in any
number of counterparts each of which shall be an original with the same effect
as if the signatures thereto and hereto were upon the same instrument.
<PAGE> 28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers or representatives, as
of the date first above written.
FIBERITE HOLDINGS, INC.
By: /s/ Thompson Dean
-----------------------------------------------
Name:
Title:
Fiberite Holdings, Inc.
c/o DLJ Merchant Banking, Inc.
140 Broadway
New York, New York 10005
Attention: Thompson Dean
Telecopy: (212) 504-4991
with a copy to:
DLJ Merchant Banking, Inc.
140 Broadway
New York, New York 10005
Attention: Thompson Dean
Telecopy: (212) 504-4991
$26,922,900 DLJ MERCHANT BANKING PARTNERS, L.P.
4,226,157 shares BY: DLJ MERCHANT BANKING, INC.
Managing General Partner
DLJ Merchant Banking, Inc.
140 Broadway
New York, New York 10005
Attention: Thompson Dean
Telecopy: (212) 504-4991
By: /s/ Thompson Dean
-----------------------------------------------
<PAGE> 29
$12,038,400 DLJ INTERNATIONAL PARTNERS, C.V.
1,889,701 shares BY: DLJ MERCHANT BANKING, INC.
Advisory General Partner
DLJ Merchant Banking, Inc.
140 Broadway
New York, New York 10005
Attention: Thompson Dean
Telecopy: (212) 504-4991
By: /s/ Thompson Dean
-----------------------------------------------
$698,000 DLJ OFFSHORE PARTNERS, C.V.
109,566 shares BY: DLJ MERCHANT BANKING, INC.
Advisory General Partner
DLJ Merchant Banking, Inc.
140 Broadway
New York, New York 10005
Attention: Thompson Dean
Telecopy: (212) 504-4991
By: /s/ Thompson Dean
-----------------------------------------------
$635,100 STEEPLE INTERNATIONAL, INC.
99,648 shares BY: /s/ Jay Aidikoff
----------------------------------------------
Name: Jay M. Aidikoff
Title: President
Address: C/O Valufinder Group, Inc.
Leveraged Finance Group
95 Horatio Street
Suite 303
New York, NY 10014
Attention: Jay M. Aidikoff
Fax: (212) 243-1388
<PAGE> 30
$17,496,000 DLJ MERCHANT BANKING FUNDING, INC.
2,746,398 shares
DLJ Merchant Banking, Inc.
140 Broadway
New York, New York 10005
Attention: Thompson Dean
Telecopy: (212) 504-4991
By: /s/ Reid S. Perper
-----------------------------------------------
Reid S. Perper
Attorney in Fact
$5,915,100 CARLISLE-FIBERITE INVESTORS, L.P.
928,530 shares A Delaware Limited Partnership
By: CARLISLE GROUP, L.P.
its General Partner
By: CARLISLE ENTERPRISES, L.P.
its General Partner
By: /s/ Dennis A. Dunn
-----------------------------------------------
Name: Dennis A. Dunn
Title:General Partner
Address: Carlisle Enterprises, L.P.
7777 Fay Avenue, Suite 200
La Jolla, CA 92037
Attention: Jim Carlisle
Fax: (619) 459-3776
<PAGE> 1
EXHIBIT 4.3
AMENDED AND RESTATED
RESTRICTED STOCK PURCHASE AGREEMENT
dated as of
December 31, 1996
between
FIBERITE HOLDINGS, INC.
and
CARLISLE GROUP, L.P.
<PAGE> 2
This Amended and Restated Restricted Stock Purchase Agreement is made as
of the 31st day of December, 1996 between Fiberite Holdings, Inc., a Delaware
corporation (the "Company"), and Carlisle Group, L.P., a Delaware limited
partnership ("Purchaser"), and supersedes, in its entirety, that certain
Restricted Stock Purchase Agreement dated as of July 17, 1996 by and between the
Company and the Purchaser.
In consideration of the agreements set forth below, the Company and
Purchaser agree as follows:
SECTION 1. (a) Definitions. The following terms have the meanings set
forth below:
"Affiliate" means, with respect to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this agreement, as amended, supplemented or otherwise
modified from time to time in accordance with its terms.
"As Adjusted" means (i) if the Company at any time subdivides (by any
stock split, stock dividend, recapitalization or otherwise) the Common Stock
into a greater number of shares or pays a dividend or makes a distribution to
holders of the Common Stock in the form of shares of Common Stock, the number of
Shares referred to shall be proportionately increased; and (ii) if the Company
at any time combines (by reverse stock split or otherwise) the Common Stock into
a smaller number of shares, the number of Shares referred to shall be
proportionately decreased.
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.
"Change of Control" means (i) a Change of Control as such term is
defined in the Credit Agreement, (ii) the sale of all or substantially all of
the assets of the Company or (iii) an Initial Public Offering in which the
Institutional
<PAGE> 3
-2-
Shareholders, after such offering, own in the aggregate less than 50% of the
outstanding Common Stock.
"Closing" has the meaning set forth in Section 2(a).
"Commission" means the Securities and Exchange Commission.
"Credit Agreement" means the Credit Agreement dated October 6, 1995,
among the Company, Fiberite, the lenders listed therein and Bank of America
National Trust and Savings Association, as Agent (in such capacity, the
"Agent"), as amended, supplemented or otherwise modified from time to time.
References to the Credit Agreement shall also include any credit agreement or
agreements entered into by the Company and/or Fiberite to replace, extend,
increase, renew, refund or refinance all or a portion of the debt or other
obligations under the Finance Documents.
"EBITDA" means, for any computation period, the sum of
(a) Consolidated Net Income (as defined in the Credit Agreement) of the
Company for such period excluding, to the extent reflected in determining
such Consolidated Net Income, extraordinary gains and losses for such
period and non-cash or non-recurring charges related to plant
consolidations or restructurings, and
(b) to the extent deducted in determining Consolidated Net Income,
Interest Expense (as defined in the Credit Agreement), income tax expense,
depreciation, depletion and amortization for such period.
"Equity Proceeds" means the aggregate cash proceeds (net of the direct
costs of any such sale or other disposition (including, without limitation,
sales and underwriters' commissions and legal, accounting and investment banking
fees)) received by all Institutional Shareholders in exchange for or in a
distribution or dividend based upon Holdings Shares (As Adjusted) and Notes
that, in each case, were issued and outstanding on October 6, 1995 from the
sale, exchange, conversion or other disposition of Holdings Shares and Notes
(including upon repayment of such Notes) or from a dividend or other
distribution to the holders of such Shares and Notes from October 6, 1995 to the
date of determination; provided that upon the occurrence of a Change of Control,
for purposes of
<PAGE> 4
-3-
this Agreement, the term Equity Proceeds shall be deemed to include, in addition
to the cash proceeds described above, the aggregate non-cash proceeds (net of
the costs outlined above) received by all Institutional Shareholders in exchange
for, or from a dividend or other distribution based upon, Holdings Shares (As
Adjusted) and Notes that, in each case, were issued and outstanding on October
6, 1995 from the sale or other disposition of Holdings Shares (As Adjusted) and
Notes (including upon repayment of such Notes) from October 6, 1995 to and
including the date of such Change of Control, less any fees and expenses
incurred by such parties in connection with such sales or other dispositions. In
the case of any non-cash proceeds, such non-cash proceeds shall be valued at the
fair value thereof as reasonably determined by the Board of Directors as of the
consummation of such sale or disposition, irrespective of any accounting
treatment. In no event shall any proceeds received in a sale, exchange,
conversion or other disposition with or to a Permitted Transferee of an
Institutional Shareholder or, to the extent such proceeds are other than cash,
with or to the Company or Fiberite, be included in any calculation of Equity
Proceeds hereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fiberite" means Fiberite, Inc., a Delaware corporation.
"Finance Documents" means the Credit Agreement together with all notes,
collateral and security documents, guaranties (including the guaranty of the
Company thereunder) and other documents delivered at any time in connection
therewith, all as amended, supplemented or otherwise modified from time to time
in accordance with their respective terms.
"Financing Lease" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
generally accepted accounting principles to be capitalized on a balance sheet of
the lessee.
"Fiscal Year" means a fiscal year of the Company.
"GmbH" means Fiberite Europe GmbH, a German GmbH.
"Holder" means any holder from time to time of any Shares.
<PAGE> 5
-4-
"Holdings Corporate Documents" means the certificate of incorporation
and by-laws of the Company.
"Holdings Shares" means shares of common stock of the Company, par
value $0.01 per share.
"Initial Public Offering" has the meaning ascribed to such term in the
Shareholders Agreement.
"Institutional Shareholder" has the meaning ascribed to such term in
the Shareholders Agreement.
"Institutional Shareholder Valuation" means, for any date of
calculation, the sum of
(a) the Equity Proceeds on such date plus, without duplication, the
value of all non-cash Equity Proceeds determined in accordance with the
second sentence or the proviso of the first sentence of the definition of
Equity Proceeds, without regard to whether a Change of Control has
occurred; and
(b) the product of
(A) the per share cash proceeds (net of the direct costs of
the applicable Public Offering (including, without limitation,
sales and underwriters' commissions and legal, accounting and
investment banking fees)) received by all Institutional
Shareholders in the Public Offering with respect to which this
calculation is made, multiplied by
(B) the number of Holdings Shares that were issued,
outstanding and held by Institutional Shareholders on October 6,
1995 (As Adjusted) less the number of any such Holdings Shares for
which Equity Proceeds are included in (a) above; and
(c) the amount of principal and accrued interest on all Notes
outstanding as of the date this calculation was made.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without
<PAGE> 6
-5-
limitation, any conditional sale or other title retention agreement and any
Financing Lease having substantially the same economic effect as any of the
foregoing).
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations or financial condition of the Company and its subsidiaries
taken as a whole or (b) the enforceability of any of the Securities Documents.
"Notes" means the Company's 11.30% Subordinated Notes due 2002.
"Permitted Transferee" has the meaning ascribed to such term in the
Shareholders Agreement.
"Person" means an individual or a corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or any agency or political subdivision
thereof) or other entity of any kind.
"Pledge Agreement" has the meaning set forth in Section 2(b).
"Promissory Note" has the meaning set forth in Section 2(a).
"Public Offering" has the meaning ascribed to such term in the
Shareholders Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Documents" means this Agreement, the Shareholders
Agreement, the Shares, the Promissory Note and the Pledge Agreement.
"Shareholders Agreement" means the Shareholders Agreement dated as of
October 6, 1995 among the Company and the other shareholders signatory thereto,
as amended or modified pursuant to the terms thereof.
"Shares" has the meaning set forth in Section 2(a).
"subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of the capital stock or other ownership
interests having ordinary voting power
<PAGE> 7
-6-
to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person.
"Time of Purchase" has the meaning set forth in Section 2(a).
"Transfer" means any disposition of Shares that would constitute a sale
thereof under the Securities Act.
"Vesting Percentage" means, for any date of calculation, the ratio of:
(a) the number of Holdings Shares which were issued, outstanding and
held by the DLJ Entities on October 6, 1995 (As Adjusted) which were sold
in the Public Offering with respect to which this calculation is made,
divided by
(b) the number of Holdings Shares that were issued, outstanding and
held by the DLJ Entities on October 6, 1995 (As Adjusted).
(b) Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with generally accepted
accounting principles as in effect from time to time, applied on a consistent
basis (except for changes concurred in by the Company's independent public
accountants). For purposes of this Agreement, references to assets, liabilities,
revenues, costs or other similar items relating to the Company, Fiberite or any
of their subsidiaries shall be deemed to include, with respect to any joint
operating agreement or partnership agreement to which the Company, Fiberite or
such subsidiary is a party, such portion, but only such portion, of the assets,
liabilities, revenues, costs or other similar items covered by such joint
operating agreement or partnership agreement as shall equal the then
proportional interest of the Company, Fiberite or such subsidiary under such
joint operating agreement or partnership agreement, determined, where
applicable, in accordance with the rules for proportionate consolidation in
accordance with generally accepted accounting principles.
SECTION 2. Sale to Purchaser. (a) Purchase and Sale of Stock. Subject
to the terms and upon the conditions hereof and
<PAGE> 8
-7-
the Shareholders Agreement, the Company agrees to sell to Purchaser, and
Purchaser agrees to purchase from the Company, 741,957 shares (the "Shares") of
Common Stock of the Company, par value $0.01 per share ("Common Stock"), at the
aggregate price of $370,978.50 ($0.50 per share). Such purchase and sale shall
be consummated (such consummation, the "Closing") at a place and time agreed
upon by the Company and Purchaser, provided that if no place and time are agreed
upon, such purchase and sale shall take place at the principal office of the
Company, at 12:00 noon, on the date fifteen Business Days after the date hereof
(such time of purchase and sale, the "Time of Purchase"). At the Closing, the
Company shall deliver the Shares, registered in the name of Purchaser, and
Purchaser shall concurrently therewith (i) deliver and execute a promissory note
having an aggregate principal amount of $363,558.93 (the "Promissory Note") in
the form of Exhibit A hereto and (ii) deliver a certified check payable to the
order of the Company in the amount of $7,419.57. Each of Purchaser and the
Company acknowledges that the Shares are subject to the terms and conditions
contained herein, the Shares and in the Shareholders Agreement and that each
Holder of a Share is bound by such terms and conditions.
(b) Financing. To secure the obligations of Purchaser under the
Promissory Note, Purchaser will enter into a pledge agreement (the "Pledge
Agreement") in the form of Exhibit B hereto.
SECTION 3. Vesting. No Share shall vest until the vesting criteria set
forth in this Section 3 with respect to such Share shall have occurred.
Purchaser may not sell, transfer, pledge, hypothecate or otherwise encumber
(except pursuant to the Pledge Agreement) any Shares prior to October 6,2005,
unless such Shares have vested pursuant to this Section. In addition to the
vesting criteria set forth below, no Share shall vest until (i) all interest
then due and payable under the Promissory Note has been paid; (ii) the aggregate
of all principal amounts of the Promissory Note paid from the date of such
Promissory Note through the date of satisfaction of the other vesting criteria
established hereunder with respect to such Share equals or exceeds the product
of (A) the total number of Shares which have (or, but for the application of
this sentence, would have) vested hereunder and (B) $.49; (iii) the portion of
any accrued and unpaid interest attributable to the principal amounts referred
to in the preceding clause (ii) have been paid; and (iv) each other obligation
of Purchaser under the Promissory Note (which obligation is required to be
satisfied at or prior to the time of any such vesting) is satisfied.
(a) Time Based Vesting. (i) The number of Shares listed on Schedule A
as Time Based Shares ("Time Based Shares")
<PAGE> 9
-8-
shall vest only in accordance with Section 3(a)(ii) and with the following
schedule:
<TABLE>
<CAPTION>
Vesting Amount (percentage
of Time Based Shares
Vesting Date Vesting on such date)
------------ --------------------------
<S> <C>
December 31, 1996 25%
December 31, 1997 25%
December 31, 1998 25%
December 31, 1999 25%
</TABLE>
(ii) If a Change of Control shall occur, then any Time Based Shares
that have not vested as of such date shall be deemed to vest immediately prior
to such Change of Control.
(b) Performance Based Vesting. (i) The number of Shares listed on
Schedule A as Performance Based Shares ("Performance Based Shares") shall vest
on October 6, 2005. Provided, however, for each period listed below, if EBITDA
is equal to or above the amount listed beside such period on the chart below
(each such amount, a "Target EBITDA") then 25% of the Performance Based Shares
(for each such period, "Target Shares") shall vest earlier as follows:
<TABLE>
<CAPTION>
Fiscal Year ending Target EBITDA
------------------ -------------
<S> <C>
December 31, 1996 $25,900,000
December 31, 1997 $29,700,000
December 31, 1998 $34,000,000
December 31, 1999 $37,000,000
</TABLE>
provided further, that if EBITDA for a period is less than the Target EBITDA for
such period, but is greater than 85% of the Target EBITDA for such period, then
the number of Performance Based Shares that shall vest for such period shall be
calculated as follows:
Target Shares x EBITDA - (.85) (Target EBITDA)
-------------------------------------,
Target EBITDA - (.85) (Target EBITDA)
provided, further, that the amount of EBITDA for a Fiscal Year in excess of the
Target EBITDA for such Fiscal Year may be carried back to EBITDA for the two
immediately preceding Fiscal Years, and additional Performance Based Shares
based thereon may vest in accordance with this Section 3(b).
<PAGE> 10
-9-
(ii) If the number of Exit Shares (as defined below) that vest pursuant
to Section 3(c)(i) is greater than the number of Performance Based Shares that
have vested prior to any such vesting of Exit Shares, then simultaneously with
the vesting of the Exit Shares hereunder additional Performance Based Shares
shall vest in a number sufficient to make the number of vested Performance Based
Shares equal to the number of such Exit Shares.
(iii) Immediately prior to the transfer to Third Parties of all or
substantially all of (A) the Holdings Shares owned by the Institutional
Shareholders on the date hereof or (B) the assets of the Company and its
subsidiaries, the Performance Based Shares that have not vested as of such date
shall automatically vest.
(c) Exit Shares. (i) The number of Shares listed on Schedule A as Exit
Shares ("Exit Shares") shall vest on October 6, 2005. Provided, however, if the
amount of Equity Proceeds hereunder equals,during the 12-month period beginning
on the dates indicated below, an amount equal to or greater than the
corresponding amount listed below (each such amount, the "Target Equity
Proceeds") then all of the Exit Shares shall vest immediately prior to the
consummation of the sale or disposition whereby Equity Proceeds will exceed such
amount:
<TABLE>
<CAPTION>
Period ending
on October 6, Target Equity Proceeds
------------- ----------------------
<S> <C>
1996 $ 70,000,000
1997 $ 87,500,000
1998 $105,000,000
1999 $140,000,000
2000 $150,000,000
2001 $180,000,000
2002 $216,000,000
2003 $259,200,000
</TABLE>
provided, for each day of a period, the Target Equity Proceeds shall be
increased by an amount equal to a fraction, the numerator of which is the Target
Equity Proceeds for the last day of such period minus the Target Equity Proceeds
for the last day of the preceding period and the denominator of which is the
number of days in the current period.
<PAGE> 11
-10-
After October 6, 1996, if on any day of a period, the Equity Proceeds
are equal to or greater than the Target Equity Proceeds for the last day of the
preceding period, but less than the Target Equity Proceeds for such date, then
the amount of Exit Shares that vest shall be equal to (i) the total number of
Exit Shares as of such date multiplied by a fraction, the numerator of which is
the Equity Proceeds minus the Target Equity Proceeds for the last day of the
preceding period and the denominator of which is the Target Equity Proceeds
minus the Target Equity Proceeds for the last day of the preceding period less
(ii) the total number of Exit Shares which have previously vested (or would have
vested but for the third sentence of this Section 3) pursuant to this paragraph.
(ii) In the event of any Public Offering (other than a registration or
offering (A) on Form S-8 or S-4 or any successor or similar forms, (B) relating
to Common Stock issuable upon exercise of employee stock options or in
connection with any employee benefit or similar plan of the Company, (C) in
connection with a direct or indirect acquisition by the Company of another
company or business, (D) in connection with sales of Common Stock or options to
employees of the Company or any direct or indirect subsidiary of the Company or
(E) where the primary purpose of such registration relates to a debt financing
by the Company or any direct or indirect subsidiary of the Company), if the
Institutional Shareholder Valuation on the date of such Public Offering equals
or exceeds the Target Equity Proceeds in effect on the date of such Public
Offering, the number of Exit Shares equal to the product of the Vesting
Percentage for such Public Offering multiplied by the number of Exit Shares
listed on Schedule A shall vest.
(iii) Immediately prior to the transfer to Third Parties of all or
substantially all of (A) the Holdings Shares owned by the Institutional
Shareholders on the date hereof or (B) the assets of the Company and its
subsidiaries, any Exit Shares that have not vested as of such date shall
automatically vest.
(d) Bonus Shares. (i) The number of Shares listed on Schedule A as
Bonus Shares ("Bonus Shares") shall vest
<PAGE> 12
-11-
on October 6, 2005. Provided, however, the Bonus Shares shall vest earlier if
during either of the periods listed below, the Equity Proceeds equal or exceed
the amount that corresponds to such period on the chart below (each such amount,
the "Target II Equity Proceeds"):
<TABLE>
<CAPTION>
Target II
Period Equity Proceeds
------ ---------------
<S> <C>
On or before October 6, 1997 $122,500,000
After October 6, 1997 but on
or before October 6, 2000 $165,000,000
</TABLE>
(ii) In the event of any Public Offering (other than a registration or
offering (A) on Form S-8 or S-4 or any successor or similar forms, (B) relating
to Common Stock issuable upon exercise of employee stock options or in
connection with any employee benefit or similar plan of the Company, (C) in
connection with a direct or indirect acquisition by the Company of another
company or business, (D) in connection with sales of Common Stock or options to
employees of the Company or any direct or indirect subsidiary of the Company or
(E) where the primary purpose of such registration relates to a debt financing
by the Company or any direct or indirect subsidiary of the Company), if the
Institutional Shareholder Valuation on the date of such Public Offering equals
or exceeds the Target II Equity Proceeds in effect on the date of such Public
Offering, the number of Bonus Shares equal to the product of the Vesting
Percentage for such Public Offering multiplied by the number of Bonus Shares
listed on Schedule A shall vest.
(iii) Immediately prior to the transfer to Third Parties of all or
substantially all of (A) the Holdings Shares owned by the Institutional
Shareholders on the date hereof or (B) the assets of the Company and its
subsidiaries, any Bonus Shares that
<PAGE> 13
-12-
(e) Certificates. Each certificate issued in respect of Shares sold to
Purchaser hereunder shall be deposited with the Company, or its designee,
together with a stock power executed in blank by Purchaser, and shall bear a
legend disclosing the restrictions on transferability imposed on such Shares by
the Securities Documents. Upon the vesting of any Shares pursuant to this
Section 3, and the satisfaction of any withholding tax liability pursuant to
Section 3(g) hereof, the certificates evidencing any such vested Shares shall be
delivered to Purchaser.
(f) Rights of a Shareholder. Prior to the time a Share is fully vested
hereunder, Purchaser shall have no right to transfer, pledge, hypothecate or
otherwise encumber such Share. During such period, Purchaser shall have all
other rights of a stockholder, including, but not limited to, the right to vote
and to receive dividends (which shall be held in escrow by the Company until the
Shares to which such dividends relate have vested. Purchaser agrees (for the
benefit of the Company and of each party to the Shareholders Agreement) that
with respect to Shares which have not vested, Purchaser will vote such unvested
shares in all matters in proportion to the votes cast by all other holders of
Holdings Shares entitled to vote on such matters.
<PAGE> 14
-13-
(g) Withholding. Purchaser agrees to make appropriate arrangements with
the Company for satisfaction of any applicable tax withholding requirements, or
similar requirements, arising out of this Agreement.
(h) Adjustment of Targets. Each party to this Agreement and Holder of a
Share that has not vested pursuant to the terms of this Agreement, by acceptance
of such Share, agree and acknowledge that each of the Target EBITDA, Target
Equity Proceeds and Target II Equity Proceeds set forth herein shall be adjusted
by the Company after negotiations between Carlisle Group, L.P. and the Company
made in good faith to reflect any acquisitions, mergers, consolidations or other
significant corporate transactions affecting the Company.
SECTION 4. Representations and Warranties of the Company.
The Company represents and warrants to Purchaser, as of the Time of
Purchase, as set forth below:
(a) Corporate Existence and Power. The Company is a corporation, duly
incorporated, validly existing and in good standing under the laws of the state
of Delaware and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its businesses as
now conducted and as proposed to be conducted and is fully qualified and in good
standing as a foreign corporation registered to do business in each jurisdiction
in which the nature of its business or its ownership or leasing of property
requires such qualification except where the failure to be so qualified or to be
in good standing would not reasonably be expected to have a Material Adverse
Effect.
(b) Authorization and Execution. The execution, delivery and
performance by each of the Company and Fiberite of each of the Securities
Documents to which it is a party and the issuance by the Company of the Shares
have been duly and validly authorized and are within the corporate powers of the
Company or Fiberite, as the case may be. Each of the Securities Documents to
which the Company or Fiberite is a party has been duly executed and delivered by
it and constitutes its valid and binding agreement.
(c) Capitalization. The authorized capital stock of the Company
consists of 15,000,000 shares of common stock, par value $0.01 per share
<PAGE> 15
-14-
All of the issued and outstanding capital stock of the Company has been duly
authorized and validly issued, is fully paid and nonassessable, and free of
pre-emptive rights. The authorized capital stock of Fiberite consists of 1,000
shares of common stock, par value $0.01 per share (of which 1,000 shares are
issued and outstanding).
(d) Governmental Authorization. The execution and delivery by each of
the Company and Fiberite of each of the Securities Documents to which it is a
party did not and will not, the issuance and sale by the Company of the Shares
will not, and the consummation of the transactions contemplated hereby and
thereby will not, require any action by or in respect of, or filing with, any
governmental body, agency or governmental official except (a) such actions or
filings as have been undertaken or made prior to the Time of Purchase and that
will be in full force and effect on and as of the Time of Purchase or which are
not required to be filed on or prior to the Time of Purchase (but will be filed
within the applicable time periods therefor) and (b) such actions or filings
that, if not taken or made, would not in the aggregate impose materially adverse
conditions upon the Securities Documents.
(e) Non-Contravention. The execution and delivery by the Company of the
Securities Documents to which it is a party did not and will not, the issuance
and sale by the Company of the Shares will not, and the consummation of the
transactions contemplated hereby and thereby will not, contravene or constitute
a default under or violation of (i) assuming the filings referred to in Section
4(d) have been undertaken or made, any provision of applicable law or regulation
the violation of which would have a Material Adverse Effect, (ii) its
certificate of incorporation or by-laws, or (iii) any agreement, judgment,
injunction, order, decree or other instrument binding upon it or any of its
assets, the violation of which would have a Material Adverse Effect or result in
the creation or imposition of any Lien on any asset of the Company or any of its
subsidiaries, except pursuant to or as permitted or contemplated by the terms
hereof or of the Finance Documents.
(f) Litigation. There is no action, suit or proceeding pending to which
the Company, Fiberite or GmbH is a party, or to the knowledge of the Company,
which is threatened against the Company, Fiberite or GmbH, before any court or
arbitrator or any governmental body, agency or official that would reasonably be
expected to result in a Material Adverse Effect.
<PAGE> 16
-15-
(g) Not an Investment Company; Not a Real Property Holding Company.
The Company is not an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. The Company is not a United States real
property holding company (as that term is defined in Section 897(c)(2) of the
United States Internal Revenue Code of 1986, as amended).
(h) Solicitation; Access to Information. No form of general
solicitation or general advertising was used by the Company or, to the best of
its knowledge, any other Person acting on behalf of the Company, in connection
with the offer and sale of the Shares. Neither the Company nor any Person acting
on behalf of the Company has, either directly or indirectly, sold or offered for
sale to any Person any of the Shares or any other similar securities of the
Company except as contemplated by this Agreement (other than those sold to James
Ashton or other employees of the Company as approved by the Board of Directors),
and the Company represents that neither the Company nor any Person acting on its
behalf will sell or offer for sale to any Person any such security to, or
solicit any offers to buy any such security from, or otherwise approach or
negotiate in respect thereof with, any Person or Persons, in each case so as
thereby to bring the issuance or sale of any of the Shares within the provisions
of Section 5 of the Securities Act.
SECTION 5. Representations And Warranties Of Purchaser.
(a) Purchase for Investment; Authority; Binding Agreement. Purchaser
represents and warrants to the Company that:
(i) Purchaser is an "accredited investor" within the meaning of Rule
501(a) under the Securities Act and the Securities to be acquired by
Purchaser pursuant to this Agreement are being acquired for its own
account and Purchaser will not offer, sell, transfer, pledge, hypothecate
or otherwise dispose of the Shares unless pursuant to a transaction either
registered under, or exempt from registration under, the Securities Act;
and
(ii) Purchaser has such knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of
its investment in the Securities and is capable of bearing the economic
risks of
<PAGE> 17
-16-
such investment or Purchaser has been advised by a representative
possessing such knowledge and experience.
(b) Private Placement. Purchaser represents and warrants to the
Company that:
(i) Purchaser understands that (i) the offering and sale of the
Shares is intended to be exempt from registration under the Securities Act
and (ii) there is no existing public or other market for any of the Shares
and there can be no assurance that Purchaser will be able to sell or
dispose of the Shares to be purchased by Purchaser;
(ii) Purchaser's financial situation is such that Purchaser can afford
to bear the economic risk of holding the Shares acquired hereunder for an
indefinite period of time, Purchaser has adequate means for providing for
Purchaser's needs and contingencies and can afford to suffer the complete
loss of the investment in the Shares;
(iii) Purchaser understands that the Shares acquired hereunder are a
speculative investment which involves a high degree of risk of loss of the
entire investment therein, that there are substantial restrictions on the
transferability of the Shares as set forth herein, in the Shares and in
the Shareholders Agreement, and that for an indefinite period following
the date hereof there will be no public market for any of the Shares and
that, accordingly, it may not be possible for Purchaser to sell the Shares
in case of emergency or otherwise;
(iv) Purchaser and his, her or its representatives, including his, her
or its professional, financial, tax and other advisors, have carefully
reviewed all documents available to them in connection with the investment
in the Shares, and Purchaser understands and has taken cognizance of all
the risks related to such investment;
(v) Purchaser and his, her or its representatives have been given the
opportunity to examine all documents and to ask questions of, and to
receive answers from, the Company and its representatives concerning the
Company and each of its subsidiaries and concerning the terms and
conditions of the acquisition of the Shares, and related matters and to
obtain all additional information which Purchaser or his, her or its
representatives deem necessary; and
<PAGE> 18
-17-
(vi) all information which Purchaser has provided to the Company and
its representatives concerning Purchaser and Purchaser's financial
position is true, complete and correct.
(c) Solicitation by Purchaser. Purchaser represents and warrants to
the Company that no form of general solicitation or general advertising was used
by Purchaser or, to the best of its knowledge, any other Person acting on behalf
of Purchaser, in respect of the Shares or in connection with the purchase of the
Shares. Neither Purchaser nor any Person acting on its behalf has, either
directly or indirectly, sold or offered for sale to any Person any of the Shares
or any other similar security of the Company except as contemplated by this
Agreement.
(d) Corporate Existence and Power. Purchaser is a limited partnership,
duly registered, validly existing and in good standing under the laws of the
state of Delaware.
(e) Authorization and Execution. The execution, delivery and
performance by Purchaser of each of the Securities Documents to which it is a
party and issuance by Purchaser of the Promissory Note have been duly and
validly authorized and are within the corporate powers of Purchaser. Each of the
Securities Documents to which Purchaser is a party has been duly executed and
delivered by it and constitutes its valid and binding agreement.
(f) Governmental Authorization. The execution and delivery by
Purchaser of each of the Securities Documents to which it is a party did not and
will not, the issuance and sale by the Company of the Promissory Note will not,
and the consummation of the transactions contemplated hereby and thereby will
not, require any action by or in respect of, or filing with, any governmental
body, agency or governmental official except (a) such actions or filings as have
been undertaken or made prior to the Time of Purchase and that will be in full
force and effect on and as of the Time of Purchase or which are not required to
be filed on or prior to the Time of Purchase (but will be filed within the
applicable time periods therefor) and (b) such actions or filings that, if not
taken or made, would not in the aggregate impose materially adverse conditions
upon the Securities Documents.
(g) Non-Contravention. The execution and delivery by Purchaser of the
Securities Documents to which it is a party
<PAGE> 19
-18-
did not and will not, the issuance and sale by Purchaser of the Promissory Note
will not, and the consummation of the transactions contemplated hereby and
thereby will not, contravene or constitute a default under or violation of its
organizational documents.
SECTION 6. General.
(a) Legends. The certificates representing all of the Shares shall have
endorsed across the face or back thereof the following legends:
(i) "The shares of stock represented by this certificate are subject to the
terms and conditions of a certain Restricted Stock Purchase Agreement
(the "Purchase Agreement") dated July 17, 1996, entered into between
Fiberite Holdings, Inc. (the "Company") and the holder of this
certificate, which Purchase Agreement is on file with the Secretary of
the Company."
(ii) The shares of stock represented by this certificate were originally
issued on ____________, 1996 and have not been registered under the
Securities Act of 1933, as amended, or under the securities laws of any
State or other jurisdiction and may not be sold, offered for sale or
otherwise transferred unless registered or qualified under said act and
applicable state or other securities laws or unless the Company
receives an opinion of counsel reasonably satisfactory to the Company
that registration, qualification or other such actions are not required
under any such laws. The shares of stock represented by this
certificate may not be transferred in violation of such Act, the rules
and regulations thereunder or the provisions of the Purchase Agreement.
The shares of stock represented by this certificate are also subject to
a Shareholders Agreement dated October 6, 1995 among Fiberite Holdings,
Inc. (the "Company") and the various shareholders signatory thereto,
and each holder of shares represented by this certificate agrees to be
bound by the terms and conditions of such
<PAGE> 20
-19-
Shareholders Agreement. A copy of the Shareholders Agreement will be
furnished without charge by the Company to the holder hereof upon
request.
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend or such other legend deemed appropriate by the
Company shall also bear such legend unless, in a written opinion of counsel
(which counsel shall be reasonably acceptable to the Company) addressed to the
Company provided by counsel to Purchaser, the securities represented thereby
need no longer be subject to the restriction contained herein. The provisions of
this Section 6(a) shall be binding upon all subsequent holders of certificates
bearing the above legend.
(b) Notices. All notices, demands and other communications to any party
hereunder shall be in writing (including telecopier or similar writing) and
shall be given to such party at its address set forth on the signature pages
hereof, or such other address as such party may hereinafter specify for the
purpose. Each such notice, demand or other communication shall be effective (i)
if given by telecopy, when such telecopy is transmitted to the telecopy number
specified on the signature page hereof, (ii) if given by mail, four days after
such communication is deposited in the mail with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this Section 6(b).
(c) No Waivers; Amendments. (i) No failure or delay on the part of any
party in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy. The remedies provided for herein are cumulative and are not
exclusive of any remedies that may be available to any party at law or in equity
or otherwise.
(ii) Any provision of this Agreement may be amended, supplemented or
waived if, but only if, such amendment, supplement or waiver is in writing and
is signed by the Company and, other than with respect to amendments pursuant to
Section 3(i), Purchaser.
(d) Expenses; Documentary Taxes. The Company and Purchaser each agree
to bear its own costs, expenses and other payments in connection with the
purchase and sale of the Shares
<PAGE> 21
-20-
as contemplated by this Agreement including without limitation (i) fees and
disbursements of special counsel for the Company incurred in connection with the
preparation of this Agreement and (ii) all out-of-pocket expenses of the
Company, including fees and disbursements of counsel, in connection with any
waiver or consent hereunder or any amendment hereof. The Company and Purchaser
each agree to share equally any and all stamp, transfer and other similar taxes,
assessments or charges payable in connection with the execution and delivery of
this Agreement or the issuance of the Shares.
(e) Successors and Assigns; Transferability. This Agreement shall be
binding upon the Company and Purchaser and its successors and assigns. Purchaser
may not assign or otherwise transfer its rights or obligations under this
Agreement to any other Person without the prior written consent of the Company.
All provisions hereunder purporting to give rights to Holders of Shares are for
the express benefit of such Persons. The Shares are subject to the transfer
restrictions set forth herein in the Shares and in the Shareholders Agreement.
(f) Brokers. Each of the Company and Purchaser represents and warrants
that it has not employed any broker, finder, financial advisor or investment
banker who might be entitled to any brokerage, finder's or other fee or
commission in connection with the sale of Shares.
(g) New York Law; Submission to Jurisdiction; Waiver of Jury Trial.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES
THEREOF. EACH PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF
ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE SHARES OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY HERETO IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
<PAGE> 22
-21-
(h) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
(i) Counterparts. This Agreement may be executed in any number of
counterparts each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
(j) Elimination of Fractional Shares. If under any provision of the
Agreement which requires a computation of the number of Shares, the number so
computed is not a whole number, such number shall be rounded down to the next
whole number.
(k) Entire Agreement. The Agreement sets forth the entire understanding
of the parties and supersedes all prior agreements, arrangements and
communications, whether oral or written, pertaining to the Shares.
<PAGE> 23
-22-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers or representatives, as of
the date first above written.
CARLISLE GROUP, L.P.
A Delaware Limited Partnership
By: CARLISLE ENTERPRISES, L.P.,
its General Partner
By:
-----------------------------------------------
Name: James S. Carlisle
Title: Managing Partner & Chief Executive
Address: 7777 Fay Avenue, Suite 200
La Jolla, California 92037
Attn: James S. Carlisle
Fax: (619) 569-3776
FIBERITE HOLDINGS, INC.
By:
-----------------------------------------------
Name:
Title:
Address: c/o DLJ Merchant Banking, Inc.
277 Park Avenue
New York, New York 10172
Attn: Thompson Dean
Fax: (212) 892-4991
<PAGE> 24
SCHEDULE A
SHARES
<TABLE>
<CAPTION>
Type Amount of Shares
- ---- ----------------
<S> <C>
Time Based Shares 219,839
Performance Based Shares 219,839
Exit Shares 219,839
Bonus Shares 82,440
</TABLE>
<PAGE> 1
Exhibit 4.4
RESTRICTED STOCK PURCHASE AGREEMENT
dated as of
January 2, 1997
between
FIBERITE HOLDINGS, INC.
and
JAMES E. ASHTON
<PAGE> 2
This Agreement is made as of the 2nd day of January, 1997
between Fiberite Holdings, Inc., a Delaware corporation (the "Company"), and
James E. Ashton (the "Purchaser"). This Agreement is that certain Restricted
Stock Purchase Agreement referred to in that certain Incentive Stock Option
Agreement dated as of September 26, 1996 between the Company and the Purchaser
(the "Option Agreement").
In consideration of the agreements set forth below, the
Company and Purchaser agree as follows:
SECTION 1.
(a) Definitions. The following terms have the meanings set
forth below:
"Affiliate" means, with respect to any Person, any other
Person that, directly or indirectly, controls, is controlled by or is under
common control with such Person. For purposes of this definition, "control"
(including with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" means this agreement, as amended, supplemented or
otherwise modified from time to time in accordance with its terms.
"As Adjusted" means (i) if the Company at any time subdivides
(by any stock split, stock dividend, recapitalization or otherwise) the Common
Stock into a greater number of shares or pays a dividend or makes a distribution
to holders of the Common Stock in the form of shares of Common Stock, the number
of Shares referred to shall be proportionately increased; and (ii) if the
Company at any time combines (by reverse stock split or otherwise) the Common
Stock into a smaller number of shares, the number of Shares referred to shall be
proportionately decreased.
"Board of Directors" means the board of directors of the
Company.
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized or
required by law to close.
"Change of Control" means (i) a Change of Control as such term
is defined in the Credit Agreement, (ii) the sale of all or substantially all of
the assets of the Company or (iii) an Initial Public Offering in which the
Institutional Shareholders, after such offering, own in the aggregate less than
50% of the outstanding Common Stock.
-1-
<PAGE> 3
"Closing" has the meaning set forth in Section 2.
"Commission" means the Securities and Exchange Commission.
"Credit Agreement" means the Credit Agreement dated October 6,
1995, among the Company, Fiberite, the lenders listed therein and Bank of
America National Trust and Savings Association, as Agent (in such capacity, the
"Agent"), as amended, supplemented or otherwise modified from time to time.
References to the Credit Agreement shall also include any credit agreement or
agreements entered into by the Company and/or Fiberite to replace, extend,
increase, renew, refund or refinance all or a portion of the debt or other
obligations under the Finance Documents.
"EBITDA" means, for any computation period, the sum of
(a) Consolidated Net Income (as defined in the Credit
Agreement) of the Company for such period excluding, to the extent reflected in
determining such Consolidated Net Income, extraordinary gains and losses for
such period and non-cash or non-recurring charges related to plant
consolidations or restructurings, and
(b) To the extent deducted in determining Consolidated Net
Income, Interest Expense (as defined in the Credit Agreement), income tax
expense, depreciation, depletion and amortization for such period.
"Equity Proceeds" means the aggregate cash proceeds (net of
the direct costs of any such sale or other disposition (including, without
limitation, sales and underwriters' commissions and legal, accounting and
investment banking fees)) received by all Institutional Shareholders in exchange
for or in a distribution or dividend based upon Holdings Shares (As Adjusted)
and Notes that, in each case, were issued and outstanding on October 6, 1995
from the sale, exchange, conversion or other disposition of Holdings Shares and
Notes (including upon repayment of such Notes) or from a dividend or other
distribution to the holders of such Shares and Notes from October 6, 1995 to the
date of determination; provided that upon the occurrence of a Change of Control,
for purposes of this Agreement, the term Equity Proceeds shall be deemed to
include, in addition to the cash proceeds described above, the aggregate
non-cash proceeds (net of the costs outlined above) received by all
Institutional Shareholders in exchange for, or from a dividend or other
distribution based upon, Holdings shares (As Adjusted) and Notes that, in each
case, were issued and outstanding on October 6, 1995 from the sale or other
disposition of Holdings Shares (As Adjusted) and Notes (including upon repayment
of such Notes) from October 6, 1995 to and including the date of such Change of
Control, less any fees and expenses incurred by such parties in connection with
such sales or other dispositions. In the case of any non-cash proceeds, such
non-cash proceeds shall be valued at the fair value thereof as reasonably
determined by the Board of Directors as of the consummation of such sale or
disposition, irrespective of any accounting treatment. In no event shall any
proceeds received in a sale, exchange, conversion or other disposition with or
to a Permitted Transferee of an Institutional Shareholder or,
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<PAGE> 4
to the extent such proceeds are other than cash, with or to the Company or
Fiberite, be included in any calculation of Equity Proceeds hereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fiberite" means Fiberite, Inc., a Delaware corporation.
"Finance Documents" means the Credit Agreement together with
all notes, collateral and security documents, guaranties (including the guaranty
of the Company thereunder) and other documents delivered at any time in
connection therewith, all as amended, supplemented or otherwise modified from
time to time in accordance with their respective terms.
"Financing Lease" means any lease of property, real or
personal, the obligations of the lessee in respect of which are required in
accordance with generally accepted accounting principles to be capitalized on a
balance sheet of the lessee.
"Fiscal Year" means a fiscal year of the Company.
"GmbH" means Fiberite Europe GmbH, a German GmbH.
"Holder" means any holder from time to time of any Shares.
"Holdings Corporate Documents" means the certificate of
incorporation and by-laws of the Company.
"Holdings Shares" means shares of common stock of the Company,
par value $0.01 per share.
"Initial Public Offering" has the meaning ascribed to such
term in the Shareholders Agreement.
"Institutional Shareholder" has the meaning ascribed to such
term in the Shareholders Agreement.
"Institutional Shareholder Valuation" means, for any date of
calculation, the sum of
(a) the Equity Proceeds on such date plus, without
duplication, the value of all non-cash Equity Proceeds determined in accordance
with the second sentence or the proviso of the first sentence of the definition
of Equity Proceeds, without regard to whether a Change of Control has occurred;
and
(b) the product of
(A) the per share cash proceeds (net of the direct
costs of the applicable Public Offering (including, without limitation, sales
and underwriters'
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<PAGE> 5
commissions and legal, accounting and investment banking fees)) received by all
Institutional Shareholders in the Public Offering with respect to which this
calculation is made, multiplied by
(B) the number of Holdings Shares that were issued,
outstanding and held by Institutional Shareholders on October 6, 1995 (As
Adjusted) less the number of any such Holdings Shares for which Equity Proceeds
are included in (a) above; and
(c) the amount of principal and accrued interest on all Notes
outstanding as of the date this calculation was made.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
Financing Lease having substantially the same economic effect as any of the
foregoing).
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations or financial condition of the Company and its
subsidiaries taken as a whole or (b) the enforceability of any of the Securities
Documents.
"Notes" means the Company's 11.30% Subordinated Notes due
2002.
"Permitted Transferee" has the meaning ascribed to such term
in the Shareholders Agreement.
"Person" means an individual or a corporation, limited
liability company, partnership, trust, incorporated or unincorporated
association, joint venture, joint stock company, government (or any agency or
political subdivision thereof) or other entity of any kind.
"Pledge Agreement" has the meaning set forth in Section 2(b).
"Promissory Note" has the meaning set forth in Section 2(a).
"Public Offering" has the meaning ascribed to such term in the
Shareholders Agreement.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Documents" means this Agreement, the Shareholders
Agreement, the Shares, the Promissory Note and the Pledge Agreement.
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<PAGE> 6
"Shareholders Agreement" means the Shareholders Agreement
dated as of October 6, 1995 among the Company and the other shareholders as
signatory thereto, as amended or modified pursuant to the terms thereof.
"Shares" has the meaning set forth in Section 2(a).
"subsidiary" means, with respect to any Person, any
corporation or other entity of which a majority of the capital stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are at the time
directly or indirectly owned by such Person.
"Time of Purchase" has the meaning set forth in Section 2(a).
"Transfer" means any disposition of Shares that would
constitute a sale thereof under the Securities Act.
"Vesting Percentage" means, for any date of calculation, the
ratio of:
(a) the number of Holdings Shares which were issued,
outstanding and held by the DLJ Entities on October 5, 1995 (As Adjusted) which
were sold in the Public Offering with respect to which this calculation is made,
divided by
(b) the number of Holdings Shares that were issued,
outstanding and held by the DLJ Entities on October 6, 1995 (As Adjusted).
(b) Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time, as applied on a consistent basis (except for changes concurred in by
the Company's independent public accountants). For purposes of this Agreement,
references to assets, liabilities, revenues, costs or other similar items
relating to the Company, Fiberite or any of their subsidiaries shall be deemed
to include, with respect to any joint operating agreement or partnership
agreement to which the Company, Fiberite or such subsidiary is a party, such
portion, but only such portion, of the assets, liabilities, revenues, costs or
other similar items covered by such joint operating agreement or partnership
agreement as shall equal the then proportional interest of the Company, Fiberite
or such subsidiary under such joint operating agreement or partnership
agreement, determined, where applicable, in accordance with the rules for
proportionate consolidation in accordance with generally accepted accounting
principles.
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<PAGE> 7
SECTION 2. Sale to Purchaser.
(a) Purchase and Sale of Stock. Subject to the terms and
conditions hereof and the Shareholders Agreement, the Company agrees from time
to time to sell to Purchaser, and Purchaser agrees to purchase from time to time
from the Company, up to an aggregate of 406,000 shares (the "Shares") of Common
Stock of the Company, par value $0.01 per share ("Common Stock"), at the
aggregate price of $203,000.00 ($0.50 per share). Each purchase and sale
hereunder shall be deemed consummated (each such consummation, a "Closing") at
the date set forth on a notice of exercise delivered pursuant to the terms of
the Option Agreement (an "Exercise Notice") (such time of purchase and sale, the
"Time of Purchase"). As soon as practicable following each Closing, the Company
shall deliver a certificate representing that number of Shares specified in the
Exercise Notice, registered in the name of Purchaser. Purchaser shall
concurrently with the Exercise Notice deliver payment for the Shares subject to
the Exercise Notice in the form of cash, a promissory note in the form attached
hereto as Exhibit A ("Promissory Note"), or other consideration approved by the
Board. Each of Purchaser and the Company acknowledges that the Shares are
subject to the terms and conditions contained herein and in the Shareholders
Agreement and that each Holder of a Share is bound by such terms and conditions.
In the event Optionee elects to exercise the Incentive Stock Option for a number
of Shares less than the aggregate number of Shares subject to this Option then
(i) the total number of shares identified in the Exercise Notice shall be
apportioned ratably among Time Based Shares, Performance Based Shares, Exit
Shares and Bonus Shares in proportion to the total number of each category of
such shares identified in Schedule A attached hereto; and (ii) number of issued
and outstanding Shares shall be reflected on an updated Schedule A prepared and
initialed by the parties hereto at the applicable Closing.
(b) Financing. To secure the obligations of Purchaser under
any Promissory Note, Purchaser will enter into a pledge agreement (the "Pledge
Agreement") in the form of Exhibit B hereto.
SECTION 3. Vesting. No Share shall vest until the vesting
criteria set forth in this Section 3 with respect to such Share shall have
occurred. Purchaser may not sell, transfer, pledge, hypothecate or otherwise
encumber (except pursuant to the Pledge Agreement) any Shares prior to October
6, 2005, unless (i) such Shares have vested pursuant to this Section 3 and (ii)
at the time of such vesting the Purchaser is an employee of the Company or any
of its subsidiaries. In addition to the vesting criteria set forth below, no
share shall vest until (i) all interest then due and payable under any
Promissory Note used to purchase such Share has been paid; (ii) the aggregate of
all principal amounts of the Promissory Note used to purchase such Share paid
from the date of such Promissory Note through the date of satisfaction of the
other vesting criteria established hereunder with respect to such Share equals
or exceeds the product of (A) the total number of Shares purchased with such
Promissory Note which have (or, but for the application of this sentence, would
have) vested hereunder and (B) $.49; (iii) the portion of any accrued and unpaid
interest attributable to the principal amounts referred to in the preceding
clause (ii) have been paid; and (iv) each other obligation of Purchaser under
the Promissory Note used to purchase such Share (which obligation is required to
be satisfied at or prior to the time of any such vesting) is satisfied.
-6-
<PAGE> 8
(a) Time Based Vesting. (i) The number of Shares listed on
Schedule A as Time Based Shares ("Time Based Shares") shall vest and become
(whether or not such Shares have been exercised pursuant to the Option
Agreement) only in accordance with Section 3(a)(ii) and with the following
schedule:
<TABLE>
<CAPTION>
Vesting Amount (percentage of Time
Vesting Date Based Shares Vesting on such date)
----------------- ----------------------------------
<S> <C>
December 31, 1996 25%
December 31, 1997 25%
December 31, 1998 25%
December 31, 1999 25%
</TABLE>
(ii) If a Change of Control shall occur, then any Time
Based Shares that have not vested as of such date shall be deemed to vest
immediately prior to such Change of Control (whether or not such Shares have
been exercised pursuant to the Option Agreement).
(b) Performance Based Vesting.
(i) The number of Shares listed on Schedule A as
Performance Based Shares ("Performance Based Shares") shall vest (whether or
not such Shares have been exercised pursuant to the Option Agreement) on
October 6, 2005. Provided, however, for each period listed below, if EBITDA is
equal to or above the amount listed beside such period on the chart below
(each such amount, a "Target EBITDA") then 25% of the Performance Based Shares
(for each such period, "Target Shares") shall vest earlier as follows:
<TABLE>
<CAPTION>
Fiscal Year ending Target EBITDA
------------------ -------------
<S> <C>
December 31, 1996 $25,900,000
December 31, 1997 $29,700,000
December 31, 1998 $34,000,000
December 31, 1999 $37,000,000
</TABLE>
provided further, that if EBITDA for a period is less than the Target EBITDA for
such period, but is greater than 85% of the Target EBITDA for such period, then
the number of Performance Based Shares that shall vest for such period shall be
calculated as follows:
EBITDA - (.85) (Target EBITDA)
Target Shares x -------------------------------------
Target EBITDA - (.85) (Target EBITDA)
provided further, that the amount of EBITDA for a Fiscal Year in excess of the
Target EBITDA for such Fiscal Year may be carried back to EBITDA for the two
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<PAGE> 9
immediately preceding Fiscal Years, and additional Performance Based Shares
based thereon may vest in accordance with this Section 3(b).
(ii) If Exit Shares (as defined below) shall vest
pursuant to Section 3(c)(i) and at such time there shall be Performance Based
Shares that have not yet vested, then additional Performance Based Shares shall
automatically vest so that the percentage of Performance Based Shares vested
shall not be less than the total percentage of Exit Shares vested.
(iii) Immediately prior to the transfer to Third Parties
of all or substantially all of (A) the Holdings Shares owned by the
Institutional Shareholders on the date hereof or (B) the assets of the Company
and its subsidiaries, the Performance Based Shares that have not vested as of
such date shall automatically vest (whether or not such Shares have been
exercised pursuant to the Option Agreement).
(c) Exit Shares.
(i) The number of Shares listed on Schedule A as Exit
Shares ("Exit Shares") shall vest (whether or not such Shares have been
exercised pursuant to the Option Agreement) on October 6, 2005. Provided,
however, if the amount of Equity Proceeds hereunder equals, during the 12-month
period beginning on the dates indicated below, an amount equal to or greater
than the corresponding amount listed below (each such amount, the "Target Equity
Proceeds"), then all of the Exit Shares shall vest immediately prior to the
consummation of the sale or disposition whereby Equity Proceeds will exceed such
amount:
<TABLE>
<CAPTION>
Period ending
on October 6, Target Equity Proceeds
-------------- ----------------------
<S> <C>
1996 $70,000,000
1997 $87,500,000
1998 $105,000,000
1999 $140,000,000
2000 $150,000,000
2001 $180,000,000
2002 $216,000,000
2003 $259,200,000
</TABLE>
provided further, for each day of a period, the Target Equity Proceeds shall be
increased by an amount equal to a fraction, the numerator of which is the Target
Equity Proceeds for the last day of such period minus the Target Equity Proceeds
for the last day of the preceding period and the denominator of which is the
number of days in the current period.
After October 6, 1996, if on any day of a period, the
Equity Proceeds are equal to or greater than the Target Equity Proceeds for the
last day of the preceding period, but less than the Target Equity Proceeds for
such date, then the
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<PAGE> 10
amount of Exit Shares that vest shall be equal to (i) the total number of Exit
Shares that have not been forfeited as of such date multiplied by a fraction,
the numerator of which is the Equity Proceeds minus the Target Equity Proceeds
for the last day of the preceding period and the denominator of which is the
Target Equity Proceeds minus the Target Equity Proceeds for the last day of the
preceding period less (ii) the total number of Exit Shares which have previously
vested (or would have vested but for the third sentence of this Section 3)
pursuant to this paragraph.
(ii) In the event of any Public Offering (other than a
registration or offering (A) on Form S-8 or S-4 or any successor or similar
forms, (B) relating to Common Stock issuable upon exercise of employee stock
options or in connection with any employee benefit or similar plan of the
Company, (C) in connection with a direct or indirect acquisition by the Company
of another company or business, (D) in connection with sales of Common Stock or
options to employees of the Company or (E) where the primary purpose of such
registration relates to a debt financing by the Company or any direct or
indirect subsidiary of the Company), if the Institutional Shareholder Valuation
on the date of such Public Offering equals or exceeds the Target Equity Proceeds
in effect on the date of such Public Offering, the number of Exit Shares equal
to the product of the Vesting Percentage for such Public Offering multiplied by
the number of Exit Shares listed on Schedule A shall vest (whether or not such
Shares have been exercised pursuant to the Option Agreement).
(iii) Immediately prior to the transfer to Third
Parties of all or substantially all of (A) the Holdings Shares owned by the
Institutional Shareholders on the date hereof or (B) the assets of the Company
and its subsidiaries, any Exit Shares that have not vested as of such date
shall automatically vest (whether or not such Shares have been exercised
pursuant to the Option Agreement).
(d) Bonus Shares.
(i) The number of Shares listed on Schedule A as Bonus
Shares ("Bonus Shares") shall vest (whether or not such Shares have been
exercised pursuant to the Option Agreement) on October 6, 2005. Provided,
however, the Bonus Shares shall vest earlier if, during either of the periods
listed below, the Equity Proceeds equal or exceed the amount that corresponds
to such period on the chart below (each such amount, the "Target II Equity
Proceeds"):
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<PAGE> 11
<TABLE>
<CAPTION>
Target II
Period Equity Proceeds
------ ---------------
<S> <C>
On or before October 6, 1997 $122,500,000
After October 6, 1997 but on or before $165,000,000
October 6, 2000
</TABLE>
(ii) In the event of any Public Offering (other than a
registration or offering (A) on Form S-8 or S-4 or any successor or similar
forms, (B) relating to Common Stock issuable upon exercise of employee stock
options or in connection with any employee benefit or similar plan of the
Company, (C) in connection with a direct or indirect acquisition by the Company
of another company or business, (D) in connection with sales of Common Stock or
options to employees of the Company or any direct or indirect subsidiary of the
Company or (E) where the primary purpose of such registration relates to a debt
financing by the Company or any direct or indirect subsidiary of the Company),
if the Institutional Shareholder Valuation on the date of such Public Offering
equals or exceeds the Target II Equity Proceeds in effect on the date of such
Public Offering, the number of Bonus Shares equal to the product of the Vesting
Percentage for such Public Offering multiplied by the number of Bonus Shares
listed on Schedule A shall vest (whether or not such Shares have been exercised
pursuant to the Option Agreement).
(iii) Immediately prior to the occurrence of the transfer
to Third Parties of all or substantially all of (A) the Holdings Shares owned by
the Institutional Shareholders on the date hereof or (B) the assets of the
Company and its subsidiaries, any Bonus Shares that have not vested as of such
date shall automatically vest (whether or not such Shares have been exercised
pursuant to the Option Agreement).
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<PAGE> 12
(e) Certificates. Each certificate issued in respect of Shares
sold to Purchaser hereunder shall be deposited with the Company, or its
designee, together with a stock power executed in blank by Purchaser, and shall
bear a legend disclosing the restrictions on transferability imposed on such
Shares by the Securities Documents. Upon the vesting of any Shares pursuant to
this Section 3, and the satisfaction of any withholding tax liability pursuant
to Section 3(g) hereof, the certificates evidencing any such vested Shares shall
be delivered to Purchaser.
(f) Rights of a Shareholder. Prior to the time a Share is
fully vested hereunder, Purchaser shall have no right to transfer, pledge,
hypothecate or otherwise encumber such Share. During such period, with respect
to the Shares which have been exercised pursuant to the Option Agreement,
Purchaser shall have all other rights of a stockholder, including, but not
limited to, the right to vote and to receive dividends (which shall be held in
escrow by the Company until the Shares to which such dividends relate have
vested). Purchaser agrees (for the benefit of the Company and of each party to
the Shareholders Agreement) that with respect to Shares which have not vested,
Purchaser will vote such unvested shares in all matters in proportion to the
votes cast by all other holders of Holdings Shares entitled to vote on such
matters.
(g) Withholding. Purchaser agrees to make appropriate
arrangements with the Company for satisfaction of any applicable tax withholding
requirements, or similar requirements, arising out of this Agreement.
(h) Adjustment of Targets. Each party to this Agreement and
Holder of a Share that has not vested pursuant to the terms of this Agreement,
by acceptance of such Share, agree and acknowledge that each of the Target
EBITDA, Target Equity Proceeds and Target II Equity Proceeds set forth herein
shall be adjusted by the Company after negotiations between Ashton and the
Company made in good faith to reflect any acquisitions, mergers, consolidations
or other significant corporate transactions affecting the Company.
SECTION 4. Representations and Warranties of the Company.
The Company represents and warrants to Purchaser, as of the
Time of Purchase, as set forth below:
(a) Corporate Existence and Power. The Company is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the state
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<PAGE> 13
of Delaware and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its businesses as
now conducted and as proposed to be conducted and is fully qualified and in good
standing as a foreign corporation registered to do business in each jurisdiction
in which the nature of its business or its ownership or leasing of property
requires such qualification except where the failure to be so qualified or to be
in good standing would not reasonably be expected to have a Material Adverse
Effect.
(b) Authorization and Execution. The execution, delivery and
performance by each of the Company and Fiberite of each of the Securities
Documents to which it is a party and the issuance by the Company of the Shares
have been duly and validly authorized and are within the corporate powers of the
Company or Fiberite, as the case may be. Each of the Securities Documents to
which the Company or Fiberite is a party has been duly executed and delivered by
it and constitutes its valid and binding agreement.
(c) Capitalization. The authorized capital stock of the
Company consists of 15,000,000 shares of common stock, par value $0.01 per
share. All of the issued and outstanding capital stock of the Company has been
duly authorized and validly issued, is fully paid and nonassessable, and free of
preemptive rights. The authorized capital stock of Fiberite consists of 1,000
shares of common stock, par value $0.01 per share (of which 1,000 shares are
issued and outstanding).
(d) Governmental Authorization. The execution and delivery by
each of the Company and Fiberite of each of the Securities Documents to which it
is a party did not and will not, the issuance and sale by the Company of the
Shares will not, and the consummation of the transactions contemplated hereby
and thereby will not, require any action by or in respect of, or filing with,
any governmental body, agency or governmental official except (a) such actions
or filings as have been undertaken or made prior to the Time of Purchase and
that will be in full force and effect on and as of the Time of Purchase or which
are not required to be filed on or prior to the Time of Purchase (but will be
filed within the applicable time periods therefor) and (b) such actions or
filings that, if not taken or made, would not in the aggregate impose materially
adverse conditions upon the Securities Documents.
(e) Non-Contravention. The execution and delivery by the
Company of the Securities Documents to which it is a party did not and will not,
the issuance and sale by the Company of the Shares will not, and the
consummation of the transactions contemplated hereby and thereby will not,
contravene or constitute a default under or violation of (i) assuming the
filings referred to in Section 4(d) have been undertaken or made, any provision
of applicable law or regulation the violation of which would have a Material
Adverse Effect, (ii) its certificate of incorporation or by-laws, or (iii) any
agreement, judgment, injunction, order, decree or other instrument binding upon
it or any of its assets, the violation of which would have a Material Adverse
Effect or result in the creation or imposition of any Lien on any
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<PAGE> 14
asset of the Company or any of its subsidiaries, except pursuant to or as
permitted or contemplated by the terms hereof or of the Finance Documents.
(f) Litigation. There is no action, suit or proceeding pending
to which the Company, Fiberite or GmbH is a party, or to the knowledge of the
Company, which is threatened against the Company, Fiberite or GmbH, before any
court or arbitrator or any governmental body, agency or official that would
reasonably be expected to result in a Material Adverse Effect.
(g) Not an Investment Company; Not a Real Property Holding
Company. The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. The Company is not a United States
real property holding company (as that term is defined in Section 897(c)(2) of
the United States Internal Revenue Code of 1986, as amended).
(h) Solicitation; Access to Information. No form of general
solicitation or general advertising was used by the Company or, to the best of
its knowledge, any other Person acting on behalf of the Company, in connection
with the offer and sale of the Shares. Neither the Company not any Person acting
on behalf of the Company has, either directly or indirectly, sold or offered for
sale to any Person any of the Shares or any other similar securities of the
Company except as contemplated by this Agreement (other than those sold to
Carlisle Group, L.P. or other employees of the Company as approved by the Board
of Directors), and the Company represents that neither the Company nor any
Person acting on its behalf will sell or offer for sale to any Person any such
security to, or solicit any offers to buy any such security from, or otherwise
approach or negotiate in respect thereof with, any Person or Persons, in each
case so as thereby to bring the issuance or sale of any of the Shares within the
provisions of Section 5 of the Securities Act.
SECTION 5. Representations and Warranties of Purchaser.
(a) Purchase for Investment; Authority; Binding Agreement.
Purchaser represents and warrants to the Company that:
(i) Purchaser is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act and the Securities to be
acquired by Purchaser pursuant to this Agreement are being acquired for his own
account and Purchaser will not offer, sell, transfer, pledge, hypothecate or
otherwise dispose of the Shares unless pursuant to a transaction either
registered under, or exempt from registration under, the Securities Act; and
(ii) Purchaser has such knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of his investment in the Securities and is capable of bearing the economic
risks of such investment or Purchaser has been advised by a representative
possessing such knowledge and experience.
-13-
<PAGE> 15
(b) Private Placement. Purchaser represents and warrants to
the Company that:
(i) Purchaser understands that (i) the offering and
sale of the Shares is intended to be exempt from registration under the
Securities Act and (ii) there is no existing public or other market for any of
the Shares and there can be no assurance that Purchaser will be able to sell or
dispose of the Shares to be purchased by Purchaser;
(ii) Purchaser's financial situation is such that
Purchaser can afford to bear the economic risk of holding the Shares acquired
hereunder for an indefinite period of time, Purchaser has adequate means for
providing for Purchaser's needs and contingencies and can afford to suffer the
complete loss of the investment in the Shares;
(iii) Purchaser understands that the Shares acquired
hereunder are a speculative investment which involves a high degree of risk or
loss of the entire investment therein, that there are substantial restrictions
on the transferability of the Shares as set forth herein, in the Shares and in
the Shareholders Agreement, and that for an indefinite period following the date
hereof there will be no public market for any of the Shares and that,
accordingly, it may not be possible for Purchaser to sell the Shares in case of
emergency or otherwise;
(iv) Purchaser and his representatives, including his
professional, financial, tax and other advisors, have carefully reviewed all
documents available to them in connection with the investment in the Shares, and
Purchaser understands and has taken cognizance of all the risks related to such
investment;
(v) Purchaser and his representatives have been given
the opportunity to examine all documents and to ask questions of, and to receive
answers from, the Company and its representatives concerning the Company and
each of its subsidiaries and concerning the terms and conditions of the
acquisition of the Shares, and related matters and to obtain all additional
information which Purchaser or his representatives deem necessary; and
(vi) all information which Purchaser has provided to the
Company and its representatives concerning Purchaser and Purchaser's financial
position is true, complete and correct.
(c) Solicitation by Purchaser. Purchaser represents and
warrants to the Company that no form of general solicitation or general
advertising was used by Purchaser or, to the best of its knowledge, any other
Person acting on behalf of Purchaser, in respect of the Shares or in connection
with the purchase of the Shares. Neither Purchaser nor any Person acting on his
behalf has, either directly or indirectly, sold or offered for sale to any
Person any of the Shares or any other similar security of the Company except as
contemplated by this Agreement.
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<PAGE> 16
(d) Legal Capacity and Execution. The Purchaser has the
requisite legal capacity to execute, deliver and perform each of his obligations
under the Securities Documents to which he is a party and to issue the
Promissory Note. Each of the Securities Documents to which Purchaser is a party
has been duly executed and delivered by it and constitutes its valid and binding
agreement.
(e) Governmental Authorization. The execution and delivery
by Purchaser of each of the Securities Documents to which he is a party did not
and will not, the issuance and sale by the Company of the Promissory Note will
not, and the consummation of the transactions contemplated hereby and thereby
will not, require any action by or in respect of, or filing with, any
governmental body, agency or governmental official except (a) such actions or
filings as have been undertaken or made prior to the Time of Purchase and that
will be in full force and effect on and as of the Time of Purchase or which are
not required to be filed on or prior to the Time of Purchase (but will be filed
within the applicable time periods therefor) and (b) such actions or filings
that, if not taken or made, would not in the aggregate impose materially adverse
conditions upon the Securities Documents.
SECTION 6. General.
(a) Legends. The certificates representing all of the Shares
shall have endorsed across the face or back thereof the following legends:
(i) "The shares of stock represented by this
certificate are subject to the terms and conditions of a certain Restricted
Stock Purchase Agreement (the "Purchase Agreement") dated January 2, 1997,
entered into between Fiberite Holdings, Inc. (the "Company") and the holder of
this certificate, which Purchase Agreement is on file with the Secretary of the
Company."
(ii) The shares of stock represented by this certificate
were originally issued on January 2, 1997, and have not been registered under
the Securities Act of 1933, as amended, or under the securities laws of any
State or other jurisdiction and may not be sold, offered for sale or otherwise
transferred unless registered or qualified under said act and applicable state
or other securities laws or unless the Company receives an opinion of counsel
reasonably satisfactory to the Company that registration, qualification or other
such actions are not required under any such laws. The shares of stock
represented by this certificate may not be transferred in violation of such Act,
the rules and regulations thereunder or the provisions of the Purchase
Agreement. The shares of stock represented by this certificate are also subject
to a Shareholders Agreement dated October 6, 1995 among Fiberite Holdings, Inc.
(the "Company") and the various shareholders signatory thereto, and each holder
of shares represented by this certificate agrees to be bound by the terms and
conditions of such Shareholders Agreement. A copy of the Shareholders Agreement
will be furnished without charge by the Company to the holder hereof upon
request.
-15-
<PAGE> 17
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend or such other legend deemed appropriate by the
Company shall also bear such legend unless, in a written opinion of counsel
(which counsel shall be reasonably acceptable to the Company) addressed to the
Company provided by counsel to Purchaser, the securities represented thereby
need no longer be subject to the restriction contained herein. The provisions of
this Section 6(a) shall be binding upon all subsequent holders of certificates
bearing the above legend.
(b) Notices. All notices, demands and other communications to
any party hereunder shall be in writing (including telecopier or similar
writing) and shall be given to such party at its address set forth on the
signature pages hereof, or such other address as such party may hereinafter
specify for the purpose. Each such notice, demand or other communication shall
be effective (i) if given to telecopy, when such telecopy is transmitted to the
telecopy number specified on the signature page hereof, (ii) if given by mail,
four days after such communication is deposited in the mail with first class
postage prepaid, addresses as aforesaid or (iii) if given by any other means,
when delivered at the address specified in this Section 6(b).
(c) No Waivers; Amendments.
(i) No failure or delay on the part of any party in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy. The remedies provided for herein are cumulative and are not exclusive of
any remedies that may be available to any party at law or in equity or
otherwise.
(ii) Any provision of this Agreement may be amended
supplemented or waived if, but only if, such amendment, supplement or waiver is
in writing and is signed by the Company and, other than with respect to
amendments pursuant to Section 3(i), Purchaser.
(d) Expenses; Documentary Taxes. The Company and Purchaser
each agree to bear its own costs, expenses and other payments in connection with
the purchase and sale of the Shares as contemplated by this Agreement including
without limitation (i) fees and disbursements of special counsel for the Company
incurred in connection with the preparation of this Agreement and (ii) all
out-of-pocket expenses of the Company, including fees and disbursements of
counsel, in connection with any waiver or consent hereunder or any amendment
hereof. The Company and Purchaser each agree to share equally any and all stamp,
transfer and other similar taxes, assessments or charges payable in connection
with the execution and delivery of this Agreement or the issuance of the Shares.
(e) Successors and Assigns; Transferability. This Agreement
shall be binding upon the Company and Purchaser and its successors and assigns.
Purchaser may not assign or otherwise transfer his rights or obligations under
this Agreement to any other Person without the prior written consent of the
Company. All provisions hereunder purporting to give rights to Holders of Shares
are for the
-16-
<PAGE> 18
express benefit of such Persons. The Shares are subject to the transfer
restrictions set forth herein in the Shares and in the Shareholders Agreement.
(f) Brokers. Each of the Company and Purchaser represents and
warrants that it has not employed any broker, finder, financial advisor or
investment banker who might be entitled to any brokerage, finder's or other fee
or commission in connection with the sale of Shares.
(g) New York Law; Submission to Jurisdiction; Waiver of Jury
Trial. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW
PRINCIPLES THEREOF. EACH PARTY HERETO HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES
OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
SHARES OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY HERETO
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
(h) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
(i) Counterparts. This Agreement may be executed in any number
of counterparts each of which shall be an original with the same effect as if
the signatures thereto and hereto were upon the same instrument.
(j) Elimination of Fractional Shares. If under any provision
of the Agreement which requires a computation of the number of Shares, the
number so computed is not a whole number such number shall be rounded down to
the next whole number.
(k) Entire Agreement. The Agreement sets forth the entire
understanding of the parties and supersedes all prior agreements, arrangements
and communications, whether oral or written, pertaining to the Shares.
-17-
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have cause this
Agreement to be duly executed by their respective authorized officers or
representatives, as of the date first above written.
_____________________________________
James E. Ashton
Address: 2055 East Technology Circle
Tempe, Arizona 85284
Attn: James E. Ashton
Fax: (602) 730-2350
FIBERITE HOLDINGS, INC.
By:__________________________________
Name:
Title:
Address: 2055 East Technology Circle
Tempe, Arizona 85284
Attn: _______________________
Fax: ________________________
-18-
<PAGE> 20
SCHEDULE A
SHARES
<TABLE>
<CAPTION>
Type Amount of Shares
- ---- ----------------
<S> <C>
Time Based Shares 116,000
Performance Based Shares 116,000
Exit Shares 58,000
Bonus Shares 116,000
</TABLE>
-19-
<PAGE> 1
Exhibit 4.5
PURCHASE AGREEMENT
BETWEEN
FIBERITE, INC.,
FIBERITE HOLDINGS, INC.
AND
ICI AMERICAN HOLDINGS INC.
With respect to all of
the outstanding shares of
common stock of
ICI COMPOSITES INC.
Dated October 6, 1995
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms.......................................... 1
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale.............................................. 6
2.2 Closing........................................................ 6
2.3 Adjustment to Purchase Price................................... 6
2.4 Excluded Assets/Included Assets................................ 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 Organization and Authority of Seller........................... 8
3.2 No Conflict; Consents and Approvals............................ 8
3.3 Litigation..................................................... 8
3.4 Composites..................................................... 9
3.5 Licenses, Permits and Qualifications........................... 10
3.6 Compliance with Laws........................................... 10
3.7 Properties..................................................... 10
3.8 Bank Accounts.................................................. 11
3.9 Environmental Protection....................................... 11
3.10 Intellectual Property.......................................... 13
3.11 Material Agreements and Bids; Breaches......................... 13
3.12 Financial Statements........................................... 15
3.13 Absence of Certain Changes or Events........................... 15
3.14 Tax Matters.................................................... 16
3.15 Employee Benefits.............................................. 16
3.16 Labor and Employment Matters................................... 18
3.17 Insurance...................................................... 19
3.18 Maintenance of Business with Customers......................... 19
3.19 Related Party Transactions..................................... 19
3.20 Disclosure Schedules........................................... 19
3.21 No Other Representations....................................... 19
3.22 Finders' Fees.................................................. 19
3.23 Payments....................................................... 20
3.24 Aviation Legal Liability Insurance............................. 20
i
<PAGE> 3
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
4.1 Organization and Authority of Purchaser........................... 20
4.2 No Conflict....................................................... 20
4.3 Absence of Litigation............................................. 20
4.4 Consents and Approvals............................................ 20
4.5 Due Diligence Investigation....................................... 21
4.6 Finders' Fees..................................................... 21
ARTICLE V
COVENANTS
5.1 Noncompetition.................................................... 21
5.2 Use of ICI Name................................................... 22
5.3 Post-Closing Access to Tax and
Other Records................................................... 22
5.4 Sales and Transfer Taxes.......................................... 23
5.5 Further Assurances................................................ 23
5.6 Section 338(h)(10) Election....................................... 23
5.7 Retained Seller Information....................................... 24
5.8 Retained Business Information..................................... 25
5.9 Refunds........................................................... 25
5.10 Filing of Returns................................................. 25
5.11 Prosecution, Maintenance and Turnover of
Intellectual Property Files..................................... 25
ARTICLE VI
EMPLOYEE MATTERS
6.1 Retention of Employees............................................ 26
6.2 Employee Benefit Plans............................................ 27
6.3 Composites Post Retirement Benefits............................... 31
6.4 Certain Unfunded Liabilities...................................... 31
6.5 Flexible Spending Account......................................... 32
6.6 Motor Vehicle Lease Agreements.................................... 32
6.7 No Third-Party Beneficiaries...................................... 32
6.8 Stock Option Plan................................................. 32
6.9 Exempt Loans...................................................... 32
6.10 Leased Employees.................................................. 32
6.11 Cooperation....................................................... 32
ARTICLE VII
INDEMNIFICATION
7.1 Survival.......................................................... 33
7.2 Indemnification by Purchaser...................................... 33
7.3 Indemnification by Seller......................................... 33
7.4 Indemnification Procedures........................................ 36
7.5 Third Party Reimbursement; Aviation Liability Insurance........... 38
ii
<PAGE> 4
7.6 Mitigation ................................................. 38
7.7 Limitation on Damages ...................................... 38
7.8 Purchase Price Adjustment .................................. 38
7.9 Remediation Procedures ..................................... 39
7.10 Exclusive Remedy ........................................... 40
ARTICLE VIII
MISCELLANEOUS
8.1 Amendment .................................................. 41
8.2 Waiver of Compliance: Consents ............................. 41
8.3 Attorneys' Fees ............................................ 41
8.4 Expenses ................................................... 41
8.5 Notices .................................................... 41
8.6 Headings ................................................... 42
8.7 Severability ............................................... 42
8.8 Entire Agreement ........................................... 43
8.9 Successors and Assigns ..................................... 43
8.10 Governing Law .............................................. 43
8.11 Counterparts ............................................... 43
8.12 Guarantee .................................................. 43
SCHEDULES
1.1 Excluded Assets
2.3(a) Statement of Working Capital Exceptions
3.2(a) Consents and Approvals
3.3 Claims and Litigation
3.4(c) Corporate Records
3.5(a) Licenses and Permits
3.5(b) Qualifications
3.7(a) Liens
3.7(b) Properties
3.7(c) Leased Property Exceptions
3.8 Bank Accounts
3.9 Environmental Matters
3.10(a) Intellectual Property
3.10(c) Intellectual Property Claims and Conflicts
3.10(d) Infringements
3.11 Material Agreements Exceptions
3.11(a)(i) Material Agreements
3.11(a)(vii) Price Adjustment Requests
3.11(b)(1) Breaches
3.11(b)(2) Notices
3.12 Financial Statements
3.12(a) Financial Statements Exceptions
3.13 Changes or Events since the Balance Sheet Date
3.13(f) Transferred Property Exceptions
3.14(b) Tax Matters
3.14(c) Tax Waivers
3.14(d) Tax Powers
3.14(e) Tax Agreements
3.14(f) 280G Agreements
iii
<PAGE> 5
3.15 Employee Benefits
3.16 Labor and Employment Matters
3.16(e) Labor Settlement Agreements
3.17 Insurance Policies for ICI Composites Inc.
3.18 Maintenance of Business with Customers
3.19 Related Party Transactions
3.23 Payments
3.24 Aviation Legal Liability Insurance
4.5 Due Diligence Investigation
5.11(a) Patents and Trademarks
5.11(d) Jointly Owned Patents/Applications
6.1(a) Composites Severance Plan
6.1(b) Individual Severance Arrangements
6.2 Pension Transfer Agreement
6.2(b) Composites ABO Assumptions and Methods
6.2(e) Composites Employees on Short-term Disability
6.4 Unfunded Liabilities
6.6 Motor Vehicle Lease Agreements
6.8(a) Management Group
6.8(b) Stock Option Plan
6.9 Exempt Loans
6.10 Leased Employees
7.4(a) Power of Attorney
iv
<PAGE> 6
PURCHASE AGREEMENT
PURCHASE AGREEMENT dated as of October 6, 1995, between ICI American
Holdings Inc. ("Seller"), a Delaware corporation, Fiberite, Inc. ("Purchaser"),
a Delaware corporation, and Fiberite Holdings, Inc. ("Guarantor"), a Delaware
corporation.
WHEREAS, Purchaser desires to acquire from Seller, and Seller desires
to sell to Purchaser, all of the outstanding shares of capital stock of ICI
Composites Inc. ("Composites"), a Delaware corporation, on the terms and
subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements and covenants hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. (a) As used in this Agreement, the following
terms shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person. A Person shall not be deemed to be an Affiliate of any other
Person solely as a result of being a director or officer of such other Person.
"Ancillary Agreements" means the Transition Services Agreement, the
Glidden Master Service Agreement, the ICI-Am Master Service Agreement and the
ICI Canada Services Agreement.
"Aviation Product" means "Aviation Product" as defined in Schedule 3.24.
"Balance Sheet" means the balance sheet set forth in the audited
financial statements of Composites dated December 25, 1994.
"Balance Sheet Date" means December 25, 1994.
"Business" means the business currently conducted by Composites.
"Business Day" means a day of the year on which banks are not required
or authorized to be closed in the City of New York.
"Closing" means the closing of the purchase and sale of the Shares.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Composites Employee Plan" means an Employee Plan sponsored or
maintained by Composites or another ICI Company for the benefit of current or
former employees of Composites.
"Current Assets" means accounts receivable, inventory (including raw
materials, work in process, finished goods and supplies), prepaid expenses,
other pre-payments and all other current assets of Composites, less related
reserves.
<PAGE> 7
"Current Liabilities" means accounts payable, employee accruals, other
accrued expenses and all other current liabilities of Composites, excluding
Income Taxes.
"Employee Plan" means any (i) employee benefit plan as that term is
defined in Section 3(3) of ERISA and (ii) any other material compensation or
benefit, plan, policy or arrangement currently maintained or contributed to by
Composites or an ERISA Affiliate for its current or former employees.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any corporation or trade or business other than
Composites that is a member of any group of organizations (i) described in
Section 414(b) or (c) of the Code of which Composites is a member and (ii)
solely for purposes of potential liability under Section 302(c)(11) of ERISA and
Section 412(c)(11) of the Code and the lien created under Section 302(f) of
ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the
Code of which Composites is a member.
"Excluded Assets" means (i) all cash or cash equivalents, (ii) all
intercompany balances between Composites and Seller in favor of Composites
existing on or prior to the Closing Date, and (iii) all assets owned or used
by Seller or any ICI Company in the provision of services to Composites
(including, without limitation, all corporate credit, telephone and similar
cards held by Composites Employees where such cards have been provided to
Composites Employees in connection with any ICI Company and including all
computer and information technology rights and systems owned or operated by
Seller or any ICI Company for the benefit of Composites) other than Included
ICI Assets.
"GAAP" means United States generally accepted accounting principles.
"Glidden Master Service Agreement" means the Master Service Agreement
dated as of the Closing Date between The Glidden Company and Composites.
"Hourly Pension Plan" means the ICI Composites Service Related Pension
Plan.
"ICI" means Imperial Chemical Industries PLC, a corporation organized
under the laws of England.
"ICI-Am Master Service Agreement" means the Master Service Agreement
dated as of the Closing Date between ICI Americas Inc. and Composites.
"ICI Canada Services Agreement" means the Services Agreement dated as
of the Closing Date between ICI Canada Inc. and Composites.
"ICI Company" means ICI or any Affiliate of ICI (excluding Composites
and Fiberite Europe GmbH).
"Included ICI Assets" means all assets owned by Seller or any other ICI
Company and used by Seller or any ICI Company exclusively or principally for
the provision of services to Composites (excluding all corporate credit,
telephone and similar cards held by Composites Employees where such cards have
been provided to Composites Employees in connection with any ICI Company,
excluding all computer and information technology rights and systems owned or
operated by Seller or any other ICI Company for the benefit of Composites and
excluding any assets owned by Seller or any ICI Company and utilized in the
performance of the Ancillary Agreements) in the operation of the Business as
presently conducted, other than the Excluded Assets and those assets set forth
in Schedule 1.1
2
<PAGE> 8
"Income Taxes" means any liability for Taxes that arises in relation
to a Tax that is based upon, measured by, or calculated with respect to income,
profits or gross receipts (other than sales or use Taxes).
"Indemnifiable Taxes" means Taxes due and payable by Composites
pertaining to any taxable period (or portion thereof) ending on or prior to the
Closing Date, including any Tax resulting from any transaction pursuant to
which the Excluded Assets remain or become the property of the Seller or any
Affiliate of the Seller. With respect to a taxable period that begins before
the Closing Date and ends after the Closing Date, the portion of any Taxes
attributable to such period that will be treated as Taxes of a Pre-Closing Tax
Period will be deemed to be: (i) in the case of any Other Tax (other than sales
and use Taxes), the amount of such Other Tax for the entire period multiplied
by a fraction, the numerator of which is the number of days in the period
ending on the Closing Date and the denominator of which is the number of days
in the entire period, (ii) in the case of any Income Taxes, the Income Tax for
the entire taxable period, multiplied by a fraction, the numerator of which is
the hypothetical Income Tax for the Pre-Closing Tax Period (determined on the
basis of an interim closing of the books, without annualization) and the
denominator of which is the sum of such numerator plus the hypothetical Income
Tax for the balance of the taxable period (determined on the basis of such
interim closing, without annualization); the hypothetical Tax for any period
shall be zero (in the case where no Tax is due) or a positive amount, and (iii)
in the case of any sales or use Tax, the Tax arising with respect to property
sold or acquired in a Pre-Closing Tax Period. Indemnifiable Taxes shall in no
event include any interest, any penalties or any additions to Tax, or any
interest on penalties or additions to Tax resulting from any action or failure
to act, following the Closing, on the part of Composites or Purchaser, except
to the extent resulting from any act or omission of Seller. No Tax shall be
included in Indemnifiable Taxes to the extent the liability for such Tax is
reflected in the Statement of Working Capital.
"Intellectual Property" means inventions, patents, and patent
applications; trademarks, trademark registrations and applications therefor;
trade names, symbols and logos; copyrights; service marks; service mark
registrations and applications therefor; know-how; and trade secrets.
"Management Group" means the Composites Employees identified in
Schedule 6.8(a).
"Manufacturing Facilities" means the manufacturing and office
facilities owned or leased by Composites located at (i) Tempe, Arizona, (ii)
Orange, California, (iii) Winona, Minnesota, (iv) Delano, Pennsylvania, and (v)
Greenville, Texas.
"Material Adverse Effect" means a material adverse effect on the
financial condition, business, assets, net worth or results of operations of
Composites taken as a whole.
"Occurrence" means "Occurrence" as defined in Schedule 3.24.
"Other Taxes" means any liability for Taxes that arises in relation to
Taxes that are not Income Taxes.
"Person" means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Qualified Plan" means an employee pension benefit plan within the
meaning of Section 3(2) of ERISA that meets the qualification requirements of
Section 401(a) of the Code, and whose trust or other funding medium is exempt
from federal income tax under Section 501(a) of the Code.
"Post-Closing Tax Period" means any period (or portion thereof) ending
after the Closing Date.
3
<PAGE> 9
"Pre-Closing Tax Period" means any period (or portion thereof) ending
on or before the Closing Date.
"Salaried Pension Plan" means the ICI Composites Pension Plan
established pursuant to a spinoff from the ICI Americas Pension Plan.
"Separate Composites Plan" means a Composites Employee Plan that only
covers Composites Employees, former employees of Composites, their dependents,
and/or their beneficiaries.
"Shares" means all of the issued and outstanding shares of common
stock, par value $1.00 per share, of Composites.
"Tax" or "Taxes" means (i) all federal, state, county, local, foreign
and other taxes and similar governmental charges or assessments (including,
without limitation, net income, alternative or add-on minimum tax, profits,
premium, estimated, excise, sales, use, occupancy, gross income, gross
receipts, franchise, ad valorem, stamp, severance, capital levy, production,
transfer, withholding, license, employment and payroll, and property taxes,
environmental or windfall profits taxes and import duties) imposed by any
governmental authority responsible for the imposition of any such tax, whether
attributable to statutory or nonstatutory rules and including interest,
penalties, additions to tax, and interest on penalties or additions to tax;
(ii) any liability of Composites or any subsidiary for the payment of any
amounts described in clause (i) as a result of being a member of an affiliated
group of corporations (within the meaning of Section 1504(a) of the Code)
filing a consolidated U.S. federal income tax return, or a group of
corporations filing a consolidated, combined or unitary tax return for state or
local tax purposes, for periods prior to the Closing Date, including any
liability pursuant to Treasury Regulation Section 1.1502-6; and (iii) any
liability of Composites for amounts described in clause (i) under any Tax
sharing or Tax allocation agreement entered into prior to the date hereof.
"Transition Services Agreement" means the Transition Services Agreement
dated as of the Closing Date between ICI Americas Inc. and Composites.
"Working Capital" means Current Assets less Current Liabilities.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Allocation 5.6(c)
Arbitrated Amount 2.3(d)
Authorizations 3.9(a)
Audited Financial Statements 3.12
Beatrice 3.11(a)(viii)
CERCLA 3.9(e)
Claim Costs 7.3
COBRA Coverage 6.2(d)(iv)
Collective Bargaining Agreement 3.16(a)
Composites ABO 6.2(b)(iii)
Composites Employee 6.1
Consequential damages 7.7
Cost Effective Cleanup 7.9(e)
Designated Representatives 7.9(d)
Environmental Law 3.9(l)
Files 5.11(a)
4
<PAGE> 10
Financial Statements 3.12
Government Bid 3.11(a)(vi)
Government Contract 3.11(a)(vi)
Hazardous Materials 3.9(e)
HCFA 7.3(i)
ICI Letters 5.2(a)
Indirect Damages 7.7
Indemnified Party 7.4(a)
Indemnifying Party 7.4(a)
Independent Accounting Firm 2.3(d)
Material Agreement 3.11(a)(v)
MICP 6.2(g)
Necessity Test 7.9(f)(ii)
Liens 3.7(a)
Off-site Remediation Liabilities 7.9(a)
On-site Cleanup 7.9(b)
On-site Remediation Liabilities 7.9(a)
Pension Transfer Agreement 6.2(b)(ii)
Permits 3.5(a)
Permitted Liens 3.7(a)
Purchase Price 2.1(b)
Purchaser Indemnitees 7.3
Purchaser's Amount 2.3(d)
Purchaser's Medical Plan 6.2(d)(i)
Purchaser's Pension Trust 6.2(b)(iv)
Purchaser's Savings Plan 6.2(c)
Real Property 7.9(a)
Relevant Factors 7.9(f)(ii)
Retained Seller Information 5.7
Retained Business Information 5.8
Section 338(h)(10) Election 5.6(b)
Seller Indemnitees 7.2
Seller's Accountants 2.3(a)
Seller's Amount 2.3(d)
Seller's Medical Plan 6.2(d)(i)
Seller's Pension Trust 6.2(b)(iv)
Seller's Savings Plan 6.2(c)
Settlement Agreement 3.11(a)(viii)
Statement of Working Capital 2.3(a)
Tax Returns 3.14(a)
Testing 7.9(f)
Third Party Claim 7.4(b)
Transaction Costs 5.6(c)
Warranties 3.20
5
<PAGE> 11
ARTICLE II
PURCHASE AND SALE
2.1 Purchase and Sale.
(a) Subject to the terms and conditions set forth in this Agreement,
Seller agrees to sell to Purchaser, and Purchaser agrees to purchase from
Seller, on the Closing Date, the Shares.
(b) Subject to any adjustment as provided in Section 2.3, the aggregate
Purchase Price (the "Purchase Price") for the Shares shall be $107,966,167.26
which Purchase Price shall be allocated in accordance with Section 5.6.
2.2 Closing. At the Closing:
(a) Seller will deliver to Purchaser the certificate representing the
Shares, duly endorsed or accompanied by stock powers duly endorsed in blank,
with any required documentary stamps affixed thereto.
(b) Purchaser shall deliver (or cause to be delivered) to Seller
$107,966,167.26 in immediately available funds by wire transfer to a bank
account designated by Seller by notice delivered to Purchaser not later than two
Business Days prior to the Closing Date.
(c) Purchaser and Seller will each deliver, or cause to be delivered,
duly executed counterparts of the Ancillary Agreements.
2.3 Adjustment to Purchase Price.
(a) Statement of Working Capital. As soon as practicable, but in any
event within forty-five Business Days following the Closing Date, Seller shall
deliver to Purchaser a statement of the Working Capital of Composites (the
"Statement of Working Capital") as of the close of business on the Closing Date,
together with a report thereon of KPMG, independent accountants for Seller
("Seller's Accountants"), to the effect that the amounts reflected therein
have, except as set forth in Schedule 2.3(a), been prepared in accordance
with the policies and procedures used to prepare the 1994 audited financial
statements as described in Section 3.12.
(b) Cooperation. Purchaser shall provide Seller and Seller's
Accountants full access to the books, records, facilities and employees of
Composites (which employees shall assist Seller's Accountants in carrying out
procedures necessary in preparing the Statement of Working Capital) and shall
cooperate fully with Seller and Seller's Accountants, in each case to the
extent required by Seller and Seller's Accountants in order to prepare the
Statement of Working Capital and to investigate any disputes or other matters
relating thereto; provided, that any such investigation shall be conducted in
such a manner as not to interfere unreasonably with the operation of
Composites.
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(c) Adjustment of Purchase Price.
(i) In the event that the amount of Working Capital set forth on the
Statement of Working Capital exceeds $22,300,000.00, the Purchase Price shall
be increased by an amount equal to such excess and Purchaser shall deliver to
Seller an amount in cash equal to such excess.
(ii) In the event that the amount of Working Capital set forth on the
Statement of Working Capital is less than $17,600,000.00, the Purchase Price
shall be reduced by an amount equal to such deficit and Seller shall deliver to
Purchaser an amount in cash equal to such deficit.
(iii) For the avoidance of doubt, in the event that the amount of
Working Capital set forth on the Statement of Working Capital is not more than
$22,300,000.00 and not less than $17,600,000.00, there shall be no adjustment
of the Purchase Price pursuant to this Section 2.3(c).
(d) Disputes. Subject to this Section 2.3(d), the Statement of
Working Capital delivered by Seller to Purchaser shall be final, binding and
conclusive on the parties hereto. Within twenty Business Days of Purchaser's
receipt of the Statement of Working Capital, Purchaser may dispute any amounts
reflected on the Statement of Working Capital by notifying Seller in writing of
each disputed item, specifying the amount thereof in dispute and setting forth,
in detail, the basis for such dispute. During such twenty Business Day period,
independent accountants for Purchaser shall have reasonable access to all
working papers, supporting analyses, computations, accounting records and
general ledger reports used by Seller or Seller's Accountants to prepare the
Statement of Working Capital. Purchaser's notice shall also set forth the
amount it believes was the Working Capital of Composites as of the close of
business on the Business Day preceding the Closing Date ("Purchaser's Amount").
In the event of such a dispute, Purchaser and Seller shall attempt to reconcile
their differences and any resolution by them as to any disputed amounts shall
be final, binding and conclusive on the parties. If Purchaser and Seller are
unable to reach a resolution within twenty Business Days of Purchaser's written
notice of dispute to Seller, Purchaser and Seller shall submit the items
remaining in dispute for resolution to an independent accounting firm of
national reputation mutually appointed by Seller and Purchaser (the "Independent
Accounting Firm"), which shall, within twenty Business Days of such submission,
determine and report to Seller and Purchaser upon such remaining disputed items
and on the amount of Working Capital of Composites as of the close of business
on the Business Day preceding the Closing Date (the "Arbitrated Amount"), which
amount shall in no event be less than Purchaser's Amount or greater than the
amount of Working Capital set forth on the Statement of Working Capital
delivered by Seller ("Seller's Amount"). The report of the Independent
Accounting Firm shall be final, binding and conclusive on Seller and Purchaser.
The fees and disbursements of the Independent Accounting Firm shall be paid by
Purchaser and Seller in the following percentages: (i) in the case of Seller, A
divided by C and (ii) in the case of Purchaser, B divided by C, where (x) A
equals the difference between Seller's Amount and the Arbitrated Amount, (y) B
equals the difference between the Arbitrated Amount and Purchaser's Amount and
(z) C equals the difference between Seller's Amount and Purchaser's Amount.
(e) Payments. Any payment required to be made pursuant to Section
2.3(c) hereof will be made in immediately available funds no later than twenty
Business Days after receipt by Purchaser of the Statement of Working Capital;
provided that if Purchaser timely delivers a dispute notice pursuant to Section
2.3(d) hereof, such payment so made shall be net of the amount in dispute,
with the balance to be made within five Business Days following the delivery of
the report determining the Arbitrated Amount.
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2.4 Excluded Assets/Included Assets. Notwithstanding the sale of the
Shares hereunder, the parties acknowledge and will ensure that the Excluded
Assets remain or will with effect from the Closing become the property of the
Seller or any ICI Company nominated by the Seller and that the Included ICI
Assets will with effect from the Closing become the property of Composites. The
parties agree to co-operate with each other and to take any action which is
reasonably necessary after the Closing in order to give effect to this Section.
Seller shall be responsible for any Taxes relating to any transfers of assets
pursuant to this Section.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants as of the Closing as follows:
3.1 Organization and Authority of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all necessary corporate power and authority to enter into and
perform this Agreement and to consummate the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by Seller and
constitutes a legal, valid and binding obligation of Seller, enforceable
against it in accordance with its terms.
3.2 No Conflict: Consents and Approvals.
(a) Except as set forth in Schedule 3.2(a), the execution, delivery and
performance of this Agreement by Seller do not (i) conflict with or violate any
law, rule, regulation, order, judgment, injunction, decree, determination or
award applicable to Seller, (ii) violate or conflict with any law, rule,
regulation, order, judgment, injunction, decree, determination or award
applicable to Composites, (iii) violate or conflict with the certificate of
incorporation or by-laws of either Seller or Composites; or (iv) require any
material pre-Closing consent, notice, authorization or approval under, result
in any breach of, or constitute a default (or event which with notice or lapse
of time, or both, would become a default) under, or result in the creation of
any lien or other encumbrance on any of the properties or assets of Composites
pursuant to any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument to which Composites or Seller or
any of their Affiliates is a party or by which any of them or any of their
respective properties is bound or affected, except in the case of Sections
3.2(a)(i) and (ii), for such conflicts, violations, breaches and defaults, and
for such consents and approvals the failure of which to obtain, would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
(b) The execution and delivery of this Agreement by Seller do not, and
the performance of this Agreement by Seller does not require any consent,
approval, authorization or other action by, or filing with or notification to,
any domestic or foreign governmental or regulatory authority or any other
person, except for the filing of forms with the Internal Revenue Service as
contemplated by Section 5.6 hereof and, except where failure to obtain such
consents, approvals, authorizations or actions, or to make such filings or
notifications, would not (i) prevent Seller from performing any of its
obligations under this Agreement or (ii) otherwise prevent the consummation of
the transactions contemplated herein by Seller.
3.3 Litigation. Except as set forth in Schedule 3.3, there are no
claims, actions, suits or proceedings pending, or to the knowledge of each of
Seller and Composites threatened,
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nor to the knowledge of each of Seller and Composites are there any
investigations pending or threatened, against or specifically affecting Seller
or Composites or to which their respective properties or assets are subject,
before any court, arbitrator, or administrative, governmental or regulatory
authority or body, domestic or foreign, that (i) challenge or otherwise put in
issue the authority of Seller to enter into or perform this Agreement, (ii)
challenge or otherwise put in issue the validity of this Agreement or any of
the transactions contemplated hereby, (iii) if adversely decided, would
materially adversely affect the ability of Seller to consummate the
transactions contemplated hereby or (iv) if adversely decided, would reasonably
be expected to have a Material Adverse Effect (other than with respect to those
matters described in Sections 3.3(i), (ii) and (iii), and, to the knowledge of
each of Seller and Composites, there is no factual basis upon which any such
claim, action, suit or proceeding would reasonably be likely to be asserted or
commenced. Composites is not subject to any order, judgment, injunction,
decree, determination or award which has or would reasonably be expected to
have a Material Adverse Effect.
3.4 Composites.
(a) Composites is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own its properties and assets and to carry on
the Business.
(b) Composites is duly qualified to transact business and is in good
standing in each state or jurisdiction in which it owns material assets or
transacts a material part of its business, except where the failure to so
qualify would not reasonably be expected to have a Material Adverse Effect.
(c) Except as set forth in Schedule 3.4(c), Seller has made available
to Purchaser complete and correct copies of (i) the Articles of Incorporation
of Composites, as amended to the Closing Date, certified by the appropriate
governmental official; (ii) the By-laws of Composites as presently in effect,
certified by the Secretary of Composites; (iii) the minutes of all meetings of
the shareholders and board of directors of Composites and any committees
thereof, and (iv) all written consents in lieu of meetings of the shareholders
and board of directors of Composites and any committees thereof. Except as set
forth in Schedule 3.4(c), such copies are true, correct and complete and
contain all amendments through the date of this Agreement. Copies of such
Articles of Incorporation and By-laws of Composites are attached to Schedule
3.4(c).
(d) Composites is not the legal or beneficial owner of any equity
securities or other ownership interests of any corporation, partnership, joint
venture, trust, business association or other legal entity.
(e) The capital stock of Composites consists solely of 1,000 shares of
common stock, par value $1.00 per share, of which 1,000 shares are issued and
outstanding. All of the Shares are owned legally, beneficially and of record by
Seller, and will be conveyed to Purchaser at the Closing, free and clear of all
security interests, liens, charges, encumbrances and adverse claims, except for
those arising by reason of an action or inaction by, or with respect to, the
Purchaser. The Shares are validly issued and are fully paid and nonassessable,
and Composites is under no obligation to register any of its securities
pursuant to any law, statute, regulation or other governmental act applicable
to the sale, exchange or issuance of securities, including, but not limited to,
the Securities Act of 1933, as amended.
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(f) There are no agreements or understandings with respect to the
voting of the Shares. There are no options, convertible securities, warrants,
rights or other instruments or agreements to which Composites or Seller or any
other ICI Company is a party or by which Composites or Seller or any other ICI
Company is bound, calling for the issuance, sale, transfer or delivery of any
equity or debt security of Composites or of any security convertible into
exchangeable for or requiring the issuance, sale, transfer or delivery of any
such equity or debt security, other than this Agreement.
3.5 Licenses, Permits and Qualifications.
(a) Except as set forth in Schedule 3.5(a), Composites possesses all
permits, licenses, orders and approvals of foreign, federal, state or local
governmental or regulatory bodies that are required in order to permit
Composites to carry on the Business, except for those permits, licenses, orders
and approvals the failure of which to obtain would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect
(hereinafter referred to as the "Permits"). Except as set forth in Schedule
3.5(a), the Permits are in full force and effect and, to the knowledge of each
of Seller and Composites, no suspension or cancellation of the Permits is
threatened.
(b) To the knowledge of Composites, all products sold by Composites
pursuant to qualification requirements established by Composites' customers were
produced in a manner consistent with the requirements of such qualifications
where the failure to do so, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect. To its knowledge, Composites held
all necessary qualifications for its products from its customers pursuant to
which sales were made to such customers during the periods covered by the
Financial Statements. Except as set forth in Schedule 3.5(b), neither Seller nor
Composites has, since July 1, 1990, received any notification that any material
qualifications for Composites' commercially manufactured products as established
by Composites' customers have been revoked or terminated as a result of the
failure of products manufactured by Composites to meet the specifications
required by such qualifications, and to the knowledge of each of Seller and
Composites, no such revocation or termination is threatened or contemplated.
3.6 Compliance with Laws. Composites is not in violation of any
foreign, federal, state or local law, statute, ordinance or regulation in
effect on or prior to the Closing Date, except for laws, statues, ordinances,
or regulations dealing with environmental, tax, employee benefits, and labor
and employment matters, improper payments (which matters are exclusively the
subject of Sections 3.9, 3.14, 3.15, 3.16 and 3.23, respectively) and except
for such violations which individually or in the aggregate would not reasonably
be expected to have a Material Adverse Effect.
3.7 Properties.
(a) Except for property (other than real property) and assets sold
since the Balance Sheet Date in the ordinary course of business which, other
than finished goods in inventory, did not in the aggregate exceed property and
assets having a fair market value in excess of $100,000, and except in the case
of Intellectual Property, which is exclusively the subject of Section 3.10,
Composites has good and valid title to or rights in, or in the case of leased
property has valid leasehold interests in, all material personal property and
assets (whether tangible or intangible) reflected on the Balance Sheet or
acquired after the Balance Sheet Date. Except as set forth in Schedule 3.7(b),
Composites has good and marketable, indefeasible, fee simple title to, or in
the case of leased real property has valid leasehold interests in, all real
property reflected on the Balance Sheet or acquired after the Balance Sheet
Date. None of such
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property or assets (whether real or personal) is subject to any liens, security
interests, claims or other charges ("Liens"), except (i) Liens for Taxes not
yet due, (ii) mechanic's, materialman's, and other common law or statutory Liens
of vendors not perfected or recorded under law, (iii) Liens that do not
materially detract from the value or materially interfere with the present use
of the assets to which they apply and (iv) Liens disclosed in Schedule 3.7(a)
(collectively, "Permitted Liens").
(b) Schedule 3.7(b) sets forth (i) all real property owned by
Composites and the most recent ALTA surveys and title reports of such property
possessed by Composites, (ii) all real property leased by Composites and any
ALTA surveys of such property possessed by Composites (and the annual rental
for such property), (iii) all personal property leased by Composites requiring
annual payments in excess of $100,000 (and the annual rental for such
property), and (iv) all personal property owned by Composites with a book value
of $100,000 or more. Except as set forth in Schedule 3.7(b), the property
listed in Schedule 3.7(b) and all other personal property owned or leased by
Composites is all that used to carry on the Business as currently conducted.
Composites conducts reasonable maintenance in the ordinary course of business
consistent with past practice with respect to all machinery and equipment
presently being utilized by it in the manufacture of its products.
(c) Except as set forth in Schedule 3.7(c), the leases of real and
personal property described in Section 3.7(b) are in full force and effect, all
rentals or other payments due and payable thereunder prior to the date hereof
have been duly paid and Composites is in compliance with all material
provisions of each such lease. To the knowledge of each of Seller and
Composites, no default or event of default exists and no event which, with
notice or lapse of time, or both, would constitute a default or event of
default has occurred and is continuing, under the terms or provisions, express
or implied, of any of such leases, nor has Seller or Composites received notice
of any claim of such default or event of default.
(d) There are no eminent domain proceedings pending or, to the
knowledge of each of Seller and Composites threatened, against any property
owned by Composites or any material portion thereof which proceedings (if
resulting in a taking) would reasonably be expected to have a material adverse
effect on the use of such property as currently used in the operation of the
Business.
(e) Seller has made available to Purchaser true and correct copies of
the most recent title insurance commitments, title insurance policies and
surveys in Composites' possession relating to real properties owned or leased
by Composites.
(f) Neither Seller nor Composites has received any notice or has
knowledge of violations of any local zoning or land use or other similar
regulations in respect of the real property listed on Schedule 3.7(b) which are
in effect or remain unresolved.
3.8 Bank Accounts. Schedule 3.8 sets forth the name and number of each
Composites bank account together with the name and address of the bank for each
account.
3.9 Environmental Protection. Except as would not reasonably be
expected to have a Materially Adverse Effect or as set forth in Schedule 3.9
hereto:
(a) Composites has obtained all permits, licenses and other
authorizations (hereinafter collectively referred to as "Authorizations") which
are required with respect to the current operation of the Business, its assets
and the use, ownership and operation of the Manufacturing Facilities and any
real property under any Environmental Law and each such
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Authorization is in full force and effect.
(b) Composites is in compliance with all terms and conditions of the
Authorizations specified in subsection 3.9(a) above, and is also in compliance
with, and not subject to liability under, any Environmental Law (including,
without limitation, compliance with standards, schedules and timetables therein
having the force of law).
(c) There is no civil, criminal or administrative action, suit, demand,
claim, hearing, notice of violation, proceeding, notice or demand letter or
request for information pending or, to the knowledge of Seller or Composites,
threatened, nor to the knowledge of Seller or Composites is there any
investigation pending or threatened, under any Environmental Law against
Composites or against any person or entity whose liability for any such matter
Composites has retained or assumed either by agreement or by operation of law.
(d) No Lien is in effect under any Environmental Law with respect to
any assets, facility or real property owned, operated, leased or controlled by
Composites.
(e) Neither Seller nor Composites has received notice that Composites
has been identified as a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA") or any
comparable state or foreign law nor has either Seller or Composites received
any notification that any hazardous substances or any pollutant or contaminant,
as defined in CERCLA and its implementing regulations, or any toxic substance,
hazardous waste, hazardous constituents, asbestos or asbestos containing
material, petroleum, including crude oil and any fractions thereof, or other
wastes, chemicals, substances or materials subject to regulation under any
Environmental Law (collectively "Hazardous Materials") that Composites has
used, generated, stored, treated, handled, transported or disposed of or
arranged for transport for disposal or treatment of, or arranged for disposal
or treatment of, has been found at any site at which any governmental agency or
private party is, to the knowledge of each of Seller and Composites, conducting
or planning to conduct an investigation or other action pursuant to any
Environmental Law.
(f) Since July 1, 1985, except as may have occurred in compliance with
an Authorization, there have been no releases (i.e., any releasing, spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, disposing or dumping) of Hazardous Materials by Composites
on, at, upon, into or from any of the real properties owned, leased, operated
or used by Composites or facilities thereon.
(g) There is no asbestos in, on, or at any real property or facility or
equipment owned, leased or operated by Composites.
(h) No real property owned, leased or operated by Composites is (i)
listed or publicly proposed for listing on the National Priorities List under
CERCLA or is (ii) listed in the Comprehensive Environmental Response,
Compensation, Liability Information System List promulgated pursuant to CERCLA,
or on any comparable published list maintained by any foreign or state
governmental authority.
(i) No notice or other filing, or consent or approval is required under
any Environmental Law in connection with or as a result of the transactions
contemplated by this Agreement.
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(j) There are no underground storage tanks or related piping located
at, on or under any real properties owned, leased or operated by Composites.
(k) Composites has delivered or otherwise made available for inspection
to Purchaser or its agents true, complete and correct copies of any reports,
studies, assessments, analyses, evaluations, test or monitoring results in each
case prepared since July 1, 1990, possessed, available to or initiated by or on
behalf of Composites pertaining to Hazardous Materials in, on, beneath or
adjacent to any of the Manufacturing Facilities or real properties owned,
leased, operated or used by Composites or regarding Composites' compliance with
or liability under any Environmental Law.
(l) For purposes of this Agreement, "Environmental Law" means the
common law and any applicable foreign, federal, state and local laws or
regulations, codes, ordinances, rules, orders, decrees or judgments in effect
on or prior to the Closing Date relating to pollution or protection of public
or employee health or the environment, including, without limitation, those
relating to (i) any releases or threats of releases of Hazardous Materials into
the environment (including, without limitation, ambient air, indoor air,
surface water, groundwater, land surface or subsurface) and (ii) underground or
above ground storage tanks, and related piping, and releases or threatened
releases therefrom.
3.10 Intellectual Property. (a) Schedule 3.10(a) sets forth or
describes all domestic and foreign patents, patent applications, patent
licenses, written know-how licenses, trade names, material secrecy agreements,
registered trademarks, registered copyrights, registered service marks,
trademark and service mark applications currently used or held for use in the
Business.
(b) To Seller's knowledge, Composites owns, licenses or has rights to
use all Intellectual Property to the extent used or held for use in connection
with the Business.
(c) Except as set forth in Schedule 3.10(c), in the last 7 years, no
claim has been asserted against Seller or Composites, and Seller and Composites
have no knowledge, that the conduct of the Business as now operated conflicts
with valid patents, patent rights, licenses, trademarks, service marks,
trademark rights, trade names, trade name rights or copyrights of others in any
way that would reasonably be expected to have a Material Adverse Effect.
(d) Except as set forth in Schedule 3.10(d), to the knowledge of each
of Seller and Composites, no other entity's use of any Intellectual Property
infringes any rights in Intellectual Property held by Composites.
3.11 Material Agreements and Bids; Breaches.
(a) Except as set forth in Schedule 3.11:
(i) Schedule 3.11(a)(i) hereto sets forth a complete and correct
list of all Material Agreements in effect on the Closing Date. All Material
Agreements are valid and binding on the parties thereto in accordance with
their terms and are in full force and effect in all material respects.
(ii) No show-cause notices, stop work orders, cure notices,
default terminations, written notices of default (claimed or actual) or
similar notices or negative determinations of responsibility are in effect
or remain unresolved against Composites with respect to any Material
Agreement.
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(iii) With respect to all Government Contracts and Government Bids,
there are no pending, and to the knowledge of each of Seller and Composites,
there are no contemplated or threatened (A) civil fraud or criminal
investigations by any government investigative agency, (B) suspension or
debarment proceedings (or equivalent proceedings) against Composites, (C)
requests by the government for a contract price adjustment based on a claimed
disallowance by the Defense Contract Audit Agency or similar agency, or claim
of defective pricing in excess of $100,000 individually or $500,000 in the
aggregate, (D) disputes between Composites and the government which have
resulted in a government contracting officer's final decision where the amount
in controversy exceeds or would reasonably be expected to exceed $100,000
individually or $500,000 in the aggregate, or (E) claims or equitable
adjustments by Composites against the government or any third party in excess
of $100,000 individually or $500,000 in the aggregate.
(iv) To the knowledge of Seller and Composites, there is no fact which
would prevent the transfer of facility security clearances held by Composites
to Purchaser after Closing other than Composites' current level of activity.
(v) For purposes of this Agreement, "Material Agreement" means any
agreement (including, without limitation, any legally binding purchase order)
or Government Contract which (A) has a stated value, including options, greater
than $100,000, (B) is a contractual obligation of Composites greater than
$100,000, or (C) is a material lease.
(vi) For purposes of this Agreement, "Government Contract" means any
prime contract, subcontract, basic ordering agreement, letter contract,
purchase order or delivery order of any kind in writing, including all
amendments, modifications, and options thereunder or relating thereto, in
existence as of the date hereof, between Composites and (A) the U.S.
Government, (B) any prime contractor of the U.S. Government, or (C) any
subcontractor to any contract described in clauses (A) or (B) above. The term
"Government Bid" shall mean any written quotation, bid or proposal outstanding
as of the date hereof made by Composites that, if accepted or awarded, would
lead to a contract with (A) the U.S. Government, (B) any prime contractor of
the U.S. Government, or (C) any subcontractor to any contract described in
clauses (A) or (B) above.
(vii) With respect to any Government Contract which expired, or was
terminated, or for which final payment was made within three (3) years prior
to the date hereof, and except as set forth in Schedule 3.11(a)(vii) hereto, to
the knowledge of Seller and Composites, there are no requests by the U.S.
Government for a contract price adjustment based upon a claim of defective
pricing in excess of $100,000.
(viii) The Settlement Agreement (the "Settlement Agreement") between
Composites and Beatrice Companies, Inc. ("Beatrice") dated May 31, 1994
constitutes the legal, valid and binding obligation of each of the parties
thereto and is enforceable on the Closing Date against each such party in
accordance with its terms, including, but not limited to, with respect to the
asbestos litigation set forth on Schedule 3.3. Composites is not, nor to
Seller's or Composites' knowledge is Beatrice in breach of its obligations
under the Settlement Agreement and Composites has not received any notice of
any alleged failure on its part to perform any of its obligations under the
Settlement Agreement.
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(b) Breaches. Except as set forth in Schedule 3.11(b)(1), Composites is
not in violation of its Certificate of Incorporation or By-laws or in default in
the performance or observance of any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise, or of any provision of any
judgment, decree, order, statute, rule (including cost accounting standards),
or regulation applicable to or binding upon Composites which individually, or
in the aggregate, would reasonably be expected to have a Material Adverse
Effect. Except as set forth in Schedule 3.11(b)(2), no notice of any alleged
failure on Composites' part to perform any obligation under any Material
Agreement or of the proposed termination or nonrenewal of any Material
Agreement is in effect or remains unresolved by reason of (i) alleged
deficiencies in products manufactured and/or sold by Composites, or (ii)
Composites' alleged failure to perform its contractual obligations on a timely
basis. There is no other actual or, to the knowledge of each of Seller and
Composites, alleged breach by Composites or, to the knowledge of each of Seller
and Composites, by any other party thereto which would warrant termination or
nonrenewal of a Material Agreement.
3.12 Financial Statements. Attached hereto as Schedule 3.12 are the
audited financial statements of Composites for the periods ending December 26,
1993 and December 25, 1994 (the "Audited Financial Statements") and the
unaudited management accounts of Composites for the period January 1995 through
August 1995 (said Audited Financial Statements and said management accounts
collectively referred to as the "Financial Statements"). The Audited Financial
Statements present fairly in all material respects the financial positions of
Composites as described therein and the results of operations of Composites for
the periods stated therein, including, without limitation, the Working Capital,
as of the dates therein referred to, and in each case are presented in
accordance with Seller's normal accounting practices, which are in accordance
with GAAP, except as disclosed in Schedule 3.12(a) and the notes to the
Financial Statements, consistently applied throughout the periods of the
Financial Statements involved. Said management accounts have been prepared in
accordance with the policies and procedures consistently applied in the
preparation of the management accounts of Composites since 1991.
3.13 Absence of Certain Changes or Events. Except as set forth in
Schedule 3.13, since the Balance Sheet Date, the Business has been conducted in
the ordinary course consistent with past practice and there has been no event
or series of events that, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect. Except as set forth in Schedule
3.13, since the Balance Sheet Date, Composites has not:
(a) incurred any obligation, commitment or liability (fixed or
contingent), except trade or business obligations incurred in the ordinary
course of business, which trade or business obligations individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect;
(b) transferred or granted any material rights under or with respect to
any Intellectual Property;
(c) (i) made or granted any wage or salary increase (other than in the
ordinary course and consistent with past practice), (ii) engaged any new
officer or employee at an annual rate of compensation in excess of $50,000 per
annum, or (iii) entered into, or increased the annual rate of compensation
paid by Composites pursuant to, any employment agreement or other arrangement
with any person which provides for an annual rate of compensation or other
payments which, together with all other payments and benefits, would provide
aggregate annual compensation in excess of $50,000 and which may not be
terminated by Composites without any payment, other than pursuant to the ICI
Composites Severance Plan, except by notice of at least 30 days;
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(d) increased the benefits in an existing Composites Employee Plan or
any commitment to adopt any additional Composites Employee Plan, terminated or
made any arrangement to terminate any Composites Employee Plan, or determined
that an event has occurred which might result in the involuntary termination
of any Employee Benefit Plan under Title IV of ERISA.
(e) made or entered into any contract or commitment to make capital
expenditures in excess of $150,000 individually or $750,00 in the aggregate; or
(f) made any transfer of property (other than cash, Excluded Assets,
and those items included in Schedules 1.1 and 3.13(f), or incurred or
guaranteed any indebtedness, to or for the benefit of Seller or its Affiliates,
other than any dividends (comprising cash, Excluded Assets or items included in
Schedules 1.1 and 3.13(f)) paid to Seller on or prior to the Closing Date.
(g) suffered any Material Adverse Effect from damage, destruction or
casualty loss to any property of Composites.
3.14 Tax Matters. (a) Composites or an ICI Company, has filed or
Seller, to the extent responsible for filing under Section 5.10 hereof, will
file or cause to be filed in a timely manner with the applicable taxing
authorities of the United States, states, localities, foreign countries and
political subdivisions of foreign countries all of Composites' Tax returns,
reports or other filings (other than IRS Forms 5500 and such other returns,
reports or other filings as they relate to employee benefit plans) which are
required to be filed on or before the Closing Date (the "Tax Returns"). All
Taxes shown on the Tax Returns to be due and payable have been paid by
Composites or will be accrued as a liability in the Statement of Working
Capital.
(b) To the knowledge of each of Seller and Composites, except as set
forth in Schedule 3.14(b), with respect to Taxes (i) Composites is not a party,
directly or through a tax sharing arrangement, to any pending action or
proceeding by any domestic or foreign governmental authority for assessment or
collection of Taxes and (ii) there is no (A) current audit, or (B)
administrative or court proceeding currently pending with regard to any Tax or
Tax Returns of Composites by any taxing authority.
(c) Except as set forth in Schedule 3.14(c), Composites has not
executed any waivers or comparable consents regarding the application of the
statute of limitations with respect to any Taxes or Tax Returns.
(d) Except as otherwise provided in Section 7.4(a) or set forth in
Schedule 3.14(d), no power of attorney currently in force has been granted by
Composites concerning any Tax matter.
(e) Except as set forth in Schedule 3.14(e), Composites is not a party
to any agreement relating to the allocation or sharing of Taxes.
(f) Except as set forth in Schedule 3.14(f), Composites is not a party
to any agreement, contract or arrangement that would result, separately or in
the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code.
3.15 Employee Benefits.
(a) (i) Except as otherwise set forth in Schedule 3.15, all material
and legally binding obligations for salaries, vacation pay and bonuses which
were due and payable to
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the employees of Composites on or before the Closing Date have been paid or
adequate accruals therefor have been provided.
(ii) Schedule 3.15 sets forth, as of the date specified in said
schedule, a materially correct and complete list of the names of the employees
of Composites and their salary or wage rates.
(b) Set forth in Schedule 3.15 is a correct and complete list of each
Composites Employee Plan. Except as set forth in Schedule 3.15, Seller provided
to Purchaser the most recent copy of each such Composites Employee Plan. To the
extent any such Composites Employee Plan is not in writing, a short summary of
the plan has been set forth in Schedule 3.15.
(c) Except as set forth in Schedule 3.15, none of the Composites
Employee Plans is a Multiemployer Plan (as defined in Section 3(37) of ERISA).
Neither Composites nor any ERISA Affiliate has made within the preceding six
plan years, or expects to make prior to the Closing, a complete or partial
withdrawal from any Multiemployer Plan so as to incur withdrawal liability as
defined in Section 4201 of ERISA or contingent withdrawal liability under
Section 4204 of ERISA for which Composites would be liable. The total aggregate
withdrawal liability which would result under Section 4201 of ERISA if
Composites were to withdraw in a complete withdrawal (as defined in Section
4203 of ERISA) on the Closing Date from each Composites Employee Plan that is a
Multiemployer Plan would not result in a Material Adverse Effect.
(d) Except as set forth in Schedule 3.15, Seller previously has provided
to Purchaser the most recent summary plan description of each Composites
Employee Plan disseminated to employees of Composites; and the most recent
annual report (Form 5500) with attached schedules for those Composites Employee
Plans that only cover employees of Composites, and in the case of such a plan
which is a defined benefit Qualified Plan, the most recent actuarial valuation
report.
(e) Except as set forth in Schedule 3.15, there is no obligation or
liability to provide post retirement welfare benefits to current or future
retirees of Composites (other than those required by Section 601 et seq. of
ERISA).
(f) Except as set forth in Schedule 3.15, each Composites Employee Plan
has been administered in material compliance with its terms, and to the extent
applicable, with ERISA and the Code.
(g) Except as set forth in Schedule 3.15, with respect to any
Composites Employee Plan, there are: (i) no prohibited transactions, within the
meaning of Section 406 of ERISA or Section 4975 of the Code, which have been
committed and which would reasonably be expected to result in a Material
Adverse Effect; (ii) no pending, or to the knowledge of Seller, threatened
suits, claims, investigations or proceedings against a Composites Employee Plan
by a Composites Employee or former employee of Composites (other than routine
claims for benefits; and (iii) no claims or other matters currently pending,
nor to the knowledge of Seller, are there any investigations or claims
threatened or pending, by, with or before the Internal Revenue Service,
Department of Labor, Pension Benefit Guaranty Corporation or other federal
governmental agency.
(h) All contributions, premiums and other payments required to be paid
prior to the Closing Date to Composites Employee Plans by Composites, under
applicable law or the terms of such plans, have been paid. Except as set forth
in Schedule 3.15, each Composites
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the employees of Composites on or before the Closing Date have been paid or
adequate accruals therefor have been provided.
(ii) Schedule 3.15 sets forth, as of the date specified in said
schedule, a materially correct and complete list of the names of the employees
of Composites and their salary or wage rates.
(b) Set forth in Schedule 3.15 is a correct and complete list of each
Composites Employee Plan. Except as set forth in Schedule 3.15, Seller provided
to Purchaser the most recent copy of each such Composites Employee Plan. To the
extent any such Composites Employee Plan is not in writing, a short summary of
the plan has been set forth in Schedule 3.15.
(c) Except as set forth in Schedule 3.15, none of the Composites
Employee Plans is a Multiemployer Plan (as defined in Section 3(37) of ERISA).
Neither Composites nor any ERISA Affiliate has made within the preceding six
plan years, or expects to make prior to the Closing, a complete or partial
withdrawal from any Multiemployer Plan so as to incur withdrawal liability as
defined in Section 4201 of ERISA or contingent withdrawal liability under
Section 4204 of ERISA for which Composites would be liable. The total aggregate
withdrawal liability which would result under Section 4201 of ERISA if
Composites were to withdraw in a complete withdrawal (as defined in Section 4203
of ERISA) on the Closing Date from each Composites Employee Plan that is a
Multiemployer Plan would not result in a Material Adverse Effect.
(d) Except as set forth in Schedule 3.15, Seller previously has
provided to Purchaser the most recent summary plan description of each
Composites Employee Plan disseminated to employees of Composites; and the most
recent annual report (Form 5500) with attached schedules for those Composites
Employee Plans that only cover employees of Composites, and in the case of such
a plan which is a defined benefit Qualified Plan, the most recent actuarial
valuation report.
(e) Except as set forth in Schedule 3.15, there is no obligation or
liability to provide post retirement welfare benefits to current or future
retirees of Composites (other than those required by Section 601 et seq. of
ERISA).
(f) Except as set forth in Schedule 3.15, each Composites Employee Plan
has been administered in material compliance with its terms, and to the extent
applicable, with ERISA and the Code.
(g) Except as set forth in Schedule 3.15, with respect to any
Composites Employee Plan, there are: (i) no prohibited transactions, within the
meaning of Section 406 of ERISA or Section 4975 of the Code, which have been
committed and which would reasonably be expected to result in a Material
Adverse Effect; (ii) no pending, or to the knowledge of Seller, threatened
suits, claims, investigations or proceedings against a Composites Employee Plan
by a Composites Employee or former employee of Composites (other than routine
claims for benefits): and (iii) no claims or other matters currently pending,
nor to the knowledge of Seller, are there any investigations or claims
threatened or pending, by, with or before the Internal Revenue Service,
Department of Labor, Pension Benefit Guaranty Corporation or other federal
governmental agency.
(h) All contributions, premiums and other payments required to be paid
prior to the Closing Date to Composites Employee Plans by Composites, under
applicable law or the terms of such plans, have been paid. Except as set forth
in Schedule 3.15, each Composites
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Employee Plan which is a "group health plan" (as defined in the Code and ERISA)
is and has been operated in material compliance with the requirements of part 6
of Subtitle B of Title 1 of ERISA and Section 4980B of the Code with respect to
former employees of Composites. Except as set forth in Schedule 3.15, neither
Composites nor any ERISA Affiliates has incurred any liability to the Pension
Benefit Guaranty Corporation, except for annual premiums that have been paid
when due. Composites and its ERISA Affiliates have made all contributions
required under Section 302 of ERISA of Section 412 of the Code with respect to
all Employee Plans. Composites and its ERISA Affiliates have made all
contributions required during the preceding five plan years under Section 302 of
ERISA or Section 412 of the Code when due with respect to the Hourly Pension
Plan and the Salaried Pension Plan.
(i) Except as required by this Agreement or disclosed in Schedule
3.15, the execution, delivery and performance of this Agreement will not result
in any increase in the compensation or benefits payable by Composites or
otherwise payable to a Composites Employee or the acceleration of the time of
payment or vesting of any such compensation or benefits.
(j) The ICI Americas Pension Plan and each other Composites Employee
Plan (other than the Salaried Pension Plan) which is intended to be a Qualified
Plan has received a favorable determination letter from the Internal Revenue
Service to the effect that such plan so qualifies, or an application for such a
letter has been applied for prior to April 1, 1995, and such application is
pending and no event has occurred and no condition exists as of the Closing
Date which would reasonably be expected to result in the loss of Qualified Plan
status or the imposition of any material liability, penalty or tax on
Composites under ERISA or the Code with respect to said Qualified Plans and
which cannot be cured retroactively without any liability (other than
compliance with the amendment or modification referred to in this sentence) by
an amendment or modification to the Qualified Plan document. The Salaried
Pension Plan is a Qualified Plan and no event has occurred and no condition
exists as of the Closing Date which would reasonably be expected to result in
the loss of Qualified Plan status or the imposition of any material liability,
penalty or Tax on Composites under ERISA or the Code with respect to said
Salaried Pension Plan and which cannot be cured retroactively without any
liability (other than compliance with the amendment or modification referred to
in this sentence) by an amendment or modification to the Qualified Plan
document.
(k) Composites does not as of the Closing have any material liability
under the joint and several liability provisions of the Code or Title IV of
ERISA as the result of pre-Closing Date liabilities of its ERISA Affiliates.
(l) No liability under any Composites Employee Plan has been funded
nor has any such obligation been satisfied with the purchase of a contract from
an insurance company as to which Seller, Composites or any ERISA Affiliate has
received notice that such insurance company is in rehabilitation.
3.16 Labor and Employment Matters. (a) Except as set forth in
Schedule 3.16, Composites is not a party to any collective bargaining agreement
or other labor union contract applicable to persons employed by it in
connection with the operation of the Business ("Collective Bargaining
Agreement"). Except as set forth in Schedule 3.16, there are no strikes,
slowdowns, work stoppages or lockouts, by or with respect to any employees of
Composites in connection with the operation of the Business and, to the
knowledge of each of Seller and Composites, no such actions are threatened.
(b) Except as set forth in Schedule 3.16, Composites is in material
compliance with all federal and state laws respecting employment and employment
practices, terms and conditions of employment and wages and hours and is not
engaged in any unfair labor practice.
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Except as set forth in Schedule 3.16, there is no unfair labor practice
complaint against Composites pending before the National Labor Relations Board
or any comparable state or local agency and, to the knowledge of Seller and
Composites, no such complaint is threatened.
(c) No grievance which would reasonably be expected to have a Material
Adverse Effect nor any material arbitration proceeding arising out of or under
a Collective Bargaining Agreement is pending.
(d) To Seller's and Composites' knowledge, there are no trade union
organizing efforts currently under way at any facility.
(e) Except as set forth in Schedule 3.16(e), there are no existing
material written labor settlement agreements (other than the Collective
Bargaining Agreements) or court orders or National Labor Relations Board
decisions which by their terms affect all the members of a collective
bargaining unit.
3.17 Insurance. Immediately prior to the Closing Date, Composites, or
an ICI Company for the benefit of Composites, maintained policies of fire,
casualty, liability and other forms of insurance, a list of such policies is
provided as set forth in Schedule 3.17. No such policies and other forms of
insurance will be in place on or after the Closing Date.
3.18 Maintenance of Business with Customers. Except as set forth in
Schedule 3.18, and excluding change orders and contract modifications and
terminations having a value not exceeding $100,000 in any individual case,
since the Balance Sheet Date, there has been no termination, cancellation or
material limitation of, or any material modification or change in, the business
relationship of Composites with any customer or group of customers whose
purchases individually or in the aggregate provided more than 7% of the gross
revenues of Composites, or of any supplier or group of suppliers whose
provision of inventory or services individually or in the aggregate constituted
more than $250,000.
3.19 Related Party Transactions. Except as set forth in Schedule
3.19, after the Closing, Composites will have no liabilities or obligations to
Seller or any other ICI Company, except as otherwise contemplated by this
Agreement and the Ancillary Agreements.
3.20 Disclosure Schedules. Information fairly disclosed in a Schedule
shall, where the context permits, be an exception to, and a qualification of,
all of the representations and warranties made in this Article III (the
"Warranties"), whether or not the Schedule is identified as being an exception
to any of the Warranties in question and whether or not any of the Warranties
identifies a different Schedule as containing exceptions to any of the
Warranties in question.
3.21 No Other Representations. Except as expressly provided in this
Agreement all warranties and representations on the part of Seller, Composites
or any ICI Company whether express or implied, statutory or otherwise are, to
the extent permitted by law, hereby expressly excluded and Purchaser hereby
acknowledges to Seller that it has not relied on any warranties,
representations, statements as to fact, undertakings or disclosures other than
those expressly set out in this Agreement (including the Schedules) and that no
other warranties, representations, undertakings or indemnities have been given
by or on behalf of Seller, Composites or any ICI Company.
3.22 Finders' Fees. Neither Composites nor any ICI Company has
retained any finder, broker or financial advisor in connection with the
transactions contemplated by this Agreement. Seller hereby agrees to indemnify
and hold harmless Purchaser from and against any
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liability for commissions or compensation in the nature of a finder's fee to
any broker or other person or firm (as well as the costs and expenses of
defending against such liability or asserted liability) for which Seller or any
of its employees or representatives may be responsible by reason of this
Agreement or the transactions contemplated hereby.
3.23 Payments. Except as set forth in Schedule 3.23, to the knowledge
of each of Seller and Composites, no manager or employee of Composites has,
during the past ten years, violated the Foreign Corrupt Practices Act of 1977,
as amended (15 U.S.C. Section 78dd-1, Section 78dd-2 and Section 78m(b)), the
Anti-Kickback Act of 1986, as amended (41 U.S.C. Section 51 et seq.) or 18
U.S.C. Section 201.)
3.24 Aviation Legal Liability Insurance. Prior to the Closing (but not
earlier than July 1, 1985), Composites was covered under a policy or policies
of aviation legal liability insurance having policy wording substantially
identical to that described in the Sedgwick Cover Note dated 26 June 1995 and
the Sedgwick 1994/95 policy wording dated 2 October 1995 set forth in Schedule
3.24 and which provided for sums insured of at least $150,000,000.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants as of the Closing as follows:
4.1 Organization and Authority of Purchaser. Purchaser is a corporation
duly organized and validly existing under the laws of the State of Delaware and
has all necessary corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly authorized, executed and delivered by Purchaser and constitutes a legal,
valid and binding obligation of Purchaser enforceable against Purchaser in
accordance with its terms.
4.2 No Conflict. The execution, delivery and performance of this
Agreement by Purchaser do not and will not (i) violate or conflict with any
material law, rule, regulation, order, judgment, injunction, decree,
determination or award applicable to Purchaser (ii) violate or conflict with
the certificate of incorporation or by-laws of Purchaser, or (iii) require any
material pre-Closing consent, notice, authorization or approval under, result
in any material breach of, or constitute a material default (or event which
with notice or lapse of time or both would become a material default) under, or
result in the creation of any material lien or other encumbrance on any of the
properties or assets of Purchaser pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument to which Purchaser or any of its Affiliates is a party or by which
any of them, any of its or their respective properties is bound or affected,
which might have a material adverse affect on the consummation of the
transactions contemplated hereby.
4.3 Absence of Litigation. No claim, action, suit or proceeding is
pending or, to the knowledge of Purchaser, threatened, and to the knowledge of
Purchaser, no investigation is pending or threatened, which seeks to delay or
prevent the consummation of the transactions contemplated hereby.
4.4 Consents and Approvals. The execution and delivery of this
Agreement by Purchaser do not, and the performance of this Agreement by
Purchaser does not require any consent, approval, authorization or other action
by, or filing with or notification to, any domestic or foreign governmental or
regulatory authority or any other person, except for the filing of forms with
the Internal Revenue Service, as contemplated by Section 5.6 hereof and except
where
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failure to obtain such consents, approvals, authorizations or actions, or to
make such filings or notifications, would not (i) prevent Purchaser from
performing any of its obligations under this Agreement, or (ii) otherwise
prevent the consummation of the transactions contemplated herein by Purchaser.
4.5 Due Diligence Investigation. Purchaser acknowledges that it has had
the opportunity to review the due diligence materials supplied or made
available by Seller, including, without limitation, the types of information
described in Schedule 4.5.
4.6 Finders' Fees. Neither Purchaser nor any Affiliate of Purchaser has
retained any finder or broker other than Valufinder Group, Inc. in connection
with the transactions contemplated by this Agreement. Purchaser hereby agrees
to indemnify and hold harmless Seller from and against any liability for
commissions or compensation in the nature of a finder's fee to any broker or
other person or firm including Valufinder Group, Inc. (as well as the costs and
expenses of defending against such liability or asserted liability) for which
purchaser or any of its employees or representatives may be responsible by
reason of this Agreement or the transactions contemplated hereby.
ARTICLE V
COVENANTS
5.1 Noncompetition. (a) For a period commencing on the Closing Date and
continuing thereafter for five (5) years, Seller or any ICI Company (excluding
any ICI Company in Australia or New Zealand with respect to polyester resins)
shall not engage in the manufacture, sale, marketing or distribution of any
products manufactured, sold, marketed or distributed by Composites on the
Closing Date in any territory where Composites has manufactured, sold, marketed
or distributed such products in the 12 month period immediately preceding and
including the Closing Date. The parties agree that if a court of competent
jurisdiction shall hold the foregoing restriction on competition to be
unreasonable, then such restriction shall be construed to refer only to such
period of time or such geographical areas as such court shall deem reasonable.
For the avoidance of doubt, nothing in this Section 5.1 shall be deemed to
apply to any ICI Company in Australia or New Zealand with respect to polyester
resins.
(b) Nothing in Section 5.1(a) or in this Agreement shall prevent Seller
or any ICI Company from purchasing any corporation or business a part of which
has an interest in any products subject to Section 5.1(a) unless more than 15%
of the turnover of such corporation or business in its last accounting year
was generated by its interest in such products. In the event that Seller or any
ICI Company purchases any corporation or business which does have such interest
in such products but such interest did not account for 15% of its turnover (as
calculated above) than as soon as practicable after such purchase taking place,
Seller or the relevant ICI Company that has acquired such corporation or
business shall, if not prohibited by applicable law, offer for sale to
Purchaser the interest relating to any such products as aforesaid and Seller
(or the relevant ICI Company) shall, if requested to do so by Purchaser, enter
into good faith exclusive negotiations with Purchaser for the sale of such
interest. In the event that Purchaser does not purchase such interest from
Seller (or the relevant ICI Company) then Seller (or the relevant ICI Company)
shall be free to keep the said interest with the consent of Purchaser (such
consent not to be unreasonably withheld or delayed provided the negotiations
referred to above were conducted in good faith (including with respect to price
and other material terms)). In the circumstances that such consent is
reasonably withheld, then Seller (or the relevant ICI Company) shall use
reasonable efforts to divest the said interest within 12 months of such consent
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having been withheld. Prior to the consummation of any sale of said interest to
a third party at a price together with other material terms in the aggregate
more favorable than offered to Purchaser pursuant hereto. Seller (or the
relevant ICI Company) shall make an irrevocable offer to Purchaser (which may
be accepted by the Purchaser within sixty days following such offer) to sell
such interest to Purchaser or one of its Affiliates on substantially identical
terms. In the event Purchaser fails to accept such offer within sixty days, or
if so accepted, the sale to Purchaser is not completed within sixty days of
such acceptance and Seller (or the relevant ICI Company) has negotiated in good
faith with Purchaser, Seller (or the relevant ICI Company) shall have no
further obligation to Purchaser hereunder.
5.2. Use of ICI Name. (a) Purchaser acknowledges and agrees that ICI
shall retain all rights to use the letters "ICI" and all trademarks, trade
names and service marks that include the letters "ICI" (including without
limitation the ICI roundel) (collectively, the "ICI Letters"). Except as
otherwise provided in this Section 5.2, after the Closing neither Purchaser nor
Composites nor any of their Affiliates will have any ownership interest in or
any right to use any trademark, trade name or service mark that includes the
ICI Letters.
(b) After the Closing, Composites shall have the right to sell existing
inventory and to use existing stocks of packaging, labelling, containers,
supplies, advertising materials, technical data sheets and any similar
materials bearing the ICI Letters until the earlier of (i) the date existing
stocks are exhausted or (ii) six (6) months following the Closing Date. After
six (6) months following the Closing Date, Purchaser shall cause Composites to
relabel any such remaining inventory and stocks. The obliteration of the ICI
Letters shall be deemed compliance with this covenant. For a period not to
exceed six (6) months after the Closing Date, Composites shall have the right
to use the ICI Letters in advertising that cannot be changed by its using
reasonable efforts.
(c) Purchaser shall cause Composites to use reasonable efforts to cease
using the ICI Letters on buildings, cars, trucks, and other fixed assets as
soon as practicable but in no event shall Composites use, nor shall Seller
permit Composites to use, the ICI letters later than three months after the
Closing Date.
(d) Within five Business Days after the Closing Date, Purchaser will
cause Composites to change its name to a name not including the ICI Letters.
5.3 Post-Closing Access to Tax and Other Records. (a) Seller and
Purchaser (for itself and on behalf of Composites) will provide each other with
such cooperation and information as either of them reasonably may request of
the other in filing any Tax Return, amended return or claim for refund,
determining a liability for Taxes or a right to a refund of Taxes, or in
conducting any audit or other proceeding in respect of Taxes. Except with
respect to any state or local taxing jurisdiction where Composites files a
separate return (i.e., a return other than a combined, unitary or consolidated
return) and that does not treat Composites as a new corporation for income tax
purposes on the day after the Closing Date or does not otherwise provide
treatment similar to that accorded under Section 338(h)(10) of the Code, such
cooperation and information shall not include providing copies of income or
franchise tax returns or portions thereof; provided, that Seller will make
available to Purchaser the portion of a consolidated, unitary or combined
return that pertains solely to Composites and Seller will make available to
Purchaser's professional representatives a copy of a combined, consolidated or
unitary Tax Return in the event that the Purchaser or Composites establishes to
Seller's reasonable satisfaction that the same is necessary in connection with
a material matter relating to the determination of Purchaser's or Composites'
liability for Taxes. Such professional representatives shall not disclose any
such Tax Return to Purchaser or Composites. Each party shall make its employees
available on a mutually convenient basis to provide explanation of any
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documents or information provided hereunder. Each party will retain all
returns, schedules and work papers and all material records or other documents
in its possession relating to Tax matters of Composites for the taxable year
ending after the Closing Date and for all previous years, until the expiration
of the statute of limitations of the taxable years to which such returns and
other documents relate (and, to the extent notified by the other party in
writing, any extensions thereof).
(b) Each party (and in the case of Purchaser for itself and on behalf
of Composites) will afford or cause to be afforded to the other party and its
agents reasonable access to the properties, books, records (including but not
limited to Tax (subject to Section 5.3(a) above) and environmental matters and
in connection with the assertion of claims respecting canceled Government
Contracts), employees and auditors of such party to the extent necessary to
permit the other party to determine any matter relating to the Business or its
rights and obligations hereunder.
(c) Each party (and in the case of Purchaser, for itself and on behalf
of Composites) will hold, and will cause its officers, directors, employees,
accountants, counsel, consultants, professional representatives, advisors
(including without limitation, any lenders and/or financial advisors to or
shareholders of the Purchaser) and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
other party's business provided to it pursuant to this Section.
(d) Notwithstanding anything to the contrary in this Agreement, Seller
shall use its reasonable efforts to require that Seller's Accountants deliver
to Purchaser and Composites, and permit the use by Purchaser and Composites of,
reports and opinions of Seller's Accountants relating to the Financial
Statements and, if Seller's Accountants refuse, Seller shall allow reasonably
necessary access to the books, records and workpapers required to enable
Purchaser's Accountants to audit the financial statements of Composites for the
three full fiscal years prior to the Closing Date.
5.4 Sales and Transfer Taxes. Purchaser and Seller shall share equally
all sales, transfer, documentary and similar taxes, if any, incurred in
connection with, by reason of or measured by the transactions contemplated by
this Agreement, except for Taxes relating to the transactions described in
Section 2.4 hereof, which shall be payable by the Seller.
5.5 Further Assurances. Each of the parties hereto shall execute, or
cause to be executed, such documents and other papers and take, or cause to be
taken, such further actions as may be reasonably required to carry out the
provisions hereof and the transactions contemplated hereby. Upon the terms and
subject to the conditions hereof, each of the parties hereto shall use its
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all other things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated by
this Agreement and to obtain in a timely manner all necessary waivers, consents
and approvals and to effect all necessary registrations and filings. Seller
shall exercise best efforts (a) to cause The Glidden Company to amend paragraph
2(a) of the Glidden Master Service Agreement to provide for an exit term of six
(6) months and (b) to amend each of the Ancillary Agreements to allow for
assignment on the same basis as this Agreement.
5.6 Section 338(h)(10) Election.
(a) Seller represents and warrants that Composites (i) is a member of
the affiliated group of corporations within the meaning of Section 1504(a) of
the Code of which
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Seller is a member and (ii) will be included in the consolidated United States
federal income tax return that includes the Seller for Composites' taxable
period ending on the Closing Date.
(b) Seller and Purchaser agree to make a timely, effective and
irrevocable election under Section 338(h)(10) of the Code and under any
comparable statutes in any other jurisdiction with respect to Seller and
Composites (the "Section 338(h)(10) Election"), and to timely file such
election in accordance with applicable regulations. Internal Revenue Service
Form 8023-A shall be completed and signed by Seller and Purchaser and filed
with the Internal Revenue Service on or prior to the date when legally due.
(c) Within six months following the Closing Date, Purchaser and Seller
shall endeavor but not be required to agree upon the deemed purchase and sale
price of the assets of Composites for federal and applicable state and local
tax purposes and the proper allocation (the "Allocation") of such deemed
purchase and sale price among the assets of Composites as of the Closing Date
in accordance with Section 338(b)(5) of the Code and Treasury Regulation
Section 1.338(h)-1. The Allocation shall not include the respective investment
banking, legal, accounting and other fees or costs incurred by each of
Purchaser and Seller as a result of the transactions contemplated by this
Agreement ("Transaction Costs"). Seller will calculate the gain or loss, if
any, resulting from the Section 338(h)(10) Election in a manner consistent with
the Allocation and will not take any position inconsistent with the Section
338(h)(10) Election or the Allocation in any Tax Return or otherwise: provided,
however, that Seller shall be entitled to take into account its Transaction
Costs when calculating its modified aggregate deemed sale price for purposes of
determining gain or loss from the deemed disposition of the assets of
Composites. Purchaser will allocate the adjusted grossed-up basis in the Shares
among the assets of Composites in a manner consistent with the Allocation and
will not take any position inconsistent with the Section 338(h)(10) Election or
the Allocation in any Tax Return or otherwise; provided, however, that
Purchaser will be entitled to add its Transaction Costs to its adjusted
grossed-up basis in the Shares for purposes of allocating such amount among the
assets of Composites.
(d) Purchaser shall prepare a draft of the Allocation, which shall be
supported by an appraisal obtained at its cost and expense from an independent,
nationally-recognized appraisal firm, and shall submit such draft to Seller,
together with the appraisal report, for Seller's review and comment no later
than 3 months before the last date on which the Section 338(h)(10) Election may
be filed. The appraisal report shall provide that Seller shall be permitted to
rely on the same in filing its Tax Returns with respect to the Section
338(h)(10) Election. Purchaser and Seller shall thereupon endeavor but shall
not be required to enter into an agreement setting forth the Allocation in
accordance with such appraisal. If the parties cannot agree, each party shall
be entitled to make its own Allocation.
5.7 Retained Seller Information. Purchaser acknowledges that, on and
after the Closing, there may be information at the Manufacturing Facilities
which does not relate to the Business ("Retained Seller Information").
Purchaser agrees to allow Seller all reasonable access (upon the Seller giving
reasonable notice to the Purchaser) to the Retained Seller Information.
Furthermore, Purchaser agrees to maintain (and agrees to cause Composites to
maintain) in confidence and not to use any Retained Seller Information. To the
extent that Retained Seller Information is contained in books and records,
Purchaser agrees not to (and shall not allow Composites to) dispose of or
destroy such books and records for a period of at least four (4) years
following the Closing Date unless it shall have first notified Seller at least
sixty (60) days before such disposition or destruction and given Seller the
opportunity (at the expense of Seller) to remove and retain the books and
records proposed to be disposed of or destroyed. Nothing in this section shall
require Purchaser or Composites to maintain in confidence, or not to use, any
information (a) that is now publicly available, (b) that subsequently becomes
publicly available other than by action of the Purchaser or Composites, but
only after it has become publicly
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available, (c) that Purchaser obtains from a third party other than Composites
not under any obligation to Seller or an Affiliate of Seller respecting such
information, but only after Purchaser so obtains such information, or (d) that
Purchaser, prior to the Closing Date, already has in its possession.
5.8 Retained Business Information. Seller acknowledges that, on and
after the Closing, there may be information at the facilities of the Seller and
other ICI Companies which relates exclusively or principally to the Business
and which is material to the day to day operations of the Business ("Retained
Business Information"). Seller agrees to allow Purchaser all reasonable access
(upon the Purchaser giving reasonable notice to the Seller) to the Retained
Business Information. Furthermore, Seller agrees to maintain in confidence and
not to use any Retained Business Information other than in relation to its
other businesses. To the extent that Retained Business Information is contained
in books and records, Seller agrees not to dispose of or destroy such books and
records for a period of at least four (4) years following the Closing Date or
such longer period as is required by a Material Agreement, a Government
Contract or by law unless it shall have first notified Purchaser at least sixty
(60) days before such disposition or destruction and given Purchaser the
opportunity (at the expense of Purchaser) to remove and retain the books and
records proposed to be disposed of or destroyed. Nothing in this section shall
require Seller or any ICI Company to maintain in confidence, or not to use, any
information (a) that is now publicly available, (b) that subsequently becomes
publicly available other than by action of the Seller or any ICI Company, but
only after it has become publicly available or (c) that Seller or any ICI
Company obtains from a third party not under any obligation to Purchaser or an
Affiliate to Purchaser respecting such information, but only after Seller or
any ICI Company so obtains such information.
5.9 Refunds. Any refunds of Indemnifiable Taxes received by Purchaser
or Composites shall be paid over to Seller immediately upon receipt. Any claim
for a refund of an Indemnifiable Tax shall be subject to Section 7.4(b).
5.10 Filing of Returns. Seller shall be responsible for filing or
causing an ICI Company to file Tax Returns on behalf of Composites of the type
customarily filed by the Tax Department of ICI Americas Inc. in the ordinary
course of business prior to the Closing Date with respect to periods prior to
the Closing Date. Composites or Purchaser shall be responsible for filing all
other Tax returns.
5.11 Prosecution, Maintenance and Turnover of Intellectual Property
Files.
(a) Within two months after the Closing Date, or earlier if requested
by Purchaser, Seller will deliver to Purchaser the files relating to the
patents, patent applications, patent licenses, trademarks, trademark
applications, service marks and service mark applications set forth in Schedule
5.11(a) (the "Files"). Purchaser will notify Seller of a location for delivery
of the Files as soon as reasonably practicable after the Closing Date but in
any event no later than one month after the Closing Date, failing which, the
Files will be delivered to Purchaser at the address specified in Section 8.5
hereof. Prior to delivery of the Files, Seller will, to the extent reasonably
practicable, provide information contained in the Files as requested by
Purchaser for the purposes of enabling Purchaser to docket maintenance fees,
annuities, office actions and other items.
(b) After the Closing Date and until such time as Seller delivers the
Files to Purchaser or unless and to the extent Purchaser requests Seller not to
take certain actions or not to pay certain fees, Seller will use its reasonable
efforts to take any actions and pay any fees in order to avoid lapse of the
patents, trademarks, and service marks. All annuity fees and other fees paid by
the Seller under this Section after the Closing Date, shall be billed to and
payable by
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Purchaser, regardless of the portion of the lifetime of the Intellectual
Property rights for which such payments are made.
(c) Purchaser agrees that neither Seller nor any ICI Company,
including any of their employees and agents, shall be liable to Purchaser or any
of its Affiliates in connection with the performance of any actions as
contemplated by Section 5.11(b) and Section 5.11(d) to the extent such actions
did not involve gross negligence or willful misconduct on the part of Seller or
any ICI Company or any agent or employee thereof. Purchaser waives any claim
(whether in contract, tort, or equity) that it may have against Seller and each
ICI Company as a result of Seller's actions as contemplated by Section 5.11(b)
and Section 5.11(d) other than claims based on gross negligence or willful
misconduct. Purchaser shall indemnify and hold Seller and each ICI Company
harmless from any costs, expenses, losses or liabilities, including reasonable
attorneys' fees, suffered or incurred by Seller and each ICI Company as a result
of Seller taking any actions as contemplated by Section 5.11(b) and Section
5.11(d), other than as set forth in the Transition Services Agreement.
(d) (i) The patent and patent applications set forth in Schedule
5.11(d) are jointly owned by ICI and Composites. After Closing Seller will
cause ICI to use its reasonable efforts to continue to prosecute and to grant
all such patent applications and to maintain such patents in force for the full
terms thereof. ICI shall keep the Purchaser advised in writing on a reasonably
regular basis as to any steps taken by it or on its behalf in the prosecution
of such applications for patents and in the maintenance or extension of such
patents and shall, on request, furnish Purchaser with a copy of any patent
application, patent or other document pertinent to the prosecution or
maintenance of such applications and patents. Purchaser shall pay to ICI,
within 30 days of receipt of an invoice from ICI, fifty percent of all costs,
including both in-house and outside costs, incurred by ICI in connection with
such prosecution, maintenance or extension, other than as set forth in the
Transition Services Agreement.
(ii) In the event that either ICI or Purchaser is no longer
willing to pay its fifty percent share of the costs referred to in paragraph
(i), it shall advise the other party in writing and shall assign its joint
interest in such patent or patent application to the other party, where ICI
assigns its interest to Purchaser, ICI shall thereafter have no responsibility
for prosecution or maintenance of the assigned patent or application.
ARTICLE VI
EMPLOYEE MATTERS
6.1 Retention of Employees. Purchaser shall cause Composites to retain
all employees of Composites listed in Schedule 3.15 (hereafter, "Composites
Employee") with base salary or wage rates equal to or greater than the base
salary or wage rates in effect immediately prior to the Closing Date for at
least one year following the Closing Date; provided, that during said year
Composites may terminate the employment of a Composites Employee so long as
Composites pays severance and other benefits in accordance with the ICI
Composites Severance Plan, as set out in Schedule 6.1(a) with respect to non
union Composites Employees, and complies with the terms of any individual
severance arrangements listed in Schedule 6.1(b), if any, applicable to the
terminated Composites Employees.
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6.2 Employee Benefit Plans.
(a) Back Service Credit. Service of a Composites Employee prior to the
Closing Date which is recognized by a Composites Employee Plan shall be
recognized by the comparable post Closing Employee Plan of Purchaser or
Composites for all purposes to include, without limitation, vesting, benefit
accrual, participation, eligibility for benefits, level of benefits, and
optional forms of payment.
(b) ICI Single Employer Pension Plans.
(i) From the Closing Date, Purchaser or Composites shall assume
sponsorship and all responsibility and liability for the Hourly Pension Plan
and the Salaried Pension Plan to include, without limitation, the liability for
any contribution due after the Closing Date.
(ii) Purchaser acknowledges that the transfer of assets from
the ICI Americas Pension Plan to the Salaried Pension Plan may not be complete
by the Closing Date. Irrespective of whether such transfer of assets is
completed prior to the Closing Date, Purchaser and Composites agree that the
amount of assets allocated by the ICI Americas Pension Plans to the Salaried
Pension Plan complies with Section 414(1) of the Code and that neither
Purchaser nor Composites will consent such allocation provided that the
allocation is performed by an enrolled actuary of the Philadelphia Office of
Towers Perrin in accordance with the Pension Transfer Agreement by and between
ICI Americas Inc. and Composites, a copy of which is set out in Schedule 6.2
("Pension Transfer Agreement"). Seller shall cause the Salaried Pension Plan to
provide that each participant for whom benefits are transferred pursuant to the
Pension Transfer Agreement will have all rights with respect to such
transferred benefits preserved to the extent required in accordance with
Section 411(d)(6) of the Code and the regulations thereunder.
(iii) If the fair market value on the Closing Date of the assets
allocated or allocable from the ICI Americas Pension Plan to the Salaried
Pension Plan pursuant to the Pension Transfer Agreement is less than the
Financial Accounting Standards Board Statement 87 Accumulated Benefit
Obligation of the Salaried Pension Plan, determined as of the Closing Date by
an enrolled actuary of Towers Perrin, (and subject to agreement by Purchaser's
actuary, which agreement will not be unreasonably withheld using the
assumptions and methods set out in Schedule 6.2(b) (which do not require
agreement of Purchaser's actuary) but without regard to benefits accrued under
the Salaried Pension Plan after the Closing Date (hereafter the "Composites
ABO"), Seller or one of its Affiliates shall pay to Purchaser an amount in cash
equal to sixty percent (60%) of such difference with interest at eight percent
(8%) from the Closing Date through the day before payment is made. If the fair
market value on the Closing Date of the assets spun off from the ICI Americas
Pension Plan is greater than the Composites ABO, Purchaser shall pay to Seller
or to an Affiliate of Seller, designated by Seller, an amount in cash equal to
sixty percent (60%) of such excess with interest at eight percent (8%) from the
Closing Date through the day before payment is made. Any payments made
hereunder shall be treated as an adjustment of the Purchase Price.
(iv) After the Closing Date, Purchaser shall establish a trust
qualified under Section 401(a) of the Code and exempt from taxation under
Section 501(a) of the Code (the "Purchaser's Pension Trust") for the purpose of
receiving a transfer of the assets of the Salaried Pension Plan and the Hourly
Pension Plan from the Trust for Defined Benefit Plans of ICI American Holdings
Inc. (the "Seller's Pension Trust"). Prior to any transfer the Purchaser shall
deliver to Seller an executed copy of the Purchaser's Pension Trust. Within
thirty (30) days of Seller's receipt of the executed copy of the Purchaser's
Pension Trust, Seller shall cause the Seller's Pension Trust to transfer all of
the assets of the Salaried Pension Plan and Hourly
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Pension Plan to the Purchaser's Pension Trust. Notwithstanding the previous
sentence, if the actuary has not finished the ERISA Section 4044 calculation
required by the Pension Transfer Agreement by October 31, 1995, the assets of
the Salaried Pension Plan will be transferred to the Purchaser's Pension Trust
in accordance with the following rules:
(A) By the later of (x) the thirtieth (30th) day
following Seller's receipt of executed copy of the Purchaser's Pension Trust or
(y) December 31, 1995. Seller shall cause the Seller's Pension Trust to transfer
to Purchaser's Pension Trust from the plan account of the Salaried Pension Plan
an amount equal to eighty percent (80%) of an estimate prepared by an enrolled
actuary of Towers Perrin of the amount of assets that will be allocated to the
Salaried Pension Plan as of July 1, 1995, from the ICI Americas Pension Plan in
accordance with Section 4044 of ERISA and the Pension Transfer Agreement,
adjusted for post June 30, 1995 payments of benefits.
(B) Within thirty (30) days following the completion of
the allocation of assets from the ICI Americas Pension Plan to the Salaried
Pension Plan in accordance with the Pension Transfer Agreement, but not later
than April 30, 1996, Seller shall cause the Seller's Pension Trust to transfer
the remaining assets of the Salaried Pension Plan to the Purchaser's Pension
Trust.
(v) Purchaser may cause Composites to amend the Salaried Pension
Plan to stop benefit accrual for the Management Group effective any day
following the Closing Date. With respect to such cessation of accrual, Purchaser
shall cause Composites to comply with Section 204(h) of ERISA.
(vi) Unless otherwise agreed by the Purchaser and Seller, the
assets to be transferred from the Seller's Pension Trust to the Purchaser's
Pension Trust shall be in cash or readily marketable securities reasonably
acceptable to Purchaser.
(vii) Notwithstanding any provision in the Pension Transfer
Agreement to the contrary, all costs relating to the transfer of assets and
liabilities from the ICI Americas Pension Plan to the Salaried Pension Plan
shall be borne by Seller.
(c) Savings Plans. As soon as practicable after the Closing Date,
Purchaser shall (or shall cause Composites to) establish or designate one or
more defined contribution Qualified Plans (the "Purchaser's Savings Plan") to
provide benefits from and after the Closing Date which are substantially
similar to the respective benefits (to include, without limitation, the current
rate of employer matching contributions) provided to the Composites Employees
under the ICI Americas Deferred Compensation Plan or the ICI Americas Deferred
Compensation Plan For Non-Exempt Employees (collectively, the "Seller's Savings
Plans"). Within ninety (90) days after the Closing Date, Purchaser shall
deliver to Seller a copy of Purchaser's Savings Plan with an opinion of
counsel, reasonably satisfactory to Seller, that such plan is qualified as to
form under Section 401(a) of the Code, and Seller shall deliver to Purchaser an
opinion of its internal counsel, reasonably satisfactory to Purchaser, that the
ICI Americas Deferred Compensation Plan and the ICI Americans Deferred
Compensation Plan for Non-Exempt Employees (collectively, the "Seller's Savings
Plans") are qualified as to form under Section 401(a) of the Code. As soon as
practicable after receipt of such copy of the Purchaser's Savings Plan and said
legal opinions, Seller shall cause to be transferred to Purchaser's Savings
Plan the account balances of all Composites Employees, former employees of
Composites, or their beneficiaries in Seller's Savings Plans. With the
exception of notes evidencing loans made by Seller's Savings Plan, the account
balance shall be transferred in cash based on the value of the assets,
determined by the trustees of the appropriate Seller's Savings Plan as of the
monthly valuation date of Seller's Savings Plans coincident with or immediately
preceding the transfer. Seller's Savings Plans shall transfer an
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estimate of the aggregate amount to be transferred to Purchaser's Savings Plan
within five (5) days of said monthly valuation date with a reconciliation to be
completed before the next monthly valuation date. With respect to notes
evidencing plan loans, Seller's Savings Plans will assign such notes to
Purchaser's Savings Plan. The account balances transferred from Seller's
Savings Plans to Purchaser's Savings Plan shall be fully vested under
Purchaser's Savings Plan. Upon receipt of said account balances, Purchaser's
Savings Plan shall assume the liability of Seller's Savings Plans with respect
thereto.
(d) MEDICAL PLAN.
(i) Effective January 1, 1996, Purchaser shall, (or
shall cause Composites to) with respect to the Composites Employees, establish
or designate one or more plans (the "Purchaser's Medical Plan") to provide
medical, dental, and prescription drug benefits substantially similar to the
benefits provided under the ICI Americas Health and Dental Care Plan (the
"Seller's Medical Plan") for those Composites Employees and their dependents who
were covered by Seller's Medical Plan on December 31, 1995. As of January 1,
1996, Purchaser shall (or shall cause Composites to) enroll all such Composites
Employees and their dependents, without any waiting period, in Purchaser's
Medical Plan. Purchaser's Medical Plan shall waive any restrictions and
limitations for pre-existing conditions. Purchaser's Medical Plan shall only be
responsible for the medical, dental and prescription drug expenses of such
persons to the extent covered under the terms of Purchaser's Medical Plan and
incurred on or after January 1, 1996. Expenses for medical services, dental
services and prescription drugs shall be considered incurred at the time the
services are rendered or the prescription drugs are purchased, as the case may
be.
(ii) Seller's Medical Plan will continue to cover the
Composites Employees and their dependents who were covered by Seller's Medical
Plan on the day before the Closing Date through December 31, 1995. Seller's
Medical Plan shall only be responsible for medical, dental and prescription
drug expenses of such persons to the extent such expenses are covered under the
terms of Seller's Medical Plan and are incurred prior to January 1, 1996. With
regard to any such person who is in the hospital on December 31, 1995, Seller's
Medical Plan shall be responsible for the hospital care expenses (to the extent
covered by Seller's Medical Plan) until such person is discharged from the
hospital. Notwithstanding the above, Purchaser or Composites shall (except as
provided below with respect to COBRA Coverage) pay to Seller or Seller's
Medical Plan within the time and in accordance with the procedures set forth in
the Transition Services Agreement, an amount equal to the amounts paid by
Seller, any other ICI Company or Seller's Medical Plan after the Closing Date
with respect to the medical, dental and prescription drug expenses incurred
under Seller's Medical Plan by any Composites Employees or their dependents
after the Closing Date.
(iii) With respect to the ICI Composites Benefit Plan,
Seller will be responsible for paying medical, dental, and prescription drug
expenses of Composites Employees, former employees of Composites, and their
dependents to the extent covered under the terms of the ICI Composites Benefit
Plan and which are incurred prior to the Closing Date.
(iv) With respect to any former employee of Composites
or dependent thereof (to include a divorced spouse) that has elected health
and/or dental continuation coverage required to be offered by Seller's Medical
Plan under Sections 601 et seq. of ERISA ("COBRA Coverage") as the result of a
qualifying event that occurred prior to the Closing Date, Seller's Medical Plan
shall retain COBRA Coverage. With respect to any Composites Employee or
dependent thereof (to include any divorced spouse) that has elected COBRA
coverage under Seller's Medical Plan as the result of a qualifying event
occurring prior to January 1, 1996, Seller's Medical Plan shall retain COBRA
Coverage; provided, that to the extent the COBRA premium collected for a
Composites Employee or a dependent of a Composites Employee (to
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include any divorced spouse) is less than the (A) sum of the amount charged by
a third party administrator to administer the COBRA coverage of said person and
(B) the amounts disbursed to said person from the Seller's Medical Plan,
Purchaser shall pay to Seller an amount equal to such difference within the
time and in accordance with the procedures set out in the Transition Services
Agreement.
(e) DISABILITY. After the Closing Date, Purchaser shall (or
shall cause Composites to) waive all restrictions and limitations for
pre-existing conditions under plans of Purchaser or Composites providing
disability or worker's compensation benefits. Purchaser or Composites and its
plans shall assume all responsibility for worker's compensation, short-term
disability and long-term disability claims made by any Composites Employee on
or after the Closing Date irrespective of whether such claim relates to an
event prior to the Closing; provided, however, that Purchaser shall not be
responsible for long-term disability claims made by any Composites Employee who
is on short-term disability on the Closing Date and who does not return to
active employment with Composites. With respect to any such Composites Employee
on short-term disability on the Closing Date, Purchaser or Composites shall, at
its expense, continue short-term disability coverage substantially similar to
that provided by Composites. Schedule 6.2(e) contains a list of all Composites
Employees on short-term disability as of seven calendar days prior to the
Closing Date, and, to the knowledge of Seller, there has not been a material
increase in the number of Composites Employees on short-term disability in the
seven calendar days preceding the Closing Date. Seller shall be responsible for
claims for workers compensation benefits which were made prior to the Closing
Date. Composites shall not be liable for long-term disability benefits for
Composites Employees who qualify for long-term disability benefits under the
ICI Americas Long Term Disability Insurance Plan.
(f) NON-UNION WELFARE PLANS. Purchaser shall (or shall cause
Composites to) establish for non-union Composites Employees welfare benefit
plans which shall be in the aggregate substantially similar to the following
plans:
(i) the ICI Americas Long-Term Disability Insurance
Plan as disclosed in the ICI Select summary plan description;
(ii) the ICI Americas Employee Life Insurance Plan and
Group Term Life Insurance Plan for employees of ICI Americas Inc. as disclosed
in the ICI Select summary plan description;
(iii) the ICI Americas Personal Accident Insurance Plan
as disclosed in the ICI Select summary plan description;
(iv) the Business Travel Risk Accident Insurance Plan;
and
(v) the applicable short-term disability plan as
disclosed in the ICI Composites Inc. Policies and Procedures Manual.
(g) MICP. Purchaser shall cause Composites to maintain, without
modification, the ICI Composites Management Incentive Compensation Plan
("MICP") through at least December 31, 1995, and to make the payments due under
the MICP for 1995 by March 15, 1996. Effective January 1, 1996, Purchaser may
cause Composites to replace the MICP with a new short term bonus plan for the
Composites Employees eligible for the MICP on the Closing Date.
(h) PLAN AMENDMENTS. Notwithstanding any provision of this
Agreement to the contrary, Composites or Purchaser may, in its reasonable
discretion, amend, modify or terminate any employee benefit plan maintained for
Composites Employees after one year following the
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Closing Date. During the one year period following the Closing Date, neither
Purchaser nor Composites may amend, modify or terminate a Separate Composites
Plan or an employee benefit plan established as a substitute for a Composites
Employee Plan pursuant to this Article VI; provided, that (i) the provisions of
any such plan may be amended if the plan, as so amended, is substantially
similar to Seller's corresponding plan on the Closing Date or to Seller's
corresponding plan at the time of the plan amendment; and (ii) the Salaried
Pension Plan may be amended as provided in Section 6.2(b)(v) hereof.
(i) MISCELLANEOUS. Promptly upon receipt thereof, Seller shall
deliver to Purchaser a copy of any determination letters received from the
Internal Revenue Service with respect to the ICI Americas Pension Plan, the
Hourly Pension Plan or the Seller's Savings Plans, and at such time Seller
shall also deliver to Purchaser a copy of any amendments to such plans required
by the Internal Revenue Service as a condition to issuance of such
determination letters. Prior to October 15, 1995 Seller shall prepare and
deliver either to Purchaser or the participants any notice to participants
required for the 1995 plan year pursuant to Section 4011 of ERISA with respect
to the Hourly Pension Plan or the Salaried Pension Plan. Seller shall cause all
amendments required to be made to the Hourly Pension Plan to be adopted prior
to the Closing Date. Seller shall be responsible for preparing the 1995
actuarial valuation report for the Hourly Pension Plan.
6.3 COMPOSITES POST RETIREMENT BENEFITS. Purchaser shall (or
shall cause Composites to) provide to the Composites Employees post-retirement
medical, dental and life insurance benefits substantially similar to those
provided by Composites prior to Closing. With respect to former employees of
Composites, their spouses, and other dependents who are entitled to
post-retirement medical, dental, and life insurance benefits on the day prior
to the Closing Date, Purchaser or Composites shall provide post-retirement
benefits, without any waiting period or restrictions or limitations for
pre-existing conditions, which are substantially similar to those enjoyed by
such former employees, their spouses, and their other dependents prior to
Closing. Post retirement medical and dental expenses incurred prior to January
1, 1996 for such former employees, their spouses, and their other dependents
shall be paid by a medical and/or dental plan of Seller and Purchaser or
Composites shall reimburse Seller in accordance with the procedure set out in
Section 6.2(d)(ii) or (iii) for those expenses incurred after the Closing Date.
6.4 CERTAIN UNFUNDED LIABILITIES. Except as otherwise provided
in this Section 6.4, Seller shall assume or retain, as the case may be, the
liabilities and obligations under the nonqualified employee pension benefit
plans of the ICI Companies which are listed in Schedule 6.4. Notwithstanding
the preceding sentence, the Purchaser or Composites shall assume or retain the
obligations and liabilities, as the case may be, for pension benefits of the
Composites Employees listed on Section 6.4 under the ICI Excess Benefit Plan
and the Executive Pension Plan if, prior to December 31, 1996, Seller pays in
cash to Purchaser an amount equal to the Financial Accounting Standards Board
Statement 87 Accumulated Benefit obligation determined as of the Closing Date
by an enrolled actuary of Towers Perrin, (and subject to agreement by
Purchaser's actuary, which agreement will not be unreasonably withheld) using
the assumptions and methods set out in Schedule 6.2(b) (which do not require
agreement of Purchaser's actuary) but without regard to benefits accrued under
said plans after the Closing Date, reduced for any pension payments made by any
ICI Company under said plans on or after the Closing Date and increased by
interest at 8.0% from Closing Date through date of payment. Purchaser or
Composites shall retain the liabilities and obligations under the individual
unfunded arrangements identified in Schedule 6.4 with respect to Composites
employees identified therein. Neither Purchaser nor Composites is obligated to
replicate any nonqualified employee pension benefit plan maintained for
Composites Employees prior to the Closing Date.
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6.5 Flexible Spending Account. Purchaser's Medical Plan shall include a
healthcare spending account effective January 1, 1996. Effective January 1,
1996, Purchaser or Composites shall establish a dependent care spending
account. Composites Employees shall remain in the ICI Americas Flexible
Spending Account Plan through December 31, 1995. Purchaser or Composites shall
take all necessary actions to ensure timely payment to the ICI Americas
Flexible Spending Account Plan of all salary deferral amounts due with respect
to participating Composites Employees for the year ending December 31, 1995.
6.6 Motor Vehicle Lease Agreements. As promptly as practicable after
the Closing Date, Purchaser or Composites shall purchase from Seller and its
Affiliates the leased executive vehicles listed in Schedule 6.6 at the value
listed in said Schedule, and the relevant seller shall assign to Purchaser or
Composites its right, title, and interest in the Motor Vehicle Lease Agreements
listed in Schedule 6.6. To the extent assignable, Seller shall (or shall cause
an Affiliate to) assign to Purchaser or Composites all of its (or such
Affiliate's) rights under those additional vehicle lease agreements listed in
Schedule 6.6 and Purchaser or Composites shall assume the obligations of Seller
and its Affiliates thereunder.
6.7 No Third-Party Beneficiaries. No provision of this Article VI shall
create any third-party beneficiary rights in any person or organization,
including, without limitation, employees or former employees (including any
beneficiary or dependent thereof) of Seller, Composites, Purchaser or any of
their respective Affiliates or other representatives of such employees or
former employees, or trustees, administrators, participants or beneficiaries of
any employee benefit plan.
6.8 Stock Option Plan. Effective on the Closing Date, Guarantor shall
establish the stock option plan for the Composites Employees identified as the
Management Group on Schedule 6.8(a). Purchaser shall allocate at least two and
one half percent (2.5%) of the common stock of Composites to the stock option
plan. The stock option plan document is attached at Schedule 6.8(b).
6.9 Exempt Loans. With respect to the outstanding loans of Composites
Employees and former employees of Composites under the ICI Exempt Employee Loan
Program which are listed in Schedule 6.9, Purchaser or Composites shall
purchase on the Closing Date the notes evidencing said loans for an amount
equal to the outstanding balance of said loans on the date said notes are so
purchased.
6.10 Leased Employees. Seller shall lease to Composites and Purchaser
the services of the person(s) listed in Schedule 6.10 under the terms of a
Leased Employee Agreement to be entered into by the parties contemporaneous
with the Closing.
6.11 Cooperation. Seller and Purchaser shall cooperate in all
reasonable respects with each other with respect to administrative issues
arising out of this Agreement which relate to the employee benefit plans of
Seller, Composites or Purchaser or any of their respective affiliates. Without
limiting the generality of the foregoing, Seller and Purchaser shall cooperate
in all reasonable respects with Purchaser in completing any questionnaires
received from the Health Care Financing Administration which request
information pertaining to periods prior to the Closing Date.
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ARTICLE VII
INDEMNIFICATION
7.1 Survival. The covenants, agreements, representations and warranties
of the parties hereto contained in this Agreement or in any certificate or
other writing delivered pursuant hereto or in connection herewith shall survive
the Closing until eighteen (18) months after the Closing Date; provided that
(i) the covenants and agreements contained in Section 5.1 shall survive for the
period set forth therein, (ii) the representations and warranties contained in
Section 3.1 and Section 3.4 and the representations, warranties, covenants and
agreements contained in Sections 5.2 through 5.11 inclusive, Article VI,
Article VII and Article VIII shall survive indefinitely, or, as the case may be,
for any lesser period set forth therein, (iii) the representations and
warranties contained in Section 3.9 shall survive until the fifth anniversary
of the Closing Date and (iv) the representations and warranties contained in
Section 3.14 shall survive through the 90th day following the last day of the
applicable statute of limitations without regard to any extension or waiver
executed by Purchaser or Composites after the Closing Date. Except with respect
to claims based on fraud, no claims for indemnification with respect to a
covenant, agreement, representation or warranty may be made after the
expiration of the relevant survival period referred to herein. Notwithstanding
the preceding sentences, any covenant, agreement, representation or warranty in
respect of which indemnity may be sought under this Agreement shall survive the
time at which it would otherwise terminate pursuant to the preceding sentence
if notice of the inaccuracy or breach thereof giving rise to such right of
indemnity shall have been given in accordance with this Agreement to the party
against whom such indemnity may be sought prior to such time.
7.2 Indemnification by Purchaser. Purchaser agrees, subject to the
other terms and conditions of this Agreement, to indemnify and defend Seller
and each other ICI Company and their respective officers, directors, employees,
agents, successors and permitted assigns (collectively, "Seller Indemnitees")
against, and hold each of them harmless from, all claims, demands, judgments,
damages, penalties, fines, losses, liabilities and expenses (including
reasonable attorneys' and experts' fees and expenses and all other reasonable
costs of investigation and defense of third party claims, but excluding
internal expenses) incurred by or asserted against any of said Seller
Indemnitees arising out of or resulting by reason of:
(a) the breach of any representation, warranty, covenant or agreement
of Purchaser herein,
(b) any liabilities of Composites or any of the Seller Indemnitees
relating to the Business for which Seller is not obligated to indemnify
Purchaser pursuant to Section 7.3, and
(c) a failed Section 338(h)(10) Election attributable to an act or
omission of Purchaser.
7.3 Indemnification by Seller. Seller agrees, subject to the other
terms and conditions of this Agreement, including, without limitation the time
periods set forth in Section 7.1, to indemnify and defend Purchaser and each
Affiliate of Purchaser and their respective officers, directors, employees,
agents, successors and permitted assigns (collectively "Purchaser Indemnitees")
against, and hold each of them harmless from, all claims, demands, judgments,
damages, penalties, fines, losses, liabilities and expenses (including
reasonable attorneys' and experts' fees and expenses and all other reasonable
costs of investigation and defense of third party claims, but excluding
internal expenses) (collectively "Claim Costs") incurred by or asserted against
any of said Purchaser Indemnitees arising out of or resulting by reason of:
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(a) the breach of any representation, warranty, covenant or agreement
of Seller herein;
(b) any Indemnifiable Tax;
(c) any federal, state and local income tax liability resulting from
the deemed sale of assets pursuant to an effective Section 338(h)(10) Election
of Composites described in Section 5.6 hereof;
(d) a failed Section 338(h)(10) Election attributable to an act or
omission of Seller;
(e) any Tax liability resulting from any transaction pursuant to
Section 2.4 by which the Excluded Assets remain or become the property of the
Seller or any Affiliate of the Seller or by which the Included Assets become
the property of Composites;
(f) any liability (excluding any liability which Purchaser or
Composites assumes under Article VI) resulting from claims relating to employee
benefit plans not assumed by Purchaser or Composites including any claim made
by any governmental customer of Composites to recover any excess funding to
such employee benefit plan either through a direct move towards assets with
such plans, or through reduction of future allowable contract pricing rates,
(g) (i) any claim asserted against any of the Purchaser Indemnitees by a
third party prior to the fifth anniversary of the Closing Date pursuant to any
Environmental Law to the extent any such claim is attributable to an event,
circumstance or condition relating to the Manufacturing Facilities or any
operations of Composites or any of its predecessors-in-interest, or any real
property, facility, site or assets owned, leased, operated or used by Composites
or any of its predecessors-in-interest at any time on or prior to the Closing
Date, or to any acts or omissions of Composites or any of its
predecessors-in-interest, including, without limitation, disposal or arranging
for disposal of Hazardous Materials at a third party site, occurring or existing
on or prior to the Closing Date, or (ii) the requirements of any Environmental
Law (including, without limitation, any failure to take reasonable steps to
achieve compliance with those requirements of Environmental Law which exist on
or prior to the Closing Date and which require compliance on or prior to June
30, 1997) to the extent (x) any Claim Costs are attributable to an event,
circumstance or condition relating to the Manufacturing Facilities or any
operations of Composites or any of its predecessors-in-interest or any real
property, facility, site or assets owned, leased, operated or used by Composites
or any of its predecessors-in-interest at any time on or prior to the Closing
Date, or to any acts or omissions of Composites or any of its
predecessors-in-interest, and (y) Claim Costs in connection therewith are
incurred or asserted prior to the fifth anniversary of the Closing Date or (iii)
any liability pursuant to any Environmental Law arising out of or resulting by
reason of the Winona Incident and the Orange Incident (in each case as referred
to in Schedule 3.9) incurred or asserted prior to the fifteenth anniversary of
the Closing Date;
(h) any liability resulting from any government action for defective
pricing under any Government Contract, or adjustments to contract pricing for
differences in allowable and for allocable costs resulting in net aggregate
contract price adjustments, after taking into account any credits or positive
adjustments, in excess of $100,000 for work performed under Government
Contracts prior to the Closing;
(i) any claim asserted by the Health Care Financing administration
("HCFA") against Purchaser Indemnitees prior to the last day of the eighteenth
(18th) month following the
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Closing Date resulting from the pre-Closing Date failure of the ICI Composites
Benefit Plan to comply with the Medicare secondary payer laws, provided, that
any claim by HCFA for Medicare Secondary Payer liability with respect to
employees covered by the HCFA questionnaire referenced in Schedule 3.15 may be
asserted within the statute of limitations;
(j) any claim by the Department of Labor or the Internal
Revenue Service asserted against Purchaser Indemnitees prior to the last day of
the eighteenth (18th) month following the Closing Date resulting from the
failure of Composites or Seller to file timely and accurate Forms 5500, 5310,
5310A, or 5330 due prior to the Closing Date with respect to a Separate
Composites Plan; provided, that any such claim with respect to the failure to
file Form 5500s disclosed in Schedule 3.15 may be asserted within the statute
of limitations;
(k) any penalty (along with interest thereon) imposed by HCFA
resulting from Composites' failure to respond to a pre-Closing Date
questionnaire from HCFA with respect to the ICI Composites Benefit Plan;
(l) any penalty (along with interest thereon) imposed by the
Pension Benefit Guaranty Corporation resulting from the failure of Composites
to file 1995 PBGC Form ES-1 for the Salaried Pension Plan and timely pay the
premium shown as due on said form;
(m) any claim asserted by a third party within the statute of
limitations resulting from the failure of the transfer of assets and
liabilities from the ICI Americas Pension Plan to the Salaried Pension Plan to
comply with Section 414(l) of the Code;
(n) any claim asserted by a third party against any of the
Purchaser Indemnitees to the extent any such claim is attributable to an
Occurrence relating to an Aviation Product occurring prior to the Closing Date
and since, but not earlier than, July 1, 1985, and for which Composites carried
insurance, but only to the extent such insurance actually provides coverage
therefor, prior to the Closing Date, and since, but not earlier than, July 1,
1985;
(o) any claim asserted against any of the Purchaser
Indemnitees by AVCO Corporation arising out of the matter described in Schedule
3.11(b)(2); provided, however, that the maximum amount indemnifiable under this
Section 7.3(o) shall in no event exceed 60% of Claim Costs in connection
therewith; and
(p) any claim for defective pricing asserted against any of
the Purchaser Indemnitees prior to the fourth anniversary of the Closing Date
by Lockheed Missiles & Space Company, Inc. arising out of the matter referred
to as the "Lockheed Missiles & Space Claim" under "Other Claims Pending" in
Schedule 3.3.
provided, that (i) Seller shall not be liable under this Section 7.3 unless the
aggregate amount of Claim Costs with respect to all matters referred to in this
Section 7.3 exceeds $587,000.00 and then only to the extent of such excess and
(ii) Seller's maximum liability under this Section 7.3 shall not exceed
$56,400,000.00. If the amount of Claim Costs arising in respect of any
individual matter referred to in this Section 7.3 is less than $25,000, then
that amount shall not be included for the purpose of calculating the aggregate
amount referred to in subparagraph (i) of this provision. Notwithstanding the
foregoing, Seller shall have no obligation to indemnify any of the Purchaser
Indemnitees under this Section 7.3 (x) to the extent that any Claim Costs are
incurred or increased as a result of any law, judicial interpretation, order,
decree, statute, ordinance, or regulation not in effect on or prior to the
Closing Date, or as a result of any change therein thereafter, (y) to the
extent that the facts, matters or circumstances giving rise to such Claim Costs
arise pursuant to Section 7.3(a) and have been fairly disclosed in the
Schedules or in any document listed or specifically referred to therein, or
(z) to the extent such Claim Costs are
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reflected in the Audited Financial Statements or in the Statement of Working
Capital. Notwithstanding anything to the contrary contained in this Agreement,
no provision of Section 7.3 following Section 7.3(p) hereof shall apply to (i)
Section 7.3(b) (other than subparagraph (z)), Section 7.3(c), Section 7.3(e)
and Section 7.3(n) hereof, and (ii)(A) the failure of a party hereto to observe
any of its obligations under any covenant or agreement in this Agreement, (B)
Section 7.3(o) hereof and (C) Section 7.3(p) (other than, with respect to this
clause (ii), the provision that Seller's maximum liability under this Section
7.3 shall not exceed $60,000,000). For the avoidance of doubt, the inclusion of
any facts, matters or circumstances on any Schedule hereto shall not relieve
Seller of its obligations under Section 7.3(g) hereof and Section 7.3(o).
Further for the avoidance of doubt, Seller shall have no obligation to
indemnify any of the Purchaser Indemnitees as a result of any reduction in
emissions of volatile organic compounds at the manufacturing Facility located
in Orange, California required under the existing Regional Clean Air Incentives
Market Program adopted by the California South Coast Air Quality Management
District pursuant to Section 4044.1 of the California Health and Safety Code.
7.4 Indemnification Procedures.
(a) Any party seeking indemnification under this Article VII (the
"Indemnified Party") shall promptly upon becoming aware of the circumstances
giving rise to the claim for indemnification, notify the party against whom a
claim for indemnification is sought hereunder (the "Indemnifying Party") in
writing, which notice shall specify, in reasonable detail, the nature and
estimated amount, if determinable, of the claim. Such notification shall be a
condition precedent to any liability on the part of the Indemnifying party.
Except as otherwise provided herein, Purchaser and Composite shall appoint
Seller or one of Seller's Affiliates, selected by Seller, as attorney in fact
with exclusive authority to collect, settle, or pay any amount due to or owed
by Composites with respect to an Indemnifiable Tax or for filing any return due
or a claim for refund for an Indemnifiable Tax. Such appointment of Seller or
its Affiliate as attorney in fact shall be pursuant to a power of attorney in
the form set forth in Schedule 7.4(a). Any audit, claim, investigation,
administrative proceeding, suit or other action by a third party relating to
any Indemnifiable Tax shall be governed by the provisions of this Section 7.4.
(b) If any third party shall assert a claim against the Indemnified
Party with respect to any matter (a "Third Party Claim") for which the
Indemnified Party intends to seek indemnification against the Indemnifying
Party under this Article VII, then the Indemnified Party shall promptly (and in
any case within ten (10) days of such claim having been asserted) notify the
Indemnifying Party thereof in writing (to include a description thereof in
reasonable detail), which notification shall be a condition precedent to any
obligation on the part of the Indemnifying Party to indemnify the Indemnified
Party under this Article VII; provided, that no notice shall be required to be
given with respect to any proceedings pertaining to an Indemnifiable Tax which
has been assessed or, to Seller's knowledge, is the subject matter of a current
audit examination by a taxing authority. The following provisions shall apply
with respect to any such Third Party Claim:
(i) The Indemnifying Party shall have the right to assume the defense
of the Third Party Claim with counsel of its choice reasonably satisfactory to
the Indemnified Party (it being understood that if in the Indemnified Party's
reasonable judgment a conflict of interest is likely to exist between such
Indemnified Party or the Indemnifying Party or any of their respective
Affiliates with respect to such counsel, such Indemnified Party shall be
entitled to require the Indemnifying Party to select other counsel pursuant to
this Section 7.4) at any time within 60 days after the Indemnified Party has
given notice of the Third Party Claim; provided, however, that (A) the
Indemnifying Party shall conduct the defense of the Third Party Claim actively
and diligently thereafter in order to preserve its rights in this regard; (B)
the Indemnified Party shall have (w) the right to participate fully in the
defense of the Third Party Claim,
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including through separate counsel of its own choosing at its sole cost and
expense, (x) the right to receive reasonable advance notice from the
Indemnifying Party of any hearings or proceedings, (y) the right, if possible,
to review in advance and comment on any pleadings, briefs or other documents to
be filed and (z) the opportunity to participate in any meetings concerning the
strategy to be adopted in opposing the Third Party Claim or any efforts to
settle the same; and (C) the Indemnified Party shall have the right at any time
to assume the sole right to defend or settle any Third Party claim upon written
waiver of its right to indemnity hereunder (in form and substance reasonably
satisfactory to the Indemnifying Party) with respect to such Third Party Claim.
(ii) So long as the Indemnifying Party has assumed and is conducting the
defense of the Third Party Claim in accordance with Section 7.4(b)(i) above, (A)
the Indemnifying Party shall not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be unreasonably withheld or
delayed) unless (x) the judgment or proposed settlement involves only the
payment of money damages by the Indemnifying Party and does not impose an
injunction or other equitable relief upon the Indemnified Party, and includes
the giving by the claimant or the plaintiff to the Indemnified Party of a
release from those liabilities which are the subject of the claim for
indemnification hereunder in form and substance reasonably satisfactory to the
Indemnified Party, or (y) in a matter relating to an Indemnifiable Tax subject
to this Section 7.4(b)(ii), is not reasonably likely to materially adversely
affect Composites' or Purchaser's liability for Taxes in a Post-Closing Tax
Period, and (B) the Indemnified Party shall not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Indemnifying Party. With respect to any
proposed settlement for an Indemnifiable Tax subject to Section 7.4(b)(ii)(A)(y)
to which the Purchaser Indemnitee does not consent, Seller may pay the amount of
any such proposed settlement to the Purchaser Indemnitee and upon such payment
be released from any and all liability to Purchaser Indemnitee with respect to
such Indemnifiable Tax.
(iii) In the event the Indemnifying Party does not assume and conduct
the defense of the Third Party Claim in accordance with Section 7.4(b)(i)
above, however, (A) the Indemnified Party may defend against, and consent to
the entry of any judgment or enter into any settlement with respect to, the
Third Party Claim in any manner it reasonably may deem appropriate (and the
Indemnified Party need not consult with, or obtain any consent from, the
Indemnifying Party in connection therewith) and (B) the Indemnifying Party
shall remain obligated to indemnify the Indemnified Party to the extent
provided pursuant to this Article VII.
(iv) The Indemnified Party will use all reasonable efforts to make
available to the Indemnifying Party those employees whose assistance, testimony
or presence is necessary to assist the Indemnifying Party in evaluating and
defending any such claim; provided that the Indemnifying Party shall be
responsible for any out-of-pocket expenses (excluding wages, benefits, and
other direct or indirect costs of employment) associated with any employees made
available hereunder. The Indemnified Party, at its expense, shall also make
available to the Indemnifying Party or its representatives on a timely basis
all documents, records and other materials in the possession of the Indemnified
Party reasonably required by the Indemnifying Party for its use in defending
any claim, and shall otherwise cooperate on a timely basis with the
Indemnifying Party in the defense of such claim.
(v) Section 7.4(b)(i)(B) and Section 7.4(b)(ii) shall not apply to any
(A) federal Tax (unless an effective Section 338(h)(10) election shall not have
been made through no fault of Purchaser) nor (B) to any state or local Tax
which is an Income Tax where the taxing jurisdiction treats Composites as a new
corporation or otherwise provides treatment similar to that accorded under
Section 338(h)(10) of the Code. For purposes of an Indemnifiable Tax with
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respect to which Section 7.4(b)(i)(B) applies and a consolidated, combined or
unitary Tax Return is required, the Purchaser Indemnitees shall not have the
right to the advance notice of (x), right to review of (y), nor the opportunity
to participate in meetings under (z) of that Section 7.4(b)(i)(B) with respect
to matters that do not pertain to Indemnifiable Taxes.
(c) Notwithstanding anything herein to the contrary, the failure of an
Indemnified Party to notify the Indemnifying Party of any claim of
indemnification as required pursuant to Section 7.4(a) or 7.4(c) shall not
affect the indemnification obligations of any party hereto, unless and only to
the extent that the Indemnifying Party is materially prejudiced thereby.
7.5 Third Party Reimbursement: Aviation Liability Insurance.
(a) The indemnities provided by this Article VII shall apply only to
damages, losses, liabilities and expenses for which the party seeking
indemnification cannot obtain reimbursement from third parties (other than third
party insurers), provided that the Indemnified Party shall not be obligated to
assert a claim against any such third party unless the Indemnifying Party shall
have agreed in form and substance reasonably satisfactory to the Indemnified
Party to reimburse the Indemnified Party for all reasonable out-of-pocket costs,
fees and expenses incurred in connection therewith.
(b) Seller will ensure that no ICI Company will take any action or fail
to take any action, in each case, which would prohibit claims by such ICI
Company under the policies providing coverage of the type described in Section
3.24 hereof which would impair its rights under such policies. As soon as there
is any indication that a claim relating to Composites under any such policy
could reasonably be expected to exceed the limits of liability of any such
policy or if any underwriter of such policy or claims adjustor or party
affiliated with any such underwriter or claims adjustor indicates that coverage
might not be afforded under a policy relating to Composites, representatives of
Composites and/or Purchaser shall be notified immediately and shall be entitled
to fully participate in any and all further matters relating to such claim.
Seller will ensure that the relevant ICI Company will act in good faith with
respect to seeking coverage under such policies.
7.6 Mitigation. Each party will use reasonable efforts to mitigate
any liabilities and damages for which it may claim indemnification under this
Article VII. To the extent that the operations of Composites after the Closing
Date contribute to or aggravate any liabilities or damages as to which
indemnification is available under Section 7.3, Seller's indemnification
obligation will be reduced by the value of such contribution or aggravation.
7.7 Limitation on Damages. Notwithstanding any other provision in
this Agreement, the liability of any party to another party arising with
respect to the matters addressed herein, regardless of the form of the claim or
cause of action (whether based in contract, infringement, negligence, strict
liability, other tort or otherwise), shall be limited to actual damages, which
shall in no event include any indirect, consequential, incidental or punitive
damages, whether arising under contract, in tort, at law, or in equity, of such
other party; provided that, for purposes of this Agreement, actual damages
suffered by an Indemnified Party, shall include, only if and to the extent
arising from or related to a Third Party Claim, any such indirect,
consequential, incidental or punitive damages and other costs and expenses for
which such Indemnified Party is liable to a third party. "Indirect" and
"consequential" damages shall include, but not be limited to, loss of
anticipated profits, loss of use, loss of revenue, cost of capital and loss or
damage of property or equipment.
7.8 Purchase Price Adjustment. Any payments made as indemnification
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pursuant to Section 7.2 or 7.3 shall be treated as an adjustment to the
Purchase Price.
7.9 Remediation Procedures.
(a) For purposes of this Section 7.9, "On-Site Remediation Liabilities"
means liabilities and obligations imposed under any Environmental Law for the
clean-up or remediation of conditions existing at the Real Property prior to the
Closing Date and for which Seller is obligated to indemnify Purchaser pursuant
to Section 7.3 hereof; "Off-Site Remediation Liabilities" means liabilities and
obligations of Composites imposed under any Environmental Law for the clean-up
or remediation of conditions existing at real property other than the Real
Property prior to the Closing Date and for which Seller is obligated to
indemnify Purchaser pursuant to Section 7.3 hereof; and "Real Property" means
the real property owned by Composites and included within the Manufacturing
Facilities.
(b) Purchase shall, to the extent Purchaser has the legal right to do
so, make all reasonable efforts to:
(i) consult with Seller (x) prior to entering into any
agreement with any third party, including but not limited to any
governmental entity, regarding the scope and nature of and
schedule for any cleanup or remediation for which Purchaser has
sought indemnification respecting an On-Site Remediation
Liability under Section 7.3 of this Agreement ("On-Site
Cleanup"), and (y) prior to submitting to any third party any
work plan or material report for any On-Site Cleanup;
(ii) provide drafts to Seller for review and comment
of material documents for any On-Site Cleanup, including
without limitation, any work plan, testing results, compliance
schedule, compliance or consent order or agreement; and
(iii) provide prior notice to Seller of any reportable
release of any Hazardous Materials resulting from any On-Site
Cleanup.
(c) Purchaser shall promptly and at its own expense provide Seller with
final copies of all reports, workplans and other documents received from or
provided to any third party, including but not limited to, any governmental
authority.
(d) As promptly as possible following Seller's receipt of a notice from
Purchaser pursuant to Section 7.4 regarding a claim made by or threatened
against Purchaser by a third party, including but not limited to any
governmental authority for On-Site Cleanup, Seller and Purchaser shall each
designate one or more representatives ("Designated Representatives") to
represent them in their dealings with each other respecting On-Site Cleanup
activities and notify each other of the name, title, address, and telephone and
facsimile numbers for each such Designated Representative.
(e) Purchaser shall conduct any On-Site Cleanup in accordance in all
material respects with any applicable Environmental Law. Unless otherwise agreed
to by the Purchaser and Seller, and to the extent permitted under such
Environmental Law, Purchaser shall propose to and advocate to governmental
entities and conduct any On-Site Cleanup, with the objective of accomplishing an
On-Site Cleanup in a cost effective manner which complies with applicable
Environmental Law taking into account the cost of commercially available
alternative cleanup technologies, the likelihood of success of the chosen
technology and whether the chosen technology will accomplish cleanup in a
reasonable period of time (hereinafter referred to as the "Cost Effective
Cleanup").
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(f) in the event Purchaser proposes soil or groundwater or other
intrusive testing ("Testing") in connection with an On-Site Cleanup, then:
(i) Purchaser shall, as soon as reasonably practicable prior
to undertaking Testing, notify Seller of its election to do so and Purchaser
and Seller agree to confer with each other in good faith in regard to
whether Purchaser should perform such Testing. If the parties cannot reach
agreement on the issue of whether Purchaser should perform Testing, either
party may invoke the dispute resolution procedures set forth in Section
7.9(g).
(ii) In the event that Purchaser proposes On-Site Cleanup under
this Section 7.9(f) and Seller believes that such cleanup (A) would not be
mandated by the applicable governmental authority if the underlying
environmental problems with respect to which the On-site Cleanup was
proposed were disclosed to such governmental authority (the "Necessity
Test") based on cleanup required by such governmental authority at similar
sites, where possible in the same jurisdiction, with contamination of
similar type, concentration and media and taking into account the relevant
site specific conditions at the parcel of Real Property involved (the
"Relevant Factors") or (B) is not a Cost Effective Cleanup which would be
acceptable to the applicable government authority if it were to exercise
jurisdiction over the parcel or Real Property in question and were to take
into account the Relevant Factors, Seller or Purchaser may initiate the
dispute resolution procedures contained in Section 7.9(g).
(g) In the event of a dispute (excluding any dispute as to the
construction or interpretation of this Section 7.9 or to the liability of the
parties under this Agreement) respecting the On-Site Cleanup arises among the
Purchaser's and Seller's Designated Representatives which cannot be resolved by
such Designated Representatives after timely (but not more than ten (10)
business days) diligent and good faith efforts, Purchaser and Seller shall each
submit the dispute for consideration and resolution to their respective chief
executive officers (or their designees). In the event that the dispute remains
unresolved after timely (but not more than thirty (30) business days) diligent
and good faith efforts by such chief executive officers, the Purchaser's
decision shall control, provided, however, that any such decision by the
Purchaser shall be without prejudice to any claim by the Seller that any
amounts relating to such dispute are not subject to indemnification by the
Seller under Section 7.3.
(h) Seller and Seller's Designated Representatives shall have the
right upon reasonable prior notice to enter the Real Property during normal
business hours and at other agreed upon times for the purposes of (i) observing
any On-Site Cleanup conducted by Purchaser and (ii) obtaining at Seller's sole
cost and expense, split or duplicate samples of Testing conducted for any
On-Site Cleanup. This subsection shall not limit Purchaser's and Seller's
obligations pursuant to Section 7.4.
(i) Nothing contained in this Section 7.9 shall restrict Purchaser
from taking any action where required by any Environmental Law, or, without
prejudice to any claim by the Seller that any such action is not subject to
indemnification by the Seller under Section 7.3, where the failure to take such
action would reasonably be expected to result in a violation of any
Environmental Law.
(j) No failure by Purchaser to comply with the requirements of this
Section 7.9 shall limit or relieve Seller's indemnity obligation hereunder
except to the extent Seller is materially prejudiced thereby.
7.10 Exclusive Remedy. The indemnification obligations of Seller
under this Article VII shall be the sole and exclusive remedy for any claims by
Purchaser against Seller or any ICI Company arising out of or relating to the
purchase of the Shares by Purchaser pursuant to this
40
<PAGE> 47
Agreement and the transactions contemplated hereby (other than those
contemplated in the Ancillary Agreements) and the Purchaser hereby waives any
and all other rights or remedies at law or in equity in connection therewith.
ARTICLE VIII
MISCELLANEOUS
8.1 Amendment. This Agreement may not be amended or modified except by
an instrument in writing signed by Seller and Purchaser.
8.2 Waiver of Compliance: Consents. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any
obligation, covenant, agreement or condition herein may be waived by the party
or parties entitled to the benefits thereof only by a written instrument signed
by the party granting such waiver, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement or condition shall
not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing in a manner
consistent with the requirements for a waiver of compliance as set forth in
this Section 8.2.
8.3 Attorneys' Fees. In any action, suit or proceeding to enforce the
obligations of any party hereto, the prevailing party shall be entitled (in
addition to all other relief to which it may be entitled) to recover all
attorneys' fees and related expenses reasonably incurred by it in the
prosecution or defense of such action, suit or proceeding.
8.4 Expenses. Unless otherwise agreed between the parties, all costs
and expenses, including, without limitation, fees and disbursements of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs and expenses, whether or not the Closing shall have occurred.
8.5 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or by
facsimile transmission or mailed by registered or certified mail (postage
prepaid, return receipt requested) to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice,
except that notices of changes of address shall be effective only upon receipt
thereof):
(a) if to Seller:
ICI American Holdings Inc.
Concord Plaza
3411 Silverside Road
Wilmington, Delaware 19850
Attention: The Secretary
Facsimile: (302) 887-8542
41
<PAGE> 48
with a copy to:
President and General Counsel
ICI Americas Inc.
3411 Silverside Road
Wilmington, Delaware 19850
Facsimile: (302) 887-8542
(b) if to Purchaser:
President
Fiberite, Inc.
2055 E. Technology Circle
Tempe, Arizona 85043
Facsimile: (602) 730-2390
with a copy to:
John Schuster, Esquire
Cahill Gordon & Reindel
Eighty Pine Street
New York, New York 10005
Facsimile: (212) 269-5420
(c) if to Guarantor:
Fiberite Holdings, Inc.
c/o DLJ Merchant Banking, Inc.
140 Broadway
New York, NY 10005
Attention: Thompson Dean
Facsimile: (212) 504-4991
with a copy to:
John Schuster, Esquire
Cahill Gordon & Reindel
Eighty Pine Street
New York, New York 10005
Facsimile: (212) 269-5420
8.6 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.7 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any
42
<PAGE> 49
manner adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner
to the end that transactions contemplated hereby are fulfilled to the extent
possible.
8.8 Entire Agreement. This Agreement and the Ancillary Agreements
constitute the entire agreement and supersede all prior agreements and
undertakings, both written and oral, between Seller and Purchaser with respect
to the subject matter hereof and, except as otherwise expressly provided
herein, are not intended to confer upon any other person any rights or remedies
hereunder.
8.9 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided that no party may
assign, delegate or otherwise transfer any of its rights, interests or
obligations under this Agreement without the consent of the other party hereto,
such consent not to be unreasonably withheld or delayed; provided further that
no such consent shall be required if (a) as a result of any and all such
assignments, only a single assignee would be entitled to indemnification
pursuant to Article VII, (b) such assignment would not relieve the assigning
party of its obligations under this Agreement and the Ancillary Agreements, (c)
the assignee agrees with the assigning party to assume the assigning party's
obligations under this Agreement and the Ancillary Agreements and (d) the
assigning party notifies the Seller prior to any such assignment, which
notification shall include the identity of the assignee, a description of the
terms of such assignment and a certification by an officer of the Purchaser that
the conditions set forth in subparagraphs 8.9(a) and (b) have been satisfied.
Notwithstanding the foregoing, the Purchaser shall be entitled to assign a
security interest in its rights hereunder in connection with a collateral
assignment to one Person acting on behalf of one or more of Purchaser's
lenders, (it being understood that with respect to such collateral assignment,
such Person is not assuming any of the Purchaser's obligations under this
Agreement as a result of such collateral assignment).
8.10 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, without regard to the
conflicts of law rules of such state.
8.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
8.12 Guarantee. Guarantor hereby agrees to pay, perform and discharge
all of the covenants, agreements, obligations and liabilities of Purchaser
under this Agreement and the Ancillary Agreements to the extent such covenants,
agreements, obligations and liabilities are not paid, performed or discharged
by Purchaser in accordance with the terms hereof and thereof.
43
<PAGE> 50
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
PURCHASER:
FIBERITE, INC.
Witness /s/ By: /s/
----------------------- -------------------------
Title: Chief Financial Officer
SELLER:
ICI AMERICAN HOLDINGS INC.
Witness /s/ By: /s/
------------------------ ------------------------
Title: Attorney-in-fact
GUARANTOR:
FIBERITE HOLDINGS, INC.
Witness /s/ By: /s/ Thompson Dean
------------------------ ------------------------
Title: President
44
<PAGE> 1
EXHIBIT 4.6
SHAREHOLDERS AGREEMENT
dated as of
October 6, 1995
among
FIBERITE HOLDINGS, INC.
- and -
THE SHAREHOLDERS LISTED ON THE SIGNATURE PAGES HEREOF,
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
1.1 Definitions................................................. 2
ARTICLE 2
CORPORATE GOVERNANCE
2.1 Composition of the Board................................... 11
2.2 Removal.................................................... 11
2.3 Vacancies.................................................. 12
2.4 Meetings.................................................... 12
2.5 Action by the Board......................................... 13
2.6 Conflicting Charter or Bylaw Provisions..................... 13
ARTICLE 3
RESTRICTIONS ON TRANSFER;
RIGHTS TO COMPEL A SALE;
RIGHTS TO PARTICIPATE IN A SALE
3.1 General..................................................... 13
3.2 Legends..................................................... 14
3.3 Permitted Transferees....................................... 15
3.4 Transfers by Institutional Shareholders..................... 15
3.5 Transfers by Management Stockholders........................ 16
3.6 Public Offering............................................. 17
3.7 Right to Participate in a Transfer.......................... 17
3.8 Right to Compel Participation in Certain
Transfers.................................................. 20
3.9 Right of First Offer....................................... 22
ARTICLE 4
CERTAIN REPURCHASES OF COMMON STOCK
4.1 Surrender of Shares......................................... 26
4.2 Method of Repurchase........................................ 27
4.3 Payment Limitations......................................... 28
4.4 Determination of Fair Market Value.......................... 29
4.5 Right of Company to Designate Third Parties................. 30
4.6 Employment; No Implied Right to Employment.................. 30
4.7 Termination of Article 4..................................... 30
-i-
<PAGE> 3
Page
ARTICLE 5
REGISTRATION RIGHTS
5.1 Demand Registration......................................... 30
5.2 Incidental Registration..................................... 33
5.3 Holdback Agreements......................................... 34
5.4 Registration Procedures..................................... 35
5.5 Indemnification by the Company.............................. 38
5.6 Indemnification by Participating Shareholders............... 39
5.7 Conduct of Indemnification Proceedings...................... 40
5.8 Contribution................................................ 41
5.9 Participation in Public Offering............................ 42
5.10 Other Indemnification....................................... 42
ARTICLE 6
COVENANTS OF THE SHAREHOLDERS
6.1 Confidentiality............................................. 43
6.2 Cooperation in Refinancings................................. 44
ARTICLE 7
MISCELLANEOUS
7.1 Entire Agreement............................................ 44
7.2 Additional Parties.......................................... 44
7.3 Binding Effect; Benefit..................................... 45
7.4 Exclusive Financial Advisor and Investment
Banking Advisor; Management Advisory Fees.................. 45
7.5 Assignability............................................... 45
7.6 Amendment; Waiver; Termination.............................. 46
7.7 Notices..................................................... 46
7.8 Headings.................................................... 48
7.9 Counterparts................................................ 48
7.10 Applicable Law.............................................. 48
7.11 Specific Enforcement........................................ 48
7.12 Consent to Jurisdiction..................................... 49
EXHIBIT A - Initial Ownership of Common Stock of Fiberite Holdings, Inc.
-ii-
<PAGE> 4
SHAREHOLDERS AGREEMENT
AGREEMENT (the "Agreement") dated as of October 6, 1995 by and among:
(1) Fiberite Holdings, Inc., a Delaware corporation (the "Company");
(2) DLJ Merchant Banking Partners, L.P., DLJ International Partners, C.V.,
DLJ Offshore Partners, C.V. and DLJ Merchant Banking Funding, Inc. (each a
"DLJ Entity", and collectively, the "DLJ Entities");
(3) Carlisle-Fiberite Investors L.P.;
(4) Steeple International, Inc. ("Steeple"); and
(5) Each other person who executes a signature page hereto on or after the
Effective Date (as defined below) pursuant to Sections 3.1 and 7.2
hereof).
This Agreement shall become effective on the date (the "Effective
Date") of, and simultaneously with, the closing of the transactions contemplated
by the Securities Purchase Agreement (as defined below).
WITNESSETH:
WHEREAS, upon consummation of the transactions contemplated hereby, the
authorized capital stock of the Company will consist of 15,000,000 shares of
Common Stock, par value $.01 per share;
WHEREAS, certain of the parties hereto have entered into a Securities
Purchase Agreement (the "Securities Purchase Agreement") dated as of the date
hereof pursuant to which the Company has sold (i) shares of its Common Stock to
the shareholders listed on Exhibit A hereto at a price of $.50 per share and
(ii) $63,705,500 aggregate principal amount of its 11.30% Subordinated Notes due
2002 at a price of $47.2644 per $100 principal amount;
WHEREAS, the parties hereto wish to record their arrangements with
respect to the Shares (as defined below) and certain other matters;
<PAGE> 5
-2-
WHEREAS, the Company, Fiberite, Inc. and ICI American Holdings Inc.
have entered into a Purchase Agreement (the "Stock Purchase Agreement") dated
the date hereof, pursuant to which Fiberite, Inc. will acquire all of the
outstanding capital stock of ICI Composites Inc. and Dalia Verwaltungsgell-
schaft mbH, a subsidiary of Fiberite, Inc., Fiberite Europe GmbH and Deutsche
ICI GmbH have entered into a Business Purchase Agreement and a Real Property
Transfer Agreement (together with the Stock Purchase Agreement, the "Purchase
Agreement"), each dated the date hereof, pursuant to which Dalia
Verwaltungsgellschaft mbH will acquire substantially all of the assets and
liabilities of Fiberite Europe GmbH (collectively, the "Acquisition");
WHEREAS, the parties hereto understand that in order to provide a
source of funds for the Acquisition, including the payment of certain fees and
expenses in connection therewith, the Company will contribute $35,000,000 to the
capital of Fiberite, Inc. which, together with other funds, will be used to
consummate the Acquisition; and
WHEREAS, the Company owns 100% of the issued and outstanding common
stock, par value $.01 per share, of Fiberite, Inc.; and
WHEREAS, the parties hereto desire to restrict the sale, assignment,
transfer, encumbrance or other disposition of the Shares, including both issued
and outstanding Shares and Shares which may be issued or otherwise acquired
hereafter, and to provide for certain rights and obligations in respect thereto
as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing covenants and
agreements herein contained, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. (a) The following terms, as used herein, have the
following meanings:
"Adverse Person" means any Person considered by the Board to be a
competitor or potential competitor of the Company or a Person whose interests
are otherwise adverse to the Company or any of the Shareholders.
<PAGE> 6
-3-
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person; provided that no shareholder of the Company shall be deemed to be
an Affiliate of any other shareholder solely by reason of any investment in the
Company. For the purpose of this definition, the term "control" (including with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
"Affiliated Employee Benefit Trust" means any trust that is a successor
to the assets held by a trust established under an employee benefit plan subject
to ERISA or any other trust established directly or indirectly under such plan
or any other such plan having the same sponsor.
"Agreement" has the meaning assigned to such term in the introduction
hereto.
"Board" means the board of directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized by law to close.
"Bylaws" means the bylaws of the Company, as amended from time to time.
"Carlisle" means Carlisle-Fiberite Investors L.P. together with
Carlisle Group, L.P., if and when Carlisle Group, L.P. becomes a party to this
Agreement in accordance herewith.
"Closing Date" means the date of the closing of the transactions
contemplated by the Purchase Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Common Stock, $.01 par value per share, of the
Company.
"Company" has the meaning assigned to such term in the introduction to
this Agreement.
<PAGE> 7
-4-
"Disability" with respect to any Management Shareholder, means that, as
a result of incapacity due to physical or mental illness, such Management
Shareholder is, or is reasonably likely to become, unable to perform his or her
duties for more than six consecutive months or six months in aggregate in any
twelve month period.
"DLJ Entity" and "DLJ Entities" have the meaning assigned to such terms
in the introduction to this Agreement.
"DLJ Ownership Period" means the period commencing on the Effective
Date and ending on the date that is the earlier to occur of (i) the tenth
anniversary of the Effective Date and (ii) the date upon which the aggregate
ownership by the DLJ Entities and their Permitted Transferees of shares of
Common Stock is less than 10% of the aggregate Initial Ownership of the DLJ
Entities.
"Duly Endorsed" means duly endorsed in blank by the Person or Persons
in whose name a stock certificate is registered or accompanied by a duly
executed stock assignment separate from the certificate with the signature(s)
thereon guaranteed by a commercial bank or trust company or a member of a
national securities exchange or of the NASD.
"Effective Date" has the meaning assigned to such term in the
introduction to this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fully Diluted" means, with respect to Shares and without duplication,
all outstanding shares, shares issuable in respect of securities convertible
into or exchangeable for Shares, stock appreciation rights or options, warrants
and other rights to purchase or subscribe for Shares or securities convertible
into or exchangeable for Shares, in each case, whether or not vested.
"Initial Management Ownership" means, with respect to any Management
Shareholder, the maximum number of Shares held by and/or subject to the right to
acquire (whether or not vested) by such Management Shareholder during the period
commencing on the Effective Date and ending on (and including) the
<PAGE> 8
-5-
date such Initial Management Ownership amount is calculated hereunder.
"Initial Ownership" means, with respect to any Shareholder, the total
number of Shares purchased by such Shareholder under the Securities Purchase
Agreement; provided that such number shall be adjusted to reflect any subsequent
subdivision, combination or reclassification of the Shares or any subsequent
dividend or other distribution on the Shares paid in shares.
"Initial Public Offering" means the first Public Offering of Shares
after the Effective Date, other than in connection with sales to employees of
the Company or any Subsidiary of the Company or where the primary purpose of
such Public Offering of Shares relates to a debt financing by the Company or any
Subsidiary of the Company.
"Initial Restriction Period" means the period commencing on the
Effective Date and ending on the date that is the later to occur of (a) the
third anniversary of the Initial Public Offering and (b) the fifth anniversary
of the Effective Date.
"Institutional Shareholders" means any DLJ Entity and its Permitted
Transferees, Carlisle and its Permitted Transferees, Steeple and its Permitted
Transferees and (with respect to Shares obtained upon exercise of a Warrant)
each party who becomes a Shareholder upon exercise of Warrants and its Permitted
Transferees.
"Management Shareholders" means employees of the Company or any of its
Subsidiaries who have become party to and agreed to be bound by this Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"Options" means options to purchase shares of Common Stock, granted
pursuant to the Plan.
"Other Shareholders" means all Shareholders and their Permitted
Transferees, other than the DLJ Entities and their Permitted Transferees.
"Payment Date" means, in connection with any Payment Note, the Business
Day immediately preceding the later of the last day of the Company's fiscal year
in which such Payment
<PAGE> 9
-6-
Note was issued and the date that is six months from such date of issuance.
"Permitted Transferee" means:
(i) in the case of any DLJ Entity, (A) any other DLJ Entity, (B) any
general or limited partner of any DLJ Entity (a "DLJ Partner"), and any
corporation, partnership, Affiliated Employee Benefit Trust or other
entity that is an Affiliate of any DLJ Partner (collectively, the "DLJ
Affiliates"), (C) any managing director, general partner, director,
limited partner, officer or employee of any DLJ Entity or of any DLJ
Affiliate, or the heirs, executors, administrators, testamentary trustees,
legatees or beneficiaries of any of the foregoing persons referred to in
this clause (C) (collectively "DLJ Associates"); (D) a trust, the
beneficiaries of which, or a corporation, limited liability company or
partnership, the stockholders, members or general or limited partners of
which, include only DLJ Entities, DLJ Affiliates, DLJ Associates, their
spouses or their lineal descendants or (E) a voting trustee for one or
more DLJ Entities, DLJ Affiliates or DLJ Associates under the terms of a
voting trust designed to conform with the requirements of the Insurance
Law of the State of New York;
(ii) in the case of Institutional Shareholders other than the DLJ
Entities and their Permitted Transferees, (A) any Affiliate of such
Institutional Shareholder, as the case may be, (B) if such Institutional
Shareholder is a partnership, to the partners of such partnership in
proportion to their interests therein, (C) if such Institutional
Shareholder is a natural Person, Persons described in clauses (iii)(A)(1)
and (2) of this definition or (D) with the consent of DLJ Merchant
Banking, Inc. on behalf of the DLJ Entities, the Company or any Other
Shareholder; and
(iii) in the case of any Management Shareholder, (A) a Person to whom
Shares are transferred from such Shareholder (1) by will or the laws of
descent and distribution or (2) by gift without consideration of any kind;
provided that such transferee is the issue, adopted issue, stepchild,
parent or spouse of such Shareholder, (B) a trust that is for the
exclusive benefit of, or a partnership the partners of which are
exclusively, such Shareholder or his or her Permitted Transferees under
(A) above, or (C) with
<PAGE> 10
-7-
the consent of DLJ Merchant Banking, Inc. on behalf of the DLJ Entities,
the Company or any Other Shareholder;
in each case, who becomes a party hereto and agrees to be bound hereby pursuant
to Sections 3.1 and 7.2 hereof.
"Person" means an individual, corporation, partnership, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"Plan" means the Company's 1995 Long Term Incentive and Share Award
Plan, as amended from time to time pursuant to its terms.
"Public Offering" means an underwritten public offering of Registrable
Stock of the Company pursuant to an effective registration statement under the
Securities Act.
"Purchase Agreement" has the meaning assigned to such term in the
preamble to this Agreement.
"Registrable Stock" means any Shares originally acquired under the
Securities Purchase Agreement and any other Shares that constitute Restricted
Securities until (i) a registration statement covering such Shares has been
declared effective by the SEC and such Shares have been disposed of pursuant to
such effective registration statement, (ii) such Shares are sold under
circumstances in which all of the applicable conditions of Rule 144 (other than
Rule 144A under the Securities Act) are met or under which it may be sold
pursuant to Rule 144(k) or (iii) such Shares are otherwise transferred, the
Company has delivered a new certificate or other evidence of ownership for such
Shares not bearing the legend required pursuant to this Agreement and such
Shares may be resold without subsequent registration under the Securities Act.
"Registration Expenses" means (i) all registration and filing fees,
(ii) fees and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Shares), (iii) printing expenses, (iv) internal expenses
of the Company (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), (v) reasonable
fees and disbursements of counsel for the Company and customary fees and
expenses for independent certified public accountants retained by the Company
(including the expenses of any comfort letters
<PAGE> 11
-8-
or costs associated with the delivery by independent certified public
accountants of a comfort letter or comfort letters requested pursuant to Article
5 hereof), (vi) the reasonable fees and expenses of any special experts retained
by the Company in connection with such registration, (vii) reasonable fees and
expenses of one counsel for the Shareholders participating in the offering
selected by the DLJ Entities, in the case of an offering in which any of the DLJ
Entities participate, or by Other Shareholders holding the majority of Shares to
be sold for the account of all Other Shareholders in the offering in the case of
an offering in which no DLJ Entity participates, (viii) fees and expenses in
connection with any review of underwriting arrangements by the NASD, including
fees and expenses of any "qualified independent underwriter" and (ix) fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities; but shall not include any underwriting fees, discounts or
commissions attributable to the sale of Registrable Stock, or any out-of-pocket
expenses (except as set forth in clauses (ii) or (vii) above) of the
Shareholders (or the agents who manage their accounts) or any fees and expenses
of underwriter's counsel.
"Restricted Securities" means Shares that are "restricted securities"
within the meaning of Rule 144.
"Rule 144" means Rule 144 and Rule 144A (or any successor provisions)
under the Securities Act.
"SEC" means the Securities and Exchange Commission or any successor
agency.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Purchase Agreement" has the meaning assigned to such term
in the preamble to this Agreement.
"Shareholder" means each Person (other than the Company) who shall be a
party to this Agreement, whether in connection with the execution and delivery
hereof as of the date hereof or otherwise, when, and so long as, such Person
shall have the power to vote or otherwise beneficially own any Shares.
"Shares" means all shares of Common Stock held by the Shareholders in
such capacity and, except with respect to provisions regarding voting, shall
include Vested Options and Vested Warrants.
<PAGE> 12
-9-
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are at the time directly or indirectly owned by
such Person.
"Third Party" means a prospective purchaser of Shares in an
arm's-length transaction from a Shareholder where such purchaser is not a
Permitted Transferee of such Shareholder.
"transfer" has the meaning set forth in Section 3.1(a).
"Vested Options" means Options which, pursuant to their terms, are
exercisable by the holder thereof on the date of determination.
"Vested Warrants" means Warrants which, pursuant to their terms, are
exercisable by the holder thereof on the date of determination.
"Warrants" means warrants to purchase Common Stock issued by the
Company pursuant to each of the Stock Purchase Warrants dated the date hereof
granted by the Company to each of Carlisle Group, L.P. and James Ashton.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
Term Section
<S> <C>
Business Plan 2.5(b)
Cause 2.2
Claim Costs 7.4
Confidential Information 6.1(b)
Carlisle Nominee 2.1(a)
DLJ Nominees 2.1(a)
DLJSC 7.4
Demand Registration 5.1(a)
Electing Shareholders 3.7(a)
Fair Market Value 4.4
Holders 5.1(a)
Incidental Registration 5.2(a)
Indemnified Party 5.7
Indemnifying Party 5.7
Inspectors 5.4(g)
Joinder Agreement 7.2
</TABLE>
<PAGE> 13
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<TABLE>
<S> <C>
Maximum Obligation 4.3
Nominee 2.3(a)
Non-Selling Shareholder 3.9(a)
Number of Shares 3.7(a)
Participating Shares 3.7(a)
Payment Note 4.2(a)
Records 5.4(g)
Representatives 6.1(b)
Repurchase Price 4.1(a)
Section 3.5 Pro Rata Portion 3.5
Section 3.7 Notice 3.7(a)
Section 3.7 Notice Period 3.7(a)
Section 3.7 Pro Rata Portion 3.7(a)
Section 3.7 Sale 3.7(a)
Section 3.7 Sale Price 3.7(a)
Section 3.7 Seller 3.7(a)
Section 3.8 Notice 3.8(a)
Section 3.8 Notice Period 3.8(a)
Section 3.8 Pro Rata Portion 3.8(a)
Section 3.8 Sale 3.8(a)
Section 3.8 Sale Price 3.8(a)
Section 3.9 Offer 3.9(b)
Section 3.9 Offer Notice 3.9(a)
Section 3.9 Offer Period 3.9(b)
Section 3.9 Sale Price 3.9(a)
Section 3.9 Seller 3.9(a)
Seller 4.2(a)
Selling Shareholder 5.1(a)
Surrendered Shares 4.2(a)
Termination Date 4.2(a)
Underwriters' Limitations 5.1(d)
Vested Parties 3.7(a)
</TABLE>
(c) The term "DLJ Entities", to the extent that any such entity shall
have transferred any of its Shares to "Permitted Transferees", shall mean the
DLJ Entities and the Permitted Transferees of the DLJ Entities, as the case may
be, and any right or action that may be taken at the election of the DLJ
Entities may be taken at the election of the DLJ Entities and the Permitted
Transferees of the DLJ Entities, as the case may be.
(d) The term "Other Shareholders", to the extent such shareholders
shall have transferred any of their Shares to "Permitted Transferees", shall
mean the Other Shareholders and the respective Permitted Transferees of the
Other Shareholders, as the case may be, and any right or action that may be
taken at the election of the Other Shareholders may be taken at the
<PAGE> 14
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election of the Other Shareholders and the Permitted Transferees of the Other
Shareholders, as the case may be.
(e) The term "Management Shareholders", to the extent such shareholders
shall have transferred any of their Shares to "Permitted Transferees", shall
mean the Management Shareholders and the respective Permitted Transferees of the
Management Shareholders, as the case may be, and any right or action that may be
taken at the election of the Management Shareholders may be taken at the
election of the Management Shareholders and the Permitted Transferees of the
Management Shareholders, as the case may be.
ARTICLE 2
CORPORATE GOVERNANCE
2.1 Composition of the Board. (a) The Board shall consist of four
directors (or such smaller or larger number as may be agreed among the DLJ
Entities and Carlisle), one of whom shall be designated from time to time by
Carlisle (the "Carlisle Nominee"), and the remaining number of whom shall be
designated from time to time by the DLJ Entities (the "DLJ Nominees"). Upon
execution of this Agreement, the parties shall take all necessary action so that
the Board shall initially consist of Thompson Dean, Chairman of the Board, James
Carlisle, Reid Perper and Karl Wyss and each such director shall serve until
resignation, removal or replacement in accordance with the terms of this
Agreement. It is acknowledged that of the initial members of the Board, Mr.
Carlisle has been designated by Carlisle and the other members of the Board have
been designated by the DLJ Entities.
(b) Each Shareholder entitled to vote for the election of directors to
the Board agrees that it will vote its Shares or execute consents, as the case
may be, and take all other necessary action (including in order to satisfy any
quorum requirement) in order to ensure that the composition of the Board is as
set forth in this Section 2.1.
(c) Except as set forth in any special security arrangement with the
United States Department of Defense entered into by a Subsidiary of the Company
with the consent of the Board, the DLJ Entities shall be entitled to designate a
majority of the directors of each Subsidiary of the Company.
<PAGE> 15
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2.2 Removal. Each Shareholder agrees that if, at any time, it is then
entitled to vote for the removal of directors of the Company, it will not vote
any of its Shares in favor of the removal of any director who shall have been
designated or nominated pursuant to Section 2.1 unless such removal shall be for
Cause or the Persons entitled to designate or nominate such director shall have
consented to such removal in writing. Each Shareholder agrees that if the
Persons entitled to designate or nominate any director pursuant to Section 2.1
shall request the removal, with or without Cause, of such director in writing,
such Shareholder shall vote its Shares in favor of such removal. Removal for
"Cause" shall mean removal of a director or employee because of such director's
or employee's (a) willful and continued failure to substantially perform his or
her duties with the Company in his or her established position, (b) willful
conduct that is foreseeably and significantly injurious to the Company or any of
its Subsidiaries, monetarily or otherwise, (c) conviction for, or plea of guilty
or no contest to, a felony or a crime involving moral turpitude, (d) abuse of
illegal drugs or other controlled substances or habitual intoxication, (e)
willful breach of this Agreement or, in the case of an employee of the Company,
termination of such employee's employment agreement with the Company for
"Cause", as defined therein, or (f) in the case of any employee that has a
severance agreement with the Company, breach by such employee of such severance
agreement.
2.3 Vacancies. If, as a result of death, disability, retirement,
resignation, removal (with or without Cause) or otherwise, there shall exist or
occur any vacancy of the Board:
(a) the Person or Persons entitled under Section 2.1 to designate or
nominate such director whose death, disability, retirement, resignation or
removal resulted in such vacancy may designate another individual (the
"Nominee") to fill such capacity and serve as a director of the Company; and
(b) each Shareholder then entitled to vote for the election of the
Nominee as a director of the Company agrees that it will vote its Shares, or
execute a written consent, as the case may be, in order to ensure that the
Nominee is elected to the Board; provided that (i) in the case of the Carlisle
Nominee, Carlisle then holds at least 80% of its Initial Ownership (including,
for this purpose, Warrants to be issued to Carlisle on or about the Closing
Date) or 2% of the Fully Diluted Common Stock, and (ii) in the case of a DLJ
Nominee,
<PAGE> 16
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the DLJ Entities then hold at least 5% of the Fully Diluted Common Stock.
2.4 Meetings. The Board shall hold a regularly scheduled meeting at
least once every calendar quarter.
2.5 Action by the Board. (a) A quorum of the Board shall consist of
three directors, of whom at least two must be DLJ Nominees; provided that the
number of Directors constituting a quorum shall be changed upon request of the
DLJ Entities. All actions of the Board shall require the affirmative vote of at
least a majority of the directors at a duly convened meeting of the Board at
which a quorum is present or the unanimous written consent of the Board;
provided that, in the event there is a vacancy on the Board and an individual
has been nominated to fill such vacancy, the first order of business shall be to
fill such vacancy.
(b) The executive officers of the Company shall submit to the Board,
and obtain their approval of, prior to the start of each calendar year of the
Company, a business plan (the "Business Plan") setting forth the annual budget
and operating plan of the Company and its Subsidiaries for such calendar year.
The Board shall receive monthly, quarterly and annual financial statements and
other appropriate reports concerning operations of the Company and its
Subsidiaries and other matters as the Board shall request.
(c) The Board may create executive, compensation and audit committees,
as well as such other committees as it may determine. The Carlisle Nominee shall
be entitled to serve, and the DLJ Nominees shall be entitled to majority
representation, on any committee created by the Board.
2.6 Conflicting Charter or Bylaw Provisions. Each Shareholder shall
vote its Shares, and shall take all other actions necessary, to ensure that the
Company's Certificate of Incorporation and Bylaws facilitate and do not at any
time conflict with any provision of this Agreement.
<PAGE> 17
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ARTICLE 3
RESTRICTIONS ON TRANSFER;
RIGHTS TO COMPEL A SALE;
RIGHTS TO PARTICIPATE IN A SALE
3.1 General. (a) Each Shareholder understands and agrees that the
Shares purchased pursuant to the Securities Purchase Agreement have not been
registered under the Securities Act and are Restricted Securities. Each
Shareholder agrees that it will not, directly or indirectly, sell, assign,
transfer, grant a participation in, pledge or otherwise dispose of ("transfer")
any Shares (or solicit any offers to buy or otherwise acquire, or take a pledge
of any Shares) except in compliance with the Securities Act, applicable state
and foreign securities laws and the terms and conditions of this Agreement. The
transfer of any Warrant also is subject to the terms and provisions set forth in
such Warrant. The transfer of any Option also is subject to the terms and
provisions set forth in such Option or in the Plan.
(b) Notwithstanding anything else to the contrary contained in this
Agreement, the Board shall have the absolute right in its discretion to refuse
to permit or acknowledge any transfer (and any such transfer or purported
transfer shall be prohibited) (i) to any Adverse Person or (ii) if such transfer
could have adverse consequences for the Company or its Shareholders (it being
understood that for purposes of this Section 3.1(b) any transfer that
individually or together with any other transfer or proposed transfer could
cause the Company to be required to register its Common Stock under the Exchange
Act prior to the Initial Public Offering would have adverse consequences for the
Company and its Shareholders).
(c) Any attempt to transfer any Shares not in compliance with this
Agreement, the Securities Act and applicable state and foreign securities laws
shall be null and void and neither the Company nor any transfer agent shall give
any effect in the Company's stock records to such attempted transfer.
(d) No transfer of Shares by any party to this Agreement including,
without limitation, transfers to one or more Permitted Transferees, shall be
effective unless (x) the certificates representing such Shares issued to the
Transferee shall bear the legends provided in Section 3.2, if required by such
Section , and (y) if the Shares are required to bear the legend set forth in
Section 3.2(b), the transferee (if not
<PAGE> 18
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already a party hereto) shall have executed and delivered to each other party
hereto, as a condition precedent to such transfer, an instrument or instruments
reasonably satisfactory to such parties confirming that the transferee agrees to
be bound by the terms of this Agreement in the same manner as such transferee's
transferor, except as otherwise specifically provided in this Agreement.
3.2 Legends. (a) In addition to any other legend that may be required,
each certificate for Restricted Securities shall bear a legend in substantially
the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR
SOLD EXCEPT IN COMPLIANCE THEREWITH."
(b) In addition to any other legend that may be required, each
certificate for Shares that is issued to any Shareholder shall bear a legend in
substantially the following form:
"THIS SECURITY IS SUBJECT TO RESTRICTIONS ON TRANSFER AND ADDITIONAL
OBLIGATIONS AS SET FORTH IN THE SHAREHOLDERS AGREEMENT DATED AS OF OCTOBER
[ ], 1995, COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM FIBERITE
HOLDINGS, INC. AND ANY SUCCESSOR THERETO. NO TRANSFER OF THIS SECURITY
WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF
COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT AND THAT ANY TRANSFEREE AGREES
TO BE BOUND BY THE RESTRICTIONS SET FORTH IN SUCH SHAREHOLDERS AGREEMENT."
(c) If any Restricted Securities shall cease to be Registrable Stock,
the Company shall, upon the written request of the holder thereof, issue to such
holder a new certificate evidencing such shares without the legend required by
Section 3.2(a) endorsed thereon. If any shares of Common Stock cease to be
subject to any restrictions on transfer set forth in this Agreement, the Company
shall, upon the written request of the holder thereof, issue to such holder a
new certificate evidencing such shares without the legend required by Section
3.2(b) endorsed thereon.
3.3 Permitted Transferees. Any Shareholder may at any time transfer any
or all of its Shares to one or more of its Permitted Transferees without the
consent of the Board or
<PAGE> 19
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any other Shareholder or group of Shareholders and without compliance with
Sections 3.7, 3.8 or 3.9, provided that (i) such Permitted Transferee shall have
agreed in writing to be bound by the terms of this Agreement and (ii) the
transfer to such Permitted Transferee is not in violation of applicable federal
or state or foreign securities laws (and, if requested by the Company, such
Shareholder shall have provided to the Company an opinion of counsel reasonably
satisfactory to the Company to such effect).
3.4 Transfers by Institutional Shareholders. Any Institutional
Shareholder may transfer Shares or unvested Warrants to any Third Party who is
not an Adverse Person in compliance with the Securities Act (pursuant to Rule
144 or any other similar exemption under the Securities Act or otherwise) and
subject to Sections 3.7 and 3.9 and Article V hereof; provided that:
(i) no such transfer by any Other Shareholder shall be permitted until
the fifth anniversary of the Effective Date unless such transfer is
pursuant to Sections 3.6, 3.7 or 3.8 hereof; and
(ii) at any time, if requested by the Company (other than in connection
with any Public Offering), any such Third Party transferee shall have
agreed in writing to be bound by the terms of this Agreement.
3.5 Transfers by Management Stockholders. Any Management Shareholder
may transfer Shares only as follows:
(i) pursuant to Section 3.7 or 3.8;
(ii) in a Public Offering (after having exercised any Vested Options to
be sold), provided that (a) no Management Shareholder may sell any Shares
in the Initial Public Offering; (b) in the first Public Offering following
the Initial Public Offering no Management Shareholder may sell more than
the lesser of (x) 50% of such Management Shareholder's Section 3.5 Pro
Rata Portion and (y) 20% of such Management Shareholder's holdings
immediately prior to such offering; and (c) in each Public Offering
thereafter, each Management Shareholder may sell no more than the lesser
of such Management Shareholder's Section 3.5 Pro Rata Portion and (y) 50%
of such Management Shareholder's holdings immediately prior to such
offering;
<PAGE> 20
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(iii) after the first anniversary of the Initial Public Offering (after
having exercised any Vested Options to be sold), pursuant to the exemption
from registration provided under Rule 144 under the Securities Act,
provided that during the Initial Restriction Period, such sales shall not
reduce the Management Shareholder's ownership to (or occur at a time when
such Management Shareholder's ownership is otherwise) below the greater of
(a) 50% of such Management Shareholder's Initial Management Ownership (as
calculated on the date of each such proposed sale), and (b) the number of
shares equal to such Management Shareholder's Initial Management Ownership
(as calculated on the date of each such proposed sale) multiplied by a
fraction, the numerator of which is the number of shares currently owned
by the Institutional Shareholders and the denominator of which is the
Initial Ownership of the Institutional Shareholders;
(iv) after the Initial Restriction Period (after having exercised any
Vested Options to be sold), pursuant to a sale to a Third Party for cash,
provided that (x) the amount sold in any 12-month period may not exceed
20% of such Management Shareholder's holdings at the beginning of such
12-month period and (y) in no event will a Management Shareholder sell
shares to an Adverse Person or any Person deemed inappropriate by the
Board of Directors; and
(v) to a Permitted Transferee of such Management Shareholder.
"Section 3.5 Pro Rata Portion" means with respect to each Management
Shareholder at the time of such Public Offering, the number of Shares the
Management Shareholder holds multiplied by a fraction the numerator of which is
the number of Shares to be sold by the Institutional Shareholders and their
Permitted Transferees in the transaction in question and the denominator of
which is the total number of Shares held by the Institutional Shareholders and
their Permitted Transferees.
The above transfer restrictions will terminate upon the earlier to
occur of (i) ten years after the Effective Date and (ii) the date upon which the
aggregate number of Shares held by the Institutional Shareholders and their
Permitted Transferees falls below 10% of the Initial Ownership of the
Institutional Shareholders.
3.6 Public Offering. At any time in connection with a Public Offering
pursuant to Article V hereof, each
<PAGE> 21
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Shareholder shall have the right to transfer Shares (after having exercised any
Vested Options and Vested Warrants to be sold) in the Public Offering as
provided in Article V.
3.7 Right to Participate in a Transfer. (a) Subject to Section 3.9, if
prior to the Initial Public Offering, any Institutional Shareholder (the
"Section 3.7 Seller") proposes to transfer, in any transaction or series of
transactions, related or unrelated any of its Shares to a Third Party, other
than in a Public Offering or as a result of a pledge of shares as security for a
loan, where (i) the Shares being so transferred constitute more than 25% of the
then outstanding Shares of the Company and (ii) prior to or as a result of the
proposed transfer, the Section 3.7 Seller and its Permitted Transferees hold or
would hold less than 50% of its Initial Ownership (a "Section 3.7 Sale"), the
Section 3.7 Seller shall provide written notice of such proposed Section 3.7
Sale ("Section 3.7 Notice") to all other Shareholders (the "Electing
Shareholders") and to the Company. The Company shall provide information with
respect to Shareholders who are holders of Vested Options or Vested Warrants
(the "Vested Parties"). The Section 3.7 Notice shall identify the number of
Shares subject to the Section 3.7 Sale (the "Number of Shares"), the per Share
consideration for which a sale is proposed to be made (the "Section 3.7 Sale
Price") and all other material terms and conditions of the proposed Section 3.7
Sale. Each Electing Shareholder shall, as to Shares held by it or which it can
obtain at or prior to the Section 3.7 Sale, have the right and option,
exercisable as set forth below, to participate in the Section 3.7 Sale for up to
the number of Shares (the "Participating Shares") as constitute its Section 3.7
Pro Rata Portion, and the Number of Shares and the amount of Shares to be sold
by the Section 3.7 Seller in the Section 3.7 Sale shall be reduced to the extent
any Electing Shareholders elect to participate. Any share to be sold in the
Section 3.7 Sale that is a Vested Option or Vested Warrant shall be exercised
prior to or upon the closing of the Section 3.7 Sale.
"Section 3.7 Pro Rata Portion" means, with respect to each Electing
Shareholder at the time of the Section 3.7 Sale, the number of Shares then owned
by such Electing Shareholder multiplied by a fraction, the numerator of which is
the number of Shares being transferred by the Section 3.7 Seller at the time
that the Section 3.7 Seller proposes to transfer Shares in the Section 3.7 Sale
and the denominator of which is the total number of Shares then owned by the
Section 3.7 Seller.
<PAGE> 22
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Each Electing Shareholder that desires to exercise such option shall
provide the Section 3.7 Seller with written irrevocable notice within 10
Business Days after the date the Section 3.7 Notice is given (the "Section 3.7
Notice Period"), and shall simultaneously provide a copy of such notice to the
Company. Each accepting Electing Shareholder shall deliver to the Section 3.7
Seller the certificate or certificates representing the Participating Shares of
such Electing Shareholder or in the case of an Electing Shareholder that is a
Vested Party, an irrevocable notice of exercise of the Warrants or Options
relating to the Participating Shares addressed to the Company requesting
exercise of such Warrants or Options immediately prior to and conditioned upon
the consummation of the Section 3.7 Sale together with funds sufficient to pay
for such exercise and any other documents required for such exercise, in each
case together with a limited power-of-attorney authorizing the Section 3.7
Seller to transfer such Shares pursuant to the terms of the Section 3.7 Sale.
Delivery of such certificate or certificates representing the Participating
Shares to be transferred and the limited power-of-attorney authorizing the
Section 3.7 Seller to transfer such Shares shall constitute an irrevocable
acceptance of the Section 3.7 Sale by the Electing Shareholder.
(b) The Section 3.7 Seller shall notify each Electing Shareholder of
any change in the Section 3.7 Sale Price or any amendment or modification of any
other material term of the Section 3.7 Sale. Any decrease in the Section 3.7
Sale Price, any change in the form of consideration or any amendment which could
materially increase the potential liability of the participating Electing
Shareholder shall not be binding upon the Electing Shareholder unless the
electing Electing Shareholder consents to such amendment or modification, or
fails to reject such modification or amendment within five Business Days after
written receipt of notice thereof (and any rejection shall be deemed to be a
revocation of such Electing Shareholder's right to participate in such Section
3.7 Sale).
(c) The per Share consideration to be paid to the Section 3.7 Seller
and each Electing Shareholder participating in the Section 3.7 Sale shall be the
Section 3.7 Sale Price net of a pro rata share of total expenses and other costs
associated with the Section 3.7 Sale.
(d) Promptly after the consummation of the transfer of the
Participating Shares of the Section 3.7 Seller and the Electing Shareholders
pursuant to the Section 3.7 Sale, the Section 3.7 Seller shall notify such
Electing Shareholders
<PAGE> 23
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thereof, shall remit to each of such Electing Shareholders the total
consideration for the Participating Shares of such Electing Shareholder
transferred pursuant thereto, and shall furnish such other evidence of the
completion and time of completion of such transfer and the terms thereof as may
be reasonably requested by such Electing Shareholders.
(e) If at the termination of the Section 3.7 Notice Period any Electing
Shareholder shall not have elected to participate in the Section 3.7 Sale, such
Electing Shareholder will be deemed to have waived any of and all of its rights
under this Section 3.7 with respect to the transfer of its Shares pursuant to
such Section 3.7 Sale. The Section 3.7 Seller shall have 120 days following such
termination of the Section 3.7 Notice Period in which to transfer the applicable
Shares at a price no more than 10% higher than that contained in the Section 3.7
Notice and on terms not materially more favorable to the Section 3.7 Seller than
were contained in the Section 3.7 Notice. Promptly after any transfer pursuant
to this Section 3.7, the Section 3.7 Seller shall notify the Company of the
consummation thereof and shall furnish such evidence of the completion thereof
(including time of completion) of such transfer and of the terms thereof as the
Company may request. If, at the end of such 120-day period, the Section 3.7
Seller has not completed the transfer of all the Shares, the Section 3.7 Seller
shall return to the Electing Shareholders the limited power-of-attorney (and all
copies thereof) together with all certificates representing the Shares which
such Electing Shareholders and to the Vested Parties the notice of exercise,
limited power-of-attorney, other documents and funds provided by the Vested
Party, in each case delivered for transfer pursuant to this Section 3.7, and all
the restrictions on transfer contained in this Agreement with respect to Shares
owned by the Electing Shareholders shall again be in effect.
(f) In the event that any Institutional Shareholder shall consummate a
Section 3.7 Sale in violation of this Section 3.7, each Institutional
Shareholder, in addition to such other remedies as may be available at law, in
equity or hereunder, shall have the right to sell to the Section 3.7 Seller its
Section 3.7 Pro Rata Portion at the same price and upon the same terms as in the
prohibited transfer within 90 days of such Institutional Shareholder becoming
aware of such violation.
(g) Notwithstanding anything contained in this Section 3.7, there shall
be no liability on the part of any Institutional Shareholder to any Electing
Shareholder if the
<PAGE> 24
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transfer of Shares pursuant to this Section 3.7 is not consummated for whatever
reason. Any decision as to whether to transfer Shares shall be at the Section
3.7 Seller's sole and absolute discretion.
3.8 Right to Compel Participation in Certain Transfers. (a) If any DLJ
Entities should propose to transfer Shares to any Third Party or such Third
Party's Affiliates (other than pursuant to a pledge as security for a loan) (i)
representing at least 30% of the Initial Ownership of the DLJ Entities or (ii)
representing, together with Shares proposed by the DLJ Entities to be included
in such transfer by the Other Shareholders, at least 50% of the outstanding
Shares of the Company at the time of such proposed transfer (a "Section 3.8
Sale"), the DLJ Entities may, at their option, require each Other Shareholder to
participate in such transfer. If the DLJ Entities shall require any Other
Shareholder to so participate, each Other Shareholder shall be required to so
participate on the same material terms and conditions on a pro-rata basis, so
that each Other Shareholder transfers in such Section 3.8 Sale its Section 3.8
Pro Rata Portion and at the same price per Share. Any Share to be sold in the
Section 3.8 Sale that is a Vested Option or Vested Warrant shall be exercised
prior to the Section 3.8 Sale.
"Section 3.8 Pro Rata Portion" means, with respect to each Other
Shareholder at the time of the Section 3.8 Sale, the number of Shares then owned
by such Other Shareholder multiplied by a fraction, the numerator of which is
the number of Shares being transferred by the DLJ Entities at the time that the
DLJ Entities propose to transfer Shares in the Section 3.8 Sale and the
denominator of which is the total number of Shares then owned by the DLJ
Entities.
The DLJ Entities shall provide written notice of such Section 3.8 Sale
to the Other Shareholders ("Section 3.8 Notice"). The Section 3.8 Notice shall
identify, to the extent known, the transferee, the number of Shares proposed to
be transferred in the Section 3.8 Sale, the per Share consideration for which a
transfer is proposed to be made (the "Section 3.8 Sale Price") and all other
material terms and conditions of the Section 3.8 Sale. Each Other Shareholder
shall be required to participate in the Section 3.8 Sale on the terms and
conditions set forth in the Section 3.8 Notice and to tender its Section 3.8 Pro
Rata Portion, as set forth below. Within 10 Business Days following the date of
the Section 3.8 Notice (the "Section 3.8 Notice Period"), each of the Other
Shareholders shall deliver to a representative of the DLJ Entities
<PAGE> 25
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designated in the Section 3.8 Notice certificates representing its Section 3.8
Pro Rata Portion, Duly Endorsed, together with all other documents required to
be executed in connection with such Section 3.8 Sale or, if such delivery is not
permitted by applicable law, an unconditional agreement to deliver such Shares
pursuant to this Section 3.8(a) at the closing for such Section 3.8 Sale against
delivery to such Other Shareholder of the consideration therefor. In the event
that an Other Shareholder should fail to deliver such certificates to the DLJ
Entities, the Company shall cause the books and records of the Company to show
that such Shares are bound by the provisions of this Section 3.8(a) and that
such Shares shall be transferred to the Third Party or such Third Party's
Affiliates immediately upon surrender for transfer by the Other Shareholders
thereof. In any such sale, if the Shareholders are obligated to make any
representation or warranty to any Third Person, the DLJ Entities shall use their
reasonable efforts to make such representations and warranties several and not
joint obligations as between the Other Shareholders, on the one hand, and the
DLJ Entities on the other hand.
(b) Notwithstanding Section 3.8(a) to the contrary, if the Section 3.8
Agreement would impose potential liability on the DLJ Entities or Carlisle in
excess of the purchase price to be received by either the DLJ Entities or
Carlisle, as applicable for the Shares to be sold by it, the DLJ Entities and
Carlisle shall agree that, as between themselves, any liability imposed on
either or both such parties shall be in proportion to their relative ownership
percentages existing at the date of such sale (excluding unvested Warrants).
(c) If, within 180 days after the DLJ Entities give the Section 3.8
Notice, they have not completed the transfer of all the Shares subject to the
Section 3.8 Sale, the DLJ Entities shall return to each of the Other
Shareholders all certificates representing Shares that such Other Shareholder
delivered for transfer pursuant hereto, together with any documents in the
possession of the DLJ Entities executed by the Other Shareholders in connection
with such proposed transfer, and all the restrictions on transfer contained in
this Agreement or otherwise applicable at such time with respect to Shares owned
by the Other Shareholders shall again be in effect.
(d) Promptly after the consummation of the transfer of Shares of the
DLJ Entities and the Other Shareholders pursuant to this Section 3.8, the DLJ
Entities shall give notice thereof to the Other Shareholders, shall remit to
each of the Other Shareholders who have surrendered their certificates the
<PAGE> 26
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total consideration (net of a pro rata share of total expenses and other costs
directly associated with the Section 3.8 Sale) for the Shares of such Other
Shareholders transferred pursuant thereto and shall furnish such other evidence
of the completion and time of completion of such transfer and the terms thereof
as may be reasonably requested by such Other Shareholders.
3.9 Right of First Offer. (a) If on or after the fifth anniversary of
the Effective Date any Institutional Shareholder other than any of the DLJ
Entities or their Permitted Transferees proposes to transfer any Shares pursuant
to Section 3.4 hereof to any Person other than its Permitted Transferees, and
such transfer is permitted subject to compliance with this Section 3.9, such
Shareholder (the "Section 3.9 Seller") shall give written notice (a "Section 3.9
Offer Notice") to the DLJ Entities (each of the DLJ Entities receiving the
Section 3.9 Offer Notice is herein referred to as a "Non-Selling Shareholder")
and the Company (A) stating that such Section 3.9 Seller desires to effect such
a transfer and (B) setting forth the number of Shares proposed to be transferred
and the cash price per Share that such Section 3.9 Seller proposes to be paid
for such Shares (the "Section 3.9 Sale Price") and the other terms (in
reasonable detail) of such proposed transfer.
(b) The receipt by the Company and each Non-Selling Shareholder of a
Section 3.9 Offer Notice from a Section 3.9 Seller shall constitute an offer
(the "Section 3.9 Offer") by such Section 3.9 Seller to sell first to each
Non-Selling Shareholder and then to the Company, for cash and on the terms set
forth in the Section 3.9 Offer Notice the Shares subject to the Section 3.9
Offer at the Section 3.9 Sale Price. Such offer shall be irrevocable for 60 days
after receipt of such Section 3.9 Offer Notice by each Non-Selling Shareholder
and the Company (the "Section 3.9 Offer Period"). During the Section 3.9 Offer
Period, each Non-Selling Shareholder and, to the extent each Non-Selling
Shareholder does not accept such offer as to all Shares subject to the Section
3.9 Offer, the Company shall have the right to accept such offer as to all or a
portion of the Shares (provided that the aggregate number of Shares accepted by
the Non-Selling Shareholders and the Company together equals the total number of
Shares subject to the Section 3.9 Offer) by giving written notice of acceptance
to the Section 3.9 Seller prior to the expiration of such period. If such
Section 3.9 Offer is either rejected by each Non- Selling Shareholder and the
Company or expires at the end of such Section 3.9 Offer Period without the
Non-Selling Shareholders and the Company having accepted all of the Shares
subject to such
<PAGE> 27
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Section 3.9 Offer, the Section 3.9 Seller shall notify each Non-Selling
Shareholder of such rejection or expiration in writing as soon as practicable.
(c) The receipt by each Non-Selling Shareholder and the Company of a
Section 3.9 Offer Notice from any Section 3.9 Seller shall constitute a Section
3.9 Offer by such Section 3.9 Seller to sell (i) first, to each Non-Selling
Shareholder a number of Shares equal to the product of (A) the number of Shares
specified by the Section 3.9 Seller in the Section 3.9 Offer Notice, multiplied
by (B) a fraction, the numerator of which shall equal the number of Shares owned
by such Non- Selling Shareholder on the date of the related Section 3.9 Offer
Notice and the denominator of which shall equal the aggregate number of Shares
owned by all Non-Selling Shareholders on such date, (ii) second, to each
Non-Selling Shareholder, any Shares subject to the Section 3.9 Offer not
acquired pursuant to clause (i) above, where such Shares being sold pursuant to
this Section 3.9(c)(ii) shall be allocated for sale among the Non-Selling
Shareholders who acquired all the Shares allocated to them pursuant to clause
(i) above, ratably on the basis of their respective holdings of Shares and in a
manner similar to the formula set forth in clause (i) above (taking into account
the Shares acquired pursuant to clause (i) above) and (iii) third, to the
Company any Shares subject to the Section 3.9 Offer not purchased by the
Non-Selling Shareholders pursuant to clauses (i) and (ii) above, in each case
for cash at the Section 3.9 Sale Price and on the other terms and conditions set
forth in the Section 3.9 Offer Notice. During the Section 3.9 Offer Period, the
Non-Selling Shareholders and, to the extent the Non-Selling Shareholders do not
accept such offer as to all Shares subject to the Section 3.9 Offer, the Company
shall have the right to accept such offer as to all or a portion of the Shares
(provided that the aggregate number of Shares accepted by the Non-Selling
Shareholders and the Company together equals the total number of Shares subject
to the Section 3.9 Offer) by giving a written notice of acceptance to such
Section 3.9 Seller prior to the expiration of such period. Any such notice
delivered on behalf of a Non-Selling Shareholder shall indicate whether such
Person wishes to acquire only the number of Shares computed in accordance with
the provisions of clause (i) above (or a portion thereof) or, if such Person
also wishes to acquire any Shares to be sold pursuant to such Section 3.9 Offer
and not acquired by the other Persons entitled to accept such Section 3.9 Offer,
the maximum number of shares such Non-Selling Shareholder wishes to acquire.
<PAGE> 28
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(d) Each Non-Selling Shareholder and the Company, as the case may be,
shall purchase and pay for all Shares accepted by such Person within a 60-day
period of its (or their) acceptance of any Section 3.9 Offer; provided, however,
that if the purchase and sale of such Shares is subject to any prior regulatory
approval, the time period during which such purchase and sale may be consummated
shall be extended (subject to the 120-day period referred to in Section 3.9(e)
hereof) until the expiration of ten Business Days after all such approvals shall
have been received.
(e) If the aggregate number of Shares accepted by the Non-Selling
Shareholders and the Company pursuant to a Section 3.9 Offer is less than all
the Shares subject to such Section 3.9 Offer or if any required consent or
regulatory approval for the purchase of the Shares subject thereto is not
obtained within 120 days of the acceptance of the Section 3.9 Offer, there shall
commence a 60-day period during which the Section 3.9 Seller that gave the
Section 3.9 Offer Notice shall have the right, subject to any obligations it may
have under Section 3.7 hereof, to effect a transfer of any or all of the Shares
subject to the Section 3.9 Offer on substantially the same terms and conditions
as were set forth in the Section 3.9 Offer Notice and at a price in cash (or,
subject to Section 3.9(f) hereof, for non-cash consideration) not less than the
Section 3.9 Sale Price; provided, however, the provisions of Section 3.7 hereto
are complied with and no Shares are transferred to any Person unless such Person
shall have agreed in writing to be bound by the terms of this Agreement or to an
Adverse Person; provided, further, that if, during such 60-day period, such
Section 3.9 Seller receives an offer for Shares at a price less than the Section
3.9 Sale Price or otherwise on substantially different terms and conditions than
those that were set forth in the Section 3.9 Offer Notice, such Section 3.9
Seller may not accept such offer without repeating the procedures set forth in
this Section 3.9. If such Section 3.9 Seller does not consummate the sale of the
Shares subject to the Section 3.9 Offer in accordance with the foregoing time
limitations, such Section 3.9 Seller must repeat the procedures set forth in
this Section 3.9 with respect to any transfer of Shares permitted by Section 3.4
hereof subject to compliance with this Section 3.9.
(f) A Section 3.9 Seller may transfer Shares in accordance with Section
3.9(e) hereof for consideration other than cash only if the aggregate fair
market value (as defined below) of the non-cash consideration that the Section
3.9 Seller proposes to accept as consideration for such Shares,
<PAGE> 29
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together with any cash consideration, is at least equal to the Section 3.9 Sale
Price. For the purposes of this Section 3.9 (f) only, the aggregate "fair market
value" of any non-cash consideration shall be equal to (i) if such non-cash
consideration consists of (a) equity securities, the aggregate value of such
equity securities based on the last reported sales prices of all such equity
securities as reported by the Nasdaq National Market or, if such equity
securities are listed on a national securities exchange, as reported on such
exchange or, if such equity securities are neither so reported nor listed, the
aggregate value of such equity securities based on the last reported bid prices
of such equity securities or, if no reported bid price is available, an amount
determined in accordance with clause (ii) below or (b) any other securities, the
last reported quote for such securities in the over-the-counter or inter-dealer
market for such securities or, if no reported quote is available, an amount
determined in accordance with clause (ii) below and (ii) in the case of any
other non-cash consideration, the value determined by an investment banking firm
or other appraiser of national standing selected by such Section 3.9 Seller
(which such firm or appraiser shall be reasonably acceptable to the Non-Selling
Shareholders) and set forth in an opinion of such firm or appraiser which
opinion shall be delivered to the Non-Selling Shareholders and the Company by
such Section 3.9 Seller.
ARTICLE 4
CERTAIN REPURCHASES OF COMMON STOCK
4.1 Surrender of Shares. (a) The Company shall have the absolute right,
upon the termination of any Management Shareholder's employment with the Company
(including its Subsidiaries) to repurchase all Shares (other than Vested
Warrants) owned by such Management Shareholder and such Management Shareholder's
Permitted Transferees in accordance with this Article 4. Such right shall
terminate on the first anniversary of the Initial Public Offering of the
Company, except in the case of any termination by the Company of such
Shareholders's employment with the Company (or a Subsidiary of the Company) for
Cause. Upon the termination of any Management Shareholder's employment with the
Company (or any of its Subsidiaries), all Options held by such Management
Shareholder and its Permitted Transferees other than Vested Options shall be
automatically cancelled. The price (the "Repurchase Price") at which each Share
may be purchased by the Company pursuant to this Section 4.1(a) shall be equal
to:
<PAGE> 30
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(i) in the case of any termination by the Company (or a Subsidiary of
the Company) of such Management Shareholder's employment with the Company
(or a Subsidiary of the Company) for Cause or the voluntary termination
within four years of the Effective Date, by such Management Shareholder of
such Management Shareholder's employment with the Company (or a Subsidiary
of the Company), the lesser of (x) the Fair Market Value at the time of
such termination and (y) the purchase price of such Shares;
(ii) in the case of any termination by the Company of such Management
Shareholder's employment with the Company (or a Subsidiary of the Company)
for a reason which does not constitute Cause, the greater of (x) the Fair
Market Value at the time of such termination and (y) the purchase price of
such Shares; and
(iii) in any other case, the Fair Market Value.
Notwithstanding the foregoing, the Repurchase Price of Vested Options purchased
by the Company pursuant to this Section 4.1(a) shall be equal to the Repurchase
Price of each Share underlying a Vested Option (as determined above) less the
exercise price per Share under such Vested Options.
(b) If the Company elects to exercise its right to require any
Management Shareholder and such Management Shareholder's Permitted Transferees
to sell Shares pursuant to Section 4.1(a), the Company shall deliver written
notice to such Management Shareholder and such Management Shareholder's
Permitted Transferees to such effect prior to 180 days after the termination of
such Management Shareholder's employment with the Company (or its Subsidiaries).
In the event that the Company does not exercise its right to repurchase Shares
pursuant to this Section 4.1 within 180 days after such termination, such
Management Shareholder may transfer such Shares, subject to the terms of the
Plan, to any Other Shareholder; provided that such transfer complies with the
Securities Act.
4.2 Method of Repurchase. (a) Upon the receipt of any notice pursuant
to Section 4.1(b), the Shares subject to repurchase pursuant to Section 4.1(a)
(collectively, "Surrendered Shares") shall be repurchased within 30 Business
Days of the date (the "Termination Date") of receipt of such notice; provided
that if the Surrendered Shares become subject to repurchase pursuant to Section
4.1(a) as the result of the death of any Management Shareholder, such
Surrendered Shares may be repurchased within 90 days of the date the will of
such
<PAGE> 31
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Management Shareholder is admitted to probate or, in the event of intestacy,
within 90 days of such death. On the repurchase date, the Management Shareholder
and such Management Shareholder's Permitted Transferees selling such Surrendered
Shares (the "Seller") shall deliver to the Company the certificate or
certificates representing the Shares owned by such Seller on such date against
delivery by the Company to such Seller of a promissory note issued by the
Company (a "Payment Note"). All certificates for Surrendered Shares shall be
Duly Endorsed in favor of the Company by the Seller. If any Seller shall fail to
deliver such Duly Endorsed certificate or certificates to the Company within the
time required, the Company shall cause its books and records to show that the
Surrendered Shares are bound by the provisions of this Section 4.2 and that the
Surrendered Shares, until transferred to the Company, shall not be entitled to
any proxy, dividend or other rights from the date by which such certificate or
certificates should have been delivered to the Company.
(b) Each Payment Note shall (i) be payable to the order of the Seller,
(ii) be issued and dated the date of transfer of the Surrendered Shares by such
Seller to the Company, (iii) be in a principal amount equal to the Repurchase
Price of such Surrendered Shares and (iv) subject to Section 4.3, mature on the
Payment Date immediately following such date of transfer. Each Payment Note
shall bear interest in respect of the unpaid principal amount of such Payment
Note from the Termination Date to the date of payment thereof at a rate per
annum equal to the then-current yield to maturity on United States treasury
bills of comparable maturity, as determined in good faith by the Company.
If any Payment Note is not repaid in full (together with accrued
interest, if any) on the maturity date of such Payment Note as a result of the
limitations set forth in Section 4.3, the Company shall promptly issue to the
holder of such Payment Note a new Payment Note, which shall (i) be payable to
the order of such holder, (ii) be dated the date of issuance of such new Payment
Note, (iii) be in a principal amount equal to the outstanding principal amount
and accrued and unpaid interest, if any, under the Payment Note in respect of
which such new Payment Note is being issued and (iv) subject to Section 4.3,
mature on the Payment Date immediately following the date of issuance of such
new Payment Note. Each such new Payment Note shall bear interest at a rate per
annum equal to the then-current yield to maturity on one year United States
treasury bills. Upon the issuance of such new Payment Note, the holder thereof
shall deliver the Payment Note in respect of
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which such new Payment Note was issued to the Company for cancellation.
(c) The Company shall have the right to resell to any Person any
Surrendered Shares received from a Seller pursuant to this Article 4, whether or
not the applicable Repurchase Price has been paid to such Seller; provided that
any such sale or other disposition by the Company of Surrendered Shares shall
not relieve the Company of its obligation to pay the applicable Repurchase Price
for such Surrendered Shares.
4.3 Payment Limitations. If the aggregate amount of principal of, and
accrued and unpaid interest (if any) on, all Payment Notes to be paid on any
Payment Date, would be greater than the Maximum Obligation (as hereinafter
defined) determined as of such Payment Date, the Company shall apply the cash
available for payment of the Payment Notes up to the amount of such Maximum
Obligation, in the following order:
(i) first, to the payment of Payment Notes issued in connection with
the repurchase of Surrendered Shares as a result of the death or
Disability of any Management Shareholder in chronological order of their
respective Termination Dates; and
(ii) second, to the payment of Payment Notes issued in connection with
the repurchase of Surrendered Shares as a result of any other event
specified in Section 4.1(a), in chronological order of their respective
Termination Dates.
To the extent cash available for payment in respect of any Payment Note shall be
insufficient to pay the principal amount of, plus accrued interest (if any), on
such Payment Note, such cash shall be applied (x) first, to the payment of such
accrued interest and (y) second, to the payment of such principal amount.
For purposes of this Section 4.3, the term "Maximum Obligation" means,
at any time, the maximum amount of cash available to the Company under debt or
lease instruments to which the Company is a party to pay for the repurchase or
redemption of Shares at such time.
4.4 Determination of Fair Market Value. Upon the occurrence of any
event specified in Section 4.1(a) that requires a determination of Fair Market
Value, "Fair Market Value" shall be equal to (i) where the Shares are quoted for
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trading on any national securities exchange (not including any over-the-counter
inter-dealer market), the average of the closing sales or last reported sales
prices for the ten trading days immediately preceding the date of determination
and (ii) in any other case, the fair market value per share as determined in
good faith by the Board, in its sole discretion. In the case of clause (ii)
above, the Board shall give consideration to, among other things, the value of
the Fully Diluted Shares of the Company as a whole and the proportion of the
Fully Diluted Shares of the Company represented by the Surrendered Shares,
including giving effect to any discount for the lack of liquidity of the Shares.
4.5 Right of Company to Designate Third Parties. Notwithstanding
anything contained herein to the contrary, the Company shall have the right (but
not any obligation) to designate third parties to purchase Surrendered Shares in
lieu of purchases by the Company under this Article 4; provided that no such
designation shall relieve the Company of its obligations hereunder and no
Payment Note shall be issued by any party other than the Company without the
consent of the relevant Seller.
4.6 Employment; No Implied Right to Employment. For purposes of this
Agreement, any Management Shareholder's employment with the Company or any
direct or indirect Subsidiary of the Company shall be deemed to be terminated at
such time as the Management Shareholder ceases to be an officer or salaried
employee of the Company or any Subsidiary of the Company. Neither this Agreement
nor any provision hereof nor any action taken or omitted to be taken hereunder
shall be deemed to create or confer on any Management Shareholder any right to
be retained in the employ of the Company or any Affiliate thereof, or to
interfere with or limit in any way the right of the Company or any Affiliate
thereof to terminate the employment of any Management Shareholder at any time.
4.7 Termination of Article 4. Notwithstanding anything else contained
herein, following the expiration of the DLJ Ownership Period, the provisions of
this Article 4 shall terminate with respect to any Shares that have not become
Surrendered Shares prior to the end of the DLJ Ownership Period.
<PAGE> 34
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ARTICLE 5
REGISTRATION RIGHTS
5.1 Demand Registration. (a) Upon the written request of one or more of
the DLJ Entities or, with the consent of DLJ Merchant Banking, Inc., their
Permitted Transferees (each such DLJ Entity and Permitted Transferee, a "Selling
Shareholder" and collectively, the "Selling Shareholders") requesting that the
Company effect the registration under the Securities Act of such Selling
Shareholder's Registrable Stock, and specifying the intended method of
disposition thereof, the Company will promptly give written notice of such
requested registration (a "Demand Registration") to all Shareholders, and
thereupon will use its best efforts to effect, as expeditiously as possible, the
registration under the Securities Act of:
(i) the Registrable Stock that the Company has been so requested to
register by the Selling Shareholders, then held by the Selling
Shareholders; and
(ii) all other Registrable Stock that any other Institutional
Shareholder or any of their Permitted Transferees and, subject to Sections
3.5 and 5.2, any Management Shareholder (all such Shareholders, together
with the Selling Shareholder, the "Holders") has requested the Company to
register by written request received by the Company within 15 days after
the receipt by such Holders of such written notice given by the Company,
all to the extent necessary to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Stock so to be
registered; provided that subject to Section 5.1(e) hereof, the Company shall
not be obligated to effect more than five Demand Registrations by DLJ Entities
pursuant to this Section 5.1 and provided further that any Registrable Stock
that is a Vested Warrant or a Vested Option shall have been exercised prior to
its sale pursuant to any such registration.
Promptly after the expiration of the 15-day period referred to in
Section 5.1(a)(ii) hereof, the Company will notify all the Holders to be
included in the Demand Registration of the other Holders and the number of
shares of Registrable Stock requested to be included therein. The Selling
Shareholder requesting a registration under this Section 5.1(a) may, at any time
prior to the effective date of the registration statement relating to such
registration, revoke such request,
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without liability to any of the other Holders, by providing a written notice to
the Company revoking such request, in which case such request, so revoked, shall
not be considered a Demand Registration.
(b) The Company will pay all Registration Expenses in connection with
any Demand Registration.
(c) A registration requested pursuant to this Section 5.1 shall not be
deemed to have been effected unless the registration statement relating thereto
(i) has become effective under the Securities Act and (ii) has remained
effective for a period of at least 180 consecutive days (or such shorter period
in which all Registrable Stock of the Holders included in such registration has
actually been sold thereunder); provided that if after any registration
statement requested pursuant to this Section 5.1 becomes effective (i) such
registration statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or other governmental agency or court due to the
actions or omissions to act of the Company and (ii) less than 75% of the
Registrable Stock included in such registration has been sold thereunder, such
registration statement shall be at the sole expense of the Company and shall not
be considered a Demand Registration.
(d) If a Demand Registration involves a Public Offering and the
managing underwriter shall advise the Company and the Selling Shareholder that,
in its view, (i) the number of shares of Common Stock requested to be included
in such registration (including Common Stock which the Company proposes to be
included which is not Registrable Stock) exceeds the largest number of Shares
which can be sold without having an adverse effect on such offering, including
the price at which such Shares can be sold or (ii) the inclusion of some or all
of the Shares owned by the Other Shareholders (including any particular category
of Other Shareholders such as the Management Shareholders), would have an
adverse effect on such offering, including the price at which such Shares can be
sold (the "Underwriters' Limitations"), the Company will include in such
registration, in the priority listed below, subject to the Underwriters'
Limitations:
(A) first, all Registrable Stock requested to be included in such
registration by all Institutional Shareholders and any other Holder
(allocated, if necessary, so as to comply with the Underwriters'
Limitations, pro rata among such Institutional Shareholders and such other
Holders on the basis of the relative number of shares of
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Registrable Stock requested to be included in such registration); and
(B) second, any Common Stock proposed to be registered by the Company.
(e) If Registrable Stock representing at least 50% of the number of
Shares requested to be registered by a Selling Shareholder is not included in
any Demand Registration, then such Shareholders may request that the Company
effect an additional registration under the Securities Act of all or part of
such Shareholders' Registrable Stock in accordance with the provisions of this
Section 5.1, and (x) the Company shall pay the Registration Expenses in
connection with such additional registration and (y) such additional
registration shall not be considered a Demand Registration.
5.2 Incidental Registration. (a) If the Company proposes to register
any of its Common Stock under the Securities Act (other than a registration (A)
in connection with an Initial Public Offering, (B) on Form S-8 or S-4 or any
successor or similar forms, (C) relating to Common Stock issuable upon exercise
of employee stock options or in connection with any employee benefit or similar
plan of the Company, (D) in connection with a direct or indirect acquisition by
the Company of another company or business, (E) in connection with sales of
Common Stock or options to employees of the Company or any Subsidiary or (F)
where the primary purpose of such registration relates to a debt financing by
the Company or any Subsidiary), whether or not for sale for its own account, it
will, subject to the provisions of Section 5.2(b) hereof, give prompt written
notice at least 20 days prior to the anticipated filing date of the registration
statement relating to such registration to each Shareholder, which notice shall
set forth such Shareholders' rights under this Section 5.2 and shall offer (i)
all Shareholders, if the proposed registration involves a Public Offering, or
(ii) any Shareholder owning at least 5% of the Shares at the time outstanding,
in any other case, the opportunity to include in such registration statement
such number of shares of Registrable Stock as each such Shareholder may request
(an "Incidental Registration"); provided that any Registrable Stock that is a
Vested Warrant or a Vested Option shall have been exercised prior to its sale
pursuant to any such registration. Upon the written request of any such
Shareholder made within ten days after the receipt of notice from the Company
(which request shall specify the number of shares of Registrable Stock intended
to be disposed of by such Shareholder), the Company will use its best efforts to
effect the
<PAGE> 37
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registration under the Securities Act of all Registrable Stock which
the Company has been so requested to register by such Shareholders, to
the extent requisite to permit the disposition of the Registrable Stock
so to be registered; provided that (I) if such registration involves a
Public Offering, all such Shareholders requesting to be included in the
Company's registration must sell their Registrable Stock to the
underwriters selected as provided in Section 5.4(f) on the same terms
and conditions as apply to the Company, (II) if, at any time after
giving written notice of its intention to register any stock pursuant
to this Section 5.2(a) and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such stock, the
Company shall give written notice to all such Shareholders and,
thereupon, shall be relieved of its obligation to register any
Registrable Stock in connection with such registration (without
prejudice, however, to rights of any Institutional Shareholder under
Section 5.1 hereof) and (III) transfers by Management Stockholders and
their Permitted Transferees shall be subject to Section 3.5. No
registration effected under this Section 5.2 shall relieve the Company
of its obligations to effect a Demand Registration to the extent
required by Section 5.1 hereof. The Company will pay all Registration
Expenses in connection with each registration of Registrable Stock
requested pursuant to this Section 5.2.
(b) If a registration pursuant to this Section 5.2 involves a Public
Offering (other than in the case of a Public Offering requested by any DLJ
Entity in a Demand Registration, in which case the provisions with respect to
priority of inclusion in such offering set forth in Section 5.1(d) shall apply)
and the managing underwriter advises the Company of any Underwriters'
Limitations, the Company will include in such registration, in the following
priority, subject to the Underwriters' Limitations:
(i) first, so much of the Common Stock proposed to be registered by the
Company as would not cause the offering to exceed the Underwriters
Limitations; and
(ii) second, all Registrable Stock requested to be included in such
registration by any Shareholder pursuant to this Section 5.2 (allocated,
if necessary in order to comply with any Underwriters' Limitations, pro
rata among such Shareholders on the basis of the relative number of shares
of Registrable Stock so requested to be included in such registration).
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5.3 Holdback Agreements. If any registration of Registrable Stock shall
be in connection with a Public Offering, each Shareholder agrees not to effect
any sale, transfer or distribution, including any sale pursuant to Rule 144, or
any successor provision, under the Securities Act, of any Registrable Stock, and
not to effect any such sale, transfer or distribution of any other Common Stock
of the Company or of any stock convertible into or exchangeable or exercisable
for any Common Stock of the Company (in each case, other than as part of such
Public Offering) during the 14 days (or such shorter period of which such
Shareholder has notice) prior to the effective date of such registration
statement (except as part of such registration) or during the period after such
effective date that shall be required by such managing underwriter (but not to
exceed 180 days). Other than those granted to Shareholders pursuant to this
Agreement, the Company shall not grant any Person any right to include any
securities in a registration statement filed by or on behalf of the Company.
5.4 Registration Procedures. Whenever Shareholders request that any
Registrable Stock be registered pursuant to Section 5.1 or 5.2 hereof, the
Company will, subject to the provisions of such Sections , use its best efforts
to effect the registration and the sale of such Registrable Stock in accordance
with the intended method of disposition thereof as quickly as practicable, and
in connection with any such request:
(a) The Company will as expeditiously as possible prepare and file with
the SEC a registration statement on any form for which the Company then
qualifies or which counsel for the Company shall deem appropriate and which form
shall be available for the sale of the Registrable Stock to be registered
thereunder in accordance with the intended method of distribution thereof, and
use its best efforts to cause such filed registration statement to become and
remain effective for a period of not less than 270 days.
(b) The Company will, if requested, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish to each
Shareholder and each underwriter, if any, of the Registrable Stock covered by
such registration statement copies of such registration statement as proposed to
be filed, and thereafter the Company will furnish to such Shareholder and
underwriter, if any, such number of copies of such registration statement, each
amendment and supplement thereto (in each case including all exhibits thereto
and documents incorporated by reference therein), the prospectus
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included in such registration statement (including each preliminary prospectus)
and such other documents as such Shareholder or underwriter may reasonably
request in order to facilitate the disposition of the Registrable Stock owned by
such Shareholder.
(c) After the filing of the registration statement, the Company will
promptly notify each Shareholder holding Registrable Stock covered by such
registration statement of any stop order, order or injunction enjoining or
suspending the use or effectiveness of such registration statement issued or
threatened by the SEC, any state securities commission, any other governmental
agency or any court and take all reasonable actions required to prevent the
entry of, or to remove it if entered, such stop order, order or injunction
enjoining or suspending the use or effectiveness of such registration statement.
(d) The Company will use its best efforts to (i) register or qualify
the Registrable Stock covered by such registration statement under such other
securities or blue sky laws of such jurisdictions in the United States as any
Shareholder holding such Registrable Stock reasonably (in light of such
Shareholder's intended plan of distribution) requests and (ii) cause such
Registrable Stock to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business and
operations of the Company and do any and all other acts and things that may be
reasonably necessary or advisable to enable such Shareholder to consummate the
disposition of the Registrable Stock owned by such Shareholder; provided that
the Company will not be required to (A) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
paragraph (d), (B) subject itself to taxation in any such jurisdiction or (C)
consent to general service of process in any such jurisdiction.
(e) The Company will immediately notify each Shareholder holding such
Registrable Stock, at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, of the occurrence of an event requiring
the preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Stock, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading and promptly prepare and make
<PAGE> 40
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available to each such Shareholder any such supplement or amendment.
(f) The DLJ Entities will have the right, in their sole discretion, to
select an underwriter or underwriters in connection with any Public Offering,
which may include any Affiliate of any DLJ Entity. The Company will enter into
customary agreements (including an underwriting agreement in customary form) and
take such other actions as are reasonably required in order to expedite or
facilitate the disposition of Registrable Stock in any such Public Offering,
including the engagement of a "qualified independent underwriter" in connection
with the qualification of the underwriting arrangements with the NASD.
(g) Upon the execution of confidentiality agreements in form and
substance satisfactory to the Company, the Company will make available for
inspection by any Shareholder and any underwriter participating in any
disposition pursuant to a registration statement being filed by the Company
pursuant to this Section 5.4 and any attorney, accountant or other professional
retained by any such Shareholder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company, excluding any information that the Company or its
Subsidiaries are prohibited from disclosing pursuant to special security
agreements with the United States Department of Defense (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any Inspectors in
connection with such registration statement. Records that the Company
determines, in good faith, to be confidential and that it notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a misstatement
or omission in such registration statement or (ii) the release of such Records
is ordered pursuant to a subpoena or other order from a court of competent
jurisdiction. Each Shareholder agrees that information obtained by it as a
result of such inspections shall be deemed confidential and shall not be used by
it as the basis for any market transactions in the securities of the Company or
its Affiliates unless and until such is made generally available to the public.
Each Shareholder further agrees that it will, upon learning that disclosure of
such Records is sought in a court of competent jurisdiction, give notice to the
Company and allow the Company, at its expense, to undertake
<PAGE> 41
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appropriate action to prevent disclosure of the Records deemed confidential.
(h) The Company will furnish to each such Shareholder and to each such
underwriter, if any, a signed counterpart, addressed to such underwriter, of (i)
an opinion or opinions of counsel to the Company and (ii) a comfort letter or
comfort letters from the Company's independent public accountants, each in
customary form and covering such matters of the type customarily covered by
opinions or comfort letters, as the case may be, as a majority of such
Shareholders or the managing underwriter therefor reasonably requests.
(i) The Company will otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering a period of 12 months, beginning within three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
(j) The Company will cooperate with each such Shareholder and each such
underwriter, if any, participating in the disposition of such Registrable Stock
and their respective counsel in connection with any filings required to be made
with the NASD.
The Company may require each such Shareholder to promptly furnish in
writing to the Company such information regarding the distribution of the
Registrable Securities as the Company may from time to time reasonably request
and such other information as may be legally required in connection with such
registration.
Each such Shareholder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 5.4(e)
hereof, such Shareholder will forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such Shareholder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 5.4(e) hereof, and, if so directed by
the Company, such Shareholder will deliver to the Company all copies, other than
any permanent file copies then in such Shareholder's possession, of the most
recent prospectus covering such Registrable Stock at the time of receipt of such
notice. In the event that the Company shall give such notice, the Company shall
extend the period during which such registration
<PAGE> 42
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statement shall be maintained effective (including the period referred to in
Section 5.4(a) hereof) by the number of days during the period from and
including the date of the giving of notice pursuant to Section 5.4(e) hereof to
the date when the Company shall make available to such Shareholder a prospectus
supplemented or amended to conform with the requirements of Section 5.4(e)
hereof.
5.5 Indemnification by the Company. The Company agrees to indemnify and
hold harmless each Shareholder holding Registrable Stock covered by a
registration statement, its officers, directors and agents, and each Person, if
any, who controls such Shareholder within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages, expenses and liabilities (including any and all
investigative, legal and other expenses reasonably incurred in connection with,
and any amount paid in settlement (to the extent set forth in Section 5.7) of,
any action, suit or proceeding or any claim asserted) arising out of or based on
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement or prospectus relating to the Registrable Stock (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or arising out of or based
on any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, expenses or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information furnished in writing to the Company by such
Shareholder or on such Shareholder's behalf expressly for use therein. The
Company also agrees to indemnify any underwriters of the Registrable Stock,
their officers and directors and each person who controls such underwriters on
substantially the same basis as that of the indemnification of the Shareholders
provided in this Section 5.5. This indemnity agreement will be in addition to
any liability the Company might otherwise have.
5.6 Indemnification by Participating Shareholders. Each Shareholder
holding Registrable Stock included in any registration statement agrees,
severally but not jointly, to indemnify and hold harmless the Company, its
officers, directors and agents and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
to such Shareholder, but only with respect to information furnished in writing
by such
<PAGE> 43
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Shareholder or on such Shareholder's behalf expressly for use in any
registration statement or prospectus relating to the Registrable Stock, or any
amendment or supplement thereto, or any preliminary prospectus. Each such
Shareholder also agrees, severally but not jointly, to indemnify and hold
harmless any underwriters of the Registrable Stock, their officers and directors
and each person who controls such underwriters on substantially the same basis
as that of the indemnification of the Company provided in this Section 5.6. As a
condition to including Registrable Stock in any registration statement filed in
accordance with Article 5 hereof, each Shareholder may require that it shall
have received an undertaking reasonably satisfactory to Shareholders holding a
majority of the Registrable Stock included in the registration statement from
any underwriter to indemnify and hold it harmless to the extent customarily
provided by underwriters with respect to similar securities.
5.7 Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
person in respect of which indemnity may be sought pursuant to this Article 5,
such person (an "Indemnified Party") shall promptly notify the person against
whom such indemnity may be sought (the "Indemnifying Party") in writing and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Party, and shall assume the
payment of all fees and expenses; provided that the failure of any Indemnified
Party so to notify the Indemnifying Party shall not relieve the Indemnifying
Party of its obligations hereunder except to the extent that the Indemnifying
Party is materially prejudiced by such failure to notify. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) in the
reasonable judgment of such Indemnified Party representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for the
Indemnified Parties, such firm shall be designated in writing by the DLJ
Entities
<PAGE> 44
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or, if none of the DLJ Entities are Indemnified Parties, the other Indemnified
Parties. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent, or if there be a final judgment for the plaintiff, the Indemnifying
Party shall indemnify and hold harmless such Indemnified Parties from and
against any loss or liability (to the extent stated above) by reason of such
settlement or judgment. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending or
threatened proceeding in respect of which any Indemnified Party is or could have
been a party and indemnity could have been sought hereunder by such Indemnified
Party, unless such settlement includes an unconditional release of such
Indemnified Party from all liability arising out of such proceeding.
5.8 Contribution. If the indemnification provided for in this Article 5
is unavailable to the Indemnified Parties in respect of any losses, claims,
damages or liabilities referred to herein, then each such Indemnifying Party, in
lieu of indemnifying such Indemnified Party, shall contribute to the amount paid
or payable by such Indemnified Party as a result of such losses, claims, damages
or liabilities (i) as between the Company and the Shareholders holding
Registrable Stock covered by a registration statement on the one hand and the
underwriters on the other, in such proportion as is appropriate to reflect the
relative benefits received by the Company and such Shareholders on the one hand
and the underwriters on the other, from the offering of the Registrable
Securities, or if such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits but also
the relative fault of the Company and such Shareholders on the one hand and of
such underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations and (ii) as between the Company on the
one hand and each such Shareholder on the other, in such proportion as is
appropriate to reflect the relative fault of the Company and of each such
Shareholder in connection with such statements or omissions, as well as any
other relevant equitable considerations. The relative benefits received by the
Company and such Shareholders on the one hand and such underwriters on the other
shall be deemed to be in the same proportion as the total proceeds from the
offering (net of underwriting discounts and commissions but before deducting
expenses) received by the Company and such Shareholders bear to the total
underwriting discounts and commissions received by such underwriters, in each
case as set forth in the table on
<PAGE> 45
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the cover page of the prospectus. The relative fault of the Company and such
Shareholders on the one hand and of such underwriters on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company and such
Shareholders or by such underwriters. The relative fault of the Company on the
one hand and of each such Shareholder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and the Shareholders agree that it would not be just and
equitable if contribution pursuant to this Section 5.8 were determined by pro
rata allocation (even if the underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5.8, no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Shareholder
shall be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such Shareholder were offered
to the public exceeds the amount of any damages which such Shareholder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Each such Shareholder's obligation to contribute
pursuant to this Section 5.8 is several in the proportion that the proceeds of
the offering received by
<PAGE> 46
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such Shareholder bears to the total proceeds of the offering received by all
such Shareholders and not joint.
5.9 Participation in Public Offering. No Person may participate in any
Public Offering hereunder unless such Person (a) agrees to sell such Person's
securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements and the provisions of this Agreement in respect of
registration rights.
5.10 Other Indemnification. Indemnification similar to that specified
herein (with appropriate modifications) shall be given by the Company and each
Shareholder participating therein with respect to any required registration or
other qualification of securities under any federal or state law or regulation
or governmental authority other than the Securities Act.
ARTICLE 6
COVENANTS OF THE SHAREHOLDERS
6.1 Confidentiality. (a) Each Shareholder hereby agrees that
Confidential Information (as defined below) was furnished to it and will be
furnished to it in connection with such Shareholder's investment in the Company.
Each Shareholder agrees that he, she or it will not use the Confidential
Information in any way to the competitive disadvantage of the Company or its
Subsidiaries. Each Shareholder further acknowledges and agrees that he, she or
it will not disclose any Confidential Information to any Person; provided that
Confidential Information may be disclosed (i) to such Shareholder's
Representatives (as defined below) in the normal course of the performance of
their duties, (ii) to the extent required by applicable law, rule or regulation
(including complying with any oral or written questions, interrogatories,
requests for information or documents, subpoena, civil investigative demand or
similar process to which a Shareholder is subject), (iii) to any Person to whom
such Shareholder is contemplating a transfer of his, her or its Shares, provided
that such transfer would not be in violation of the provisions of this Agreement
and as long as such Person is advised of the confidential nature of such
information and agrees to be bound by a confidentiality
<PAGE> 47
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agreement in form and substance satisfactory to the Company or (iv) if the prior
written consent of the Board shall have been obtained. Nothing contained herein
shall prevent the use of Confidential Information in connection with the
assertion or defense of any claim by or against the Company or any Shareholder.
(b) "Confidential Information" means all information or material
relating to the Company or its subsidiaries not generally known by non-Company
personnel which (i) is marked "Confidential Information", "Proprietary
Information" or other similar marking, (ii) is known by such Shareholder to be
considered confidential and proprietary by the Company or its subsidiaries or
(iii) derives value by virtue of the fact that it is not generally known;
provided that the term "Confidential Information" does not include information
that (i) was or becomes generally available publicly other than through
disclosure by a Shareholder or his, her or its employees, officers, agents,
partners, advisors or representatives (all such Persons being collectively
referred to as "Representatives") in violation of the Securities Purchase
Agreement, this Agreement or any confidentiality agreement executed in
accordance with Section 5.4(g) or Section 6.1(a), (ii) was available to such
Shareholder on a non-confidential basis prior to disclosure hereunder, excepting
any such information provided to a Shareholder by the Company in connection with
the execution of this Agreement, or (iii) becomes available to a Shareholder
from a source not known to such Shareholder to have a duty of confidentiality
with regard to such information.
6.2 Cooperation in Refinancings. Each Shareholder agrees to use
reasonable best efforts to cooperate with the Company and take such steps as the
Board reasonably deems appropriate in any refinancing of debt of the Company and
any of its Subsidiaries in connection with the financing of the transactions
contemplated in the Securities Purchase Agreement, including by voting its
Shares in favor of any proposed recapitalization of the Company, executing such
documents as the Board reasonably determines should be filed with any
governmental agency and conducting presentations to potential investors and
rating agencies.
<PAGE> 48
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ARTICLE 7
MISCELLANEOUS
7.1 Entire Agreement. This Agreement, the Securities Purchase Agreement
and the documents delivered at the closing of the transactions contemplated
thereby constitute the entire agreement among the parties hereto and supersede
all prior agreements and understandings, oral and written, among the parties
hereto with respect to the subject matter hereof.
7.2 Additional Parties. Only Persons (other than the initial
signatories hereto) that execute and deliver to the Company a signature page
hereto and an agreement (a "joinder agreement") to be bound by this Agreement
shall be deemed to be Shareholders. Except to the extent limited in any joinder
agreement, each Person that so becomes a Shareholder after the date hereof shall
be entitled to all rights and privileges of a Shareholder and subject to all the
obligations hereunder as if he, she or it had been an original signatory to this
Agreement. Each holder of Options shall execute a signature page to (such
execution a condition of the grant of each Option under the Plan), and agree to
be bound by, this Agreement.
7.3 Binding Effect; Benefit. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs,
successors, legal representatives and permitted assigns. Nothing in this
Agreement, expressed or implied, is intended to confer on any Person other than
the parties hereto, and their respective heirs, successors, legal
representatives and permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
7.4 Exclusive Financial Advisor and Investment Banking Advisor;
Management Advisory Fees. During the ten-year period beginning on the Effective
Date, Donaldson, Lufkin & Jenrette Securities Corporation ("DLJSC"), or any
Affiliate of DLJSC that the DLJ Entities may choose in their sole discretion,
shall be engaged as the exclusive financial and investment banking advisor for
the Company on DLJSC's customary terms for similar services. Until the earlier
of (i) the last day of the DLJ Ownership Period and (ii) the consummation of the
Initial Public Offering, each of DLJ Merchant Banking, Inc. and Carlisle Group,
L.P. shall be paid management advisory fees of $250,000 per year, payable in
advance in equal installments at the beginning of each fiscal quarter of the
Company, and with respect to the period from the Effective Date to the end of
the
<PAGE> 49
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fiscal quarter during which the Effective Date falls, a pro rata amount, payable
on the last day of such fiscal quarter. The Company hereby agrees to indemnify
and hold harmless each of DLJSC, DLJ Merchant Banking, Inc. and Carlisle Group,
L.P., and their respective partners, Affiliates, officers, directors and
employees, against any and all loss, liability, expenses, claims, costs, damages
and expenses (including reasonable attorneys' fees) ("Claim Costs") relating to
or arising from its performance of services pursuant to this Section 7.4
(including any acts or omissions associated therewith); provided that no such
Person shall be indemnified to the extent Claim Costs arise as a result of the
gross negligence or misconduct of such Person.
7.5 Assignability. This Agreement shall not be assignable by any party
hereto, except that any Person acquiring Shares who is required by the terms of
this Agreement to become a party hereto shall execute and deliver to the Company
an agreement to be bound by this Agreement and shall thenceforth be a
"Shareholder", and any Shareholder who ceases to beneficially own any Shares
shall cease to be bound by the terms hereof (other than Article 6 and the
provisions of Sections 4.7, 5.5, 5.6, 5.7, 5.8, and 5.10 applicable to such
Shareholder with respect to any offering of Registrable Stock completed before
the date such Shareholder ceased to own any Shares).
7.6 Amendment; Waiver; Termination. (a) No provision of this Agreement
may be amended, waived, terminated or otherwise modified except by an instrument
in writing executed by the Company and the holders of a majority of the Shares
outstanding on the date of such amendment, waiver, termination or modification;
provided that if so amended, waived, terminated or otherwise modified, then such
amendment, waiver, termination or modification shall be binding upon the Company
and all Shareholders.
(b) Notwithstanding Section 7.6(a), except for amendments or
modifications that affect all Shareholders alike, (i) no provision of this
Agreement that is specifically applicable to and adversely affects the interests
of any DLJ Entity may be amended, waived, terminated or otherwise modified
except with the consent of such DLJ Entity, as the case may be, (ii) no
provision of this Agreement that is specifically applicable to and adversely
affects any Management Shareholder may be amended, waived, terminated or
otherwise modified except with the consent of such the Management Shareholder,
and (iii) no provision of this Agreement that is specifically
<PAGE> 50
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applicable to and adversely affects the interests of the Institutional
Shareholders other than the DLJ Entities may be amended, waived, terminated or
otherwise modified except with the consent of the relevant Institutional
Shareholder.
(c) This Agreement shall expire on the tenth anniversary of the date
hereof, unless earlier terminated in accordance with this Section 7.6.
7.7 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmissions) and
shall be given,
if to the Company, to:
Fiberite Holdings, Inc.
c/o DLJ Merchant Banking, Inc.
140 Broadway
New York, New York 10005-1285
Attention: Thompson Dean
Fax: (212) 504-4991
and a copy to the DLJ Entities at their addresses listed below.
if to the DLJ Entities, to:
DLJ Merchant Banking Funding, Inc.
DLJ Merchant Banking Partners, L.P.
140 Broadway
New York, New York 10005-1285
Attention: Thompson Dean
Fax: (212) 504-4991
and to:
DLJ International Partners, C.V.
DLJ Offshore Partners, C.V.
c/o DLJ Offshore Management N.V.
John B. Gorsiraweg 6
Willemstad, Curacao
Netherlands Antilles
Attention: Germaine Sprock
MeesPierson Trust (Curacao) N.V.
if to Carlisle, to:
Carlisle Enterprises, L.P.
<PAGE> 51
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7777 Fay Avenue, Suite 200
La Jolla, CA 92037
Attention: Jim Carlisle
Fax: (619) 459-3776
if to Steeple, to:
Steeple International, Inc.
c/o Valufinder Group, Inc.
Leveraged Finance Group
95 Horatio Street
Suite 303
New York, NY 10014
Attention: Jay M. Aidikoff
Fax: (212) 243-1838
if to any Management Shareholder, to:
Fiberite, Inc.
2055 East Technology Circle
Tempe, AZ 85284
Attention: Chief Executive Officer
Fax: (602) 730-2097
All notices, requests and other communications shall be deemed received
on the date of receipt by the recipient thereof if received prior to 5 p.m. in
the place of receipt and such day is a Business Day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding Business Day in the place of receipt.
Any notice, request or other written communication sent by facsimile
transmission shall be confirmed by mail, sent within two Business Days, or by
personal delivery, whether courier or otherwise, made within two Business Days
after the date of such facsimile transmission.
Any Person who becomes a Shareholder shall provide its address and fax
number to the Company, which shall promptly provide such information to DLJ
Merchant Banking, Inc.
7.8 Headings. The headings contained in this Agreement are for
convenience only and shall not affect the meaning or interpretation of this
Agreement.
7.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
<PAGE> 52
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7.10 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW RULES OF SUCH STATE.
7.11 Specific Enforcement. Each party hereto acknowledges that the
remedies at law of the other parties for a breach or threatened breach of this
Agreement would be inadequate and, in recognition of this fact, any party to
this Agreement, without posting any bond, and in addition to all other remedies
which may be available, shall be entitled to obtain equitable relief in the form
of specific performance, a temporary restraining order, a temporary or permanent
injunction or any other equitable remedy which may then be available.
7.12 Consent to Jurisdiction. Each party hereto irrevocably submits to
the non-exclusive jurisdiction of any Federal court sitting in New York over any
suit, action or proceeding arising out of or relating to this Agreement and
waives, to the fullest extent permitted by law, any objection it may now or
hereafter have to the laying of venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit, action or proceeding
brought in such a court has been brought in an inconvenient forum.
<PAGE> 53
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
FIBERITE HOLDINGS, INC.
By: /s/ Thompson Dean
----------------------------
Name: Thompson Dean
Title: Director
CARLISLE-FIBERITE INVESTORS, L.P.
By: Carlisle Group, L.P.
its General Partner
By: Carlisle Enterprises, L.P.
its General Partner
By: /s/ Dennis A. Dunn
----------------------------
Name: Dennis A. Dunn
Title: General Partner
DLJ MERCHANT BANKING PARTNERS, L.P.
By: DLJ MERCHANT BANKING, INC.
Managing General Partner
By: /s/ Thompson Dean
----------------------------
Name: Thompson Dean
Title: Director
DLJ INTERNATIONAL PARTNERS, C.V.
By: DLJ MERCHANT BANKING, INC.
Advisory General Partner
By: /s/ Thompson Dean
----------------------------
Name: Thompson Dean
Title: Director
<PAGE> 54
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DLJ OFFSHORE PARTNERS, C.V.
By: DLJ MERCHANT BANKING, INC.
Advisory General Partner
By: /s/ Thompson Dean
----------------------------
Name: Thompson Dean
Title: Director
DLJ MERCHANT BANKING FUNDING, INC.
By: /s/ Reid S. Perper
----------------------------
Name: Reid S. Perper
Title:
STEEPLE INTERNATIONAL, INC.
By: /s/ Jay M. Adikoff
----------------------------
Name: Jay M. Adikoff
Title: President
<PAGE> 55
Exhibit A
Initial Ownership of Common Stock of Fiberite Holdings, Inc.
<TABLE>
<CAPTION>
Number of Percentage of
Shares of Total Shares
Shareholder Common Stock of Common Stock
----------- ------------ ---------------
<S> <C> <C>
DLJ MERCHANT BANKING PARTNERS, L.P. 4,226,157 42.26%
DLJ INTERNATIONAL PARTNERS, C.V. 1,889,701 18.90
DLJ OFFSHORE PARTNERS, C.V. 109,566 1.10
DLJ MERCHANT BANKING FUNDING, INC. 2,746,398 27.46
CARLISLE-FIBERITE INVESTORS, L.P. 928,530 9.28
STEEPLE INTERNATIONAL, INC. 99,648 1.00
</TABLE>
<PAGE> 56
AMENDMENT OF SHAREHOLDERS AGREEMENT
THIS AMENDMENT OF SHAREHOLDERS AGREEMENT (the "Amendment") is made as
of December 1, 1996 by and among Fiberite Holdings, Inc. (the "Company") and the
shareholder parties to the Shareholders Agreement dated October 6, 1995.
RECITALS
WHEREAS, on October 6, 1995, the Company entered into a Shareholders
Agreement regarding certain rights of shareholders of the Company, (the
"Agreement"), which Agreement was among the Company and the shareholders listed
on the signature page thereto (the "Shareholders");
WHEREAS, on July 1, 1996, the Company entered into a Securities
Purchase Agreement (the "Purchase Agreement") among the Company and the
purchasers listed on the signature page thereto (the "Purchasers"), which
Purchase Agreement contained certain provisions regarding repurchase rights in
favor of the Company for the securities being acquired by the Purchasers
pursuant thereto;
WHEREAS, on July 1, 1996 the Company entered into a number of Option
Agreements between the Company and the optionees listed on the signature pages
thereto (the "Optionees"), pursuant to which the Company granted to each
Optionee an option to purchase the number of shares of Common Stock of the
Company provided in each Optionee's Option Agreement.
WHEREAS, on July 1, 1996 each of the Purchasers and each of the
Optionees executed a Joinder Agreement, pursuant to which each Purchaser and
each Optionee became a party to the Agreement;
WHEREAS, the Company, the Shareholders, the Purchasers and the
Optionees desire that the repurchase rights contained in the Agreement be
superseded by the repurchase rights contained in the Purchase Agreement or other
repurchase rights substantially similar thereto.
AGREEMENT
NOW, THEREFORE, in consideration the foregoing and the promises and
covenants contained herein, the sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. Amendment. The provisions of Article 4 of the Agreement
entitled "Certain Repurchases of Common Stock" shall not apply to the Management
Shareholders listed on the Schedule of Purchasers attached hereto as Exhibit A,
and
-1-
<PAGE> 57
the provisions of Article VII of the Purchase Agreement entitled "Vesting and
Company's Repurchase Right" shall apply to all shares of Common Stock acquired
by the Management Shareholders pursuant to the Purchase Agreement or upon
exercise of any of the Option Agreements.
2. Additions to Schedule of Purchasers. The undersigned hereby
agree and empower the Board of Directors of the Company (the "Board") to add the
names of additional Management Shareholders to the Schedule of Purchasers
attached hereto as Exhibit A upon resolution by the Board.
3. Capitalized Terms. All capitalized terms in this Amendment not
otherwise defined shall have the meaning ascribed them in the Agreement.
4. Entire Agreement. The Agreement, as amended by this Amendment
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
5. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be an original, and all of which shall
together constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment of
Shareholders Agreement as of the date first written above.
"COMPANY"
Fiberite Holdings, Inc.
By: /s/ James Ashton
------------------------------------
Its: Vice-President
------------------------------------
"SHAREHOLDERS"
CARLISLE-FIBERITE INVESTORS, L.P.
By: Carlisle Group, L.P.
its General Partner
By: Carlisle Enterprises, L.P.
its General Partner
By: /s/ James S. Carlisle
------------------------------------
Name: James S. Carlisle
Title:
-2-
<PAGE> 58
DLJ MERCHANT BANKING PARTNERS, L.P.
By: DLJ Merchant Banking, Inc.
Managing General Partner
By: /s/ Thompson Dean
------------------------------------
Name: Thompson Dean
Title:
DLJ INTERNATIONAL PARTNERS, C.V.
By: DLJ Merchant Banking, Inc.
Advisory General Partner
By: /s/ Thompson Dean
------------------------------------
Name: Thompson Dean
Title:
DLJ OFFSHORE PARTNERS, C.V.
By: DLJ Merchant Banking, Inc.
Advisory General Partner
By: /s/ Thompson Dean
------------------------------------
Name: Thompson Dean
Title:
DLJ MERCHANT BANKING FUNDING, INC.
By: /s/ Thomas E. Seigler
------------------------------------
Name: Thomas E. Seigler
Title: Secretary
STEEPLE INTERNATIONAL, INC.
By:
------------------------------------
Name:
Title:
-3-
<PAGE> 1
Exhibit 10.1
INDEMNITY AGREEMENT
This Indemnity Agreement, dated as of , is made by
and between Fiberite Holdings, Inc., a Delaware corporation (the "Company"), and
________________________ (the "Indemnitee").
RECITALS
A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors, officers or agents of corporations
unless they are protected by comprehensive liability insurance or
indemnification, due to increased exposure to litigation costs and risks
resulting from their service to such corporations, and due to the fact that the
exposure frequently bears no reasonable relationship to the compensation of such
directors, officers and other agents.
B. The statutes and judicial decisions regarding the duties of
directors and officers are often difficult to apply, ambiguous, or conflicting,
and therefore fail to provide such directors, officers and agents with adequate,
reliable knowledge of legal risks to which they are exposed or information
regarding the proper course of action to take.
C. Plaintiffs often seek damages in such large amounts and the costs of
litigation may be so enormous (whether or not the case is meritorious), that the
defense and/or settlement of such litigation is often beyond the personal
resources of directors, officers and other agents.
D. The Company believes that it is unfair for its directors, officers
and agents and the directors, officers and agents of its subsidiaries to assume
the risk of huge judgments and other expenses which may occur in cases in which
the director, officer or agent received no personal profit and in cases where
the director, officer or agent was not culpable.
E. The Company recognizes that the issues in controversy in litigation
against a director, officer or agent of a corporation such as the Company or its
subsidiaries are often related to the knowledge, motives and intent of such
director, officer or agent, that he is usually the only witness with knowledge
of the essential facts and exculpating circumstances regarding such matters, and
that the long period of time which usually elapses before the trial or other
disposition of such litigation often extends beyond the time that the director,
officer or agent can reasonably recall such matters; and may extend beyond the
normal time for retirement for such director, officer or agent with the result
that he, after retirement or in the event of his
1
<PAGE> 2
death, his spouse, heirs, executors or administrators, may be faced with limited
ability and undue hardship in maintaining an adequate defense, which may
discourage such a director, officer or agent from serving in that position.
F. Based upon their experience as business managers, the Board of
Directors of the Company (the "Board") has concluded that, to retain and attract
talented and experienced individuals to serve as directors, officers and agents
of the Company and its subsidiaries and to encourage such individuals to take
the business risks necessary for the success of the Company and its
subsidiaries, it is necessary for the Company to contractually indemnify its
directors, officers and agents and the directors, officers and agents of its
subsidiaries, and to assume for itself maximum liability for expenses and
damages in connection with claims against such directors, officers and agents in
connection with their service to the Company and its subsidiaries, and has
further concluded that the failure to provide such contractual indemnification
could result in great harm to the Company and its subsidiaries and the Company's
stockholders.
G. Section 145 of the General Corporation Law of Delaware, under which
the Company is organized ("Section 145"), empowers the Company to indemnify its
directors, officers, employees and agents by agreement and to indemnify persons
who serve, at the request of the Company, as the directors, officers, employees
or agents of other corporations or enterprises, and expressly provides that the
indemnification provided by Section 145 is not exclusive.
H. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director, officer or agent of the Company and/or one or
more subsidiaries of the Company free from undue concern for claims for damages
arising out of or related to such services to the Company and/or one or more
subsidiaries of the Company.
I. Indemnitee is willing to serve, or to continue to serve, the Company
and/or one or more subsidiaries of the Company, provided that he is furnished
the indemnity provided for herein.
2
<PAGE> 3
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions.
(a) Agent. For the purposes of this Agreement, "agent" of the
Company means any person who is or was a director, officer, employee or other
agent of the Company or a subsidiary of the Company; or is or was serving at the
request of, for the convenience of, or to represent the interests of the Company
or a subsidiary of the Company as a director, officer, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise; or was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor corporation of the Company or a
subsidiary of the Company, or was a director, officer, employee or agent of
another enterprise at the request of, for the convenience of, or to represent
the interests of such predecessor corporation.
(b) Expenses. For purposes of this Agreement, "expenses"
include all out-of-pocket costs of any type or nature whatsoever (including,
without limitation, all attorneys' fees and related disbursements), actually and
reasonably incurred by the Indemnitee in connection with either the
investigation, defense or appeal of a proceeding or establishing or enforcing a
right to indemnification under this Agreement or Section 145 or otherwise;
provided, however, that "expenses" shall not include any judgments, fines, ERISA
excise taxes or penalties, or amounts paid in settlement of a proceeding.
(c) Proceeding. For the purposes of this Agreement,
"proceeding" means any threatened, pending, or completed action, suit or other
proceeding, whether civil, criminal, administrative, or investigative.
(d) Subsidiary. For purposes of this Agreement, "subsidiary"
means any corporation of which more than 50% of the outstanding voting
securities is owned directly or indirectly by the Company, by the Company and
one or more other subsidiaries, or by one or more other subsidiaries.
2. Agreement to Serve. The Indemnitee agrees to serve and/or
continue to serve as agent of the Company, at its will (or under separate
agreement, if such agreement exists), in the capacity Indemnitee currently
serves as an agent of the Company, so long as he is duly appointed or elected
and qualified in accordance with the applicable provisions of the Bylaws of the
Company or any subsidiary of the Company or until such time as he tenders his
resignation in writing; provided,
3
<PAGE> 4
however, that nothing contained in this Agreement is intended to create any
right to continued employment by Indemnitee.
3. Mandatory Indemnification. Subject to Section 8 below, the
Company indemnify the Indemnitee as follows:
(a) Successful Defense. To the extent the Indemnitee has been
successful on the merits or otherwise in defense of any proceeding (including,
without limitation, an action by or in the right of the Company) to which the
Indemnitee was a party by reason of the fact that he is or was an agent of the
Company at any time, against all expenses of any type whatsoever actually and
reasonably incurred by him in connection with the investigation, defense or
appeal of such proceeding.
(b) Third Party Actions. If the Indemnitee is a person who was
or is a party or is threatened to be made a party to any proceeding (other than
an action by or in the right of the Company) by reason of the fact that he is or
was an agent of the Company, or by reason of anything done or not done by him in
any such capacity, the Company shall indemnify the Indemnitee against any and
all expenses and liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in
settlement) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal of such proceeding, provided the
Indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company and its stockholders, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
(c) Derivative Actions. If the Indemnitee is a person who was
or is a party or is threatened to be made a party to any proceeding by or in the
right of the Company by reason of the fact that he is or was an agent of the
Company, or by reason of anything done or not done by him in any such capacity,
the Company shall indemnify the Indemnitee against all expenses actually and
reasonably incurred by him in connection with the investigation, defense,
settlement, or appeal of such proceeding, provided the Indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and its stockholders; except that no indemnification
under this subsection 3(c) shall be made in respect to any claim, issue or
matter as to which such person shall have been finally adjudged to be liable to
the Company by a court of competent jurisdiction unless and only to the extent
that the court in which such proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such amounts which the court shall deem proper.
4
<PAGE> 5
(d) Actions where Indemnitee is Deceased. If the Indemnitee is a
person who was or is a party or is threatened to be made a party to any
proceeding by reason of the fact that he is or was an agent of the Company, or
by reason of anything done or not done by him in any such capacity, and if prior
to, during the pendency of after completion of such proceeding Indemnitee
becomes deceased, the Company shall indemnify the Indemnitee's heirs, executors
and administrators against any and all expenses and liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
and penalties, and amounts paid in settlement) actually and reasonably incurred
to the extent Indemnitee would have been entitled to indemnification pursuant to
Sections 3(a), 3(b), or 3(c) above were Indemnitee still alive.
(e) Notwithstanding the foregoing, the Company shall not be
obligated to indemnify the Indemnitee for expenses or liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
and penalties, and amounts paid in settlement) for which payment is actually
made to or on behalf of Indemnitee under a valid and collectible insurance
policy of D&O Insurance, or under a valid and enforceable indemnity clause,
by-law or agreement.
4. Partial Indemnification. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts
paid in settlement) incurred by him in the investigation, defense, settlement or
appeal of a proceeding, but not entitled, however, to indemnification for all of
the total amount hereof, the Company shall nevertheless indemnify the Indemnitee
for such total amount except as to the portion hereof to which the Indemnitee is
not entitled.
5. Mandatory Advancement of Expenses. Subject to Section 7(a) below,
the Company shall advance all expenses incurred by the Indemnitee in connection
with the investigation, defense, settlement or appeal of any proceeding to which
the Indemnitee is a party or is threatened to be made a party by reason of the
fact that the Indemnitee is or was an agent of the Company. Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall be determined ultimately that the Indemnitee is not entitled to be
indemnified by the Company as authorized hereby. The advances to be made
hereunder shall be paid by the Company to the Indemnitee within twenty (20) days
following delivery of a written request therefor by the Indemnitee to the
Company.
6. Notice and Other Indemnification Procedures.
(a) Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
5
<PAGE> 6
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.
(b) If, at the time of the receipt of a notice of the
commencement of a proceeding pursuant to Section 6(a) hereof, the Company has
D&O Insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(c) In the event the Company shall be obligated to pay the
expenses of any proceeding against the Indemnitee, the Company, if appropriate,
shall be entitled to assume the defense of such proceeding, with counsel
approved by the Indemnitee, upon the delivery to the Indemnitee of written
notice of its election so to do. After delivery of such notice, approval of such
counsel by the Indemnitee and the retention of such counsel by the Company, the
Company will not be liable to the Indemnitee under this Agreement for any fees
of counsel subsequently incurred by the Indemnitee with respect to the same
proceeding, provided that (i) the Indemnitee shall have the right to employ his
counsel in any such proceeding at the Indemnitee's expense; and (ii) if (A) the
employment of counsel by the Indemnitee has been previously authorized by the
Company, (B) the Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and the Indemnitee in the conduct of
any such defense, or (C) the Company shall not, in fact, have employed counsel
to assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.
7. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance
expenses to the Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by the Indemnitee and not by way of defense, unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board, (iii) such indemnification is provided by the Company,
in its sole discretion, pursuant to the powers vested in the Company under the
General Corporation Law of Delaware or (iv) the proceeding is brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise as required under Section 145.
(b) Lack of Good Faith. To indemnify the Indemnitee for any
expenses incurred by the Indemnitee with respect to any proceeding instituted by
the
6
<PAGE> 7
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
(c) Unauthorized Settlements. To indemnify the Indemnitee under
this Agreement for any amounts paid in settlement of a proceeding unless the
Company consents to such settlement, which consent shall not be unreasonably
withheld.
8. Non-exclusivity. The provisions for indemnification and advancement
of expenses set forth in this Agreement shall not be deemed exclusive of any
other rights which the Indemnitee may have under any provision of law, the
Company's Certificate of Incorporation or Bylaws, the vote of the Company's
stockholders or disinterested directors, other agreements, or otherwise, both as
to action in his official capacity and to action in another capacity while
occupying his position as an agent of the Company, and the Indemnitee's rights
hereunder shall continue after the Indemnitee has ceased acting as an agent of
the Company and shall inure to the benefit of the heirs, executors and
administrators of the Indemnitee.
9. Enforcement. Any right to indemnification or advances granted by
this Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee
in any court of competent jurisdiction if (i) the claim for indemnification or
advances is denied, in whole or in part, or (ii) no disposition of such claim is
made within ninety (90) days of request therefor. Indemnitee, in such
enforcement action, if successful in whole or in part, shall be entitled to be
paid also the expense of prosecuting his claim. It shall be a defense to any
action for which a claim for indemnification is made under this Agreement (other
than an action brought to enforce a claim for expenses pursuant to Section 5
hereof, provided that the required undertaking has been tendered to the Company)
that Indemnitee is not entitled to indemnification because of the limitations
set forth in Sections 3 and 7 hereof. Neither the failure of the Company
(including its Board of Directors or its stockholders) to have made a
determination prior to the commencement of such enforcement action that
indemnification of Indemnitee is proper in the circumstances, nor an actual
determination by the Company (including its Board of Directors or its
stockholders) that such indemnification is improper, shall be a defense to the
action or create a presumption that Indemnitee is not entitled to
indemnification under this Agreement or otherwise.
10. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
7
<PAGE> 8
11. Survival of Rights.
(a) All agreements and obligations of the Company contained
herein shall continue during the period Indemnitee is an agent of the Company
and shall continue thereafter so long as Indemnitee shall be subject to any
possible claim or threatened, pending or completed action, suit or proceeding,
whether civil, criminal, arbitrational, administrative or investigative, by
reason of the fact that Indemnitee was serving in the capacity referred to
herein.
(b) The Company shall require any successor to the Company
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place.
12. Interpretation of Agreement. It is understood that the parties
hereto intend this Agreement to be interpreted and enforced so as to provide
indemnification to the Indemnitee to the fullest extent permitted by law
including those circumstances in which indemnification would otherwise be
discretionary.
13. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
(i) the validity, legality and enforceability of the remaining provisions of the
Agreement (including without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (ii) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 12 hereof.
14. Modification and Waiver. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
15. Notice. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee or (ii) if mailed by
certified or registered mail with postage prepaid, on the third business day
after the mailing
8
<PAGE> 9
date. Addresses for notice to either party are as shown on the signature page of
this Agreement, or as subsequently modified by written notice.
16. Governing Law. This Agreement shall be governed exclusively by and
construed according to the laws of the State of Delaware as applied to contracts
between Delaware residents entered into and to be performed entirely within
Delaware.
9
<PAGE> 10
The parties hereto have entered into this Indemnity Agreement effective
as of the date first above written.
THE COMPANY:
FIBERITE HOLDINGS, INC.
By
--------------------------------
-----------------------------------
(Printed Name)
Title
-----------------------------
Address:2055 East Technology Circle
-----------------------------------
Tempe, AZ 85284
-----------------------------------
INDEMNITEE:
By
--------------------------------
- ------------------------------------ -----------------------------------
(Indemnitee's Printed Name)
Address:
-----------------------------------
-----------------------------------
10
<PAGE> 1
EXHIBIT 10.2
FIBERITE HOLDINGS, INC.
1995 LONG TERM INCENTIVE AND SHARE AWARD PLAN
<PAGE> 2
FIBERITE HOLDINGS, INC.
- --------------------------------------------------------------------------------
1995 LONG TERM INCENTIVE AND SHARE AWARE PLAN
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
1. Purposes .............................................................. 1
2. Definitions ............................................................ 1
3. Administration.......................................................... 4
(a) Authority of the Committee......................................... 4
(b) Manner of Exercise of Committee Authority.......................... 5
(c) Limitation of Liability............................................ 5
4. Shares Subject to the Plan.............................................. 6
5. Specific Terms of Awards................................................ 7
(a) General............................................................ 7
(b) Options............................................................ 7
(c) SARs............................................................... 8
(d) Restricted Shares.................................................. 9
(e) Restricted Share Units............................................. 10
(f) Performance Shares and Performance Units........................... 11
(g) Dividend Equivalents............................................... 12
(h) Other Share-Based Awards........................................... 12
6. Certain Provisions Applicable to Awards................................. 13
(a) Stand-Alone, Additional, Tandem and Substitute Awards.............. 13
(b) Terms of Awards.................................................... 13
(c) Form of Payment Under Awards....................................... 13
(d) Nontransferability................................................. 14
7. General Provisions...................................................... 14
(a) Compliance with Legal and Trading Requirements..................... 14
(b) No Right to Continued Employment or Service........................ 14
(c) Taxes.............................................................. 14
(d) Changes to the Plan and Awards..................................... 15
(e) No Rights to Awards; No Shareholder Rights......................... 15
(f) Unfunded Status of Awards.......................................... 15
(g) Nonexclusivity of the Plan......................................... 15
(h) Not Compensation for Benefit Plans................................. 16
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C>
(i) No Fractional Shares............................................... 16
(j) Governing Law...................................................... 16
(k) Effective Date; Plan Termination................................... 16
(l) Titles and Headings................................................ 16
</TABLE>
-ii-
<PAGE> 4
FIBERITE HOLDINGS, INC.
- --------------------------------------------------------------------------------
1995 LONG TERM INCENTIVE AND SHARE AWARE PLAN
- --------------------------------------------------------------------------------
1. Purposes. The purposes of the 1995 Long Term Incentive and Share
Award Plan are to advance the interests of Fiberite Holdings, Inc. and its
shareholders by providing a means to attract, retain, and motivate employees and
directors of the Company upon whose judgment, initiative and efforts the
continued success, growth and development of the Company is dependent.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below:
(a) "Affiliate" means any entity other than the Company and its
Subsidiaries that is designated by the Board or the Committee as a
participating employer under the Plan, provided that the Company directly or
indirectly owns at least 20% of the combined voting power of all classes of
stock of such entity or at least 20% of the ownership interests in such
entity.
(b) "Award" means any Option, SAR, Restricted Share, Restricted Share
Unit, Performance Share, Performance Unit, Dividend Equivalent, or Other
Share-Based Award granted to an Eligible Employee under the Plan.
(c) "Award Agreement" means any written agreement, contract, or other
instrument or document evidencing an Award.
(d) "Beneficiary" means the person, persons, trust or trusts which have
been designated by such Eligible Employee in his or her most recent written
beneficiary designation filed with the Company to receive the benefits
specified under this Plan upon the death of the Eligible Employee, or, if
there is no designated Beneficiary or surviving designated Beneficiary, then
the person, persons, trust or trusts entitled by will or the laws of descent
and distribution to receive such benefits.
(e) "Board" means the Board of Directors of the Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time. References to any provision of the Code shall be deemed to
include successor provisions thereto and regulations thereunder.
<PAGE> 5
-2-
(g) "Committee" means the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the
Plan; provided, however, that the Committee shall consist of two or more
directors of the Company, each of whom is a "disinterested person" within
the meaning of Rule 16b-3 under the Exchange Act, to the extent applicable.
(h) "Company" means Fiberite Holdings, Inc. a corporation organized
under the laws of Delaware, or any successor corporation.
(i) "Dividend Equivalent" means a right, granted under Section 5(g), to
receive cash, Shares, or other property equal in value to dividends paid
with respect to a specified number of Shares. Dividend Equivalents may be
awarded on a free-standing basis or in connection with another Award, and
may be paid currently or on a deferred basis.
(j) "Eligible Employee" means an employee or director (including
nonemployee directors) of the Company or its Subsidiaries and Affiliates who
is responsible for or contributes to the management, growth and/or
profitability of the business of the Company, its Subsidiaries or
Affiliates.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time. References to any provision of the Exchange Act
shall be deemed to include successor provisions thereto and regulations
thereunder.
(l) "Fair Market Value" means, with respect to Shares or other
property, the fair market value of such Shares or other property determined
by such methods or procedures as shall be established from time to time by
the Committee. Unless otherwise determined by the Committee in good faith,
the Fair Market Value of Shares as of any given date prior to the existence
of a public market for the Company's Shares shall mean the Company's book
value. Thereafter, unless otherwise determined by the Committee in good
faith, the Fair Market Value of Shares shall mean the mean between the high
and low selling prices per Share on the immediately preceding date (or, if
the Shares were not traded on that day, the next preceding day that the
Shares were traded) on the principal exchange on which the Shares are
traded, as such prices are officially quoted on such exchange.
<PAGE> 6
-3-
(m) "ISO" means any Option intended to be and designated as an
incentive stock option within the meaning of Section 422 of the Code.
(n) "NQSO" means any Option that is not an ISO.
(o) "Option" means a right granted under Section 5(b) to purchase
Shares.
(p) "Other Share-Based Award" means a right, granted under Section
5(h), that relates to or is valued by reference to Shares.
(q) "Participant" means an Eligible Employee who has been granted an
Award or Option under the Plan.
(r) "Performance Share" means a performance share granted under Section
5(f).
(s) "Performance Unit" means a performance unit granted under Section
5(f).
(t) "Plan" means this 1995 Long Term Incentive and Share Award Plan.
(u) "Restricted Shares" means an Award of Shares under Section 5(d)
that may be subject to certain restrictions and to a risk of forfeiture.
(v) "Restricted Share Unit" means a right, granted under Section 5(e),
to receive Shares or cash at the end of a specified deferral period.
(w) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(x) "SAR" or "Share Appreciation Right" means the right, granted under
Section 5(c), to be paid an amount measured by the difference between the
exercise price of the right and the Fair Market Value of Shares on the date
of exercise of the right, with payment to be made in cash, Shares, or
property as specified in the Award or determined by the Committee.
(y) "Shares" means common stock, $.01 par value per share, of the
Company.
<PAGE> 7
-4-
(z) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns
shares possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee, and the Committee shall have full and final authority to take the
following actions, in each case subject to and consistent with the
provisions of the Plan:
(i) to select Eligible Employees to whom Awards may be granted;
(ii) to designate Affiliates;
(iii) to determine the type or types of Awards to be granted to
each Eligible Employee;
(iv) to determine the type and number of Awards to be granted, the
number of Shares to which an Award may relate, the terms and conditions
of any Award granted under the Plan (including, but not limited to, any
exercise price, grant price, or purchase price, and any bases for
adjusting such exercise, grant or purchase price, any restriction or
condition, any schedule for lapse of restrictions or conditions
relating to transferability or forfeiture, exercisability, or
settlement of an Award, and waiver or accelerations thereof, and
waivers of performance conditions relating to an Award, based in each
case on such considerations as the Committee shall determine), and all
other matters to be determined in connection with an Award;
(v) to determine whether, to what extent, and under what
circumstances an Award may be settled, or the exercise price of an
Award may be paid, in cash, Shares, Other Awards, or other property, or
an Award may be cancelled, forfeited, exchanged, or surrendered;
(vi) to determine whether, to what extent, and under what
circumstances cash, Shares, other Awards, or other property payable
with respect to an Award will be
<PAGE> 8
-5-
deferred either automatically, at the election of the Committee, or at
the election of the Eligible Employee;
(vii) to prescribe the form of each Award Agreement, which need not
be identical for each Eligible Employee;
(viii) to adopt, amend, suspend, waive, and rescind such rules and
regulations and appoint such agents as the Committee may deem necessary
or advisable to administer the Plan;
(ix) to correct any defect or supply any omission or reconcile any
inconsistency in the Plan and to construe and interpret the Plan and
any Award, rules and regulations, Award Agreement, or other instrument
hereunder;
(x) to accelerate the exercisability or vesting of all or any
portion of any Award or to extend the period during which an Award is
exercisable; and
(xi) to make all other decisions and determinations as may be
required under the terms of the Plan-or as the Committee may deem
necessary or advisable for the administration of the Plan.
(b) Manner of Exercise of Committee Authority. The committee shall have
sole discretion in exercising its authority under the Plan. Any action of
the Committee with respect to the Plan shall be final, conclusive, and
binding on all persons, including the Company, Subsidiaries, Affiliates,
Eligible Employees, any person claiming any rights under the Plan from or
through any Eligible Employee, and shareholders. The express grant of any
specific power to the Committee, and the taking of any action by the
Committee, shall not be construed as limiting any power or authority of the
Committee. The Committee may delegate to officers or managers of the Company
or any Subsidiary or Affiliate the authority, subject to such terms as the
Committee shall determine, to perform administrative functions and, with
respect to Awards granted to persons not subject to Section 16 of the
Exchange Act, to perform such other functions as the Committee may
determine, to the extent permitted under Rule 16b-3 (if applicable) and
applicable law.
(c) Limitation of Liability. Each member of the Committee shall be
entitled to, in good faith, rely or act upon any report or other information
furnished to him or her
<PAGE> 9
-6-
by any officer or other employee of the Company or any Subsidiary or
Affiliate, the Company's independent certified public accountants, or other
professional retained by the Company to assist in the administration of the
Plan. No member of the Committee, nor any-officer or employee of the Company
acting on behalf of the Committee shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to
the Plan, and all members of the Committee and any officer or employee of
the Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company with respect to any such
action, determination, or interpretation.
4. Shares Subject to the Plan.
(a) Subject to adjustment as provided in Section 4(c) hereof, the total
number of Shares reserved for issuance in connection with Awards under the
Plan shall be [500,000]. No Award may be granted if the number of Shares to
which such Award relates, when added to the number of Shares previously
issued under the Plan, exceeds the number of Shares reserved under the
preceding sentence. If any Awards are forfeited, cancelled, terminated,
exchanged or surrendered or such Award is settled in cash or otherwise
terminates without a distribution of Shares to the Participant, any Shares
counted against the number of Shares reserved and available under the Plan
with respect to such Award shall, to the extent of any such forfeiture,
settlement, termination, cancellation, exchange or surrender, again be
available for Awards under the Plan; provided, however, that in the case of
forfeiture, cancellation, exchange or surrender of Restricted Shares or
Restricted Share Units with respect to which dividends or Dividend
Equivalents have been paid or accrued, such number of Shares shall not be
available for Awards unless, in the case of Shares with respect to which
dividends or Dividend Equivalents were accrued but unpaid, such dividends
and Dividend Equivalents are also forfeited, cancelled, exchanged or
surrendered. Upon the exercise of any Award granted in tandem with any other
Awards, such related Awards shall be cancelled to the extent of the number
of Shares as to which the Award is exercised.
(b) Any Shares distributed pursuant to an Award may consist, in whole
or in part, of authorized and unissued Shares or treasury Shares including
Shares acquired by purchase in the open market or in private transactions.
<PAGE> 10
-7-
(c) In the event that the Committee shall determine that any dividend
in Shares, recapitalization, Share split, reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase, or share exchange,
or other similar corporate transaction or event, affects the Shares such
that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of Eligible Employees under the Plan, then the
Committee shall make such equitable changes or adjustments as it deems
appropriate and, in such manner as it may deem equitable, adjust any or all
of (i) the number and kind of shares which may thereafter be issued under
the Plan, (ii) the number and kind of shares, other securities or other
consideration issued or issuable in respect of outstanding Awards, and (iii)
the exercise price, grant price, or purchase price relating to any Award;
provided, however, in each case that, with respect to ISOs, such adjustment
shall be made in accordance with Section 424(h) of the Code, unless the
Committee determines otherwise. In addition, the Committee is authorized to
make adjustments in the terms and conditions of, and the criteria and
performance objectives included in, Awards in recognition of unusual or
non-recurring events (including, without limitation, events described in the
preceding sentence) affecting the Company or any Subsidiary or Affiliate or
the financial statements of the Company or any Subsidiary or Affiliate, or
in response to changes in applicable laws, regulations, or accounting
principles; provided, however, that, if an Award Agreement specifically so
provides, the Committee shall not have discretion to increase the amount of
compensation payable under the Award to the extent such an increase would
cause the Award to lose its qualification as performance-based compensation
for purposes of Section 162(m)(4)(C) of the Code and the regulations
thereunder.
5. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 5. In addition, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter (subject to
Section 8(d)), such additional terms and conditions, not inconsistent with
the provisions of the Plan, as the Committee shall determine, including
terms regarding forfeiture of Awards or continued exercisability of Awards
in the event of termination of employment by the Eligible Employee.
<PAGE> 11
-8-
(b) Options. The Committee is authorized to grant Options, which may be
NQSOs or ISOs, to Eligible Employees on the following terms and conditions:
(i) Exercise Price. The exercise price per Share purchasable under
an Option shall be determined by the Committee, and the Committee may,
without limitation, set an exercise price that is based upon
achievement of performance criteria if deemed appropriate by the
Committee.
(ii) Time and Method of Exercise. The Committee shall determine at
the date of grant or thereafter the time or times at which an Option
may be exercised in whole or in part (including, without limitation,
upon achievement of performance criteria if deemed appropriate by the
Committee), the methods by which such exercise price may be paid or
deemed to be paid (including, without limitation, broker-assisted
exercise arrangements), the form of such payment (including, without
limitation, cash, Shares, notes or other property), and the methods by
which Shares will be delivered or deemed to be delivered to Eligible
Employees.
(iii) ISOs. The terms of any ISO granted under the Plan shall
comply in all respects with the provisions of Section 422 of the Code,
including but not limited to the requirement that no ISO shall be
granted more than ten years after the earlier of the date of adoption
or shareholder approval of the Plan.
(c) SARs. The Committee is authorized to grant SARs (Share Appreciation
Rights) to Eligible Employees on the following terms and conditions:
(i) Right to Payment. An SAR shall confer on the Eligible Employee
to whom it is granted a right to receive with respect to each Share
subject thereto, upon exercise thereof, the excess of (1) the Fair
Market Value of one Share on the date of exercise (or, if the Committee
shall so determine in the case of any such right, the Fair Market Value
of one Share at any time during a specified period before or after the
date of exercise) over (2) the exercise price of the SAR as determined
by the Committee as of the date of grant of the SAR (which, in the case
of an SAR granted in tandem
<PAGE> 12
-9-
with an option, shall be equal to the exercise price of the underlying
Option).
(ii) Other Terms. The Committee shall determine, at the time of
grant or thereafter, the time or times at which an SAR may be exercised
in whole or in part, the method of exercise, method of settlement, form
of consideration payable in settlement, method by which Shares will be
delivered or deemed to be delivered to Eligible Employees, whether or
not an SAR shall be in tandem with any other Award, and any other terms
and conditions of any SAR. Unless the Committee determines otherwise,
an SAR (1) granted in tandem with an NQSO may be granted at the time of
grant of the related NQSO or at any time thereafter or (2) granted in
tandem with an ISO may only be granted at the time of grant of the
related ISO.
(d) Restricted Shares. The Committee is authorized to grant Restricted
Shares to Eligible Employees on the following terms and conditions:
(i) Issuance and Restrictions. Restricted Shares shall be subject
to such restrictions on transferability and other restrictions, if any,
as the Committee may impose at the date of grant or thereafter, which
restrictions may lapse separately or in combination at such times,
under such circumstances (including, without limitation, upon
achievement of performance criteria if deemed appropriate by the
Committee), in such installments, or otherwise, as the Committee may
determine. Except to the extent restricted under the Award Agreement
relating to the Restricted Shares, an Eligible Employee granted
Restricted Shares shall have all of the rights of a shareholder
including, without limitation, the right to vote Restricted Shares and
the right to receive dividends thereon.
(ii) Forfeiture. Except as otherwise determined by the Committee,
at the date of grant or thereafter, upon termination of employment
during the applicable restriction period, Restricted Shares and any
accrued but unpaid dividends or Dividend Equivalents that are at that
time subject to restrictions shall be forfeited; provided, however,
that the Committee may provide, by rule or regulation or in any Award
Agreement, or may determine in any individual case, that restrictions
or forfeiture conditions relating to Restricted Shares will
<PAGE> 13
-10-
be waived in whole or in part in the event of terminations resulting
from specified causes, and the Committee may in other cases waive in
whole or in part the forfeiture of Restricted Shares.
(iii) Certificates for Shares. Restricted Shares granted under the
Plan may be evidenced in such manner as the Committee shall determine.
If certificates representing Restricted Shares are registered in the
name of the Eligible Employee, such certificates shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Restricted Shares, and the Company shall retain
physical possession of the certificate.
(iv) Dividends. Dividends paid on Restricted Shares shall be either
paid at the dividend payment date, or deferred for payment to such date
as determined by the Committee, in cash or in unrestricted Shares
having a Fair Market Value equal to the amount of such dividends.
Shares distributed in connection with a Share split or dividend in
Shares, and other property distributed as a dividend, shall be subject
to restrictions and a risk of forfeiture to the same extent as the
Restricted Shares with respect to which such Shares or other property
has been distributed.
(e) Restricted Share Units. The Committee is authorized to grant
Restricted Share Units to Eligible Employees, subject to the following terms
and conditions:
(i) Award and Restrictions. Delivery of Shares or cash, as the case
may be, will occur upon expiration of the deferral period specified for
Restricted Share Units by the Committee (or, if permitted by the
Committee, as elected by the Eligible Employee). In addition,
Restricted Share Units shall be subject to such restrictions as the
Committee may impose, if any (including, without limitation, the
achievement of performance criteria if deemed appropriate by the
Committee), at the date of grant or thereafter, which restrictions may
lapse at the expiration of the deferral period or at earlier or later
specified times, separately or in combination, in installments or
otherwise, as the Committee may determine.
(ii) Forfeiture. Except as otherwise determined by the Committee at
date of grant or thereafter, upon
<PAGE> 14
-11-
termination of employment (as determined under criteria established
by the Committee) during the applicable deferral period or portion
thereof to which forfeiture conditions apply (as provided in the Award
Agreement evidencing the Restricted Share Units), or upon failure to
satisfy any other conditions precedent to the delivery of Shares or
cash to which such Restricted Share Units relate, all Restricted Share
Units that are at that time subject to deferral or restriction shall be
forfeited; provided, however, that the Committee may provide, by rule
or regulation or in any Award Agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating to
Restricted Share Units will be waived in whole or in part in the event
of termination resulting from specified causes, and the Committee may
in other cases waive in whole or in part the forfeiture of Restricted
Share Units.
(f) Performance Shares and Performance Units. The Committee is
authorized to grant Performance Shares or Performance Units or both to
Eligible Employees on the following terms and conditions:
(i) Performance Period. The Committee shall determine a performance
period (the "Performance Period") of one or more years and shall
determine the performance objectives for grants of Performance Shares
and Performance Units. Performance objectives may vary from Eligible
Employee to Eligible Employee and shall be based upon such performance
criteria as the Committee may deem appropriate. Performance Periods may
overlap and Eligible Employees may participate simultaneously with
respect to Performance Shares and Performance Units for which different
Performance Periods are prescribed.
(ii) Award Value. At the beginning of a Performance Period, the
Committee shall determine for each Eligible Employee or group of
Eligible Employees with respect to that Performance Period the range of
number of Shares, if any, in the case of Performance Shares, and the
range of dollar values, if any, in the case of Performance Units, which
may be fixed or may vary in accordance with such performance or other
criteria specified by the Committee, which shall be paid to an Eligible
Employee as an Award if the relevant measure of Company performance for
the Performance Period is met.
<PAGE> 15
-12-
(iii) Significant Events. If during the course of a Performance
Period there shall occur significant events as determined by the
Committee which the Committee expects to have a substantial effect on a
performance objective during such period, the Committee may revise such
objective; provided, however, that, if an Award Agreement so provides,
the Committee shall not have any discretion to increase the amount of
compensation payable under the Award to the extent such an increase
would cause the Award to lose its qualification as performance-based
compensation for purposes of Section 162(m)(4)(C) of the Code and the
regulations thereunder.
(iv) Forfeiture. Except as otherwise determined by the Committee,
at the date of grant or thereafter, upon termination of employment
during the applicable Performance Period, Performance Shares and
Performance Units for which the Performance Period was prescribed shall
be forfeited; provided, however, that the Committee may provide, by
rule or regulation or in any Award Agreement, or may determine in an
individual case, that restrictions or forfeiture conditions relating to
Performance Shares and Performance Units will be waived in whole or in
part in the event of terminations resulting from specified causes, and
the Committee may in other cases waive in whole or in part the
forfeiture of Performance Shares and Performance Units.
(v) Payment. Each Performance Share or Performance Unit may be paid
in whole Shares, or cash, or a combination of Shares and cash either as
a lump sum payment or in installments, all as the Committee shall
determine, at the time of grant of the Performance Share or Performance
Unit or otherwise, commencing as soon as practicable after the end of
the relevant Performance Period.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to Eligible Employees. The Committee may provide, at the date of
grant or thereafter, that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in additional
Shares, or other investment vehicles as the Committee may specify, provided
that Dividend Equivalents (other than freestanding Dividend Equivalents)
shall be subject to all conditions and restrictions of the underlying Awards
to which they relate.
<PAGE> 16
-13-
(h) Other Share-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Eligible Employees such other
Awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Shares, as deemed by the
Committee to be consistent with the purposes of the Plan, including, without
limitation, unrestricted shares awarded purely as a "bonus" and not subject
to any restrictions or conditions, other rights convertible or exchangeable
into Shares, purchase rights for Shares, Awards with value and payment
contingent upon performance of the Company or any other factors designated
by the Committee, and Awards valued by reference to the performance of
specified Subsidiaries or Affiliates. The Committee shall determine the
terms and conditions of such Awards at date of grant or thereafter. Shares
delivered pursuant to an Award in the nature of a purchase right granted
under this Section 5(h) shall be purchased for such consideration, paid for
at such times, by such methods, and in such forms, including, without
limitation, cash, Shares, notes or other property, as the Committee shall
determine. Cash awards, as an element of or supplement to any other Award
under the Plan, shall also be authorized pursuant to this Section 5(h).
6. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
to Eligible Employees either alone or in addition to, in tandem with, or in
exchange or substitution for, any other Award granted under the Plan or any
award granted under any other plan or agreement of the Company, any
Subsidiary or Affiliate, or any business entity to be acquired by the
Company or a Subsidiary or Affiliate, or any other right of an Eligible
Employee to receive payment from the Company or any Subsidiary or Affiliate.
Awards may be granted in addition to or in tandem with such other Awards or
awards, and may be granted either as of the same time as or a different time
from the grant of such other Awards or awards. The per Share exercise price
of any option, grant price of any SAR, or purchase price of any other Award
conferring a right to purchase Shares which is granted, in connection with
the substitution of awards granted under any other plan or agreement of the
Company or any Subsidiary or Affiliate or any business entity to be acquired
by the Company or any Subsidiary or Affiliate, shall be determined by the
Committee, in its discretion.
<PAGE> 17
-14-
(b) Terms of Awards. The term of each Award granted to an Eligible
Employee shall be for such period as may be determined by the Committee;
provided, however, that in no event shall the term of any ISO or an SAR
granted in tandem therewith exceed a period of ten years from the date of
its grant (or such shorter period as may be applicable under Section 422 of
the Code).
(c) Form of Payment Under Awards. Subject to the terms of the Plan and
any applicable Award Agreement, payments to be made by the Company or a
Subsidiary or Affiliate upon the grant, maturation, or exercise of an Award
may be made in such forms as the Committee shall determine at the date of
grant or thereafter, including, without limitation, cash, Shares, or other
property, and may be made in a single payment or transfer, in installments,
or on a deferred basis. The Committee may make rules relating to installment
or deferred payments with respect to Awards, including the rate of interest
to be credited with respect to such payments.
(d) Nontransferability. Awards (except for vested shares) shall not be
transferable by an Eligible Employee except by will or the laws of descent
and distribution (except pursuant to a Beneficiary designation) and shall be
exercisable during the lifetime of an Eligible Employee only by such
Eligible Employee or his guardian or legal representative. An Eligible
Employee's rights under the Plan may not be pledged, mortgaged,
hypothecated, or otherwise encumbered, and shall not be subject to claims of
the Eligible Employees creditors.
7. General Provisions.
(a) Compliance with Legal and Trading Requirements. The Plan, the
granting and exercising of Awards hereunder, and the other obligations of
the Company under the Plan and any Award Agreement, shall be subject to all
applicable federal and state laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may be required. The
Company, in its discretion, may postpone the issuance or delivery of Shares
under any Award until completion of such stock exchange or market system
listing or registration or qualification of such Shares or other required
action under any state or federal law, rule or regulation as the Company may
consider appropriate, and may require any Participant to make such
representations and furnish such information as it may consider appropriate
in connection with the issuance or delivery of Shares in compliance with
applicable laws, rules
<PAGE> 18
-15-
and regulations. No provisions of the Plan shall be interpreted or construed
to obligate the Company to register any Shares under federal or state law.
(b) No Right to Continued Employment or Service. Neither the Plan nor
any action taken thereunder shall be construed as giving any employee or
director the right to be retained in the employ or service of the Company or
any of its Subsidiaries or Affiliates, nor shall it interfere in any way
with the right of the Company or any of its Subsidiaries or Affiliates to
terminate any employee's or director's employment or service at any time.
(c) Taxes. The Company or any Subsidiary or Affiliate is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Shares, or any payroll or other
payment to an Eligible Employee, amounts of withholding and other taxes due
in connection with any transaction involving an Award, and to take such
other action as the Committee may deem advisable to enable the Company and
Eligible Employees to satisfy obligations for the payment of withholding
taxes and other tax obligations relating to any Award. This authority shall
include authority to withhold or receive Shares or other property and to
make cash payments in respect thereof in satisfaction of an Eligible
Employee's tax obligations.
(d) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue, or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of shareholders of the
Company or Participants, except that any such amendment, alteration,
suspension, discontinuation, or termination shall be subject to the approval
of the Company's shareholders to the extent such shareholder approval is
required (i) in order to insure that Awards granted under the Plan are
exempt under Rule 16b-3 or (ii) under Section 422 of the Code; provided,
however, that, without the consent of an affected Participant, no amendment,
alteration, suspension, discontinuation, or termination of the Plan may
impair the rights or, in any other manner, adversely affect the rights of
such Participant under any Award theretofore granted to him or her.
(e) No Rights to Awards; No Shareholder Rights. No Eligible Employee or
employee shall have any claim to be granted any Award under the Plan, and
there is no obligation for uniformity of treatment of Eligible Employees and
employees. No Award shall confer on any Eligible Employee any
<PAGE> 19
-16-
of the rights of a shareholder of the Company unless and until Shares are
duly issued or transferred to the Eligible Employee in accordance with the
terms of the Award.
(f) Unfunded Status of Awards. The Plan is intended to constitute an
"unfunded" plan for incentive compensation. With respect to any payments not
yet made to a Participant pursuant to an Award, nothing contained in the
Plan or any Award shall give any such Participant any rights that are
greater than those of a general creditor of the Company; provided, however,
that the Committee may authorize the creation of trusts or make other
arrangements to meet the Company's obligations under the Plan to deliver
cash, Shares, other Awards, or other property pursuant to any Award, which
trusts or other arrangements shall be consistent with the "unfunded" status
of the Plan unless the Committee otherwise determines with the consent of
each affected Participant.
(g) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the shareholders of the Company for approval
shall be construed as creating any limitations on the power of the Board to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of options and other awards otherwise than
under the Plan, and such arrangements may be either applicable generally or
only in specific cases.
(h) Not Compensation for Benefit Plans. No Award payable under this
Plan shall be deemed salary or compensation for the purpose of computing
benefits under any benefit plan or other arrangement of the Company for the
benefit of its employees or directors unless the Company shall determine
otherwise.
(i) No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. In the case of Awards to
Eligible Employees, the Committee shall determine whether cash, other
Awards, or other property shall be issued or paid in lieu of such fractional
Shares or whether such fractional Shares or any rights thereto shall be
forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction, and effect of the Plan,
any rules and regulations relating to the Plan, and any Award Agreement
shall be determined in accordance with the laws of New York without giving
effect to principles of conflict of laws.
<PAGE> 20
-17-
(k) Effective Date; Plan Termination. The Plan shall become effective
as of October 4, 1995, (the "Effective Date"). The Plan shall terminate as
to future awards on the date which is ten (10) years after the Effective
Date.
(l) Titles and Headings. The titles and headings of the sections in the
Plan are for convenience of reference only. In the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
<PAGE> 21
FIRST AMENDMENT TO
FIBERITE HOLDINGS, INC.
1995 LONG TERM INCENTIVE AND SHARE AWARD PLAN
The Fiberite Holdings, Inc. 1995 Long Term Incentive and Share Award Plan
is amended as follows, effective as of December 1, 1995.
1. Section 2(j) is amended to read as follows:
"Eligible Employee" means (i) an employee of the Company or its
Subsidiaries or Affiliates who has been designated by the Board, the
Committee or the board of directors of Fiberite, Inc. as a Management
Employee, and (ii) a nonemployee member of the Board."
All other terms and conditions of the Plan shall remain the same.
December 12, 1995 Approved by the Board of Directors
July 17, 1996 Approved by the Shareholders
<PAGE> 22
SECOND AMENDMENT TO
FIBERITE HOLDINGS, INC. 1995
LONG TERM INCENTIVE AND SHARE AWARD PLAN
Pursuant to Section 7(d) of the Fiberite Holdings, Inc. 1995 Long Term
Incentive and Share Award Plan (the "Plan"), said Plan is amended as follows:
1. Section 4(a) of the Plan is amended to increase the number of
shares available for issuance under the Plan from 500,000 shares to 906,000
shares.
2. The effective date of this Second Amendment to the Plan is the
date of approval of this Second Amendment by the Board of Directors of Fiberite
Holdings, Inc.
All other terms and conditions of the Plan shall remain the same.
September 26, 1996 Approved by the Board of Directors
____________, 1997 Approved by the Shareholders
-1-
<PAGE> 23
THIRD AMENDMENT TO
FIBERITE HOLDINGS, INC.
1995 LONG TERM INCENTIVE AND SHARE AWARD PLAN
The Fiberite Holdings, Inc. 1995 Long Term Incentive and Share Award
Plan (the "Plan") is amended as follows, effective January __, 1997.
1. Section 4 of the Plan is amended to increase the total Number of
Shares reserved for issuance in connection with Awards under the Plan to
1,300,000.
All other terms and conditions of the Plan shall remain the same.
January 29, 1997 Approved by the Board of Directors
, 1997 Approved by the Shareholders
1
<PAGE> 1
EXHIBIT 10.3
FIBERITE HOLDINGS, INC.
1997 OUTSIDE DIRECTORS STOCK OPTION PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The Fiberite Holdings, Inc. 1997 Outside
Directors Stock Option Plan (the "Plan") is hereby established effective as of
the effective date of the initial registration by the Company of its Stock under
Section 12 of the Exchange Act (the "Effective Date").
1.2 PURPOSE. The purpose of the Plan is to advance the
interests of the Participating Company Group and its stockholders by providing
an incentive to attract and retain highly qualified persons to serve as Outside
Directors of the Company and by creating additional incentive for Outside
Directors to promote the growth and profitability of the Participating Company
Group.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Whenever used herein, the following terms
shall have their respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the
Company. If one or more Committees have been appointed by the Board to
administer the Plan, "Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986,
as amended, and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means a committee of the Board duly
appointed to administer the Plan and having such powers as shall be specified by
the Board. Unless the powers of the Committee have been specifically limited,
the Committee shall have all of the powers of the Board granted herein,
including, without limitation, the power to amend or terminate the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law.
(d) "COMPANY" means Fiberite Holdings, Inc., a
Delaware corporation, or any successor corporation thereto.
1
<PAGE> 2
(e) "CONSULTANT" means any person, including an
advisor, engaged by a Participating Company to render services other than as an
Employee or a Director.
(f) "DIRECTOR" means a member of the Board or the
board of directors of any other Participating Company.
(g) "EMPLOYEE" means any person treated as an
employee (including an officer or a Director who is also treated as an employee)
in the records of a Participating Company; provided, however, that neither
service as a Director nor payment of a director's fee shall be sufficient to
constitute employment for purposes of the Plan.
(h) "EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended.
(i) "FAIR MARKET VALUE" means, as of any date, if
there is then a public market for the Stock, the closing price of the Stock on
the New York Stock Exchange ("NYSE") or such other national or regional
securities exchange or market system constituting the primary market for the
Stock. If the relevant date does not fall on a day on which the Stock is trading
on the NYSE or other national or regional securities exchange or market system,
the date on which the Fair Market Value shall be established shall be the last
day on which the Stock was so traded prior to the relevant date. If there is
then no public market for the Stock, the Fair Market Value on any relevant date
shall be as determined by the Board without regard to any restriction other than
a restriction which, by its terms, will never lapse. Notwithstanding the
foregoing, the Fair Market Value per share of Stock on the Effective Date shall
be deemed to be the public offering price set forth in the final prospectus
filed with the Securities and Exchange Commission in connection with the initial
public offering of the Stock.
(j) "OPTION" means a right to purchase Stock (subject
to adjustment as provided in Section 4.2) pursuant to the terms and conditions
of the Plan.
(k) "OPTIONEE" means a person who has been granted
one or more Options.
(l) "OPTION AGREEMENT" means a written agreement
between the Company and an Optionee setting forth the terms, conditions and
restrictions of the Option granted to the Optionee.
(m) "OUTSIDE DIRECTOR" means a Director of the
Company who is not an Employee.
(n) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(o) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation.
2
<PAGE> 3
(p) "PARTICIPATING COMPANY GROUP" means, at any point
in time, all corporations collectively which are then Participating Companies.
(q) "RULE 16b-3" means Rule 16b-3 as promulgated
under the Exchange Act, as amended from time to time, or any successor rule or
regulation.
(r) "SERVICE" means the Optionee's service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant. The Optionee's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee renders Service
to the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption
or termination of the Optionee's Service. The Optionee's Service shall be deemed
to have terminated either upon an actual termination of Service or upon the
corporation for which the Optionee performs Service ceasing to be a
Participating Company.
(s) "STOCK" means the common stock, par value $0.01,
of the Company, as adjusted from time to time in accordance with Section 4.2.
(t) "SUBSIDIARY CORPORATION" means any present or
future "subsidiary corporation" of the Company, as defined in Section 424(f) of
the Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural, the plural shall include the singular, and
use of the term "or" shall include the conjunctive as well as the disjunctive.
3. ADMINISTRATION.
3.1 ADMINISTRATION BY THE BOARD. The Plan shall be
administered by the Board, including any duly appointed Committee of the Board.
All questions of interpretation of the Plan or of any Option shall be determined
by the Board, and such determinations shall be final and binding upon all
persons having an interest in the Plan or such Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, determination or election which
is the responsibility of or which is allocated to the Company herein, provided
the officer has apparent authority with respect to such matter, right,
obligation, determination or election.
3.2 LIMITATIONS ON AUTHORITY OF THE BOARD. Notwithstanding any
other provision herein to the contrary, the Board shall have no authority,
discretion, or power to select the Outside Directors who will receive Options,
to set the exercise price of the Options, to determine the number of shares of
Stock to be subject to an Option or the time at which an Option shall be
granted, to establish the duration of an Option, or to alter any other terms or
conditions specified in the Plan, except in the sense of administering the Plan
subject to the provisions of the Plan.
3
<PAGE> 4
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment
as provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be One Hundred Fifty Thousand (150,000) and
shall consist of authorized but unissued shares or reacquired shares of Stock or
any combination thereof. If an outstanding Option for any reason expires or is
terminated or canceled or shares of Stock acquired, subject to repurchase, upon
the exercise of an Option are repurchased by the Company, the shares of Stock
allocable to the unexercised portion of such Option, or such repurchased shares
of Stock, shall again be available for issuance under the Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event
of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made in the number and class of shares
subject to the Plan, to the "Initial Option" (as defined in Section 6.1) and to
any outstanding Options, and in the exercise price of any outstanding Options.
If a majority of the shares which are of the same class as the shares that are
subject to outstanding Options are exchanged for, converted into, or otherwise
become (whether or not pursuant to an "Ownership Change Event" as defined in
Section 8.1) shares of another corporation (the "New Shares"), the Board may
unilaterally amend the outstanding Options to provide that such Options are
exercisable for New Shares. In the event of any such amendment, the number of
shares subject to, and the exercise price of, the outstanding Options shall be
adjusted in a fair and equitable manner as determined by the Board, in its sole
discretion. Notwithstanding the foregoing, any fractional share resulting from
an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest
whole number, and in no event may the exercise price of any Option be decreased
to an amount less than the par value, if any, of the stock subject to the
Option.
5. ELIGIBILITY AND TYPE OF OPTIONS.
5.1 PERSONS ELIGIBLE FOR OPTIONS. An Option shall be granted
only to a person who, at the time of grant, is an Outside Director.
5.2 OPTIONS AUTHORIZED. Options shall be nonstatutory stock
options; that is, options which are not treated as incentive stock options
within the meaning of Section 422(b) of the Code.
6. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
Option Agreements specifying the number of shares of Stock covered thereby, in
such form as the Board shall from time to time establish. Option Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:
6.1 AUTOMATIC GRANT OF OPTIONS. Subject to execution by an
Outside Director of the appropriate Option Agreement, Options shall be granted
automatically and without further action of the Board, as follows:
4
<PAGE> 5
(a) INITIAL OPTION. Each person who (i) is an Outside
Director on the Effective Date, or (ii) first becomes an Outside Director after
the Effective Date shall be granted an Option to purchase Fifteen Thousand
(15,000) shares of Stock on the Effective Date or the date he or she first
becomes an Outside Director, respectively (an "Initial Option"). Notwithstanding
anything herein to the contrary, an Initial Option shall not be granted to a
Director of the Company who previously did not qualify as an Outside Director
but subsequently becomes an Outside Director as a result of the termination of
his or her status as an Employee.
(b) RIGHT TO DECLINE OPTION. Notwithstanding the
foregoing, any person may elect not to receive an Option by delivering written
notice of such election to the Board no later than the day prior to the date
such Option would otherwise be granted. A person so declining an Option shall
receive no payment or other consideration in lieu of such declined Option. A
person who has declined an Option may revoke such election by delivering written
notice of such revocation to the Board no later than the day prior to the date
such Option would be granted pursuant to Section 6.1(a).
6.2 DISCRETION TO VARY OPTION SIZE. Notwithstanding any
provision of the Plan to the contrary, the Board may, in its sole discretion,
increase or decrease the number of shares of Stock that would otherwise be
subject to one or more Initial Options to be granted pursuant to Section 6.1 if
the exercise of such discretion would not otherwise preclude any transaction in
an equity security of the Company by an officer or Director of a Participating
Company from being exempt from Section 16(b) of the Exchange Act pursuant to
Rule 16b-3.
6.3 EXERCISE PRICE. The exercise price per share of Stock
subject to an Option shall be the Fair Market Value of a share of Stock on the
date the Option is granted.
6.4 EXERCISE PERIOD. Each Option shall terminate and cease to
be exercisable on the date ten (10) years after the date of grant of the Option
unless earlier terminated pursuant to the terms of the Plan or the Option
Agreement.
6.5 RIGHT TO EXERCISE OPTIONS. Except as otherwise provided in
the Plan or in the Option Agreement, an Initial Option shall (i) first become
exercisable on the date which is one (1) year after the date on which the
Initial Option was granted (the "Initial Option Vesting Date"); and (ii) be
exercisable on and after the Initial Option Vesting Date and prior to the
termination thereof in an amount equal to the number of shares of Stock
initially subject to the Initial Option multiplied by the Vested Ratio as set
forth below, less the number of shares previously acquired upon exercise
thereof. The Vested Ratio described in the preceding sentence shall be
determined as follows:
5
<PAGE> 6
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
Prior to Initial Option Vesting Date 0
On Initial Option Vesting Date, provided the 1/4
Optionee's Service is continuous from the date of
grant of the Initial Option until the Initial Option
Vesting Date
Plus
For each full month of of the Optionee's 1/48
continuous Service from the Initial Option Vesting
Date until the Vested Ratio equals 1/1, an additional
</TABLE>
6.6 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the exercise price for the number of shares
of Stock being purchased pursuant to any Option shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of shares of Stock
owned by the Optionee having a Fair Market Value not less than the exercise
price, (iii) by the assignment of the proceeds of a sale or loan with respect to
some or all of the shares being acquired upon the exercise of the Option
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System) (a "Cashless Exercise"), or (iv) by any
combination thereof.
(b) TENDER OF STOCK. Notwithstanding the foregoing,
an Option may not be exercised by tender to the Company of shares of Stock to
the extent such tender of Stock would constitute a violation of the provisions
of any law, regulation or agreement restricting the redemption of the Company's
stock. Unless otherwise provided by the Board, an Option may not be exercised by
tender to the Company of shares of Stock unless such shares either have been
owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. The Company reserves, at any
and all times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise.
6.7 TAX WITHHOLDING. The Company shall have the right, but not
the obligation, to deduct from the shares of Stock issuable upon the exercise of
an Option, or to accept from the Optionee the tender of, a number of whole
shares of Stock having a Fair Market
6
<PAGE> 7
Value equal to all or any part of the federal, state, local and foreign taxes,
if any, required by law to be withheld by the Participating Company Group with
respect to such Option or the shares acquired upon exercise thereof.
Alternatively or in addition, in its sole discretion, the Company shall have the
right to require the Optionee to make adequate provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares acquired upon exercise thereof. The Company shall
have no obligation to deliver shares of Stock until the Participating Company
Group's tax withholding obligations have been satisfied.
7. STANDARD FORM OF OPTION AGREEMENT.
7.1 INITIAL OPTION. Unless otherwise provided for by the Board
at the time an Initial Option is granted, each Initial Option shall comply with
and be subject to the terms and conditions set forth in the form of Nonstatutory
Stock Option Agreement for Outside Directors (Initial Option) adopted by the
Board concurrently with its adoption of the Plan and as amended from time to
time.
7.2 AUTHORITY TO VARY TERMS. Subject to the limitations set
forth in Section 3.2, the Board shall have the authority from time to time to
vary the terms of the standard form of Option Agreement described in this
Section 7 either in connection with the grant or amendment of an individual
Option or in connection with the authorization of a new standard form or forms;
provided, however, that the terms and conditions of any such new, revised or
amended standard form of Option Agreement are not inconsistent with the terms of
the Plan. Such authority shall include, but not by way of limitation, the
authority to grant Options which are immediately exercisable subject to the
Company's right to repurchase any unvested shares of Stock acquired by the
Optionee upon the exercise of an Option in the event such Optionee's Service is
terminated for any reason.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "Ownership Change Event" shall be deemed to
have occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in
a single or series of related transactions by the stockholders of the Company of
more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the
Company is a party;
(iii) the sale, exchange, or transfer of all
or substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the
Company.
7
<PAGE> 8
(b) A "Transfer of Control" shall mean an Ownership
Change Event or a series of related Ownership Change Events (collectively, the
"Transaction") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "Transferee
Corporation(s)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTIONS. In the event of
a Transfer of Control, any unexercisable or unvested portion of the outstanding
Options shall be immediately exercisable and vested in full as of the date ten
(10) days prior to the date of the Transfer of Control. The exercise or vesting
of any Option that was permissible solely by reason of this Section 8.2 shall be
conditioned upon the consummation of the Transfer of Control. In addition, the
surviving, continuing, successor, or purchasing corporation or parent
corporation thereof, as the case may be (the "Acquiring Corporation"), may
either assume the Company's rights and obligations under outstanding Options or
substitute for outstanding Options substantially equivalent options for the
Acquiring Corporation's stock. Any Options which are neither assumed or
substituted for by the Acquiring Corporation in connection with the Transfer of
Control nor exercised as of the date of the Transfer of Control shall terminate
and cease to be outstanding effective as of the date of the Transfer of Control.
Notwithstanding the foregoing, shares acquired upon exercise of an Option prior
to the Transfer of Control and any consideration received pursuant to the
Transfer of Control with respect to such shares shall continue to be subject to
all applicable provisions of the Option Agreement evidencing such Option except
as otherwise provided in such Option Agreement. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the outstanding
Options immediately prior to an Ownership Change Event described in Section
8.1(a)(i) constituting a Transfer of Control is the surviving or continuing
corporation and immediately after such Ownership Change Event less than fifty
percent (50%) of the total combined voting power of its voting stock is held by
another corporation or by other corporations that are members of an affiliated
group within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the outstanding Options shall not
terminate.
9. NONTRANSFERABILITY OF OPTIONS. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee or the Optionee's guardian
or legal representative. No Option shall be assignable or transferable by the
Optionee, except by will or by the laws of descent and distribution.
8
<PAGE> 9
10. INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board is delegated shall be indemnified by the Company against all
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan, or any right granted hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such person
is liable for gross negligence, bad faith or intentional misconduct in duties;
provided, however, that within sixty (60) days after the institution of such
action, suit or proceeding, such person shall offer to the Company, in writing,
the opportunity at its own expense to handle and defend the same.
11. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or amend
the Plan at any time. However, subject to changes in the law or other legal
requirements that would permit otherwise, without the approval of the Company's
stockholders, there shall be (a) no increase in the total number of shares of
Stock that may be issued under the Plan (except by operation of the provisions
of Section 4.2), and (b) no other amendment of the Plan that would require the
approval of the Company's stockholders under any applicable law, regulation or
rule. In any event, no termination or amendment of the Plan may adversely affect
any then outstanding Option, or any unexercised portion thereof, without the
consent of the Optionee, unless such termination or amendment is necessary to
comply with any applicable law or government regulation.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing Fiberite Holdings, Inc. 1997 Outside Directors Stock Option
Plan was duly adopted by the Board on January __, 1997.
-----------------------------
Secretary
9
<PAGE> 10
PLAN HISTORY
------------
January __, 1997 Board adopts Plan, with an initial reserve of 150,000
shares.
January __, 1997 Stockholders approve Plan, with an initial reserve of
150,000 shares.
10
<PAGE> 11
FIBERITE HOLDINGS, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
FOR OUTSIDE DIRECTORS
INITIAL OPTION
THIS NONSTATUTORY STOCK OPTION AGREEMENT FOR OUTSIDE DIRECTORS INITIAL
OPTION (the "Option Agreement") is made and entered into as of ___________,
199_, by and between Fiberite Holdings, Inc. and ___________________________
(the "Optionee").
The Company has granted to the Optionee an option to purchase certain
shares of Stock, upon the terms and conditions set forth in this Option
Agreement (the "Option").
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Whenever used herein, the following terms
shall have their respective meanings set forth below:
(a) "DATE OF OPTION GRANT" means ____________, 199_.
(b) "NUMBER OF OPTION SHARES" means Fifteen Thousand
(15,000) shares of Stock (the number of shares set forth in Section 6.1(a) of
the Plan), as adjusted from time to time pursuant to Section 9.
(c) "EXERCISE PRICE" means $_____ per share of Stock,
as adjusted from time to time pursuant to Section 9.
(d) "INITIAL EXERCISE DATE" means the Initial Vesting
Date.
(e) "INITIAL VESTING DATE" means the date occurring
one (1) year after the Date of Option Grant.
-1-
<PAGE> 12
(f) "VESTED RATIO" means, on any relevant date, the
ratio determined as follows:
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the Optionee's 1/4
Service is continuous from the Date of Option Grant
until the Initial Vesting Date
Plus
For each full month of the Optionee's continuous 1/48
Service from the Initial Vesting Date until the
Vested Ratio equals 1/1, an additional
</TABLE>
(g) "OPTION EXPIRATION DATE" means the date ten (10)
years after the Date of Option Grant.
(h) "BOARD" means the Board of Directors of the
Company. If one or more Committees have been appointed by the Board to
administer the Plan, "Board" shall also mean such Committee(s).
(i) "CODE" means the Internal Revenue Code of 1986,
as amended, and any applicable regulations promulgated thereunder.
(j) "COMMITTEE" means a committee of the Board duly
appointed to administer the Plan and having such powers as shall be specified by
the Board. Unless the powers of the Committee have been specifically limited,
the Committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to amend or terminate the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law.
(k) "COMPANY" means Fiberite Holdings, Inc., a
Delaware corporation, or any successor corporation thereto.
(l) "CONSULTANT" means any person, including an
advisor, engaged by a Participating Company to render services other than as an
Employee or a Director.
(m) "DIRECTOR" means a member of the Board or of the
board of directors of any other Participating Company.
-2-
<PAGE> 13
(n) "DISABILITY" means the permanent and total
disability of the Optionee within the meaning of Section 22(e)(3) of the Code.
(o) "EMPLOYEE" means any person treated as an
employee (including an officer or a Director who is also treated as an employee)
in the records of a Participating Company; provided, however, that neither
service as a Director nor payment of a director's fee shall be sufficient to
constitute employment for purposes of the Plan.
(p) "EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended.
(q) "FAIR MARKET VALUE" means, as of any date, if
there is then a public market for the Stock, the closing price of the Stock on
the New York Stock Exchange ("NYSE") or regional securities exchange or market
system constituting the primary market for the Stock. If the relevant date does
not fall on a day on which the Stock is trading on the NYSE or other national or
regional securities exchange or market system, the date on which the Fair Market
Value shall be established shall be the last day on which the Stock was so
traded prior to the relevant date. If there is then no public market for the
Stock, the Fair Market Value on any relevant date shall be as determined by the
Board without regard to any restriction other than a restriction which, by its
terms, will never lapse.
(r) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(s) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation.
(t) "PARTICIPATING COMPANY GROUP" means, at any point
in time, all corporations collectively which are then Participating Companies.
(u) "PLAN" means the Fiberite Holdings, Inc. 1997
Outside Directors Stock Option Plan.
(v) "SECURITIES ACT" means the Securities Act of
1933, as amended.
(w) "SERVICE" means the Optionee's service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant. The Optionee's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee renders Service
to the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption
or termination of the Optionee's Service. The Optionee's Service shall be deemed
to have terminated either upon an actual termination of Service or upon the
corporation for which the Optionee performs Service ceasing to be a
Participating Company.
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<PAGE> 14
(x) "STOCK" means the common stock, par value $0.01,
of the Company, as adjusted from time to time in accordance with Section 9.
(y) "SUBSIDIARY CORPORATION" means any present or
future "subsidiary corporation" of the Company, as defined in Section 424(f) of
the Code.
1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, the plural shall include the
singular, and the term "or" shall include the conjunctive as well as the
disjunctive.
2. TAX STATUS OF THE OPTION. This Option is intended to be a
nonstatutory stock option and shall not be treated as an incentive stock option
within the meaning of Section 422(b) of the Code.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
4. EXERCISE OF THE OPTION.
4.1 RIGHT TO EXERCISE. Except as otherwise provided herein,
the Option shall be exercisable on and after the Initial Exercise Date and prior
to the termination of the Option (as provided in Section 6) in an amount not to
exceed the Number of Option Shares multiplied by the Vested Ratio less the
number of shares previously acquired upon exercise of the Option. In no event
shall the Option be exercisable for more shares than the Number of Option
Shares.
4.2 METHOD OF EXERCISE. Exercise of the Option shall be by
written notice to the Company which must state the election to exercise the
Option, the number of whole shares of Stock for which the Option is being
exercised and such other representations and agreements as to the Optionee's
investment intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. The written notice must be signed by the
Optionee and must be delivered in person, by certified or registered mail,
return receipt requested, by confirmed facsimile transmission, or by such other
means as the Company may permit, to the Chief Financial Officer of the Company,
or other authorized representative of the Participating Company Group, prior to
the termination of the Option as set forth in Section 6, accompanied by full
payment of the aggregate Exercise Price for the number of shares of Stock being
purchased. The Option shall be deemed to be exercised upon receipt by the
Company of such written notice and the aggregate Exercise Price.
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4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as
otherwise provided below, payment of the aggregate Exercise Price for the number
of shares of Stock for which the Option is being exercised shall be made (i) in
cash, by check, or cash equivalent, (ii) by tender to the Company of whole
shares of Stock owned by the Optionee having a Fair Market Value not less than
the aggregate Exercise Price, (iii) by means of a Cashless Exercise, as defined
in Section 4.3(c), or (iv) by any combination of the foregoing.
(b) TENDER OF STOCK. Notwithstanding the foregoing,
the Option may not be exercised by tender to the Company of shares of Stock to
the extent such tender of Stock would constitute a violation of the provisions
of any law, regulation or agreement restricting the redemption of the Company's
stock. The Option may not be exercised by tender to the Company of shares of
Stock unless such shares either have been owned by the Optionee for more than
six (6) months or were not acquired, directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. A "Cashless Exercise" means
the assignment in a form acceptable to the Company of the proceeds of a sale or
loan with respect to some or all of the shares of Stock acquired upon the
exercise of the Option pursuant to a program or procedure approved by the
Company (including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System). The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.
4.4 TAX WITHHOLDING. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee agrees to make adequate provision for any sums required to satisfy the
federal, state, local and foreign tax withholding obligations of the
Participating Company Group, if any, which arise in connection with the Option,
including, without limitation, obligations arising upon (i) the exercise, in
whole or in part, of the Option, (ii) the transfer, in whole or in part, of any
shares acquired upon exercise of the Option, or (iii) the lapsing of any
restriction with respect to any shares acquired upon exercise of the Option.
4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate for the shares as
to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF
SHARES. The grant of the Option and the issuance of shares of Stock upon
exercise of the Option shall be subject to compliance with all applicable
requirements of federal, state or foreign law with respect to such securities.
The Option may not be exercised if the issuance of shares of Stock upon exercise
would constitute a violation of any applicable federal, state or foreign
securities laws or other law or regulations or the requirements of any stock
exchange or market system upon which the Stock may then be listed. In addition,
the Option may not be exercised unless (i) a registration statement
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under the Securities Act shall at the time of exercise of the Option be in
effect with respect to the shares issuable upon exercise of the Option or (ii)
in the opinion of legal counsel to the Company, the shares issuable upon
exercise of the Option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act.
THE OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE
FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO
EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The inability
of the Company to obtain from any regulatory body having jurisdiction the
authority, if any, deemed by the Company's legal counsel to be necessary to the
lawful issuance and sale of any shares subject to the Option shall relieve the
Company of any liability in respect of the failure to issue or sell such shares
as to which such requisite authority shall not have been obtained. As a
condition to the exercise of the Option, the Company may require the Optionee to
satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
4.7 FRACTIONAL SHARES. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee or the Optionee's guardian or
legal representative and may not be assigned or transferred in any manner except
by will or by the laws of descent and distribution. Following the death of the
Optionee, the Option, to the extent provided in Section 7, may be exercised by
the Optionee's legal representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable laws of descent and
distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date, (b)
the last date for exercising the Option following termination of the Optionee's
Service as described in Section 7, or (c) a Transfer of Control to the extent
provided in Section 8.
7. EFFECT OF TERMINATION OF SERVICE.
7.1 OPTION EXERCISABILITY.
(a) DISABILITY. If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of twelve (12) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date.
(b) DEATH. If the Optionee's Service with the
Participating Company Group is terminated because of the death of the Optionee,
the Option, to the extent unexercised and exercisable on the date on which the
Optionee's Service terminated, may be exercised by the
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<PAGE> 17
Optionee's legal representative or other person who acquired the right to
exercise the Option by reason of the Optionee's death at any time prior to the
expiration of twelve (12) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date. The
Optionee's Service shall be deemed to have terminated on account of death if the
Optionee dies within three (3) months after the Optionee's termination of
Service.
(c) OTHER TERMINATION OF SERVICE. If the Optionee's
Service with the Participating Company Group terminates for any reason, except
Disability or death, the Option, to the extent unexercised and exercisable by
the Optionee on the date on which the Optionee's Service terminated, may be
exercised by the Optionee within three (3) months after the date on which the
Optionee's Service terminated, but in any event no later than the Option
Expiration Date.
7.2 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth in Section 7.1 is prevented by the provisions of Section 4.6, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Expiration Date.
7.3 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale, within the applicable time periods set
forth in Section 7.1, of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date.
8. OWNERSHIP CHANGE AND TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "Ownership Change Event" shall be deemed to
have occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in
a single or series of related transactions by the stockholders of the Company of
more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the
Company is a party;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the
Company.
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(b) A "Transfer of Control" shall mean an Ownership
Change Event or a series of related Ownership Change Events (collectively, the
"Transaction") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "Transferee
Corporation(s)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTION. In the event of a
Transfer of Control, any unexercised portion of the Option shall be immediately
exercisable and vested in full as of the date ten (10) days prior to the date of
the Transfer of Control. Any exercise of the Option that was permissible solely
by reason of this Section 8.2 shall be conditioned upon the consummation of the
Transfer of Control. In addition, the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the
"Acquiring Corporation"), may either assume the Company's rights and obligations
under the Option or substitute for the Option a substantially equivalent option
for the Acquiring Corporation's stock. The Option shall terminate and cease to
be outstanding effective as of the date of the Transfer of Control to the extent
that the Option is neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the
date of the Transfer of Control. Notwithstanding the foregoing, shares acquired
upon exercise of the Option prior to the Transfer of Control and any
consideration received pursuant to the Transfer of Control with respect to such
shares shall continue to be subject to all applicable provisions of this Option
Agreement except as otherwise provided herein. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the Option
immediately prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Transfer of Control is the surviving or continuing corporation
and immediately after such Ownership Change Event less than fifty percent (50%)
of the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the Option shall not terminate.
9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number, Exercise Price and class of
shares of stock subject to the Option. If a majority of the shares which are of
the same class as the shares that are subject to the Option are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event) shares of another corporation (the "New Shares"), the Board may
unilaterally amend the Option
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<PAGE> 19
to provide that the Option is exercisable for New Shares. In the event of any
such amendment, the Number of Option Shares and the Exercise Price shall be
adjusted in a fair and equitable manner, as determined by the Board, in its sole
discretion. Notwithstanding the foregoing, any fractional share resulting from
an adjustment pursuant to this Section 9 shall be rounded down to the nearest
whole number, and in no event may the Exercise Price be decreased to an amount
less than the par value, if any, of the stock subject to the Option.
10. RIGHTS AS A STOCKHOLDER. The Optionee shall have no rights as a
stockholder with respect to any shares covered by the Option until the date of
the issuance of a certificate for the shares for which the Option has been
exercised (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company). No adjustment shall be made
for dividends, distributions or other rights for which the record date is prior
to the date such certificate is issued, except as provided in Section 9.
11. LEGENDS. The Company may at any time place legends referencing any
applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section .
12. BINDING EFFECT. Subject to the restrictions on transfer set forth
herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.
13. TERMINATION OR AMENDMENT. The Board may terminate or amend the Plan
or the Option at any time; provided, however, that no such termination or
amendment may adversely affect the Option or any unexercised portion hereof
without the consent of the Optionee unless such termination or amendment is
necessary to comply with any applicable law or government regulation. No
amendment or addition to this Option Agreement shall be effective unless in
writing.
14. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Participating Company Group with respect to such subject
matter other than those as set forth or provided for herein. To the extent
contemplated herein, the provisions of this Option Agreement shall survive any
exercise of the Option and shall remain in full force and effect.
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15. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of Delaware as such laws are applied to agreements between Delaware
residents entered into and to be performed entirely within the State of
Delaware.
FIBERITE HOLDINGS, INC.
By:________________________________
Title:_______________________________
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement and hereby accepts the Option subject to
all of the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Option Agreement.
OPTIONEE
Date:_________________ ______________________________
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EXHIBIT 10.4
FIBERITE HOLDINGS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The Fiberite Holdings, Inc. 1997 Employee
Stock Purchase Plan (the "PLAN") is hereby established effective as of the
effective date of the initial registration by the Company of its Stock under
Section 12 of the Exchange Act (the "EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan is to provide Eligible
Employees of the Participating Company Group with an opportunity to acquire a
proprietary interest in the Company through the purchase of Stock. The Company
intends that the Plan shall qualify as an "employee stock purchase plan" under
Section 423 of the Code (including any amendments or replacements of such
section), and the Plan shall be so construed.
1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued.
2. DEFINITIONS AND CONSTRUCTION.
2.1 DEFINITIONS. Any term not expressly defined in the Plan
but defined for purposes of Section 423 of the Code shall have the same
definition herein. Whenever used herein, the following terms shall have their
respective meanings set forth below:
(a) "BOARD" means the Board of Directors of the
Company. If one or more Committees have been appointed by the Board to
administer the Plan, "Board" also means such Committee(s).
(b) "CODE" means the Internal Revenue Code of 1986,
as amended, and any applicable regulations promulgated thereunder.
(c) "COMMITTEE" means a committee of the Board duly
appointed to administer the Plan and having such powers as shall be specified by
the Board. Unless the powers of the Committee have been specifically limited,
the Committee shall have all of the powers of the Board granted herein,
including, without limitation, the power to amend or terminate the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law.
(d) "COMPANY" means Fiberite Holdings, Inc., a
Delaware corporation, or any successor corporation thereto.
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(e) "COMPENSATION" means, with respect to an Offering
Period under the Plan, all amounts paid in cash in the forms of base salary,
commissions, overtime, bonuses, annual awards, other incentive payments, shift
premiums, and all other compensation paid in cash during such Offering Period
before deduction for any contributions to any plan maintained by a Participating
Company and described in Section 401(k) or Section 125 of the Code. Compensation
shall not include reimbursements of expenses, allowances, long-term disability,
workers' compensation or any amount deemed received without the actual transfer
of cash or any amounts directly or indirectly paid pursuant to the Plan or any
other stock purchase or stock option plan.
(f) "ELIGIBLE EMPLOYEE" means an Employee who meets
the requirements set forth in Section 5 for eligibility to participate in the
Plan.
(g) "EMPLOYEE" means any person treated as an
employee (including an officer or a director who is also treated as an employee)
in the records of a Participating Company and for purposes of Section 423 of the
Code; provided, however, that neither service as a director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan.
(h) "EXCHANGE ACT" means the Securities Exchange Act
of 1934, as amended.
(i) "FAIR MARKET VALUE" means, as of any date, if
there is then a public market for the Stock, the closing price of a share of
Stock (or the mean of the closing bid and asked prices of a share of Stock if
the Stock is so reported instead) as reported on the New York Stock Exchange
("NYSE") or such other national or regional securities exchange or market system
constituting the primary market for the Stock. If the relevant date does not
fall on a day on which the Stock is trading on the NYSE or other national or
regional securities exchange or market system, the date on which the Fair Market
Value shall be established shall be the last day on which the Stock was so
traded prior to the relevant date, or such other appropriate day as shall be
determined by the Board, in its sole discretion. If there is then no public
market for the Stock, the Fair Market Value on any relevant date shall be as
determined by the Board without regard to any restriction other than a
restriction which, by its terms, will never lapse. Notwithstanding the
foregoing, the Fair Market Value per share of Stock on the Effective Date shall
be deemed to be the public offering price set forth in the final prospectus
filed with the Securities and Exchange Commission in connection with the initial
public offering of the Stock.
(j) "OFFERING" means an offering of Stock as provided
in Section 6.
(k) "OFFERING DATE" means, for any Offering Period,
the first day of such Offering Period.
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(l) "OFFERING PERIOD" means a period determined in
accordance with Section 6.1.
(m) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(n) "PARTICIPANT" means an Eligible Employee
participating in the Plan.
(o) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation which the Board determines should
be included in the Plan. The Board shall have the sole and absolute discretion
to determine from time to time what Parent Corporations or Subsidiary
Corporations shall be Participating Companies.
(p) "PARTICIPATING COMPANY GROUP" means, at any point
in time, the Company and all other corporations collectively which are then
Participating Companies.
(q) "PURCHASE DATE" means, for any Purchase Period,
the last day of such Purchase Period.
(r) "PURCHASE PERIOD" means a period determined in
accordance with Section 6.2.
(s) "PURCHASE PRICE" means the price at which a share
of Stock may be purchased pursuant to the Plan, as determined in accordance with
Section 9.
(t) "PURCHASE RIGHT" means an option pursuant to the
Plan to purchase such shares of Stock as provided in Section 8 which may or may
not be exercised at the end of an Offering Period. Such option arises from the
right of a Participant to withdraw such Participant's accumulated payroll
deductions (if any) and terminate participation in the Plan or any Offering
therein at any time during a Purchase Period.
(u) "STOCK" means the common stock, par value $0.01,
of the Company, as adjusted from time to time in accordance with Section 4.2.
(v) "SUBSIDIARY CORPORATION" means any present or
future "subsidiary corporation" of the Company, as defined in Section 424(f) of
the Code.
2.2 CONSTRUCTION. Captions and titles contained
herein are for convenience only and shall not affect the meaning or
interpretation of any provision of the Plan. Except when otherwise indicated by
the context, the singular shall
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include the plural, the plural shall include the singular, and use of the term
"or" shall include the conjunctive as well as the disjunctive.
3. ADMINISTRATION. The Plan shall be administered by the Board,
including any duly appointed Committee of the Board. All questions of
interpretation of the Plan or of any Purchase Right shall be determined by the
Board and shall be final and binding upon all persons having an interest in the
Plan or such Purchase Right. Subject to the provisions of the Plan, the Board
shall determine all of the relevant terms and conditions of Purchase Rights
granted pursuant to the Plan; provided, however, that all Participants granted
Purchase Rights pursuant to the Plan shall have the same rights and privileges
within the meaning of Section 423(b)(5) of the Code. All expenses incurred in
connection with the administration of the Plan shall be paid by the Company.
4. SHARES SUBJECT TO PLAN.
4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment
as provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be One Hundred Fifty Thousand (150,000) and
shall consist of authorized but unissued or reacquired shares of the Stock, or
any combination thereof. If an outstanding Purchase Right for any reason expires
or is terminated or canceled, the shares of Stock allocable to the unexercised
portion of such Purchase Right shall again be available for issuance under the
Plan.
4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event
of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, or in the event of any merger (including a merger effected for the
purpose of changing the Company's domicile), sale of assets or other
reorganization in which the Company is a party, appropriate adjustments shall be
made in the number and class of shares subject to the Plan, to the Per Offering
Share Limit set forth in Section 8.1 and to each Purchase Right and in the
Purchase Price.
5. ELIGIBILITY.
5.1 EMPLOYEES ELIGIBLE TO PARTICIPATE. Any Employee of a
Participating Company is eligible to participate in the Plan except the
following:
(a) Employees who are customarily employed by the
Participating Company Group for twenty (20) hours or less per week;
(b) Employees who are customarily employed by the
Participating Company Group for not more than five (5) months in any calendar
year; and
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(c) Employees who own or hold options to purchase or
who, as a result of participation in the Plan, would own or hold options to
purchase, stock of the Company or of any Parent Corporation or Subsidiary
Corporation possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of such corporation within the meaning of
Section 423(b)(3) of the Code.
5.2 LEASED EMPLOYEES EXCLUDED. Notwithstanding anything herein
to the contrary, any individual performing services for a Participating Company
solely through a leasing agency or employment agency shall not be deemed an
"Employee" of such Participating Company.
6. OFFERINGS.
6.1 OFFERING PERIODS. Except as otherwise set forth below, the
Plan shall be implemented by sequential Offerings of approximately twenty-four
(24) months duration (an "OFFERING PERIOD"); provided, however that the first
Offering Period shall commence on the Effective Date and end on April 30, 1999
(the "INITIAL OFFERING PERIOD"). Subsequent Offerings shall commence on the
first day of May and November of each year and end on the last day of the second
April and October, respectively, occurring thereafter. Notwithstanding the
foregoing, the Board may establish a different term for one or more Offerings or
different commencing or ending dates for such Offerings; provided, however, that
no Offering may exceed a term of twenty-seven (27) months. An Employee who
becomes an Eligible Employee after an Offering Period has commenced shall not be
eligible to participate in such Offering but may participate in any subsequent
Offering provided such Employee is still an Eligible Employee as of the
commencement of any such subsequent Offering. Eligible Employees may not
participate in more than one Offering at a time. In the event the first or last
day of an Offering Period is not a business day, the Company shall specify the
business day that will be deemed the first or last day, as the case may be, of
the Offering Period.
6.2 PURCHASE PERIODS. Each Offering Period shall consist of
four (4) consecutive purchase periods of approximately six (6) months duration
(individually, a "PURCHASE PERIOD"). The Purchase Period commencing on the
Offering Date of the Initial Offering Period shall end on October 31, 1997. A
Purchase Period commencing on May 1 shall end on the last day of the next
following October. A Purchase Period commencing on November 1 shall end on the
last day of the next following April. Notwithstanding the foregoing, the Board
may establish a different term for one or more Purchase Periods or different
commencing or ending dates for such Purchase Periods. In the event the first or
last day of a Purchase Period is not a business day, the Company shall specify
the business day that will be deemed the first or last day, as the case may be,
of the Purchase Period.
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6.3 GOVERNMENTAL APPROVAL; STOCKHOLDER APPROVAL.
Notwithstanding any other provision of the Plan to the contrary, any Purchase
Right granted pursuant to the Plan shall be subject to (a) obtaining all
necessary governmental approvals or qualifications of the sale or issuance of
the Purchase Rights or the shares of Stock and (b) obtaining stockholder
approval of the Plan. Notwithstanding the foregoing, stockholder approval shall
not be necessary in order to grant any Purchase Right granted in the Plan's
Initial Offering Period; provided, however, that the exercise of any such
Purchase Right shall be subject to obtaining stockholder approval of the Plan.
7. PARTICIPATION IN THE PLAN.
7.1 INITIAL PARTICIPATION. An Eligible Employee shall become a
Participant on the first Offering Date after satisfying the eligibility
requirements of Section 5 and delivering to the Company's payroll office or
other office designated by the Company not later than the close of business for
such office on the last business day before such Offering Date (the
"SUBSCRIPTION DATE") a subscription agreement indicating the Employee's election
to participate in the Plan and authorizing payroll deductions. An Eligible
Employee who does not deliver a subscription agreement to the Company's payroll
or other designated office on or before the Subscription Date shall not
participate in the Plan for that Offering Period or for any subsequent Offering
Period unless such Employee subsequently enrolls in the Plan by filing a
subscription agreement with the Company by the Subscription Date for such
subsequent Offering Period. The Company may, from time to time, change the
Subscription Date as deemed advisable by the Company in its sole discretion for
proper administration of the Plan.
7.2 CONTINUED PARTICIPATION. A Participant shall automatically
participate in the Offering Period commencing immediately after the final
Purchase Date of each Offering Period in which the Participant participates
until such time as such Participant (a) ceases to be an Eligible Employee, (b)
withdraws from the Plan pursuant to Section 13.2 or (c) terminates employment as
provided in Section 14. If a Participant automatically may participate in a
subsequent Offering Period pursuant to this Section 7.2, then the Participant is
not required to file any additional subscription agreement for such subsequent
Offering Period in order to continue participation in the Plan. However, a
Participant may file a subscription agreement with respect to a subsequent
Offering Period if the Participant desires to change any of the Participant's
elections contained in the Participant's then effective subscription agreement.
8. RIGHT TO PURCHASE SHARES.
8.1 PURCHASE RIGHT. Except as set forth below, during an
Offering Period each Participant in such Offering Period shall have a Purchase
Right consisting of the right to purchase that number of whole shares of Stock
arrived at by dividing Fifty Thousand Dollars ($50,000) by the Fair Market Value
of a share of
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Stock on the Offering Date of such Offering Period; provided, however, that such
number shall not exceed five thousand (5,000) shares (the "PER OFFERING SHARE
LIMIT"). Shares of Stock may only be purchased through a Participant's payroll
deductions pursuant to Section 10.
8.2 PRO RATA ADJUSTMENT OF PURCHASE RIGHT. Notwithstanding the
foregoing, if the Board shall establish an Offering Period of less than
twenty-three and one-half (23 1/2) months or more than twenty-four and one-half
(24 1/2) months in duration, (a) the dollar amount in Section 8.1 shall be
determined by multiplying $2,083.33 by the number of months in the Offering
Period and rounding to the nearest whole dollar, and (b) the Per Offering Share
Limit shall be determined by multiplying 208.33 shares by the number of months
in the Offering Period and rounding to the nearest whole share. For purposes of
the preceding sentence, fractional months shall be rounded to the nearest whole
month.
9. PURCHASE PRICE. The Purchase Price at which each share of Stock may
be acquired in a given Offering Period pursuant to the exercise of all or any
portion of a Purchase Right granted under the Plan shall be set by the Board;
provided, however, that the Purchase Price shall not be less than eighty-five
percent (85%) of the lesser of (a) the Fair Market Value of a share of Stock on
the Offering Date of the Offering Period, or (b) the Fair Market Value of a
share of Stock on the Purchase Date of the Offering Period. Unless otherwise
provided by the Board prior to the commencement of an Offering Period, the
Purchase Price for that Offering Period shall be eighty-five percent (85%) of
the lesser of (a) the Fair Market Value of a share of Stock on the Offering Date
of the Offering Period, or (b) the Fair Market Value of a share of Stock on the
Purchase Date of the Offering Period.
10. ACCUMULATION OF PURCHASE PRICE THROUGH PAYROLL DEDUCTION. Shares of
Stock which are acquired pursuant to the exercise of all or any portion of a
Purchase Right for an Offering Period may be paid for only by means of payroll
deductions from the Participant's Compensation accumulated during the Offering
Period. Except as set forth below, the amount of Compensation to be deducted
from a Participant's Compensation during each pay period shall be determined by
the Participant's subscription agreement.
10.1 COMMENCEMENT OF PAYROLL DEDUCTIONS. Payroll deductions
shall commence on the first payday following the Offering Date and shall
continue to the end of the Offering Period unless sooner altered or terminated
as provided in the Plan.
10.2 LIMITATIONS ON PAYROLL DEDUCTIONS. The amount of payroll
deductions with respect to the Plan for any Participant during any pay period
shall be in one percent (1%) increments not to exceed ten percent (10%) of the
Participant's Compensation for such pay period. Notwithstanding the foregoing,
the Board may change the limits on payroll deductions effective as of a future
Offering Date, as determined by the Board. Amounts deducted from Compensation
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shall be reduced by any amounts contributed by the Participant and applied to
the purchase of Company stock pursuant to any other employee stock purchase plan
qualifying under Section 423 of the Code.
10.3 ELECTION TO INCREASE, DECREASE OR STOP PAYROLL
DEDUCTIONS. During an Offering Period, a Participant may elect to increase or
decrease the amount deducted or stop deductions from his or her Compensation by
filing an amended subscription agreement with the Company on or before the
"Change Notice Date." The "CHANGE NOTICE DATE" shall initially be the seventh
(7th) day prior to the end of the first pay period for which such election is to
be effective; however, the Company may change such Change Notice Date from time
to time.
10.4 PARTICIPANT ACCOUNTS. Individual Plan accounts shall be
maintained for each Participant. All payroll deductions from a Participant's
Compensation shall be credited to such account and shall be deposited with the
general funds of the Company. All payroll deductions received or held by the
Company may be used by the Company for any corporate purpose.
10.5 NO INTEREST PAID. Interest shall not be paid on sums
deducted from a Participant's Compensation pursuant to the Plan.
10.6 COMPANY ESTABLISHED PROCEDURES. The Company may, from
time to time, establish or change (a) a minimum required payroll deduction
amount for participation in an Offering, (b) limitations on the frequency or
number of changes in the rate of payroll deduction during an Offering, (c) an
exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars, (d) payroll deduction in excess of or less than the amount designated
by a Participant in order to adjust for delays or mistakes in the Company's
processing of subscription agreements, (e) the date(s) and manner by which the
Fair Market Value of a share of Stock is determined for purposes of
administration of the Plan, or (f) such other limitations or procedures as
deemed advisable by the Company in the Company's sole discretion which are
consistent with the Plan and in accordance with the requirements of Section 423
of the Code.
11. PURCHASE OF SHARES.
11.1 EXERCISE OF PURCHASE RIGHT. On each Purchase Date of an
Offering Period, each Participant who has not withdrawn from the Offering or
whose participation in the Offering has not terminated on or before such
Purchase Date shall automatically acquire pursuant to the exercise of the
Participant's Purchase Right the number of whole shares of Stock arrived at by
dividing the total amount of the Participant's accumulated payroll deductions
for the Purchase Period by the Purchase Price; provided, however, in no event
shall the number of shares purchased by the Participant during an Offering
Period exceed the number of shares subject to the Participant's Purchase Right.
No shares of Stock shall be purchased
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on a Purchase Date on behalf of a Participant whose participation in the
Offering or the Plan has terminated on or before such Purchase Date.
11.2 RETURN OF CASH BALANCE. Any cash balance remaining in the
Participant's Plan account shall be refunded to the Participant as soon as
practicable after the Purchase Date. In the event the cash to be returned to a
Participant pursuant to the preceding sentence is an amount less than the amount
necessary to purchase a whole share of Stock, the Company may establish
procedures whereby such cash is maintained in the Participant's Plan account and
applied toward the purchase of shares of Stock in the subsequent Purchase Period
or Offering Period.
11.3 TAX WITHHOLDING. At the time a Participant's Purchase
Right is exercised, in whole or in part, or at the time a Participant disposes
of some or all of the shares of Stock he or she acquires under the Plan, the
Participant shall make adequate provision for the foreign, federal, state and
local tax withholding obligations of the Participating Company Group, if any,
which arise upon exercise of the Purchase Right or upon such disposition of
shares, respectively. The Participating Company Group may, but shall not be
obligated to, withhold from the Participant's compensation the amount necessary
to meet such withholding obligations.
11.4 EXPIRATION OF PURCHASE RIGHT. Any portion of a
Participant's Purchase Right remaining unexercised after the end of the Offering
Period to which such Purchase Right relates shall expire immediately upon the
end of such Offering Period.
12. LIMITATIONS ON PURCHASE OF SHARES; RIGHTS AS A STOCKHOLDER.
12.1 FAIR MARKET VALUE LIMITATION. Notwithstanding any other
provision of the Plan, no Participant shall be entitled to purchase shares of
Stock under the Plan (or any other employee stock purchase plan which is
intended to meet the requirements of Section 423 of the Code sponsored by the
Company or a Parent Corporation or Subsidiary Corporation at a rate which
exceeds $25,000 in Fair Market Value, which Fair Market Value is determined for
shares purchased during a given Offering Period as of the Offering Date for such
Offering Period (or such other limit as may be imposed by the Code), for each
calendar year in which the Participant participates in the Plan (or any other
employee stock purchase plan described in this sentence).
12.2 PRO RATA ALLOCATION. In the event the number of shares of
Stock which might be purchased by all Participants in the Plan exceeds the
number of shares of Stock available in the Plan, the Company shall make a pro
rata allocation of the remaining shares in as uniform a manner as shall be
practicable and as the Company shall determine to be equitable.
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12.3 RIGHTS AS A STOCKHOLDER AND EMPLOYEE. A Participant shall
have no rights as a stockholder by virtue of the Participant's participation in
the Plan until the date of the issuance of a stock certificate for the shares of
Stock being purchased pursuant to the exercise of the Participant's Purchase
Right. No adjustment shall be made for cash dividends or distributions or other
rights for which the record date is prior to the date such stock certificate is
issued. Nothing herein shall confer upon a Participant any right to continue in
the employ of the Participating Company Group or interfere in any way with any
right of the Participating Company Group to terminate the Participant's
employment at any time.
13. WITHDRAWAL.
13.1 WITHDRAWAL FROM AN OFFERING. A Participant may withdraw
from an Offering by signing and delivering to the Company's payroll or other
designated office a written notice of withdrawal on a form provided by the
Company for such purpose. Such withdrawal may be elected at any time prior to
the end of an Offering Period; provided, however, if a Participant withdraws
after the Purchase Date for a Purchase Period of an Offering, the withdrawal
shall not affect shares of Stock acquired by the Participant in such Purchase
Period. Unless otherwise indicated, withdrawal from an Offering shall not result
in a withdrawal from the Plan or any succeeding Offering therein. By withdrawing
from an Offering effective as of the close of a given Purchase Date, a
Participant may have shares of Stock purchased on such Purchase Date and
immediately commence participation in the new Offering commencing immediately
after such Purchase Date. A Participant is prohibited from again participating
in an Offering at any time following withdrawal from such Offering. The Company
may impose, from time to time, a requirement that the notice of withdrawal be on
file with the Company's payroll office or other designated office for a
reasonable period prior to the effectiveness of the Participant's withdrawal
from an Offering.
13.2 WITHDRAWAL FROM THE PLAN. A Participant may withdraw from
the Plan by signing and delivering to the Company's payroll office or other
designated office a written notice of withdrawal on a form provided by the
Company for such purpose. Withdrawals made after a Purchase Date shall not
affect shares of Stock acquired by the Participant on such Purchase Date. In the
event a Participant voluntarily elects to withdraw from the Plan, the
Participant may not resume participation in the Plan during the same Offering
Period, but may participate in any subsequent Offering under the Plan by again
satisfying the requirements of Sections 5 and 7.1. The Company may impose, from
time to time, a requirement that the notice of withdrawal be on file with the
Company's payroll office or other designated office for a reasonable period
prior to the effectiveness of the Participant's withdrawal from the Plan.
13.3 RETURN OF PAYROLL DEDUCTIONS. Upon a Participant's
withdrawal from an Offering or the Plan pursuant to Sections 13.1 or 13.2,
respectively, the
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Participant's accumulated payroll deductions which have not been applied toward
the purchase of shares of Stock shall be returned as soon as practicable after
the withdrawal, without the payment of any interest, to the Participant, and the
Participant's interest in the Offering or the Plan, as applicable, shall
terminate. Such accumulated payroll deductions may not be applied to any other
Offering under the Plan.
13.4 AUTOMATIC WITHDRAWAL FROM AN OFFERING. If the Fair Market
Value of a share of Stock on a Purchase Date of an Offering (other than the
final Purchase Date of such Offering) is less than the Fair Market Value of a
share of Stock on the Offering Date for such Offering, then every Participant
shall automatically (a) be withdrawn from such Offering at the close of such
Purchase Date and after the acquisition of shares of Stock for such Purchase
Period and (b) be enrolled in the Offering commencing on the first business day
subsequent to such Purchase Period. A Participant may elect not to be
automatically withdrawn from an Offering Period pursuant to this Section 13.4 by
delivering to the Company not later than the close of business on the last day
before the Purchase Date a written notice indicating such election.
14. TERMINATION OF EMPLOYMENT OR ELIGIBILITY. Termination of a
Participant's employment with a Participating Company for any reason, including
retirement, disability or death or the failure of a Participant to remain an
Eligible Employee, shall terminate the Participant's participation in the Plan
immediately. In such event, the payroll deductions credited to the Participant's
Plan account since the last Purchase Date shall, as soon as practicable, be
returned to the Participant or, in the case of the Participant's death, to the
Participant's legal representative, and all of the Participant's rights under
the Plan shall terminate. Interest shall not be paid on sums returned to a
Participant pursuant to this Section 14. A Participant whose participation has
been so terminated may again become eligible to participate in the Plan by again
satisfying the requirements of Sections 5 and 7.1.
15. TRANSFER OF CONTROL.
15.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to
have occurred if any of the following occurs with respect to the Company: (i)
the direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the
Company a party; (iii) the sale, exchange, or transfer of all or substantially
all of the assets of the Company; or (iv) a liquidation or dissolution of the
Company.
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(b) A "TRANSFER OF CONTROL" shall mean an Ownership
Change Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
15.2 EFFECT OF TRANSFER OF CONTROL ON PURCHASE RIGHTS. In the
event of a Transfer of Control, the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the
"ACQUIRING CORPORATION"), may assume the Company's rights and obligations under
the Plan or substitute substantially equivalent Purchase Rights for stock of the
Acquiring Corporation. If the Acquiring Corporation elects not to assume or
substitute for the outstanding Purchase Rights, the Board may, in its sole
discretion and notwithstanding any other provision herein to the contrary,
adjust the Purchase Date of the then current Purchase Period to a date on or
before the date of the Transfer of Control, but shall not adjust the number of
shares of Stock subject to any Purchase Right. All Purchase Rights which are
neither assumed or substituted for by the Acquiring Corporation in connection
with the Transfer of Control nor exercised as of the date of the Transfer of
Control shall terminate and cease to be outstanding effective as of the date of
the Transfer of Control. Notwithstanding the foregoing, if the corporation the
stock of which is subject to the outstanding Purchase Rights immediately prior
to an Ownership Change Event described in Section 15.1(a)(i) constituting a
Transfer of Control is the surviving or continuing corporation and immediately
after such Ownership Change Event less than fifty percent (50%) of the total
combined voting power of its voting stock is held by another corporation or by
other corporations that are members of an affiliated group within the meaning of
section 1504(a) of the Code without regard to the provisions of section 1504(b)
of the Code, the outstanding Purchase Rights shall not terminate unless the
Board otherwise provides in its sole discretion.
16. NONTRANSFERABILITY OF PURCHASE RIGHTS. A Purchase Right may not be
transferred in any manner otherwise than by will or the laws of descent and
distribution and shall be exercisable during the lifetime of the Participant
only by the Participant. The Company, in its absolute discretion, may impose
such
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restrictions on the transferability of the shares purchasable upon the exercise
of a Purchase Right as it deems appropriate and any such restriction shall be
set forth in the respective subscription agreement and may be referred to on the
certificates evidencing such shares.
17. REPORTS. Each Participant who exercised all or part of his or her
Purchase Right for a Purchase Period shall receive, as soon as practicable after
the Purchase Date of such Purchase Period, a report of such Participant's Plan
account setting forth the total payroll deductions accumulated, the number of
shares of Stock purchased, the Purchase Price for such shares, the date of
purchase and the remaining cash balance to be refunded or retained in the
Participant's Plan account pursuant to Section 11.2, if any. Each Participant
shall be provided information concerning the Company equivalent to that
information generally made available to the Company's common stockholders.
18. RESTRICTION ON ISSUANCE OF SHARES. The issuance of shares under the
Plan shall be subject to compliance with all applicable requirements of foreign,
federal or state law with respect to such securities. A Purchase Right may not
be exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable foreign, federal or state securities laws or other
law or regulations. In addition, no Purchase Right may be exercised unless (a) a
registration statement under the Securities Act of 1933, as amended, shall at
the time of exercise of the Purchase Right be in effect with respect to the
shares issuable upon exercise of the Purchase Right, or (b) in the opinion of
legal counsel to the Company, the shares issuable upon exercise of the Purchase
Right may be issued in accordance with the terms of an applicable exemption from
the registration requirements of said Act. The inability of the Company to
obtain from any regulatory body having jurisdiction the authority, if any,
deemed by the Company's legal counsel to be necessary to the lawful issuance and
sale of any shares under the Plan shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. As a condition to the exercise of a
Purchase Right, the Company may require the Participant to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation, and to make any representation or warranty
with respect thereto as may be requested by the Company.
19. LEGENDS. The Company may at any time place legends or other
identifying symbols referencing any applicable foreign, federal or state
securities law restrictions or any provision convenient in the administration of
the Plan on some or all of the certificates representing shares of Stock issued
under the Plan. The Participant shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to a Purchase Right in the possession of the Participant in order to
carry out the provisions of this Section . Unless otherwise specified by the
Company, legends placed on such certificates may include but shall not be
limited to the following:
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"THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON THE PURCHASE OF SHARES UNDER AN
EMPLOYEE STOCK PURCHASE PLAN AS DEFINED IN SECTION 423 OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY
SHALL NOTIFY THE CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE
REGISTERED HOLDER HEREOF MADE ON OR BEFORE , 19 . THE REGISTERED HOLDER
SHALL HOLD ALL SHARES PURCHASED UNDER THE PLAN IN THE REGISTERED HOLDER'S NAME
(AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE."
20. NOTIFICATION OF SALE OF SHARES. The Company may require the
Participant to give the Company prompt notice of any disposition of shares
acquired by exercise of a Purchase Right within two years from the date of
granting such Purchase Right or one year from the date of exercise of such
Purchase Right. The Company may require that until such time as a Participant
disposes of shares acquired upon exercise of a Purchase Right, the Participant
shall hold all such shares in the Participant's name (and not in the name of any
nominee) until the lapse of the time periods with respect to such Purchase Right
referred to in the preceding sentence. The Company may direct that the
certificates evidencing shares acquired by exercise of a Purchase Right refer to
such requirement to give prompt notice of disposition.
21. AMENDMENT OR TERMINATION OF THE PLAN. The Board may at any time
amend or terminate the Plan, except that (a) such termination shall not affect
Purchase Rights previously granted under the Plan, except as permitted under the
Plan, and (b) no amendment may adversely affect a Purchase Right previously
granted under the Plan (except to the extent permitted by the Plan or as may be
necessary to qualify the Plan as an employee stock purchase plan pursuant to
Section 423 of the Code or to obtain qualification or registration of the shares
of Stock under applicable foreign, federal or state securities laws). In
addition, an amendment to the Plan must be approved by the stockholders of the
Company within twelve (12) months of the adoption of such amendment if such
amendment would authorize the sale of more shares than are authorized for
issuance under the Plan or would change the definition of the corporations that
may be designated by the Board as Participating Companies.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the Fiberite Holdings, Inc. 1997 Employee Stock Purchase Plan was duly
adopted by the Board of Directors of the Company on ______________.
---------------------------
Secretary
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PLAN HISTORY
__________, 199_ Board adopts Plan, with an initial reserve of 150,000
shares.
__________, 199_ Stockholders approve Plan, with an initial reserve of
150,000 shares.
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FIBERITE HOLDINGS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
[ ] Original Application
[ ] Change in Percentage of Payroll Deductions
I hereby elect to participate in the 1997 Employee Stock Purchase Plan
(the "PLAN") of Fiberite Holdings, Inc. (the "COMPANY") and subscribe to
purchase shares of the Company's common stock as determined in accordance with
the terms of the Plan.
I hereby authorize payroll deductions in the amount of percent
(in 1% increments not to exceed 10%) of my "COMPENSATION" (as defined in the
Plan) from each paycheck throughout the "OFFERING PERIOD" (as defined in the
Plan) in accordance with the terms of the Plan. I understand that these payroll
deductions will be accumulated for the purchase of shares of common stock of the
Company at the applicable purchase price determined in accordance with the Plan.
I further understand that, except as otherwise set forth in the Plan, shares
will be purchased for me automatically on the last day of each Purchase Period
unless I withdraw from the Plan or from the Offering by giving written notice to
the Company or unless I terminate employment.
I further understand that I will automatically participate in each
subsequent Offering which commences immediately after the last day of an
Offering in which I am participating under the Plan until such time as I file
with the Company a notice of withdrawal from the Plan on such form as may be
established from time to time by the Company or I terminate employment.
Shares purchased for me under the Plan should be issued in the name set
forth below. (I understand that shares may be issued either in my name alone or
together with my spouse as community property or in joint tenancy.)
NAME:
------------------------------------------------------
ADDRESS:
------------------------------------------------------
------------------------------------------------------
MY SOCIAL SECURITY NUMBER:
-----------------------------------
I hereby authorize withholding from my compensation in order to satisfy
the foreign, federal, state and local tax withholding obligations, if any, which
may arise upon my purchase of shares under the Plan and/or upon my disposition
of shares I acquired under the Plan. I hereby agree that until I dispose of the
shares, unless otherwise permitted by the Company, I will hold all shares I
acquire under the Plan in the name entered above (and not in the name of any
nominee) for at least two (2) years from the first day of the Offering Period in
which, and at least one (1) year from the Purchase Date on which, I acquired
such shares. I further agree that I will promptly notify the Chief Financial
Officer of the Company in writing of any transfer of such shares prior to the
end of the periods referred to in the preceding sentence.
I am familiar with the provisions of the Plan and hereby agree to
participate in the Plan subject to all of the provisions thereof. I understand
that the Board of Directors of the Company reserves the right to amend the Plan
and my right to purchase stock under the Plan as may be necessary to qualify the
Plan as an employee stock purchase plan as defined in section 423 of the
Internal Revenue Code of 1986, as amended, or to obtain qualification or
registration of the Company's common stock to be issued out of the Plan under
applicable foreign, federal and state securities laws. I understand that the
effectiveness of this subscription agreement is dependent upon my eligibility to
participate in the Plan.
Date: Signature:
------------------------- -----------------------------
Name Printed:
--------------------------
<PAGE> 17
FIBERITE HOLDINGS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
I hereby elect to withdraw from the current offering (the "CURRENT
OFFERING") of the common stock of Fiberite Holdings, Inc. (the "COMPANY") under
the Company's 1997 Employee Stock Purchase Plan (the "PLAN").
MAKE ONE ELECTION UNDER SECTION A AND ONE ELECTION UNDER SECTION B:
A. Current Offering. As to my participation in the current purchase period
(the "Current Purchase Period") of the Current Offering under the Plan,
I elect as follows (check one):
______ 1. I elect to terminate my participation in the Current Purchase
Period immediately.
I hereby request that all payroll deductions credited to my
account under the Plan (if any) not previously used to
purchase shares under the Plan shall not be used to purchase
shares on the last day of the Current Purchase Period.
Instead, I request that all such amounts be paid to me as soon
as practicable. I understand that this election immediately
terminates my interest in the Current Offering.
______ 2. I elect to terminate my participation in the Current Offering
following my purchase of shares on the last day of the Current
Purchase Period.
I hereby request that all payroll deductions credited to my
account under the Plan (if any) not previously used to
purchase shares under the Plan shall be used to purchase
shares on the last day of the Current Purchase Period. I
understand that this election will terminate my interest in
the Current Offering immediately following such purchase. I
request that any cash balance remaining in my account under
the Plan after my purchase of shares be returned to me as soon
as practicable.
I understand that if no election is made as to participation in the
Current Offering under the Plan, I will be deemed to have elected to participate
in the Current Offering.
B. Future Offerings. As to my participation in future offerings of common
stock under the Plan, I elect as follows (check one):
______ 1. I elect to participate in future offerings under the Plan.
I understand that by making this election I will participate
in the next offering under the Plan commencing subsequent to
the Current Offering, and in each subsequent offering
commencing immediately after the last day of an offering in
which I participate, until such time as I elect to withdraw
from the Plan or from any such subsequent offering.
______ 2. I elect not to participate in future offerings under the Plan.
I understand that by making this election I terminate my
interest in the Plan and that no further payroll deductions
will be made unless I elect in accordance with the Plan to
become a participant in another offering under the Plan.
I understand that if no election is made as to participation in future
offerings under the Plan, I will be deemed to have elected to participate in
such future offerings.
Date: Signature:
------------------------- -----------------------------
Name Printed:
--------------------------
<PAGE> 1
Exhibit 10.5
FIBERITE, INC.
MANAGEMENT INCENTIVE COMPENSATION PLAN
1. Scope and Purpose.
The purpose of the Fiberite, Inc. Management Incentive Compensation
Plan ("Plan") is to provide a reward and incentive to certain management
employees of Fiberite, Inc. for their efforts in increasing the earnings of
Fiberite, Inc.
2. Definitions.
2.1 "Covered Employees" for a given Plan Year shall mean those
Fiberite, Inc. employees who (i) complete at least 30 days of service for
Fiberite, Inc. during the Plan Year and (ii) are classified in pay grade 35 or
above at any time during the Plan Year.
2.2 "EBITDA" shall mean for the Plan Year the earnings of Fiberite,
Inc. before interest, taxes, depreciation and amortization as shown on the
end-of-the-year internal unaudited financial statements.
2.3 "EBITDA Commitment" shall mean the EBITDA goal for Fiberite, Inc.
for the Plan Year as set by the Board of Directors of Fiberite, Inc. The Board
of Directors of Fiberite, Inc. may, in its sole discretion, revise the EBITDA
Commitment during the Plan Year to take into account extraordinary events.
2.4 "Plan Year" shall mean the calendar year.
2.5 "Salary" shall mean a Covered Employee's salary (exclusive of
bonuses, awards or other add-ons) for the Plan Year.
3. Incentive Compensation.
The payment of incentive compensation under this Plan for any Plan Year
is contingent upon the EBITDA for the Plan Year equalling or exceeding 91% of
the EBITDA Commitment for such Plan Year. After the close of the Plan Year, the
EBITDA for the Plan Year shall be determined. If the EBITDA for the Plan Year
does not equal or exceed 91% of the EBITDA Commitment for such Plan Year, then
no incentive compensation shall be payable under the Plan for the Plan Year. If
the EBITDA for the Plan Year equals or exceeds 91% of the EBITDA Commitment for
such Plan Year, then Covered Employees shall be entitled to incentive
compensation under the Plan, as determined in accordance with Article 4.
-1-
<PAGE> 2
4. Calculation of Incentive Compensation.
Incentive compensation for Covered Employees shall be calculated
according to the provisions of this Article 4.
4.1 For each Covered Employee, the incentive compensation payable under
the Plan for a particular Plan Year shall be determined by (i) multiplying (a)
the Covered Employee's Salary times (b) the Pay Grade Factor as set forth in the
Table in Section 4.2, times (c) the EBITDA Realization Multiplier as set forth
in Section 4.3, and (ii) adjusting the resulting product by multiplying such
amount by the Management Factor described in Section 4.4. This formula can be
stated as:
Incentive Compensation = (Salary X Pay Grade Factor X
EBITDA Realization Multiplier) X
(Management Factor)
4.2 Pay Grade Factor. The Pay Grade Factor to be applied is as follows:
<TABLE>
<CAPTION>
Covered
-------
Employee's Pay Grade Factor (%)
-------------------- ----------
<S> <C>
35 or 36 5 %
37 or 38 10 %
39 20 %
</TABLE>
If a Covered Employee is employed at more than one Pay Grade at any time during
the Plan Year, the Pay Grade Factor shall be adjusted as necessary to account
for the different Pay Grades. For example, if a Covered Employee is employed
one-half of a Plan Year at Pay Grade 36 and one-half of the Plan Year at Pay
Grade 37, the Covered Employee's Pay Grade Factor for such Plan Year shall be
7.5%.
4.3 EBITDA Realization Multiplier. The EBITDA Realization Multiplier is
based upon the ratio of the EBITDA to the EBITDA Commitment for the Plan Year,
according to the following formulae:
4.3.1 If the EBITDA for the Plan Year is less than 91% of the
EBITDA Commitment for the Plan Year, the EBITDA Realization Multiplier is 0 and
no incentive compensation is payable under the Plan for the Plan Year.
4.3.2 If the EBITDA for the Plan Year is equal to at least 91% of
the EBITDA Commitment for such Plan Year, the EBITDA Realization Multiplier is
0.10.
4.3.3 If the EBITDA for the Plan Year is between 90% and 100% of
the EBITDA Commitment for such Plan Year, the EBITDA Realization Multiplier is
.10 for each full percentage point by which EBITDA exceeds 90% of the EBITDA
Commitment, not to exceed 1.00 (if EBITDA for the Plan Year equals the EBITDA
-2-
<PAGE> 3
Commitment). Thus, for example, if EBITDA for the Plan Year equals 95% of the
EBITDA Commitment, the EBITDA Realization Multiplier is .50; if EBITDA equals
98% of the EBITDA Commitment, the EBITDA Realization multiplier is .80.
4.3.4 If the EBITDA for the Plan Year is equal to the EBITDA
Commitment for such Plan Year, the EBITDA Realization Multiplier is 1.00.
4.3.5 If the EBITDA of Fiberite, Inc. for the Plan Year exceeds the
EBITDA Commitment for such period, the EBITDA Realization Multiplier will be
1.00 plus .05 for each full percentage point by which EBITDA exceeds 100% of
EBITDA Commitment, not to exceed 2.00 (in the case where EBITDA for the Plan
Year equals 120% of the EBITDA Commitment). In no event will the EBITDA
Realization Multiplier exceed 2.00. Thus, for example, if EBITDA equals 110% of
the EBITDA Commitment, the EBITDA Realization Multiplier is 1.50. If EBITDA
equals 114% of the EBITDA Commitment, the EBITDA Realization Multiplier is 1.70.
4.3.6 The EBITDA Realization Multiplier is set forth in tabular
form in Table A attached hereto.
4.4 Management Factor. The Chief Executive Officer of Fiberite, Inc.
shall review the proposed amount of incentive compensation (i.e., Salary X Pay
Grade Factor X EBITDA Realization Multiplier) to be paid to each Covered
Employee for the Plan Year. Based upon such review, the Chief Executive Officer
may, in his sole and absolute discretion, adjust the proposed amount of
incentive compensation payable to any Covered Employee upwards or downwards by
multiplying the incentive compensation times a "Management Factor" selected by
the Chief Executive Officer for the Covered Employee. The Management Factor is a
number between .95 and 1.05 separately selected by the Chief Executive Officer
for each Covered Employee. The selection of the Management Factor for any
Covered Employee within the range set forth in the preceding sentence shall be
in the sole and absolute discretion of the Chief Executive Officer of Fiberite,
Inc. In the event that the Chief Executive Officer determines that the
Management Factor for any Covered Employee should be less than .95 or should
exceed 1.05, the Management Factor shall be selected by joint agreement of the
Chief Executive Officer, Chief Operating Officer and Chief Financial Officer.
4.5 In order to be eligible for incentive compensation under the Plan
for a Plan Year, a Covered Employee must be employed on the last day of the Plan
Year or must have terminated employment during the Plan Year due to (i) lay-off,
reduction in force or other involuntary termination (except a termination "for
cause"); (ii) death or total disability (within the meaning of Section 72(m)(7)
of the Internal Revenue Code); or (iii) attainment of age 65. For purposes of
this Plan, termination for cause shall mean termination for any of the following
reasons: (i) theft, dishonesty or falsification of business records of Fiberite,
Inc. or any affiliate; (ii) improper use or disclosure of confidential or
proprietary information of Fiberite, Inc. or any affiliate; (iii) any action by
the Covered Employee which has a
-3-
<PAGE> 4
detrimental effect on the business or reputation of Fiberite, Inc. or any
affiliate; (iv) the Covered Employee's failure or inability to perform
reasonably assigned duties; (v) any material breach by Covered Employee of an
employment agreement which is not cured pursuant to the terms of the agreement;
or (vi) the Covered Employee's conviction of any criminal act which impairs his
or her ability to perform duties for Fiberite, Inc. or any affiliate.
4.6 Incentive compensation payments shall be prorated for Covered
Employees not actively employed for the entirety of the Plan Year. In such case,
incentive compensation shall be based on the Covered Employee's actual Salary
received during the Plan Year and not on annualized Salary.
5. Time of Payment.
Incentive compensation payments under this Plan for a Plan Year shall
be paid to Covered Employees at the time and in the manner determined by the
Board of Directors, but in no event later than March 15 of the following Plan
Year. All payments under the Plan shall be subject to appropriate payroll
withholdings and deductions.
6. Amendment, Modification, and Termination of the Plan.
This Plan may be amended, modified or terminated at any time and for
any reason by resolution of the Board of Directors of Fiberite, Inc.
7. Administration.
7.1 Except as set forth in Section 4.4 with respect to the selection of
the Management Factor by the Chief Executive Officer, the Board of Directors of
Fiberite, Inc. shall be the sole judge of questions of interpretation and
application of the terms of this Plan, and its interpretation of the terms and
calculations described herein and all of its decisions under the Plan shall be
binding. The Board of Directors and the Chief Executive Officer shall have the
broadest discretion available under law with respect to their administration of
the Plan. The Board may delegate its rights and duties under this Plan to any
committee or person. Any action by the Board of Directors with respect to this
Plan or its delegates shall be final, conclusive and binding on all persons.
7.2 Each member of the Board of Directors, the Chief Executive Officer
and any person to whom administrative duties with respect to the Plan have been
delegated shall be entitled to rely or act upon in good faith any report or
other information furnished to him or her by any officer or other employee of
Fiberite, Inc., and any independent certified public accountant, or other
professional retained by Fiberite, Inc. to assist in the administration of the
Plan or its operations. No member of the Board of Directors of Fiberite, Inc.,
nor the Chief Executive Officer or any officer or employee of Fiberite, Inc.
acting with respect to the Plan shall be personally
-4-
<PAGE> 5
liable for any action, determination, or interpretation taken or made in good
faith with respect to the Plan, and all such persons shall, to the fullest
extent permitted by law, be fully indemnified and protected by Fiberite, Inc.
with respect to any such action, determination, or interpretation.
7.3 Any disputes concerning the interpretation, application or meaning
of the Plan shall be arbitrated pursuant to the rules for Commercial Arbitration
of the American Arbitration Association. Such arbitration shall take place in
Tempe, Arizona or other location determined solely by Fiberite, Inc.
8. Nontransferability.
The right to any incentive compensation payable under the Plan shall
not be transferable by a Covered Employee except by will or the laws of descent
and distribution. A Covered Employee's rights under the Plan may not be pledged,
mortgaged, hypothecated, or otherwise encumbered, and shall not be subject to
claims of the Covered Employee's creditors except as required by law.
9. No Right to Continued Employment or Service.
Neither the Plan nor any action taken hereunder shall be construed as
giving any Covered Employee the right to be retained in the employ or service of
Fiberite, Inc. or any affiliate, nor shall it interfere in any way with the
right of Fiberite, Inc. or any affiliate to terminate any Covered Employee's
employment at any time.
10. Unfunded Status of the Plan.
The Plan is intended to constitute an "unfunded" plan for incentive
compensation. With respect to any payments not yet made to a Covered Employee
pursuant to the Plan, nothing contained in the Plan shall give any such Covered
Employee rights that are greater than those of a general unsecured creditor of
Fiberite, Inc.
11. Nonexclusivity of the Plan.
The adoption of the Plan shall not be construed as creating any
limitations on the power of the Board of Directors to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of options, awards and incentive compensation otherwise than under the
Plan, and such arrangements may be either applicable generally or only in
specific cases.
12. Governing Law.
The validity, construction, and effect of the Plan, any rules and
regulations relating to the Plan shall be determined in accordance with the laws
of Arizona without giving effect to principles of conflict of laws.
-5-
<PAGE> 6
13. Effective Date.
The Plan shall become effective as of January 1, 1996.
Adopted this 10th day of May, 1996.
FIBERITE, INC.
By: /s/ James E. Ashton
----------------------------
James E. Ashton
Its: Chief Executive Officer
-6-
<PAGE> 7
TABLE A
OF EBITDA REALIZATION MULTIPLIER
<TABLE>
<CAPTION>
=========================================================================================
EBITDA as a Percentage of EBITDA EBITDA Realization Multiplier
Commitment
- -----------------------------------------------------------------------------------------
<S> <C>
less than 91% 0
- -----------------------------------------------------------------------------------------
91.00% to 91.99% .10
- -----------------------------------------------------------------------------------------
92.00% to 92.99% .20
- -----------------------------------------------------------------------------------------
93.00% to 93.99% .30
- -----------------------------------------------------------------------------------------
94.00% to 94.99% .40
- -----------------------------------------------------------------------------------------
95.00% to 95.99% .50
- -----------------------------------------------------------------------------------------
96.00% to 96.99% .60
- -----------------------------------------------------------------------------------------
97.00% to 97.99% .70
- -----------------------------------------------------------------------------------------
98.00% to 98.99% .80
- -----------------------------------------------------------------------------------------
99.00% to 99.99% .90
- -----------------------------------------------------------------------------------------
100% to 100.99% 1.00
- -----------------------------------------------------------------------------------------
101.00% to 101.99% 1.05
- -----------------------------------------------------------------------------------------
102.00% to 102.99% 1.10
- -----------------------------------------------------------------------------------------
103.00% to 103.99% 1.15
- -----------------------------------------------------------------------------------------
104.00% to 104.99% 1.20
- -----------------------------------------------------------------------------------------
105.00% to 105.99% 1.25
- -----------------------------------------------------------------------------------------
106.00% to 106.99% 1.30
- -----------------------------------------------------------------------------------------
107.00% to 107.99% 1.35
- -----------------------------------------------------------------------------------------
108.00% to 108.99% 1.40
- -----------------------------------------------------------------------------------------
109.00% to 109.99% 1.45
- -----------------------------------------------------------------------------------------
110.00% to 110.99% 1.50
- -----------------------------------------------------------------------------------------
111.00% to 111.99% 1.55
- -----------------------------------------------------------------------------------------
112.00% to 112.99% 1.60
- -----------------------------------------------------------------------------------------
113.00% to 113.99% 1.65
- -----------------------------------------------------------------------------------------
114.00% to 114.99% 1.70
- -----------------------------------------------------------------------------------------
</TABLE>
-7-
<PAGE> 8
<TABLE>
- -----------------------------------------------------------------------------------------
<S> <C>
115.00% to 115.99% 1.75
- -----------------------------------------------------------------------------------------
116.00% to 116.99% 1.80
- -----------------------------------------------------------------------------------------
117.00% to 117.99% 1.85
- -----------------------------------------------------------------------------------------
118.00% to 118.99% 1.90
- -----------------------------------------------------------------------------------------
119.00% to 119.99% 1.95
- -----------------------------------------------------------------------------------------
120.00% or above 2.00
=========================================================================================
</TABLE>
-8-
<PAGE> 9
FIRST AMENDMENT TO
FIBERITE, INC. MANAGEMENT INCENTIVE COMPENSATION PLAN
Pursuant to Section 6 of the Fiberite, Inc. Management
Incentive Compensation Plan (the "Plan"), said Plan is hereby amended as
follows:
1. Section 4.2 of the Plan is revised by adding
the following language at the end of said Section:
Notwithstanding the preceding provisions of this
Section 4.2, the Chief Executive Officer of
Fiberite, Inc. May, in his sole and absolute
discretion, adjust the Pay Grade Factor for any
Covered Employee upwards (to a Factor not exceeding
the next highest Factor) or downwards (to a Factor
not less than the immediately preceding Factor).
For example, the Chief Executive Officer may
determine that a Covered Employee at Pay Grade 37
(Pay Grade Factor of 10%) should instead have a
Pay Grade Factor of 15% for a specific Plan Year or
a Pay Grade Factor of 8% for a specific Plan Year.
Any such adjustments in Pay Grade Factor made by
the Chief Executive Office shall be communicated
to the affected Covered Employee.
The Effective Date of this First Amendment shall be
January 1, 1996.
Adopted this 8th day of July, 1996.
FIBERITE, INC.
By: /s/ James E. Ashton
----------------------------
James E. Ashton
Its: Chief Executive Officer
<PAGE> 1
Exhibit 10.6
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is made effective as
of December 9, 1996 (the "Effective Date"), between Fiberite, Inc., a Delaware
corporation, hereinafter referred to as "Fiberite", and James E. Ashton
hereinafter referred to as "Employee." This Amended and Restated Executive
Employment Agreement was approved and made effective by the Board of Directors
of Fiberite on January 29, 1997.
In consideration of the promises and of the mutual covenants contained
herein, and for other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto do hereby agree as follows:
1. Employment. Fiberite hereby affirms its employment of Employee, and
Employee hereby affirms such employment, upon the terms and conditions set forth
above.
2. Duties. Employee is engaged in the position of Chief Executive
Officer of Fiberite. Employee shall faithfully and diligently perform the duties
customarily performed by persons in the position for which Employee is engaged,
together with such other duties the Board of Directors of Fiberite (the "Board")
shall designate from time to time. As part of Employee's duties, Employee
acknowledges and understands that: (a) Employee will devote utmost knowledge and
best skill to the performance of his duties; (b) Employee shall devote his full
business time to the rendition of such services, subject to absences for
customary vacations and for temporary illness; and (c) Employee will not engage
in any other gainful occupation which requires his personal attention without
prior consent of the Board with the exception that Employee may personally trade
in publicly traded stocks, bonds, commodities or real estate investments for his
own benefit.
3. Compensation.
3.1 Salary. As compensation for the proper and satisfactory
performance of all duties to be performed by Employee hereunder, Fiberite shall
pay Employee a salary of $200,000 per year plus an annual target bonus of 75% of
the base salary during the employment term (as defined in Section 4 below) of
this agreement. The actual bonus paid will be a multiple of the target bonus
amount, with the multiple range from 0.0 to 2.0 as described in the Fiberite,
Inc. Management Incentive Compensation Plan.
3.2 Salary Increase and Bonus Plan. The Board shall develop and
implement a plan under which it, or a committee thereof, will evaluate
Employee's performance on not less than an annual basis and, if warranted, grant
Employee increases in Base Salary and/or additional bonus compensation based on
such evaluations. Any such increases shall automatically be incorporated by
reference into this Agreement.
<PAGE> 2
3.3 Customary Fringe Benefits. Employee shall be entitled to such
fringe benefits as Fiberite customarily makes available to executive employees
of Fiberite ("Fringe Benefits"). Such Fringe Benefits may include vacation
leave, sick leave, and health insurance coverage.
4. Term. The employment term pursuant to this Agreement shall commence
on the Effective Date set forth above, and shall remain in effect until
Employee's employment is terminated in accordance with the provisions of Section
0 below. It is understood that Employee serves at the will of the Board of
Directors of the Company and that he shall be considered an "at will" Employee.
5. Termination. This Agreement and the employment of Employee shall
terminate under the following conditions:
5.1 Death. The death of Employee.
5.2 Disability. The permanent disability of Employee (permanent
disability shall exist when Employee suffers from a condition of mind or body
that indefinitely prevents Employee from satisfactory further performance of his
duties, even with reasonable accommodation, for a cumulative period of 120
business days in any consecutive 12-month period following the commencement of
employment).
5.3 Termination for Good Cause. Upon receipt by Employee of written
notice from Fiberite that Employee's employment is being terminated for "good
cause." Fiberite has "good cause" to terminate Employee's employment if Employee
has engaged in one or more of the following:
5.3.1 Commission of a felony which results in conviction.
5.3.2 Breach of the provisions of Section 8 hereof or of any
material provision of the Employee Inventions and Proprietary Rights
Assignment Agreement entered into between the Company and Employee
("Proprietary Rights Agreement").
5.3.3 Cause material loss, damage or injury to or otherwise
materially endangered the property, reputation or employees of Fiberite.
5.4 Resignation. At any time during the term of this Agreement,
Employee may provide notice of his intent to resign. Employee is required to
provide two (2) months advance notice of his resignation. Fiberite may require
that Employee work for some or all of that notice period, but Fiberite must pay
Employee for the time he actually continues in the employment of Fiberite.
-2-
<PAGE> 3
5.5 Termination for Other Than Good Cause. Fiberite may terminate
Employee's employment at any time without good cause, upon written notice
delivered to Employee that Employee's employment is being terminated for "other
than good cause." It shall be deemed a termination by Fiberite without good
cause under this Section 5.5 if Employee (i) resigns within 30 days of the
date on which, without his consent, he no longer holds the positions of
Chairman and Chief Executive Officer of Fiberite, Inc., or (ii) resigns due
to his being required to relocate to a workplace outside Arizona.
6. Compensation Upon Termination.
6.1 Payment of Compensation Upon Termination for Good Cause. In the
event Employee is terminated for good cause, as set forth in Section 5.3, he
shall receive two weeks notice that his employment is terminated and Employee
shall be entitled only to the compensation set forth as Base Salary herein,
prorated through the date of said notice. When Employee is terminated for good
cause as defined in Section 5.3, Employee is entitled to no other severance
compensation arising out of this Agreement and out of his employment
relationship with Fiberite, and Employee shall permanently and absolutely
forfeit all rights to all other severance benefits otherwise accruing by reason
of Employee's employment by Fiberite.
6.2 Payment of Compensation Upon Termination Other Than for Good
Cause. In the event Employee's employment is terminated for other than good
cause, Employee shall receive severance compensation in an amount described
below, only if Employee executes a general release of claims, releasing any and
all claims Employee has against Fiberite arising out of his employment or the
termination of said employment. Employee is not entitled to any severance
compensation pursuant to this Section unless he signs the general release
described above. The severance compensation described in this Section shall be
six (6) monthly payments commencing one (1) month after the effective date of
the termination in the amount of $29,167. Except as provided in Section 6.3,
Employee is entitled to no other severance compensation when his employment is
terminated for other than good cause.
6.3 Payment Upon Change in Control. If within six (6) months of a
Change in Control, as that term is defined herein, Employee's employment is
terminated for other than good cause or Employee refuses to accept or
voluntarily resigns from a position other than a Qualified Position, as that
term is defined herein, Employee shall receive additional severance compensation
in an amount equal to two (2) years of his then current Base Salary plus
applicable target bonus. A "Change in Control" means the acquisition, directly
or indirectly of more than 40% of the outstanding shares of any class of voting
securities of Fiberite by any person or entity that is not an existing
shareholder as of the Effective Date, or a merger, consolidation or sale of all
or substantially all of the assets of Fiberite, such that the individuals
constituting the Board of Fiberite immediately prior to such period shall cease
to constitute a majority the Board, unless the election of each director who was
not a
-3-
<PAGE> 4
director prior thereto was approved by vote of at least two-thirds of the
directors then in office who were directors prior to such period.
Notwithstanding the foregoing, an acquisition of the requisite percentage of
voting securities in connection with a public offering of securities by Fiberite
for the primary purpose of providing capital resources to Fiberite shall not be
considered a "Change in Control" for purposes of this Section 6.3. A "Qualified
Position" is an executive officer position with the entity surviving the Change
in Control, with substantially the same responsibilities as those held by the
Chief Executive Officer of Fiberite as of the date of this Agreement, which
position reports directly, or through no more than one (1) individual, to the
Board of Directors of the "Ultimate Parent Entity," as that term is defined in
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, of the entity
surviving the Change in Control. Also notwithstanding the foregoing, if Fiberite
determines that the amounts payable to Employee under this Agreement, when
considered together with any other amounts payable to Employee as a result of a
Change in Control, cause such payments to be treated as excess parachute
payments within the meaning of Section 280G of the Internal Revenue Code,
Fiberite shall reduce the amount payable to Employee under this Section 6.3 to
an amount that will not subject Employee to the imposition of tax under Section
4999 of the Internal Revenue Code. For purposes of this Section 6.3, the term
"Fiberite" includes both Fiberite, Inc. and Fiberite Holdings, Inc., in that
Employee will receive the aforementioned additional severance compensation upon:
(1) a Change of Control of either Fiberite, Inc. or Fiberite Holdings, Inc. and
(2) the other conditions set forth herein are met.
6.4 Payment Upon Death or Disability. In the event this Agreement is
terminated pursuant to Sections 5.1 or 5.2, Employee (or his estate in the case
of death) shall be entitled to a lump-sum payment equal to two (2) months of
Employee's then current Base Salary.
7. Arbitration/Sole Remedy for Breach of Agreement. In the event of any
dispute between Fiberite and Employee concerning any aspect of the employment
relationship, including any disputes upon termination, all such disputes shall
be resolved by binding arbitration before a single neutral arbitrator. The
arbitrator shall be selected from the American Arbitration Association. The
arbitrator is bound to rule only on whether or not there has been a violation of
the terms of this Agreement and to render an award, if any, that is consistent
with the terms of this Agreement. Neither party to this Agreement is entitled to
any legal recourse or rights or remedies other than those provided within this
Agreement. The Employee's sole remedies for claims arising out of his
employment, with the exception of workers' compensation remedies, are those set
forth in this Agreement. In the event of a termination of employment, the
arbitrator is limited to a determination of whether or not the discharge was for
good cause or for other than good cause. If an arbitration is brought for
something other than a termination of employment, the arbitrator is limited to
award contract damages. Fiberite shall bear the costs of the arbitration,
including arbitrator's fees and the reasonable fees of one counsel for Employee.
-4-
<PAGE> 5
8. Covenant Not to Compete. Employee agrees that, during Employee's
employment, and during any period with respect to which payments to Employee are
made pursuant to Section 5.4, Employee will not directly or indirectly compete
with Fiberite in any way, or prepare to compete or assist any other person or
entity to compete with Fiberite in any way, and that Employee will not act as an
officer, director, employee, consultant, more than one-percent shareholder,
significant lender, or agent of any other entity which is engaged in any
business of the same nature as, or in competition with, the business in which
Fiberite is now engaged or in which Fiberite becomes engaged during the term of
Employee's employment.
9. General Provisions.
9.1 Payments. All payments due pursuant to the terms of this
Agreement shall be delivered in person, or by first-class mail, postage prepaid
to the last known address of the other party. Payments may be in lawful money of
the United States, or may be made by check, draft or warrant of the paying
entity. Any payments made pursuant to Section 5.4 or Section 6 hereof shall be
made by certified or cashier's check and shall be delivered pursuant to the
terms of Section 9.2.
9.2 Notices and Delivery. Any notices to be given hereunder by
either party to the other may be effected by either personal delivery in
writing, or by mail, registered or certified, postage prepaid with a return
receipt requested. Mailed notices shall be addressed to the other party to the
address appearing beneath the party's signature on this Agreement, but each
party may change its address by written notice in accordance with this
paragraph. Notices shall be deemed communicated as of the date of delivery.
9.3 Complete Agreement. Employee acknowledges receipt of this
Agreement and agrees that this Agreement, along with the Proprietary Rights
Agreement, represents the entire Agreement with Employer concerning the subject
matter hereof. This Agreement supersedes any and all other Agreements, either
oral or in writing, between the parties hereto with respect to the matters
discussed herein of Employee and contains all of the covenants and agreements
between the parties with respect to the terms and conditions of Employee's
employment. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, orally or otherwise, have been made by
any party or anyone acting on behalf of any party which are not embodied herein.
9.4 Severability. If any provision of this agreement is held by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
-5-
<PAGE> 6
9.5 Other Benefits. Any amounts payable under this Agreement, other
than Base Salary, shall not be deemed salary or other compensation for the
purpose of computing benefits under any pension plan or other arrangement of
Fiberite for the benefit of its employees.
9.6 No Waiver. Either party's failure to enforce any provision of this
Agreement shall not in any way be construed as a waiver of any such provision,
or prevent that party from thereafter enforcing each and every other provision,
or prevent that party from thereafter enforcing each and every other provision
of this Agreement.
9.7 Successors and Assigns. The rights and obligations of Fiberite
under this Agreement shall enure to the benefit of and shall be binding upon the
successors and assigns of Fiberite. Employee shall not be entitled to assign any
of his rights or obligations under this Agreement.
9.8 Applicable Law. This Agreement shall be interpreted, construed,
governed and enforced in accordance with the laws of the State of Delaware.
9.9 Amendments. No amendment or modification of the terms or conditions
of this Agreement shall be valid unless in subsequent writing and signed by the
parties thereto.
IN WITNESS WHEREOF, the parties hereto execute this Agreement,
effective as of the date first above written.
EMPLOYEE: FIBERITE, INC.
a Delaware corporation
/s/ James Ashton By: /s/ Carl Smith
- --------------------------------- ------------------------------
James E. Ashton Carl W. Smith, President
Address: 5125 E. Roadrunner Road Address: 2055 E.Technology Circle
Paradise Valley, AZ 85253 Tempe, AZ 85284
-6-
<PAGE> 1
EXHIBIT 10.8
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is made
effective as of January 29, 1997 (the "Effective Date"), between Fiberite, Inc.,
a Delaware corporation, hereinafter referred to as "Fiberite," and Ronald M.
Miller hereinafter referred to as "Employee."
In consideration of the promises and of the mutual covenants
contained herein, and for other good and valuable consideration, receipt of
which is hereby acknowledged, the parties hereto do hereby agree as follows:
1. Employment. Fiberite hereby affirms its employment of Employee, and
Employee hereby affirms such employment, upon the terms and subject to the
conditions set forth herein.
2. Duties. Employee is engaged in the positions of Vice President and
Chief Financial Officer of Fiberite. Employee shall faithfully and diligently
perform the duties customarily performed by persons in the positions for which
Employee is engaged, together with such other duties the Board of Directors of
Fiberite (the "Board") shall designate from time to time. As part of Employee's
duties, Employee acknowledges and understands that: (a) Employee will devote his
utmost knowledge and best skill to the performance of his duties; (b) Employee
shall devote his full business time to the rendition of such services, subject
to absences for customary vacations and for temporary illness; and (c) Employee
will not engage in any other gainful occupation which requires his personal
attention without prior consent of the Board with the exception that Employee
may personally trade in publicly traded stocks, bonds, commodities or real
estate investments for his own benefit.
3. Compensation.
3.1 Salary. As compensation for the proper and satisfactory
performance of all duties to be performed by Employee hereunder, Fiberite shall
pay Employee a salary of $150,000 per year plus an annual target bonus of
$60,000 during the employment term (as defined in Section 4 below) of this
agreement. The actual bonus paid will be a multiple of the target bonus amount,
with the multiple range from 0.0 to 2.0 as described in the Fiberite, Inc.
Management Incentive Compensation Plan.
3.2 Salary Increase and Bonus Plan. The Board shall develop
and implement a plan under which it, or a committee thereof, will evaluate
Employee's performance on not less than an annual basis and, if warranted, grant
Employee increases in Base Salary and/or additional bonus compensation based on
such evaluations. Any such increases should automatically be incorporated by
reference into this Agreement.
<PAGE> 2
3.3 Customary Fringe Benefits. Employee shall be entitled to
such fringe benefits as Fiberite customarily makes available to executive
employees of Fiberite ("Fringe Benefits"). Such Fringe Benefits may include
vacation leave, sick leave, and health insurance coverage.
4. Term. The employment term pursuant to this Agreement shall commence
on the Effective Date set forth above, and shall remain in effect until
Employee's employment is terminated in accordance with the provisions of Section
5 below. It is understood that Employee serves at the will of the Board of
Directors of the Company and that he shall be considered an "at will" Employee.
5. Termination. This Agreement and the employment of Employee shall
terminate under the following conditions:
5.1 Death. The death of Employee.
5.2 Disability. The permanent disability of Employee (permanent
disability shall exist when Employee suffers from a condition of mind or body
that indefinitely prevents Employee from satisfactory further performance of his
duties, even with reasonable accommodation, for a cumulative period of 120
business days in any consecutive 12-month period following the commencement of
employment).
5.3 Termination for Good Cause. Upon receipt by Employee of written
notice from Fiberite that Employee's employment is being terminated for "good
cause." Fiberite has "good cause" to terminate Employee's employment if Employee
has engaged in one or more of the following:
5.3.1 Commission of a felony which results in conviction.
5.3.2 Breach of the provisions of Section 8 hereof or of any
material provision of the Employee Inventions and Proprietary Rights Assignment
Agreement entered into between the Company and Employee ("Proprietary Rights
Agreement").
5.3.3 Cause material loss, damage or injury to or otherwise
materially endangered the property, reputation or employees of Fiberite.
5.4 Resignation. At any time during the term of this Agreement,
Employee may provide notice of his intent to resign. Employee is required to
provide two (2) months advance notice of his resignation. Fiberite may require
that Employee work for some or all of that notice period, but Fiberite must pay
Employee for the time he actually continues in the employment of Fiberite.
5.5 Termination for Other Than Good Cause. Fiberite may terminate
Employee's employment at any time without good cause, upon written notice
delivered to Employee that Employee's employment is being terminated for "other
2
<PAGE> 3
than good cause." It shall be deemed a termination by Fiberite without good
cause under this Section 5.5 if Employee (i) resigns within 30 days of the date
on which, without his consent, he no longer holds the positions of Vice
President and Chief Financial Officer of Fiberite, Inc., or (ii) resigns due to
his being required to relocate to a workplace outside Arizona.
6. Compensation Upon Termination.
6.1 Payment of Compensation Upon Termination for Good Cause. In the
event Employee is terminated for good cause, as set forth in Section 5.3, he
shall receive two weeks notice that his employment is terminated and Employee
shall be entitled only to the compensation set forth as Base Salary herein,
prorated through the date of said notice. When Employee is terminated for good
cause as defined in Section 5.3, Employee is entitled to no other severance
compensation arising out of this Agreement and out of his employment
relationship with Fiberite, and Employee shall permanently and absolutely
forfeit all rights to all other severance benefits otherwise accruing by reason
of Employee's employment by Fiberite.
6.2 Payment of Compensation Upon Termination Other Than for Good
Cause. In the event Employee's employment is terminated for other than good
cause, Employee shall receive severance compensation in an amount described
below, only if Employee executes a general release of claims, releasing any and
all claims Employee has against Fiberite arising out of his employment or the
termination of said employment. Employee is not entitled to any severance
compensation pursuant to this Section unless he signs the general release
described above. The severance compensation described in this Section shall be
six (6) monthly payments, commencing one (1) month after the effective date of
the termination, in arrears, of the then applicable Base Salary and benefits
plus one-twelfth of his prior year's bonus. Except as provided in Section 6.3,
Employee is entitled to no other severance compensation when his employment is
terminated for other than good cause.
6.3 Payment Upon Change in Control. If within six (6) months of a
Change in Control, as that term is defined herein, Employee's employment is
terminated for other than good cause or Employee refuses to accept or
voluntarily resigns from a position other than a Qualified Position, as that
term is defined herein, Employee shall receive additional severance compensation
in an amount equal to two (2) years of his then current Base Salary plus
applicable target bonus. A "Change in Control" means the acquisition, directly
or indirectly of more than 40% of the outstanding shares of any class of voting
securities of Fiberite by any person or entity that is not an existing
shareholder as of the Effective Date, or a merger, consolidation or sale of all
or substantially all of the assets of Fiberite, such that the individuals
constituting the Board of Fiberite immediately prior to such period shall cease
to constitute a majority the Board, unless the election of each director who was
not a director prior thereto was approved by vote of at least two-thirds of the
directors then in office who were directors prior to such period.
Notwithstanding the foregoing, an acquisition of the requisite percentage of
voting securities in connection
3
<PAGE> 4
with a public offering of securities by Fiberite for the primary purpose of
providing capital resources to Fiberite shall not be considered a "Change in
Control" for purposes of this Section 6.3. A "Qualified Position" is an
executive officer position with the entity surviving the Change in Control, with
substantially the same responsibilities as those held by the Vice President and
Chief Financial Officer of Fiberite as of the date of this Agreement, which
position reports directly to the Chief Executive Officer of Fiberite in place
immediately prior to the Change of Control. Also notwithstanding the foregoing,
if Fiberite determines that the amounts payable to Employee under this
Agreement, when considered together with any other amounts payable to Employee
as a result of a Change in Control, cause such payments to be treated as excess
parachute payments within the meaning of Section 280G of the Internal Revenue
Code, Fiberite shall reduce the amount payable to Employee under this Section
6.3 to an amount that will not subject Employee to the imposition of tax under
Section 4999 of the Internal Revenue Code. For purposes of this Section 6.3, the
term "Fiberite" includes both Fiberite, Inc. and Fiberite Holdings, Inc., in
that Employee will receive the aforementioned additional severance compensation
upon: (1) a Change of Control of either Fiberite, Inc. or Fiberite Holdings,
Inc. and (2) the other conditions set forth herein are met.
6.4 Payment Upon Death or Disability. In the event this Agreement
is terminated pursuant to Sections 5.1 or 5.2, Employee (or his estate in the
case of death) shall be entitled to a lump-sum payment equal to two (2) months
of Employee's then current Base Salary.
7. Arbitration/Sole Remedy for Breach of Agreement. In the event of any
dispute between Fiberite and Employee concerning any aspect of the employment
relationship, including any disputes upon termination, all such disputes shall
be resolved by binding arbitration before a single neutral arbitrator. The
arbitrator shall be selected from the American Arbitration Association. The
arbitrator is bound to rule only on whether or not there has been a violation of
the terms of this Agreement and to render an award, if any, that is consistent
with the terms of this Agreement. Neither party to this Agreement is entitled to
any legal recourse or rights or remedies other than those provided within this
Agreement. The Employee's sole remedies for claims arising out of his
employment, with the exception of workers' compensation remedies, are those set
forth in this Agreement. In the event of a termination of employment, the
arbitrator is limited to a determination of whether or not the discharge was for
good cause or for other than good cause. If an arbitration is brought for
something other than a termination of employment, the arbitrator is limited to
award contract damages. Fiberite shall bear the costs of the arbitration,
including arbitrator's fees and the reasonable fees of one counsel for Employee.
8. Covenant Not to Compete. Employee agrees that, during Employee's
employment, and during any period with respect to which payments to Employee are
made pursuant to Section 5.4, Employee will not directly or indirectly compete
with Fiberite in any way, or prepare to compete or assist any other person or
entity to compete with Fiberite in any way, and that Employee will not act as an
officer,
4
<PAGE> 5
director, employee, consultant, more than one-percent shareholder, significant
lender, or agent of any other entity which is engaged in any business of the
same nature as, or in competition with, the business in which Fiberite is now
engaged or in which Fiberite becomes engaged during the term of Employee's
employment.
9. General Provisions.
9.1 Payments. All payments due pursuant to the terms of this
Agreement shall be delivered in person, or by first-class mail, postage prepaid
to the last known address of the other party. Payments may be in lawful money of
the United States, or may be made by check, draft or warrant of the paying
entity. Any payments made pursuant to Section 5.4 or Section 6 hereof shall be
made by certified or cashier's check and shall be delivered pursuant to the
terms of Section 9.2.
9.2 Notices and Delivery. Any notices to be given hereunder by
either party to the other may be effected by either personal delivery in
writing, or by mail, registered or certified, postage prepaid with a return
receipt requested. Mailed notices shall be addressed to the other party to the
address appearing beneath the party's signature on this Agreement, but each
party may change its address by written notice in accordance with this
paragraph. Notices shall be deemed communicated as of the date of delivery.
9.3 Complete Agreement. Employee acknowledges receipt of this
Agreement and agrees that this Agreement, along with the Proprietary Rights
Agreement, represents the entire Agreement with Employer concerning the subject
matter hereof. This Agreement supersedes any and all other agreements, either
oral or in writing, between the parties hereto with respect to the matters
discussed herein of Employee and contains all of the covenants and agreements
between the parties with respect to the terms and conditions of Employee's
employment. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, orally or otherwise, have been made by any
party or anyone acting on behalf of any party which are not embodied herein.
9.4 Severability. If any provision of this agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
9.5 Other Benefits. Any amounts payable under this Agreement,
other than Base Salary, shall not be deemed salary or other compensation for the
purpose of computing benefits under any pension plan or other arrangement of
Fiberite for the benefit of its employees.
5
<PAGE> 6
9.6 No Waiver. Either party's failure to enforce any provision of this
Agreement shall not in any way be construed as a waiver of any such provision,
or prevent that party from thereafter enforcing each and every other provision,
or prevent that party from thereafter enforcing each and every other provision
of this Agreement.
9.7 Successors and Assigns. The rights and obligations of Fiberite
under this Agreement shall enure to the benefit of and shall be binding upon the
successors and assigns of Fiberite. Employee shall not be entitled to assign any
of his rights or obligations under this Agreement.
9.8 Applicable Law. This Agreement shall be interpreted, construed,
governed and enforced in accordance with the laws of the State of Delaware.
9.9 Amendments. No amendment or modification of the terms or conditions
of this Agreement shall be valid unless in subsequent writing and signed by the
parties thereto.
IN WITNESS WHEREOF, the parties hereto execute this Agreement,
effective as of the date first above written.
EMPLOYEE: FIBERITE, INC.
a Delaware corporation
/s/ Ronald M. Miller By: /s/ James E. Ashton
- ----------------------------- ---------------------------------
Ronald M. Miller James E. Ashton, Chief Executive Officer
Address: Address:
3776 Mt. Ariane Drive 2055 East Technology Circle
San Diego, CA 92111 Tempe, AZ 85284
6
<PAGE> 1
Exhibit 10.9
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is made
effective as of February 1, 1997 (the "Effective Date"), between Fiberite, Inc.,
a Delaware corporation, hereinafter referred to as "Fiberite," and Jon DeVault
hereinafter referred to as "Employee."
In consideration of the promises and of the mutual covenants
contained herein, and for other good and valuable consideration, receipt of
which is hereby acknowledged, the parties hereto do hereby agree as follows:
1. Employment. Fiberite hereby affirms its employment of Employee, and
Employee hereby affirms such employment, upon the terms and subject to the
conditions set forth herein.
2. Duties. Employee is hereby engaged in the position of Vice President
of Marketing and Business Development of Fiberite. Employee shall faithfully and
diligently perform the duties customarily performed by persons in the position
for which Employee is engaged, together with such other duties the Board of
Directors of Fiberite (the "Board") shall designate from time to time. As part
of Employee's duties, Employee acknowledges and understands that: (a) Employee
will devote his utmost knowledge and best skill to the performance of his
duties; (b) Employee shall devote a minimum of 75% of his working time to the
rendition of such services, subject to absences for customary vacations and for
temporary illness; and (c) Employee will not engage in any other gainful
occupation which requires his personal attention without prior consent of the
Board except as follows: (i) Employee may personally trade in publicly traded
stocks, bonds, commodities or real estate investments for his own benefit; and
(ii) Employee may enter into consulting agreements with entities other than
Fiberite as long as Employee obtains the prior written consent of Fiberite's
Chief Executive Officer and a copy of any such consulting agreement(s) and the
prior written consent thereto are maintained in Employee's employment file at
Fiberite's corporate headquarters. If, during the term of Employee's employment
with Fiberite, Fiberite Holdings, Inc., Fiberite or any of Fiberite's
subsidiaries desire to enter into a transaction, with any entity with which
Employee is then currently engaged as a consultant, then such transaction must
be pre-approved in writing by a second executive officer of Fiberite other than
the Employee, and such prior written approval shall be maintained in Employee's
employment file at Fiberite's corporate headquarters.
3. Compensation.
3.1 Salary. As compensation for the proper and satisfactory
performance of all duties to be performed by Employee hereunder, Fiberite shall
pay Employee a salary of $120,000 per year plus an annual target bonus of
$50,000 during the employment term (as defined in Section 4 below) of this
agreement. The actual
<PAGE> 2
bonus paid will be a multiple of the target bonus amount, with the multiple
range from 0.0 to 2.0 as described in the Fiberite, Inc. Management Incentive
Compensation Plan.
3.2 Salary Increase and Bonus Plan. The Board shall develop
and implement a plan under which it, or a committee thereof, will evaluate
Employee's performance on not less than an annual basis and, if warranted, grant
Employee increases in Base Salary and/or additional bonus compensation based on
such evaluations. Any such increases should automatically be incorporated by
reference into this Agreement.
3.3 Customary Fringe Benefits. Employee shall be entitled to
such fringe benefits as Fiberite customarily makes available to executive
employees of Fiberite ("Fringe Benefits"). Such Fringe Benefits may include
vacation leave, sick leave, and health insurance coverage.
4. Term. The employment term pursuant to this Agreement shall commence
on the Effective Date set forth above, and shall remain in effect until
Employee's employment is terminated in accordance with the provisions of Section
5 below. It is understood that Employee serves at the will of the Board of
Directors of the Company and that he shall be considered an "at will" Employee.
5. Termination. This Agreement and the employment of Employee shall
terminate under the following conditions:
5.1 Death. The death of Employee.
5.2 Disability. The permanent disability of Employee
(permanent disability shall exist when Employee suffers from a condition of mind
or body that indefinitely prevents Employee from satisfactory further
performance of his duties, even with reasonable accommodation, for a cumulative
period of 120 business days in any consecutive 12-month period following the
commencement of employment).
5.3 Termination for Good Cause. Upon receipt by Employee of
written notice from Fiberite that Employee's employment is being terminated for
"good cause." Fiberite has "good cause" to terminate Employee's employment if
Employee has engaged in one or more of the following:
5.3.1 Commission of a felony which results in
conviction.
5.3.2 Breach of the provisions of Section 8 hereof or
of any material provision of the Employee Inventions and Proprietary Rights
Assignment Agreement entered into between the Company and Employee ("Proprietary
Rights Agreement").
5.3.3 Cause material loss, damage or injury to or
otherwise materially endangered the property, reputation or employees of
Fiberite.
2
<PAGE> 3
5.4 Resignation. At any time during the term of this
Agreement, Employee may provide notice of his intent to resign. Employee is
required to provide two (2) months advance notice of his resignation. Fiberite
may require that Employee work for some or all of that notice period, but
Fiberite must pay Employee for the time he actually continues in the employment
of Fiberite.
5.5 Termination for Other Than Good Cause. Fiberite may
terminate Employee's employment at any time without good cause, upon written
notice delivered to Employee that Employee's employment is being terminated for
"other than good cause." It shall be deemed a termination by Fiberite without
good cause under this Section 5.5 if Employee (i) resigns within 30 days of the
date on which, without his consent, he no longer holds the position of Vice
President of Marketing and Business Development of Fiberite, Inc., or (ii)
resigns due to his being required to relocate to a workplace outside Arizona.
6. Compensation Upon Termination.
6.1 Payment of Compensation Upon Termination for Good Cause.
In the event Employee is terminated for good cause, as set forth in Section 5.3,
he shall receive two weeks notice that his employment is terminated and Employee
shall be entitled only to the compensation set forth as Base Salary herein,
prorated through the date of said notice. When Employee is terminated for good
cause as defined in Section 5.3, Employee is entitled to no other severance
compensation arising out of this Agreement and out of his employment
relationship with Fiberite, and Employee shall permanently and absolutely
forfeit all rights to all other severance benefits otherwise accruing by reason
of Employee's employment by Fiberite.
6.2 Payment of Compensation Upon Termination Other Than for
Good Cause. In the event Employee's employment is terminated for other than good
cause, Employee shall receive severance compensation in an amount described
below, only if Employee executes a general release of claims, releasing any and
all claims Employee has against Fiberite arising out of his employment or the
termination of said employment. Employee is not entitled to any severance
compensation pursuant to this Section unless he signs the general release
described above. The severance compensation described in this Section shall be
six (6) monthly payments, commencing one (1) month after the effective date of
the termination, in arrears, of the then applicable Base Salary and benefits
plus one-twelfth of his prior year's bonus. Except as provided in Section 6.3,
Employee is entitled to no other severance compensation when his employment is
terminated for other than good cause.
6.3 Payment Upon Change in Control. If within six (6) months
of a Change in Control, as that term is defined herein, Employee's employment is
terminated for other than good cause or Employee refuses to accept or
voluntarily resigns from a position other than a Qualified Position, as that
term is defined herein, Employee shall receive additional severance compensation
in an amount equal to two (2) years of his then current Base Salary plus
applicable target bonus. A "Change in
3
<PAGE> 4
Control" means the acquisition, directly or indirectly of more than 40% of the
outstanding shares of any class of voting securities of Fiberite by any person
or entity that is not an existing shareholder as of the Effective Date, or a
merger, consolidation or sale of all or substantially all of the assets of
Fiberite, such that the individuals constituting the Board of Fiberite
immediately prior to such period shall cease to constitute a majority the Board,
unless the election of each director who was not a director prior thereto was
approved by vote of at least two-thirds of the directors then in office who were
directors prior to such period. Notwithstanding the foregoing, an acquisition of
the requisite percentage of voting securities in connection with a public
offering of securities by Fiberite for the primary purpose of providing capital
resources to Fiberite shall not be considered a "Change in Control" for purposes
of this Section 6.3. A "Qualified Position" is an executive officer position
with the entity surviving the Change in Control, with substantially the same
responsibilities as those held by the Vice President of Marketing and Business
Development of Fiberite as of the date of this Agreement, which position reports
directly to the Chief Executive Officer of Fiberite in place immediately prior
to the Change of Control. Also notwithstanding the foregoing, if Fiberite
determines that the amounts payable to Employee under this Agreement, when
considered together with any other amounts payable to Employee as a result of a
Change in Control, cause such payments to be treated as excess parachute
payments within the meaning of Section 280G of the Internal Revenue Code,
Fiberite shall reduce the amount payable to Employee under this Section 6.3 to
an amount that will not subject Employee to the imposition of tax under Section
4999 of the Internal Revenue Code. For purposes of this Section 6.3, the term
"Fiberite" includes both Fiberite, Inc. and Fiberite Holdings, Inc., in that
Employee will receive the aforementioned additional severance compensation upon:
(1) a Change of Control of either Fiberite, Inc. or Fiberite Holdings, Inc. and
(2) the other conditions set forth herein are met.
6.4 Payment Upon Death or Disability. In the event this
Agreement is terminated pursuant to Sections 5.1 or 5.2, Employee (or his estate
in the case of death) shall be entitled to a lump-sum payment equal to two (2)
months of Employee's then current Base Salary.
7. Arbitration/Sole Remedy for Breach of Agreement. In the event of any
dispute between Fiberite and Employee concerning any aspect of the employment
relationship, including any disputes upon termination, all such disputes shall
be resolved by binding arbitration before a single neutral arbitrator. The
arbitrator shall be selected from the American Arbitration Association. The
arbitrator is bound to rule only on whether or not there has been a violation of
the terms of this Agreement and to render an award, if any, that is consistent
with the terms of this Agreement. Neither party to this Agreement is entitled to
any legal recourse or rights or remedies other than those provided within this
Agreement. The Employee's sole remedies for claims arising out of his
employment, with the exception of workers' compensation remedies, are those set
forth in this Agreement. In the event of a termination of employment, the
arbitrator is limited to a determination of whether or not the discharge was for
good cause or for other than good cause. If an arbitration is
4
<PAGE> 5
brought for something other than a termination of employment, the arbitrator is
limited to award contract damages. Fiberite shall bear the costs of the
arbitration, including arbitrator's fees and the reasonable fees of one counsel
for Employee.
8. Covenant Not to Compete. Employee agrees that, during Employee's
employment, and during any period with respect to which payments to Employee are
made pursuant to Section 5.4, Employee will not directly or indirectly compete
with Fiberite in any way, or prepare to compete or assist any other person or
entity to compete with Fiberite in any way, and that Employee will not act as an
officer, director, employee, consultant, more than one-percent shareholder,
significant lender, or agent of any other entity which is engaged in any
business of the same nature as, or in competition with, the business in which
Fiberite is now engaged or in which Fiberite becomes engaged during the term of
Employee's employment.
9. General Provisions.
9.1 Payments. All payments due pursuant to the terms of this
Agreement shall be delivered in person, or by first-class mail, postage prepaid
to the last known address of the other party. Payments may be in lawful money of
the United States, or may be made by check, draft or warrant of the paying
entity. Any payments made pursuant to Section 5.4 or Section 6 hereof shall be
made by certified or cashier's check and shall be delivered pursuant to the
terms of Section 9.2.
9.2 Notices and Delivery. Any notices to be given hereunder by
either party to the other may be effected by either personal delivery in
writing, or by mail, registered or certified, postage prepaid with a return
receipt requested. Mailed notices shall be addressed to the other party to the
address appearing beneath the party's signature on this Agreement, but each
party may change its address by written notice in accordance with this
paragraph. Notices shall be deemed communicated as of the date of delivery.
9.3 Complete Agreement. Employee acknowledges receipt of this
Agreement and agrees that this Agreement, along with the Proprietary Rights
Agreement, represents the entire Agreement with Employer concerning the subject
matter hereof. This Agreement supersedes any and all other agreements, either
oral or in writing, between the parties hereto with respect to the matters
discussed herein of Employee and contains all of the covenants and agreements
between the parties with respect to the terms and conditions of Employee's
employment. Each party to this Agreement acknowledges that no representations,
inducements, promises or agreements, orally or otherwise, have been made by any
party or anyone acting on behalf of any party which are not embodied herein.
9.4 Severability. If any provision of this agreement is held
by a court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
5
<PAGE> 6
9.5 Other Benefits. Any amounts payable under this Agreement,
other than Base Salary, shall not be deemed salary or other compensation for the
purpose of computing benefits under any pension plan or other arrangement of
Fiberite for the benefit of its employees.
9.6 No Waiver. Either party's failure to enforce any provision
of this Agreement shall not in any way be construed as a waiver of any such
provision, or prevent that party from thereafter enforcing each and every other
provision, or prevent that party from thereafter enforcing each and every other
provision of this Agreement.
9.7 Successors and Assigns. The rights and obligations of
Fiberite under this Agreement shall enure to the benefit of and shall be binding
upon the successors and assigns of Fiberite. Employee shall not be entitled to
assign any of his rights or obligations under this Agreement.
9.8 Applicable Law. This Agreement shall be interpreted,
construed, governed and enforced in accordance with the laws of the State of
Delaware.
9.9 Amendments. No amendment or modification of the terms or
conditions of this Agreement shall be valid unless in subsequent writing and
signed by the parties thereto.
IN WITNESS WHEREOF, the parties hereto execute this Agreement,
effective as of the date first above written.
EMPLOYEE: FIBERITE, INC.
a Delaware corporation
/s/Jon DeVault
- ------------------------------------ By: /s/James E. Ashton
Jon DeVault ------------------------------
James E. Ashton
Chief Executive Officer
Address: 6317 Chaucer Lane Address: 2055 East Technology Circle
Alexandria, VA 22304 Tempe, AZ 85284
6
<PAGE> 1
Exhibit 10.10
CREDIT AGREEMENT
DATED AS OF OCTOBER 6, 1995
AMONG
FIBERITE, INC.,
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
AS AGENT,
AND
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
ARRANGED BY
BA SECURITIES, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE I
DEFINITIONS.................................................. 1
1.1 Certain Defined Terms................................................................................... 1
1.2 Other Interpretive Provisions........................................................................... 28
1.3 Accounting Principles................................................................................... 29
ARTICLE II
THE CREDITS.................................................. 29
2.1 Amounts and Terms of Commitments........................................................................ 29
(a) The Term A Credit............................................................................. 29
(b) The Term B Credit............................................................................. 30
(c) The Revolving Credit.......................................................................... 30
2.2 Loan Accounts........................................................................................... 30
2.3 Procedure for Borrowing................................................................................. 31
2.4 Conversion and Continuation Elections................................................................... 31
2.5 Voluntary Termination or Reduction of Revolving
Commitments....................................................................................... 33
2.6 Optional Prepayments.................................................................................... 33
2.7 Mandatory Prepayments of Loans.......................................................................... 34
2.8 Repayment............................................................................................... 35
(a) The Term A Credit............................................................................. 35
(b) The Term B Credit............................................................................. 35
(c) The Revolving Credit.......................................................................... 36
2.9 Interest............................................................................................... 36
2.10 Fees .................................................................................................. 36
(a) Arranger and Agency Fees..................................................................... 36
(b) Commitment Fees.............................................................................. 37
2.11 Computation of Fees and Interest....................................................................... 37
2.12 Payments by the Company................................................................................ 37
2.13 Payments by the Lenders to the Agent................................................................... 38
2.14 Sharing of Payments, Etc............................................................................... 39
ARTICLE III
THE LETTERS OF CREDIT............................................. 39
3.1 The Letter of Credit Subfacility........................................................................ 39
3.2 Issuance, Amendment and Renewal of Letters of Credit.................................................... 41
3.3 Risk Participations, Drawings and Reimbursements........................................................ 43
3.4 Repayment of Participations............................................................................. 45
3.5 Role of the Issuing Lenders............................................................................. 45
3.6 Obligations Absolute.................................................................................... 46
3.7 Cash Collateral Pledge.................................................................................. 47
3.8 Letter of Credit Fees................................................................................... 47
3.9 Uniform Customs and Practice............................................................................ 48
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Section Page
<S> <C>
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY..................................... 48
4.1 Taxes................................................................................................... 48
4.2 Illegality.............................................................................................. 50
4.3 Increased Costs and Reduction of Return................................................................. 50
4.4 Funding Losses.......................................................................................... 51
4.5 Inability to Determine Rates............................................................................ 52
4.6 Certificates of Lenders................................................................................. 52
4.7 Substitution of Lenders................................................................................. 52
4.8 Survival................................................................................................ 53
ARTICLE V
CONDITIONS PRECEDENT.............................................. 53
5.1 Documentary Conditions of Initial Credit Extensions..................................................... 53
(a) Credit Agreement and Notes................................................................ 53
(b) Resolutions and Incumbency of Company .................................................... 53
(c) Resolutions and Incumbency of Parent...................................................... 53
(d) Organization Documents; Good Standing..................................................... 54
(e) Legal Opinions............................................................................ 54
(f) Solvency Opinion.......................................................................... 54
(g) Payment of Fees........................................................................... 54
(h) Certificate............................................................................... 54
(i) Security Agreement, etc................................................................... 55
(j) Guaranty.................................................................................. 55
(k) Pledge Agreements......................................................................... 55
(l) Real Property............................................................................. 55
(m) Landlord's Consents ...................................................................... 56
(n) Purchase Agreement Assignment............................................................. 56
(o) Purchase Agreements, and Other Documents.................................................. 56
(p) Other Documents........................................................................... 56
5.2 Other Conditions to Initial Loan or Letter of Credit.................................................... 56
(a) Capitalization of the Company............................................................. 56
(b) Capitalization of the Parent.............................................................. 57
(c) Subordinated Notes........................................................................ 57
(d) Purchase.................................................................................. 57
5.3 Conditions to All Credit Extensions..................................................................... 57
(a) Notice, Application....................................................................... 57
(b) Continuation of Representations and Warranties............................................ 57
(c) No Existing Default....................................................................... 57
ARTICLE VI
REPRESENTATIONS AND WARRANTIES..................................... 58
6.1 Corporate Existence and Power..................................................................... 58
6.2 Corporate Authorization; No Contravention......................................................... 58
6.3 Governmental Authorization........................................................................ 59
6.4 Binding Effect.................................................................................... 59
6.5 Litigation........................................................................................ 59
</TABLE>
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<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
6.6 No Default........................................................................................ 59
6.7 ERISA Compliance.................................................................................. 60
6.8 Use of Proceeds; Margin Regulations............................................................... 60
6.9 Title to Properties............................................................................... 60
6.10 Taxes............................................................................................. 61
6.11 Financial Condition............................................................................... 61
6.12 Environmental Matters............................................................................. 62
6.13 Regulated Entities................................................................................ 62
6.14 No Burdensome Restrictions........................................................................ 62
6.15 Copyrights, Patents, Trademarks and Licenses, etc................................................. 63
6.16 Subsidiaries...................................................................................... 63
6.17 Insurance......................................................................................... 63
6.18 Solvency, etc..................................................................................... 63
6.19 Purchase, etc..................................................................................... 63
6.20 Real Property..................................................................................... 64
6.21 Swap Obligations.................................................................................. 64
6.22 Full Disclosure................................................................................... 64
ARTICLE VII
AFFIRMATIVE COVENANTS............................................. 65
7.1 Financial Statements.............................................................................. 65
7.2 Certificates; Other Information................................................................... 66
7.3 Notices........................................................................................... 67
7.4 Preservation of Corporate Existence, Etc.......................................................... 68
7.5 Maintenance of Property........................................................................... 68
7.6 Insurance......................................................................................... 69
7.7 Payment of Obligations............................................................................ 69
7.8 Compliance with Laws.............................................................................. 69
7.9 Compliance with ERISA............................................................................. 69
7.10 Inspection of Property and Books and Records...................................................... 69
7.11 Environmental Laws................................................................................ 70
7.12 Interest Rate Protection.......................................................................... 70
7.13 Use of Proceeds................................................................................... 70
7.14 Further Assurances................................................................................ 70
ARTICLE VIII
NEGATIVE COVENANTS............................................... 71
8.1 Limitation on Liens............................................................................... 71
8.2 Disposition of Assets............................................................................. 73
8.3 Consolidations and Mergers........................................................................ 73
8.4 Loans and Investments............................................................................. 73
8.5 Limitation on Indebtedness........................................................................ 74
8.6 Transactions with Affiliates...................................................................... 75
8.7 Use of Proceeds................................................................................... 76
8.8 Contingent Obligations............................................................................ 76
8.9 Joint Ventures.................................................................................... 76
8.10 Lease Obligations................................................................................. 76
8.11 Minimum Fixed Charge Coverage..................................................................... 77
</TABLE>
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<TABLE>
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8.12 Minimum Interest Coverage......................................................................... 77
8.13 Maximum Leverage.................................................................................. 77
8.14 Minimum Net Worth................................................................................. 77
8.15 Maximum Capital Expenditures...................................................................... 78
8.16 Restricted Payments............................................................................... 78
8.17 ERISA............................................................................................. 79
8.18 Change in Business................................................................................ 79
8.19 Amendments to Certain Documents................................................................... 79
8.20 Accounting Changes................................................................................ 79
ARTICLE IX
EVENTS OF DEFAULT............................................... 79
9.1 Event of Default........................................................................................ 79
(a) Non-Payment............................................................................... 79
(b) Representation or Warranty................................................................ 79
(c) Specific Defaults......................................................................... 80
(d) Other Defaults............................................................................ 80
(e) Cross-Default............................................................................. 80
(f) Insolvency; Voluntary Proceedings......................................................... 80
(g) Involuntary Proceedings................................................................... 81
(h) ERISA..................................................................................... 81
(i) Monetary Judgments........................................................................ 81
(j) Non-Monetary Judgments.................................................................... 81
(k) Change of Control......................................................................... 81
(l) Guarantor Defaults........................................................................ 82
(m) Collateral Documents, etc................................................................. 82
9.2 Remedies.......................................................................................... 82
9.3 Rights Not Exclusive.............................................................................. 83
ARTICLE X
THE AGENT................................................... 83
10.1 Appointment and Authorization..................................................................... 83
10.2 Delegation of Duties.............................................................................. 83
10.3 Liability of Agent................................................................................ 84
10.4 Reliance by Agent................................................................................. 84
10.5 Notice of Default................................................................................. 85
10.6 Credit Decision................................................................................... 85
10.7 Indemnification of Agent.......................................................................... 85
10.8 Agent in Individual Capacity...................................................................... 86
10.9 Successor Agent................................................................................... 86
10.10 Withholding Tax................................................................................... 87
10.11 Collateral Matters................................................................................ 88
ARTICLE XI
MISCELLANEOUS................................................. 89
11.1 Amendments and Waivers............................................................................ 89
11.2 Notices........................................................................................... 90
</TABLE>
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11.3 No Waiver; Cumulative Remedies.................................................................... 91
11.4 Costs and Expenses................................................................................ 91
11.5 Company Indemnification........................................................................... 92
11.6 Payments Set Aside................................................................................ 92
11.7 Successors and Assigns............................................................................ 92
11.8 Assignments, Participations, etc.................................................................. 93
11.9 Confidentiality................................................................................... 94
11.10 Set-off........................................................................................... 95
11.11 Automatic Debits of Fees.......................................................................... 95
11.12 Notification of Addresses, Lending Offices, Etc................................................... 96
11.13 Counterparts...................................................................................... 96
11.14 Severability...................................................................................... 96
11.15 No Third Parties Benefited........................................................................ 96
11.16 Governing Law and Jurisdiction.................................................................... 96
11.17 Waiver of Jury Trial.............................................................................. 97
11.18 Subsidiary References............................................................................. 97
11.19 Entire Agreement.................................................................................. 97
</TABLE>
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SCHEDULES
Schedule 1.1 Commitments, Revolving Percentages, Term A
Percentages, Term B Percentages
Schedule 6.5 Litigation
Schedule 6.11 Permitted Liabilities
Schedule 6.12 Environmental Matters
Schedule 6.16 Subsidiaries and Minority Interests
Schedule 6.17 Insurance Matters
Schedule 6.20 Real Property
Schedule 8.1 Permitted Liens
Schedule 8.5 Permitted Indebtedness
Schedule 8.8 Contingent Obligations
Schedule 11.2 Lending Offices; Addresses for Notices
EXHIBITS
Exhibit A Form of Notice of Borrowing
Exhibit B Form of Notice of Conversion/Continuation
Exhibit C Form of Compliance Certificate
Exhibit D Form of Promissory Note
Exhibit E Form of Security Agreement
Exhibit F Form of Trademark Security Agreement
Exhibit G Form of Guaranty
Exhibit H Form of Company Pledge Agreement
Exhibit I Form of Parent Pledge Agreement
Exhibit J Form of Landlord's Consent
Exhibit K Form of Purchase Agreement Assignment
Exhibit L Form of Opinion of Counsel to the Company and
the Parent
Exhibit M Form of Opinion of Local Counsel to the Company
Exhibit N Intentionally Omitted
Exhibit O Form of Opinion of Special Counsel to the Agent
Exhibit P Form of Solvency Opinion
Exhibit Q Form of Assignment and Acceptance
Exhibit R Form of Patent Security Agreementy
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CREDIT AGREEMENT
This CREDIT AGREEMENT is entered into as of October 6, 1995, among
FIBERITE, INC., a Delaware corporation (the "Company"), the several financial
institutions from time to time party to this Agreement (collectively the
"Lenders"; individually each a "Lender"), and BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as agent for the Lenders.
WHEREAS, the Lenders have agreed to make available to the Company term
loans and a revolving credit facility with a letter of credit subfacility upon
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements, provisions
and covenants contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. The following terms have the following
meanings:
Acquired Businesses means ICI Composites, Inc. and
Fiberite Europe GmbH.
Acquisition means any transaction or series of related
transactions for the purpose of, or resulting directly or indirectly
in, (a) the acquisition of all or substantially all of the assets of a
Person, or of any business or division of a Person, (b) the acquisition
of in excess of 50% of the capital stock, partnership interests,
membership interests or equity of any Person, or otherwise causing any
Person to become a Subsidiary, or (c) a merger or consolidation or any
other combination with another Person (other than a Person that is a
Subsidiary) provided that the Company or a Subsidiary is the surviving
entity.
Adjusted Working Capital means the excess of:
(a) (i) the consolidated current assets of the Company and its
Subsidiaries, less (ii) the amount of cash and cash equivalents
included in such consolidated current assets;
over
(b) (i) consolidated current liabilities of the Company and
its Subsidiaries, less (ii) the amount of short-term Indebtedness
(including current maturities of long-term
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Indebtedness) of the Company and its Subsidiaries included in such
consolidated current liabilities.
Affected Lender -- see Section 4.7.
Affiliate means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of such other Person, whether through the
ownership of voting securities or membership interests, by contract, or
otherwise. Without limiting the foregoing, any Person which is an
officer, director or shareholder of the Company, or a member of the
immediate family of any such officer, director or shareholder, shall be
deemed to be an Affiliate of the Company.
Agent means BofA in its capacity as agent for the Lenders
hereunder, and any successor agent arising under Section 10.9.
Agent-Related Persons means BofA and any successor agent
arising under Section 10.9, together with their respective Affiliates
(including the Arranger), and the officers, directors, employees,
agents and attorneys-in-fact of such Persons and Affiliates.
Agent's Payment Office means the address for payments set
forth on Schedule 11.2 in relation to the Agent, or such other address
as the Agent may from time to time specify.
Agreement means this Credit Agreement.
Applicable Base Rate Margin means (a) initially, 1.50% in the
case of any Revolving Loan or Term A Loan bearing interest based on the
Base Rate and 2.00% in the case of any Term B Loan bearing interest
based on the Base Rate, and (b) on and after any date specified below
on which the Applicable Base Rate Margin is to be adjusted, the rate
per annum set forth in the table below for the applicable Loan opposite
the applicable Leverage Ratio and Interest Coverage Ratio:
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Applicable Base Applicable
Leverage Ratio Rate Margin for Base Rate
and Interest Revolving Loans Margin for
Coverage Ratio and Term A Loans Term B Loans
Leverage Ratio greater
than 3.00 to 1 or 1.50% 2.00%
Interest Coverage
Ratio less than 3.50 to 1
Leverage Ratio less
than 3.00 to 1 1.25% 2.00%
and Interest Coverage
Ratio greater than 3.50 to 1
Leverage Ratio less than 2.50 1.00% 2.00%
to 1 and Interest Coverage
Ratio greater than 4.00 to 1
The Applicable Base Rate Margin shall be adjusted, to the extent
applicable, 45 days (or, in the case of the last calendar quarter of
any year, 90 days) after the end of each calendar quarter, based on the
Leverage Ratio and Interest Coverage Ratio as of the last day of such
calendar quarter; it being understood that if the Company fails to
deliver the financial statements required by subsection 7.1(a) or
7.1(b)(ii), as applicable, and the related Compliance Certificate
required by subsection 7.2(b) by the 45th day (or, if applicable, the
90th day) after any calendar quarter, the Applicable Base Rate Margin
shall be 1.50% for any Revolving Loan or Term A Loan bearing interest
based on the Base Rate and 2.00% for Term B Loan bearing interest based
on the Base Rate until such financial statements and Compliance
Certificate are delivered. Notwithstanding the foregoing, the
Applicable Base Rate Margin shall not be reduced at any time before
September 30, 1996.
Applicable Offshore Rate Margin means (a) initially, 2.75% in
the case of any Revolving Loan or Term A Loan bearing interest based on
the Offshore Rate and 3.25% in the case of any Term B Loan bearing
interest based on the Offshore Rate, and (b) on and after any date
specified below on which the Applicable Offshore Rate Margin is to be
adjusted, the rate per annum set forth in the table below for the
applicable Loan opposite the applicable Leverage Ratio and Interest
Coverage Ratio:
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Applicable Applicable
Offshore Offshore
Leverage Ratio Rate Margin for Rate
and Interest Revolving Loans Margin for
Coverage Ratio and Term A Loans Term B Loans
Leverage Ratio greater
than 3.00 to 1 or 2.75% 3.25%
Interest Coverage
Ratio less than 3.50 to 1
Leverage Ratio less
than 3.00 to 1 and 2.50% 3.25%
Interest Coverage
Ratio greater than 3.50 to 1
Leverage Ratio less than 2.50 2.25% 3.25%
to 1 and Interest Coverage
Ratio greater than 4.00 to 1
The Applicable Offshore Rate Margin shall be adjusted, to the extent
applicable, 45 days (or, in the case of the last calendar quarter of
any year, 90 days) after the end of each calendar quarter, based on the
Leverage Ratio and Interest Coverage Ratio as of the last day of such
quarter; it being understood that if the Company fails to deliver the
financial statements required by subsection 7.1(a) or 7.1(b)(ii), as
applicable, and the related Compliance Certificate required by
subsection 7.2(b) by the 45th day (or, if applicable, the 90th day)
after any calendar quarter, the Applicable Offshore Rate Margin shall
be 2.75% for Revolving Loans and Term A Loans bearing interest based on
the Offshore Rate and 3.25% for Term B Loans bearing interest based on
the Offshore Rate until such financial statements and Compliance
Certificate are delivered. Notwithstanding the foregoing, the
Applicable Offshore Rate Margin shall not be reduced at any time before
September 30, 1996.
Arranger means BA Securities, Inc., a Delaware corporation.
Assignee - see subsection 11.8(a).
Assignment and Acceptance - see subsection 11.8(a).
Attorney Costs means and includes (i) all reasonable fees and
disbursements of any law firm or other external counsel and (ii) the
reasonable allocated cost of internal legal services and all reasonable
disbursements of internal counsel incurred after the Closing Date.
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BAI means Bank of America Illinois, an Illinois banking
corporation.
Bankruptcy Code means the Federal Bankruptcy Reform Act
of 1978 (11 U.S.C. Section101, et seq.).
Base Rate means, for any day, the higher of: (a) 0.50% per
annum above the latest Federal Funds Rate; and (b) the rate of interest
in effect for such day as publicly announced from time to time by BAI
in Chicago, Illinois as its "reference rate." (The "reference rate" is
a rate set by BAI based upon various factors including BAI's costs and
desired return, general economic conditions and other factors, and is
used as a reference point for pricing some loans, which may be priced
at, above, or below such announced rate.) Any change in the reference
rate announced by BAI shall take effect at the opening of business on
the day specified in the public announcement of such change.
Base Rate Loan means a Loan that bears interest based on the
Base Rate.
BofA means Bank of America National Trust and Savings
Association, a national banking association.
Borrowing means a borrowing hereunder consisting of Revolving
Loans, Term A Loans or Term B Loans of the same Type made to the
Company on the same day by the Lenders under Article II and, in the
case of Offshore Rate Loans, having the same Interest Period.
Borrowing Date means any date on which a Borrowing occurs
under Section 2.3.
Business Day means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City, Chicago or San
Francisco are authorized or required by law to close and, if the
applicable Business Day relates to any Offshore Rate Loan, means such a
day on which dealings are carried on in the applicable offshore dollar
interbank market.
Capital Adequacy Regulation means any guideline, request or
directive of any central bank or other Governmental Authority, or any
other law, rule or regulation, whether or not having the force of law,
in each case regarding capital adequacy of any bank or of any
corporation controlling a bank.
Capital Expenditures means all expenditures which, in
accordance with GAAP, would be required to be capitalized and shown on
the consolidated balance sheet of the Company, but excluding
expenditures made in connection with the replacement, substitution or
restoration of assets to the
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<PAGE> 13
extent financed (i) from insurance proceeds (or other similar
recoveries) paid on account of the loss of or damage to the assets
being replaced or restored or (ii) with awards of compensation arising
from the taking by eminent domain or condemnation of the assets being
replaced.
Carlisle means Carlisle Enterprises, L.P.
Cash Collateralize means to pledge and deposit with or deliver
to the Agent, for the benefit of the Agent, the Issuing Lenders and the
Lenders, as additional collateral for the L/C Obligations, cash or
deposit account balances pursuant to documentation in form and
substance satisfactory to the Agent and the Issuing Lenders (which
documents are hereby consented to by the Lenders). Derivatives of such
term shall have corresponding meanings. The Company hereby grants the
Agent, for the benefit of the Agent, the Issuing Lenders and the
Lenders, a security interest in all such cash and deposit account
balances. Cash collateral shall be maintained in blocked, non-interest
bearing deposit accounts at BAI.
"Cash Equivalent Investments" shall mean (i) securities issued
or directly and fully guaranteed or insured by the United States of
America or any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged in
support thereof) having maturities of not more than three years from
the date of acquisition, (ii) marketable direct obligations issued by
any State of the United States of America or any local government or
other political subdivision thereof rated (at the time of acquisition
of such security) at least AA by Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies, Inc. ("S&P") or the equivalent
thereof by Moody's Investors Service, Inc. ("Moody's") having
maturities of not more than one year from the date of acquisition,
(iii) U.S. dollar denominated time deposits, certificates of deposit
and bankers' acceptances of (x) any Lender, (y) any domestic commercial
bank of recognized standing having capital and surplus in excess of
$250,000,000 or (z) any bank whose short-term commercial paper rating
(at the time of acquisition of such security) by S&P is at least A-1 or
the equivalent thereof (any such bank, an "Approved Bank"), in each
case with maturities of not more than six months from the date of
acquisition, (iv) commercial paper and variable or fixed rate notes
issued by any Lender or Approved Bank or by the parent company of any
Lender or Approved Bank and commercial paper and variable rate notes
issued by, or guaranteed by, any industrial or financial company with a
short-term commercial paper rating (at the time of acquisition of such
security) of at least A-1 or the equivalent thereof by S&P or at least
P-1 or the equivalent thereof by Moody's, or guaranteed by any
industrial company with a long-term unsecured debt rating
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<PAGE> 14
(at the time of acquisition of such security) of at least AA or the
equivalent thereof by S&P or at least Aa or the equivalent thereof by
Moody's and in each case maturing within one year after the date of
acquisition and (v) repurchase agreements with any Lender or any
primary dealer maturing within one year from the date of acquisition
that are fully collateralized by investment instruments that would
otherwise be Cash Equivalent Investments; provided that the terms of
such repurchase agreements comply with the guidelines set forth in the
Federal Financial Institutions Examination Council Supervisory Policy
-- Repurchase Agreements of Depository Institutions With Securities
Dealers and Others, as adopted by the Comptroller of the Currency on
October 31, 1985.
CFILP means Carlisle-Fiberite Investors, L.P.
Change of Control means that (i) DLJMB and CFILP collectively
cease to own, beneficially and of record, at least 51% of each class of
capital stock of the Parent; (ii) any Person, or two or more Persons
acting in concert, acquires the beneficial ownership of 15% or more of
any class of capital stock of the Company; or (iii) the Parent ceases
to own, beneficially and of record, 100% of each class of capital stock
of the Company.
Closing Date means the date on which all conditions precedent
set forth in Sections 5.1 and 5.2 are satisfied or waived by all
Lenders (or, in the case of subsection 5.1(g), waived by the Person
entitled to receive the applicable payment).
Code means the Internal Revenue Code of 1986.
Collateral Document means the Security Agreement, each
Trademark Security Agreement, each Patent Security Agreement, each
Pledge Agreement, each Mortgage and any other document pursuant to
which collateral securing the liabilities of the Company or any
Guarantor under any Loan Document is granted to the Agent for the
benefit of itself and the Lenders.
Commercial Letter of Credit means any Letter of Credit which
is drawable upon presentation of a sight draft and other documents
evidencing the sale or shipment of goods purchased by the Company in
the ordinary course of business.
Commitment means, as to each Lender, such Lender's Revolving
Commitment, Term A Commitment or Term B Commitment, as applicable.
Company - See the Preamble.
Company Pledge Agreement - see subsection 5.1(k).
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<PAGE> 15
Compliance Certificate means a certificate substantially in
the form of Exhibit C.
Computation Period means (a) the period from the Closing Date
through March 31, 1996, (b) the period from the Closing Date through
June 30, 1996, (c) the period from the Closing Date through September
30, 1996 and (d) any period of four consecutive fiscal quarters ending
on or after December 31, 1996.
Consolidated Net Income means, with respect to the Company and
its Subsidiaries for any period, the net income (or loss) of the
Company and its Subsidiaries for such period.
Contingent Obligation means, as to any Person, any direct or
indirect liability of such Person, whether or not contingent, with or
without recourse, (a) with respect to any Indebtedness, lease,
dividend, letter of credit or other obligation (the "primary
obligation") of another Person (the "primary obligor"), including any
obligation of such Person (i) to purchase, repurchase or otherwise
acquire such primary obligation or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any primary
obligation, or to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency or
any balance sheet item, level of income or financial condition of the
primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any primary
obligation of the ability of the primary obligor to make payment of
such primary obligation, or (iv) otherwise to assure or hold harmless
the holder of any primary obligation against loss in respect thereof
(each, a "Guaranty Obligation"); (b) with respect to any Surety
Instrument (other than any Letter of Credit) issued for the account of
such Person or as to which such Person is otherwise liable for
reimbursement of drawings or payments; (c) to purchase any materials,
supplies or other property from, or to obtain the services of, another
Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property,
or for such services, shall be made regardless of whether delivery of
such materials, supplies or other property is ever made or tendered, or
such services are ever performed or tendered; or (d) in respect of any
Swap Contract. The amount of any Contingent Obligation shall, (a) in
the case of Guaranty Obligations, be deemed equal to the stated or
determinable amount of the primary obligation in respect of which such
Guaranty Obligation is made or, if not stated or if indeterminable, the
maximum reasonably anticipated liability in respect thereof, and (b) in
the case of Swap Contracts, be equal to the Swap Termination Value, and
(c) in the case
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<PAGE> 16
of other Contingent Obligations, be equal to the maximum reasonably
anticipated liability in respect thereof.
Contractual Obligation means, as to any Person, any provision
of any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument,
document or agreement to which such Person is a party or by which it or
any of its property is bound.
Conversion/Continuation Date means any date on which, under
Section 2.4, the Company (a) converts Loans of one Type to the other
Type or (b) continues as Offshore Rate Loans, but with a new Interest
Period, Offshore Rate Loans having Interest Periods expiring on such
date.
Credit Extension means and includes (a) the making of any Loan
hereunder and (b) the Issuance of any Letter of Credit hereunder.
Defense Agreement means any agreement entered into between the
Company and United States Department of Defense concerning the disclosure of
information to third parties so long as such agreement is not materially more
adverse to the Lenders with respect to their inspection, audit and visitation
rights than the draft dated October 2, 1995 of the Special Security Agreement
among AXA, The Equitable Companies Incorporated, Donaldson, Lufkin & Jenrette,
Inc., DLJ Capital Investors, Inc., DLJ Merchant Banking, Inc., Parent, Company,
and the United States Department of Defense.
DLJMB means DLJ Merchant Banking, Inc. and its
Affiliates.
Dollars and $ mean lawful money of the United States.
Dollar Amount means, in relation to any Indebtedness (i)
denominated in Dollars, the amount of such Indebtedness, and (ii)
denominated in a currency other than Dollars, the Dollar Equivalent of
the amount of such Indebtedness on the last day of the
immediately-preceding calendar month.
Dollar Equivalent means, in relation to an amount denominated
in a currency other than Dollars, the amount of Dollars which could be
purchased with such amount at the prevailing foreign exchange spot
rate.
EBITDA means, for any Computation Period, the sum of
(a) Consolidated Net Income of the Company for such period
excluding, to the extent reflected in determining such Consolidated Net
Income, extraordinary gains and losses for such period and other
non-cash or non-recurring charges
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related to but not limited to the adoption of new accounting policies
and plant consolidations or restructurings,
plus
(b) to the extent deducted in determining Consolidated Net
Income, Interest Expense, income tax expense, depreciation, depletion
and amortization for such period.
Effective Amount means, with respect to any outstanding L/C
Obligations on any date, (i) the amount of such L/C Obligations on such
date after giving effect to any Issuances of Letters of Credit
occurring on such date; (ii) the amount of any undrawn Commercial
Letters of Credit which have expired less than 25 days prior to such
date; and (iii) any other changes in the aggregate amount of the L/C
Obligations as of such date, including as a result of any
reimbursements of outstanding unpaid drawings under any Letter of
Credit or any reduction in the maximum amount available for drawing
under Letters of Credit taking effect on such date.
Eligible Assignee means (i) a commercial bank organized under
the laws of the United States, or any state thereof, and having a
combined capital and surplus of at least $100,000,000; (ii) a
commercial bank organized under the laws of any other country which is
a member of the Organization for Economic Cooperation and Development
(the "OECD"), or a political subdivision of any such country, and
having a combined capital and surplus of at least $100,000,000,
provided that such bank is acting through a branch or agency located in
the United States; and (iii) a Person that is primarily engaged in the
business of commercial banking and that is (A) a Subsidiary of a
Lender, (B) a Subsidiary of a Person of which a Lender is a Subsidiary,
or (C) a Person of which a Lender is a Subsidiary.
Environmental Claims means all claims, however asserted, by
any Governmental Authority or other Person alleging potential liability
under any Environmental Law or responsibility for violation of any
Environmental Law.
Environmental Laws means all federal, state or local laws,
statutes, the common law, rules, regulations, ordinances and codes
relating to pollution or protection of public or employee health or the
environment, together with all administrative orders, consent decrees,
licenses, authorizations and permits of any Governmental Authority
implementing them.
ERISA means the Employee Retirement Income Security Act of
1974, as amended, and regulations promulgated thereunder.
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ERISA Affiliate means any trade or business (whether or not
incorporated) under common control with the Company within the meaning
of Section 414(b) or (c) of the Code (and Sections 414(m) and (o) of
the Code for purposes of provisions relating to Section 412 of the
Code).
ERISA Event means (a) a Reportable Event with respect to a
Pension Plan; (b) a withdrawal by the Company or any ERISA Affiliate
from a Pension Plan subject to Section 4063 of ERISA during a plan year
in which it was a substantial employer (as defined in Section
4001(a)(2) of ERISA) or a substantial cessation of operations which is
treated as such a withdrawal; (c) a complete or partial withdrawal by
the Company or any ERISA Affiliate from a Multiemployer Plan or
notification that a Multiemployer Plan is in reorganization; (d) the
filing of a notice of intent to terminate, the treatment of a Pension
Plan amendment as a termination under Section 4041 or 4041A of ERISA,
or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Pension Plan or Multiemployer Plan; or (f) the
imposition of any liability under Title IV of ERISA, other than PBGC
premiums under Section 4007 of ERISA, upon the Company or any ERISA
Affiliate.
Event of Default means any of the events or circumstances
specified in Section 9.1.
Excess Cash Flow means, for any period, the remainder
of
(a) the sum, without duplication, of
(i) Consolidated Net Income for such period,
excluding (a) any extraordinary gains or losses and other
non-cash or, to the extent not paid in cash during such
period, non-recurring charges related to but limited to the
adoption of new accounting policies and plant consolidations
or restructurings and (b) any gains or losses on the sale of
any property to the extent the sale of such property gave rise
to a prepayment pursuant to Section 2.7,
plus
(ii) all depreciation and amortization of assets
(including goodwill and other intangible assets) of the
Company and its Subsidiaries deducted in determining
Consolidated Net Income for such period,
plus
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<PAGE> 19
(iii) any net decrease in Adjusted Working Capital
during such period (exclusive of decreases in working capital
associated with asset sales),
plus
(iv) all federal, state, local and foreign income
taxes (whether paid or deferred) of the Company and its
Subsidiaries deducted in determining Consolidated Net Income
for such period,
less
(b) the sum, without duplication, of
(i) repayments of principal of Term Loans pursuant to
Section 2.7 or Section 2.8, regularly scheduled principal
payments arising with respect to any other long-term
Indebtedness of the Company and its Subsidiaries, and the
portion of any regularly scheduled payments with respect to
capital leases allocable to principal, in each case made
during such period,
plus
(ii) voluntary prepayments of the Term Loans
pursuant to Section 2.6 during such period,
plus
(iii) Capital Expenditures for such period,
plus
(iv) all federal, state, local and foreign
income taxes paid by the Company and its Subsidiaries
during such period,
plus
(v) any net increase in Adjusted Working Capital
during such period (exclusive of increases in working capital
associated with asset sales),
plus
(vi) any non-cash pension income during such
period.
plus
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<PAGE> 20
(vii) any amounts paid pursuant to the purchase
price adjustments set forth in Section 2.3 of the U.S.
Purchase Agreement and Section 2.9 of the German Purchase
Agreement.
Exchange Act means the Securities Exchange Act of 1934, and
regulations promulgated thereunder.
Federal Funds Rate means, for any day, the rate set forth in
the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Bank of New
York (including any such successor, "H.15(519)") on the preceding
Business Day opposite the caption "Federal Funds (Effective)"; or, if
for any relevant day such rate is not so published on any such
preceding Business Day, the rate for such day will be the arithmetic
mean as determined by the Agent of the rates for the last transaction
in overnight Federal funds arranged prior to 9:00 a.m. (New York City
time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Agent.
Fee Letter -- see subsection 2.10(a).
Financial Standby Letter of Credit means any Standby Letter of
Credit which any Lender is required under any Requirement of Law
(including under 12 CFR Part 3, Appendix A, Section 3, clause (b)) to
classify as a financial letter of credit with respect to its issuance
thereof or participation therein pursuant to this Agreement.
Fixed Charge Coverage Ratio means, for the Computation Period
most recently ended on or before such date, the ratio of (a) (i) EBITDA
for such Computation Period less (ii) Capital Expenditures (other than
MIS Expenditures) for such Computation Period to (b) the sum of (i)
Interest Expense for such Computation Period, (ii) cash taxes paid by
the Company and its Subsidiaries for such Computation Period and (iii)
the required installments of principal of the Term Loans for such
Computation Period.
Foreign Subsidiary shall mean each Subsidiary of the Company
organized under the laws of any jurisdiction other than, or conducting
substantially all of its operations or holding substantially all of its
assets outside, the United States.
FRB means the Board of Governors of the Federal Reserve
System, and any Governmental Authority succeeding to any of its
principal functions.
Funded Debt means all Indebtedness of the Company and its
Subsidiaries, excluding (i) Indebtedness of the Company to Subsidiaries
or of Subsidiaries to the Company or other
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<PAGE> 21
Subsidiaries and (ii) Indebtedness of the Company and its Subsidiaries
in respect of Swap Contracts.
GAAP means generally accepted accounting principles set forth
from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date
of determination.
German Purchase Agreement means the Business Purchase
Agreement dated as of the Closing Date between Fiberite Europe GmbH, as
seller, and DALIA Verwaltungsgesellschaft mbh as buyer, and the Parent,
as guarantor, amended from time to time in accordance with Section
8.19.
German Transition Services Agreement means the Transition
Services Agreement dated as of the Closing Date, between Deutsche ICI
GmbH and DALIA Verwaltungsgesellschaft mbh as amended from time to time
in accordance with Section 8.19.
Governmental Authority means any nation or government, any
state or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
Guarantor means (a) as of the Closing Date, the Parent and (b)
thereafter, the Parent and each other Person which from time to time
executes and delivers a counterpart of the Guaranty.
Guaranty means the guaranty substantially in the form of
Exhibit G which will be executed by the Parent on the Closing Date and
from time to time by other Guarantors.
Guaranty Obligation has the meaning specified in the
definition of Contingent Obligation.
Honor Date -- see subsection 3.3(b).
Indebtedness of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money; (b) all obligations
issued, undertaken or assumed by such Person as the deferred purchase
price of property or services (other than trade payables entered into
in the ordinary course of business on ordinary terms); (c) all non-
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<PAGE> 22
contingent reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations of such Person evidenced by notes,
bonds, debentures or similar instruments; (e) all indebtedness of such
Person created or arising under any conditional sale or other title
retention agreement, or incurred as financing, in either case with
respect to property acquired by such Person (even though the rights and
remedies of the seller or lender under such agreement in the event of
default are limited to repossession or sale of such property); (f) all
obligations of such Person with respect to capital leases; (g) all
indebtedness referred to in clause (a) through (f) above secured by (or
for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in property
(including accounts and contracts rights) owned by such Person, even
though such Person has not assumed or become liable for the payment of
such Indebtedness; and (h) all Guaranty Obligations of such Person in
respect of indebtedness or obligations of others of the kinds referred
to in clauses (a) through (g) above.
Indemnified Liabilities -- see Section 11.5.
Indemnified Person -- see Section 11.5.
Independent Auditor -- see subsection 7.1(a).
Initial Parent Stockholders means the purchasers under
the Securities Purchase Agreement.
Insolvency Proceeding means, with respect to any Person, (a)
any case, action or proceeding with respect to such Person before any
court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors (including any proceeding under the
Bankruptcy Code) or (b) any general assignment for the benefit of
creditors, composition, marshalling of assets for creditors, or other,
similar arrangement in respect of such Person's creditors generally or
any substantial portion of such creditors.
Interest Coverage Ratio means, for the Computation Period most
recently ended on or before such date, the ratio of (a) EBITDA for such
Computation Period to (b) Interest Expense for such Computation Period.
Interest Expense means for any period the consolidated
interest expense of the Company and its Subsidiaries for such period
(including all imputed interest on capital leases but excluding
amortization of fees and expenses in connection with the Purchase, this
Agreement and the transactions contemplated by the foregoing).
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<PAGE> 23
Interest Payment Date means (i) as to any Offshore Rate Loan,
the last day of each Interest Period applicable to such Loan and, in
the case of any Offshore Rate Loan with a six-month Interest Period,
the three-month anniversary of the first day of such Interest Period,
and (ii) as to any Base Rate Loan, the last Business Day of each
calendar quarter.
Interest Period means, as to any Offshore Rate Loan, the
period commencing on the Borrowing Date of such Loan or on the
Conversion/Continuation Date on which the Loan is converted into or
continued as an Offshore Rate Loan, and ending (i) in the case of
Offshore Rate Loans made or converted during the period from the
Closing Date through the earlier of November 1, 1995 and the Primary
Syndication Date, one week thereafter and (ii) in the case of Offshore
Rate Loans made or converted at any time after the earlier of November
1, 1995 and the Primary Syndication Date, one, two, three or six months
thereafter, as selected by the Company in its Notice of Borrowing or
Notice of Conversion/Continuation; provided that:
(i) if any Interest Period would otherwise end on a
day that is not a Business Day, such Interest Period shall be
extended to the following Business Day unless the result of
such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period
shall end on the preceding Business Day;
(ii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last
Business Day of the calendar month at the end of such Interest
Period;
(iii) no Interest Period applicable to a Term A Loan
or a Term B Loan or portion of either thereof shall extend
beyond any date upon which is due any scheduled principal
payment in respect of the Term A Loans or Term B Loans, as
applicable, unless the aggregate principal amount of Term A
Loans or Term B Loans, as applicable, represented by Base Rate
Loans, or by Offshore Rate Loans having Interest Periods that
will expire on or before such date, equals or exceeds the
amount of such principal payment; and
(iv) no Interest Period for any Revolving Loan shall
extend beyond the scheduled Revolving Termination Date.
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<PAGE> 24
IRS means the Internal Revenue Service, and any Governmental
Authority succeeding to any of its principal functions under the Code.
Issuance Date -- see subsection 3.1(a).
Issue means, with respect to any Letter of Credit, to issue or
to extend the expiry of, or to renew or increase the amount of, such
Letter of Credit; and the terms "Issued," "Issuing" and "Issuance" have
corresponding meanings.
Issuing Lender means each of BAI and in its capacity as issuer
of one or more Letters of Credit hereunder, together with (i) any
replacement letter of credit issuer arising under subsection 10.1(b) or
Section 10.9 and (ii) any other Lender which the Agent and the Company
have approved in writing as an "Issuing Lender" hereunder.
Joint Venture means a corporation, partnership, limited
liability company, joint venture or other similar legal arrangement
(whether created by contract or conducted through a separate legal
entity) which is not a Subsidiary of the Company or any of its
Subsidiaries and which is now or hereafter formed by the Company or any
of its Subsidiaries with another Person in order to conduct a common
venture or enterprise with such Person.
Landlord's Consent means a document substantially in the form
of Exhibit J, with appropriate insertions, or such other form as shall
be acceptable to the Required Lenders.
L/C Advance means each Lender's participation in any L/C
Borrowing in accordance with its Revolving Percentage.
L/C Amendment Application means an application form for
amendment of an outstanding standby or commercial documentary letter of
credit as shall at any time be in use at the applicable Issuing Lender,
as such Issuing Lender shall request.
L/C Application means an application form for issuances of a
standby or commercial documentary letter of credit as shall at any time
be in use at the applicable Issuing Lender, as such Issuing Lender
shall request.
L/C Borrowing means an extension of credit resulting from a
drawing under any Letter of Credit which shall not have been reimbursed
on the date when made nor converted into a Borrowing of Revolving Loans
under subsection 3.3(c).
L/C Commitment means the commitment of the Issuing Lenders to
Issue, and the commitment of the Lenders severally to participate in,
Letters of Credit from time to
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<PAGE> 25
time Issued or outstanding under Article III, in an aggregate amount
not to exceed on any date the lesser of $10,000,000 and the amount of
the Revolving Commitment; it being understood that the L/C Commitment
is a part of the Revolving Commitment, rather than a separate,
independent commitment.
L/C Fee Rate means, at any time, (i) 0.50% in the case of each
Commercial Letter of Credit and (ii) the Applicable Offshore Rate
Margin for Revolving Loans in the case of each Financial Standby Letter
of Credit and each Non-Financial Standby Letter of Credit; provided
that each of the foregoing rates shall be increased by 2% at any time
an Event of Default exists.
L/C Obligations means at any time the sum of (a) the aggregate
undrawn amount of all Letters of Credit then outstanding, plus (b) the
amount of all unreimbursed drawings under all Letters of Credit,
including all outstanding L/C Borrowings.
L/C-Related Documents means the Letters of Credit, the L/C
Applications, the L/C Amendment Applications and any other document
relating to any Letter of Credit, including any of the applicable
Issuing Lender's standard form documents for letter of credit
issuances.
Lender has the meaning specified in the introductory clause
hereto. References to the "Lenders" shall include each Issuing Lender
in its capacity as such; for purposes of clarification only, to the
extent that any Issuing Lender may have any rights or obligations in
addition to those of the other Lenders due to its status as Issuing
Lender, its status as such will be specifically referenced.
Lending Office means, as to any Lender, the office or offices
of such Lender specified as its "Lending Office" or "Domestic Lending
Office" or "Offshore Lending Office", as the case may be, on Schedule
11.2, or such other office or offices as such Lender may from time to
time specify to the Company and the Agent.
Letters of Credit means any letters of credit (whether standby
letters of credit or commercial documentary letters of credit) Issued
by an Issuing Lender pursuant to Article III.
Leverage Ratio means
(a) for the Computation Period ending March 31, 1996,
the ratio of
(i) Funded Debt as of March 31, 1996
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<PAGE> 26
to
(ii) EBITDA for such Computation Period multiplied by
the quotient of (y) 365 divided by (z) the number of days in
such Computation Period;
(b) for the Computation Period ending June 30, 1996,
the ratio of
(i) Funded Debt as of June 30, 1996
to
(ii) EBITDA for such Computation Period multiplied by
the quotient of (y) 365 divided by (z) the number of days in
such Computation Period;
(c) for the Computation Period ending September 30,
1996, the ratio of
(i) Funded Debt as of September 30, 1996
to
(ii) EBITDA for such Computation Period multiplied by
the quotient of (y) 365 divided by (z) the number of days in
such Computation Period; and
(d) for each Computation Period ending on or after
December 31, 1996, the ratio of
(i) Funded Debt as of any date
to
(ii) EBITDA for such Computation Period most recently
ended on or before such date.
Lien means any security interest, mortgage, deed of trust,
pledge, hypothecation, assignment, charge or deposit arrangement,
encumbrance, lien (statutory or other) or preferential arrangement of
any kind or nature whatsoever in respect of any property (including
those created by, arising under or evidenced by any conditional sale or
other title retention agreement, the interest of a lessor under a
capital lease, or any financing lease having substantially the same
economic effect as any of the foregoing, but not including the interest
of a lessor under an operating lease).
Loan means an extension of credit by a Lender to the Company
under Article II or Article III in the form of a Revolving Loan, Term
Loan or L/C Advance. Each Revolving Loan and each Term Loan may be
divided into tranches which
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are a Base Rate Loan or an Offshore Rate Loan (each a "Type" of Loan).
Loan Documents means this Agreement, any Notes, the Fee
Letter, the L/C-Related Documents, the Guaranty, the Collateral
Documents and all other documents delivered to the Agent or any Lender
in connection herewith.
Margin Stock means "margin stock" as such term is defined in
Regulation G, T, U or X of the FRB.
Material Adverse Effect means (a) a material adverse change
in, or a material adverse effect upon, the operations, business,
properties, condition (financial or otherwise) or prospects of the
Company; (b) a material impairment of the ability of the Company to
perform under any Loan Document; or (c) a material adverse effect upon
the legality, validity, binding effect or enforceability against the
Company of any Loan Document.
MIS Expenditures means Capital Expenditures made by the
Company relating to the Company's new management information system;
provided, that such Capital Expenditures shall only be considered MIS
Expenditures to the extent that the aggregate amount of such
expenditures does not exceed $2,000,000.
Mortgage means a mortgage, leasehold mortgage, deed of trust
or similar document granting a Lien on real property in appropriate
form for filing or recording in the applicable jurisdiction and
otherwise reasonably satisfactory to the Agent.
Multiemployer Plan means a "multiemployer plan", within the
meaning of Section 4001(a)(3) of ERISA, with respect to which the
Company or any ERISA Affiliate may have any liability.
Net Cash Proceeds means
(a) with respect to the sale, transfer, or other
disposition by the Company or any Subsidiary of any
asset (including any stock of any Subsidiary), the
aggregate cash proceeds (including cash proceeds
received by way of deferred payment of principal
pursuant to a note, installment receivable or
otherwise, but only as and when received) received by
the Company or any Subsidiary pursuant to such sale,
transfer or other disposition, net of (i) the direct
costs relating to such sale, transfer or other
disposition (including, without limitation, sales
commissions and legal, accounting and investment
banking fees), (ii) taxes paid or payable as a result
thereof (after taking into account any available tax
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<PAGE> 28
credits or deductions and any tax sharing
arrangements), (iii) amounts required to be applied to
the repayment of any Indebtedness secured by a Lien on
the asset subject to such sale, transfer or other
disposition (other than the Loans) and (iv) any reserve
for adjustment in respect of the sale price of such
asset (until such amount is available to the Company or
the applicable Subsidiary); and
(b) with respect to any issuance of equity securities or Other
Debt, the aggregate cash proceeds received by the Company or
any Subsidiary pursuant to such issuance, net of the direct
costs relating to such issuance (including, without
limitation, sales and underwriter's commissions and legal,
accounting and investment banking fees).
Net Worth means the Company's consolidated stockholders'
equity plus all non-cash or non-recurring charges after the Closing
Date related to but not limited to the adoption of new accounting
policies and plant consolidations or restructurings to the extent such
charges were deducted in determining such consolidated stockholders
equity.
Non-Financial Standby Letter of Credit means any
Standby Letter of Credit that is not a Financial Standby
Letter of Credit.
Note means a promissory note executed by the Company in favor
of a Lender pursuant to subsection 2.2(b), in substantially the form of
Exhibit D.
Notice of Borrowing means a notice in substantially the form
of Exhibit A.
Notice of Conversion/Continuation means a notice in
substantially the form of Exhibit B.
Obligations means all advances, debts, liabilities,
obligations, covenants and duties arising under any Loan Document owing
by the Company to any Lender, the Agent, or any Indemnified Person,
whether direct or indirect (including those acquired by assignment),
absolute or contingent, due or to become due, or now existing or
hereafter arising.
Offshore Rate means, for any Interest Period, with respect to
Offshore Rate Loans comprising part of the same Borrowing, the rate of
interest per annum (rounded upward, if the resulting rate is not an
integral multiple of 1/16 of 1%, to the next 1/16th of 1%) determined
by the Agent as follows:
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Offshore Rate = IBOR
------------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Reserve Percentage" means for any day for any
Interest Period the maximum reserve percentage (expressed as a
decimal, rounded upward, if the resulting decimal is not an
integral multiple of 1/100 of 1%, to the next 1/100th of 1%)
in effect on such day applicable to any Lender under
regulations issued from time to time by the FRB for
determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement)
with respect to Eurocurrency funding (currently referred to as
"Eurocurrency liabilities"); and
"IBOR" means the rate of interest per annum determined by the
Agent as the rate at which Dollar deposits in the approximate
amount of BAI's Offshore Rate Loan for such Interest Period
would be offered by BofA's Grand Cayman Branch, Grand Cayman
B.W.I. (or such other office as may be designated for such
purpose by BofA), to major banks in the offshore dollar
interbank market at their request at approximately 11:00 a.m.
(New York City time) two Business Days prior to the
commencement of such Interest Period.
The Offshore Rate shall be adjusted automatically as to all
Offshore Rate Loans then outstanding as of the effective date of any
change in the Eurodollar Reserve Percentage.
Offshore Rate Loan means a Loan that bears interest based on
the Offshore Rate.
Organization Documents means, for any corporation, the
certificate or articles of incorporation, the bylaws, any certificate
of determination or instrument relating to the rights of preferred
shareholders of such corporation, any shareholder rights agreement, and
all applicable resolutions of the board of directors (or any committee
thereof) of such corporation.
Other Debt means debt securities of the Company and its
Subsidiaries, other than as permitted by Section 8.5.
Other Taxes means any present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies
which arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document.
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Parent means Fiberite Holdings, Inc., a Delaware
corporation.
Parent Pledge Agreement - see subsection 5.1(k).
Participant -- see subsection 11.8(c).
Patent Security Agreement -- see subsection 5.1(i).
PBGC means the Pension Benefit Guaranty Corporation, or any
Governmental Authority succeeding to any of its principal functions
under ERISA.
Pension Plan means a pension plan (as defined in Section 3(2)
of ERISA) subject to Title IV of ERISA with respect to which the
Company or any ERISA Affiliate may have any liability.
Permitted Liens -- see Section 8.1.
Permitted Swap Obligations means all obligations (contingent
or otherwise) of the Company or any Subsidiary existing or arising
under Swap Contracts, provided that each of the following criteria is
satisfied: (a) such obligations are (or were) entered into by such
Person in the ordinary course of business for the purpose of directly
mitigating risks associated with liabilities, commitments or assets
held or reasonably anticipated by such Person, or changes in the value
of securities issued by such Person in conjunction with a securities
repurchase program not otherwise prohibited hereunder, and not for
purposes of speculation or taking a "market view;" and (b) such Swap
Contracts do not contain (i) any provision ("walk-away" provision)
exonerating the non-defaulting party from its obligation to make
payments on outstanding transactions to the defaulting party, or (ii)
any provision creating or permitting the declaration of an event of
default, termination event or similar event upon the occurrence of an
Event of Default hereunder (other than an Event of Default under
subsection 9.1(a).
Person means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust,
unincorporated association, joint venture or Governmental Authority.
Plan means an employee benefit plan (as defined in Section
3(3) of ERISA) which the Company sponsors or maintains or to which the
Company makes, is making, or is obligated to make contributions and
includes any Pension Plan.
Pledge Agreement means the Company Pledge Agreement or
the Parent Pledge Agreement.
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<PAGE> 31
Primary Syndication Date means the first date upon which BAI
assigns any of its commitments pursuant to Section 11.8.
Public Offering means the offering of shares of stock or
Indebtedness registered under the Securities Act of 1933.
Purchase means the purchase by the Company of ICI Composites,
Inc. and the assets and liabilities of Fiberite Europe GmbH pursuant to
the Purchase Agreements.
Purchase Agreement means the U.S. Purchase Agreement or
the German Purchase Agreement.
Purchase Agreement Assignment means a Purchase Agreement
Assignment in the form of Exhibit K, with appropriate insertions.
Replacement Lender -- see Section 4.7.
Reportable Event means, any of the events set forth in Section
4043(b) of ERISA or the regulations thereunder, other than any such
event for which the 30-day notice requirement under ERISA has been
waived in regulations issued by the PBGC or administrative
pronouncements.
Required Lenders means, at any time, Lenders having an
aggregate Total Percentage of 60% or more.
Required Revolving Lenders means, at any time, Lenders having
an aggregate Revolving Percentage of 60% or more.
Requirement of Law means, as to any Person, any law (statutory
or common), treaty, rule or regulation or determination of an
arbitrator or of a Governmental Authority, in each case applicable to
or binding upon such Person or any of its property or to which such
Person or any of its property is subject.
Responsible Officer means the chief executive officer or the
president of the Company, or any other officer having substantially the
same authority and responsibility; or, with respect to compliance with
financial covenants, the chief financial officer or the treasurer of
the Company, or any other officer having substantially the same
authority and responsibility.
Revolving Commitment means, as to any Lender, the commitment
of such Lender to make Revolving Loans pursuant to subsection 2.1(c).
The initial amount of each Lender's Revolving Commitment is set forth
on Schedule 1.1.
Revolving Loan -- see Section 2.1.
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<PAGE> 32
Revolving Percentage means, as to any Lender, the percentage
which (a) the amount of such Lender's Revolving Commitment is of (b)
the aggregate amount of all of the Lenders' Revolving Commitments.
Revolving Termination Date means the earlier to occur of:
(a) December 31, 2000; and
(b) the date on which the Revolving Commitment
terminates in accordance with the provisions of
this Agreement.
SEC means the Securities and Exchange Commission, or any
Governmental Authority succeeding to any of its principal functions.
Sellers means ICI American Holdings, Inc. and Deutsche
ICI GmbH.
Securities Purchase Agreement means the Securities Purchase
Agreement dated as of the Closing Date, among Parent and the Initial
Parent Stockholders named therein.
Security Agreement -- see subsection 5.1(g).
Shareholder Agreement means the Shareholder Agreement dated as
of the Closing Date, among the Company, DLJMB, Carlisle and the other
Initial Parent Stockholders.
Standby Letter of Credit means any Letter of Credit that is
not a Commercial Letter of Credit.
Subordinated Notes means the subordinated notes of the Parent
issued pursuant to the Securities Purchase Agreement.
Subsidiary of a Person means any corporation, association,
partnership, limited liability company, joint venture or other business
entity of which more than 50% of the voting stock, membership interests
or other equity interests is owned or controlled directly or indirectly
by such Person, or one or more of the Subsidiaries of such Person, or a
combination thereof. Unless the context otherwise clearly requires,
references herein to a "Subsidiary" refer to a Subsidiary of the
Company.
Surety Instruments means all letters of credit (including
standby and commercial), banker's acceptances, bank guaranties, surety
bonds and similar instruments.
Swap Contract means any agreement, whether or not in writing,
relating to any transaction that is a rate swap, basis swap, forward
rate transaction, commodity swap,
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<PAGE> 33
commodity option, equity or equity index swap or option, bond, note or
bill option, interest rate option, forward foreign exchange
transaction, cap, collar or floor transaction, currency swap,
cross-currency rate swap, swaption, currency option or any other,
similar transaction (including any option to enter into any of the
foregoing) or any combination of the foregoing, and, unless the context
otherwise clearly requires, any master agreement relating to or
governing any or all of the foregoing.
Swap Termination Value means, in respect of any one or more
Swap Contracts, after taking into account the effect of any legally
enforceable netting agreement relating to such Swap Contracts, (a) for
any date on or after the date such Swap Contracts have been closed out
and termination value(s) determined in accordance therewith, such
termination value(s), and (b) for any date prior to the date referenced
in clause (a) the amount(s) determined as the mark-to-market value(s)
for such Swap Contracts, as determined based upon one or more
mid-market or other readily available quotations provided by any
recognized dealer in such Swap Contracts (which may include any
Lender).
Tax Sharing Agreement means the Tax Sharing Agreement dated as
of the Closing Date, between the Company and the Parent as amended from
time to time pursuant to Section 8.19.
Taxes means any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Agent,
such taxes (including income taxes or franchise taxes) as are imposed
on or measured by such Lender's or the Agent's, as the case may be, net
income by the jurisdiction (or any political subdivision thereof) under
the laws of which such Lender or the Agent, as the case may be, is
organized, maintains a lending office or is carrying on business.
Term A Commitment means, as to any Lender, the commitment of
such Lender to make a Term A Loan pursuant to subsection 2.1(a). The
amount of each Lender's Term A Commitment is set forth on Schedule 1.1.
Term A Loan -- see subsection 2.1(a).
Term A Percentage means, as to any Lender, the percentage
which (a) the Term A Commitment of such Lender (or, after the making of
the Term A Loans, the principal amount of such Lender's Term A Loan) is
of (b) the aggregate amount of Term A Commitments (or after the making
of the Term A Loans, the aggregate principal amount of all Term A
Loans). The initial amount of the Term A Loan Percentage
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<PAGE> 34
for each Lender is set forth such Lender's name on Schedule 1.1.
Term B Commitment means, as to any Bank, the commitment of
such Lender to make a Term B Loan pursuant to subsection 2.1(b). The
amount of each Bank's Term B Commitment is set forth on Schedule 1.1.
Term B Loan -- see subsection 2.1(b).
Term B Percentage means, as to any Lender, the percentage
which (a) the Term B Commitment of such Lender (or, after the making of
the Term B Loans, the principal amount of such Lender's Term B Loan) is
of (b) the aggregate amount of Term B Commitments (or after the making
of the Term B Loans, the aggregate principal amount of all Term B
Loans). The initial amount of the Term B Loan Percentage for each
Lender is set forth such Lender's name on Schedule 1.1.
Term Loan means a Term A Loan or a Term B Loan.
Total Percentage means, as to any Lender the percentage which
(a) the aggregate amount of such (i) Lender's Revolving Commitment plus
(ii) such Lender's Term A Commitment (or, after the making of the Term
A Loans, the outstanding principal amount of such Lender's Term A
Loans) plus (iii) such Lender's Term B Commitment (or, after the making
of the Term B Loans, the outstanding principal amount of such Lender's
Term B Loans) is of (b) the aggregate amount of (i) the Revolving
Commitments of all Lenders plus (ii) the Term A Commitments of all
Lenders (or, after the making of the Term A Loans, the outstanding
principal amount of all Term A Loans) plus (iii) the Term B Commitments
of all Lenders (or, after the making of the Term B Loans, the
outstanding principal amount of all Term B Loans); provided that after
the Revolving Commitments have been terminated, "Total Percentage"
shall mean as to any Lender the percentage which the aggregate
principal amount of such Lender's Loans is of the aggregate principal
amount of all Loans. The initial Total Percentage for each Lender is
set forth opposite such Lender's name on Schedule 1.1.
Trademark Security Agreement -- see subsection 5.1(i).
Transition Services Agreement means the U.S. Transition
Services Agreement or the German Transition Services
Agreement.
Type has the meaning specified in the definition of
"Loan."
Unfunded Pension Liability means the excess of a Pension
Plan's benefit liabilities under Section 4001(a)(16)
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<PAGE> 35
of ERISA, over the current value of such Pension Plan's assets,
determined in accordance with the assumptions used for funding such
Pension Plan pursuant to Section 412 of the Code for the applicable
plan year.
United States and U.S. each means the United States of
America.
Unmatured Event of Default means any event or circumstance
which, with the giving of notice, the lapse of time, or both, would (if
not cured or otherwise remedied during such time) constitute an Event
of Default.
U.S. Purchase Agreement means the Purchase Agreement dated as
of the Closing Date, between ICI American Holdings, Inc., as seller,
the Company, as buyer, and the Parent, as guarantor as amended from
time to time pursuant to Section 8.19.
U.S. Transition Services Agreement means the Transition
Services Agreement dated as of the Closing Date, between ICI
Composites, Inc. and ICI American Holdings, Inc. as amended
from time to time pursuant to Section 8.19.
1.2 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to
the singular and plural forms of the defined terms.
(b) The words "hereof", "herein", "hereunder" and similar
words refer to this Agreement as a whole and not to any particular provision of
this Agreement; and subsection, Section, Schedule and Exhibit references are to
this Agreement unless otherwise specified.
(c) (i) The term "documents" includes any and all instruments,
documents, agreements, certificates, indentures, notices and other
writings, however evidenced.
(ii) The term "including" is not limiting and
means "including without limitation."
(iii) In the computation of periods of time from a
specified date to a later specified date, the word "from" means "from
and including"; the words "to" and "until" each mean "to but
excluding"; and the word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual instruments shall
be deemed to include all subsequent amendments and other modifications thereto,
but only to the extent such amendments and other modifications are not
prohibited by the terms of any Loan Document, and (ii) references to any
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<PAGE> 36
statute or regulation are to be construed as including all statutory and
regulatory provisions consolidating, amending, replacing, supplementing or
interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement.
(f) This Agreement and the other Loan Documents may use
several different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are cumulative and
shall each be performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the result
of negotiations among and have been reviewed by counsel to the Agent, the
Company and the other parties, and are the products of all parties. Accordingly,
they shall not be construed against the Lenders or the Agent merely because of
the Lenders' or the Agent's involvement in their preparation.
1.3 Accounting Principles.
(a) Unless the context otherwise clearly requires, all
accounting terms not expressly defined herein shall be construed, and all
financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied; provided that if the Company
notifies the Agent that the Company wishes to amend any covenant in Article VIII
to eliminate the effect of any change in GAAP on the operation of such covenant
(or if the Agent notifies the Company that the Required Lenders wish to amend
Article VIII for such purpose), then the Company's compliance with such covenant
shall be determined on the basis of GAAP in effect immediately before the
relevant change in GAAP became effective, until either such notice is withdrawn
or such covenant is amended in a manner satisfactory to the Company and the
Required Lenders.
(b) References herein to "fiscal year" and "fiscal quarter"
refer to such fiscal periods of the Company.
ARTICLE II
THE CREDITS
2.1 Amounts and Terms of Commitments. (a) The Term A Credit. Each
Lender severally agrees, on the terms and conditions set forth herein, to make a
single loan to the Company (each such loan, a "Term A Loan") on the Closing Date
in an amount not to exceed such Lender's Term A Percentage of $50,000,000.
Amounts borrowed as Term A Loans which are repaid or prepaid by the Company may
not be reborrowed. The Term A
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Commitments shall expire concurrently with the making of the Term A Loans on the
Closing Date.
(b) The Term B Credit. Each Lender severally agrees, on the
terms and conditions set forth herein, to make a single loan to the Company
(each such loan, a "Term B Loan") on the Closing Date in an amount not to exceed
such Lender's Term B Percentage of $25,000,000. Amounts borrowed as Term B Loans
which are repaid or prepaid by the Company may not be reborrowed. The Term B
Commitments shall expire concurrently with the making of the Term B Loans on the
Closing Date.
(c) The Revolving Credit. Each Lender severally agrees, on the
terms and conditions set forth herein, to make loans to the Company (each such
loan, a "Revolving Loan"), from time to time on any Business Day during the
period from the Closing Date to the Revolving Termination Date, in an aggregate
amount not to exceed at any time outstanding such Lender's Revolving Percentage
of $25,000,000; provided that, after giving effect to any Borrowing of Revolving
Loans, the aggregate amount of all Revolving Loans plus the Effective Amount of
all L/C Obligations shall not exceed the Revolving Commitment; and provided,
further, the amount of all Revolving Loans made on the Closing Date shall not
exceed $19,000,000. Within the foregoing limits, and subject to the other terms
and conditions hereof, the Company may borrow under this subsection 2.1(c),
prepay under Section 2.6 and reborrow under this subsection 2.1(c).
2.2 Loan Accounts. (a) The Loans made by each Lender and the Letters of
Credit Issued by each Issuing Lender shall be evidenced by one or more accounts
or records maintained by such Lender or Issuing Lender, as the case may be, in
the ordinary course of business. The accounts or records maintained by the
Agent, each Issuing Lender and each Lender shall be conclusive (absent manifest
error) as to the amount of the Loans made by the Lenders to the Company and the
Letters of Credit Issued for the account of the Company, and the interest and
payments thereon. Any failure so to record or any error in doing so shall not,
however, limit or otherwise affect the obligation of the Company hereunder to
pay any amount owing with respect to any Loan or any Letter of Credit.
(b) Upon the request of any Lender made through the Agent, the
Loans made by such Lender may be evidenced by one or more Notes, instead of loan
accounts. Each such Lender shall endorse on the schedules annexed to its Note(s)
the date, amount and maturity of each Loan made by it and the amount of each
payment of principal made by the Company with respect thereto. Each such Lender
is irrevocably authorized by the Company to endorse its Note(s) and each
Lender's record shall be rebuttable presumptive evidence of the matters set
forth therein; provided, however, that the failure of a Lender to make, or an
error in making, a notation thereon with respect to any Loan shall not
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<PAGE> 38
limit or otherwise affect the obligations of the Company hereunder or under any
Note to such Lender.
2.3 Procedure for Borrowing. (a) Each Borrowing shall be made upon the
Company's irrevocable written notice delivered to the Agent in the form of a
Notice of Borrowing (which notice must be received by the Agent (i) prior to
8:30 a.m. (San Francisco time) three Business Days prior to the requested
Borrowing Date, in the case of Offshore Rate Loans; and (ii) prior to 8:30 a.m.
(San Francisco time) on the requested Borrowing Date, in the case of Base Rate
Loans), specifying:
(A) the amount of the Borrowing, which shall
be in an amount of $500,000 or a higher integral multiple of
$100,000;
(B) the requested Borrowing Date, which
shall be a Business Day;
(C) the Type of Loans comprising the
Borrowing; and
(D) in the case of Offshore Rate Loans, the
duration of the Interest Period applicable to such Loans
included in such notice.
(b) The Agent will promptly notify each Lender of its receipt
of any Notice of Borrowing and of the amount of such Lender's share of such
Borrowing based upon such Lender's Revolving Percentage, Term A Percentage or
Term B Percentage, as applicable.
(c) Each Lender will make the amount of its share of each
Borrowing available to the Agent for the account of the Company at the Agent's
Payment Office by 11:00 a.m. (San Francisco time) on the Borrowing Date
requested by the Company in funds immediately available to the Agent. The
proceeds of all Loans will then be made available to the Company by the Agent at
such office by crediting the account of the Company on the books
of BAI with the aggregate of the amounts made available to the Agent by the
Lenders and in like funds as received by the Agent.
(d) After giving effect to any Borrowing, there may not be
more than seven different Interest Periods in effect.
2.4 Conversion and Continuation Elections. (a) The Company
may, upon irrevocable written notice to the Agent in accordance
with subsection 2.4(b):
(i) elect to convert, on any Business Day, any Base
Rate Loans (in an aggregate amount of $500,000 or a higher integral
multiple of $100,000) into Offshore Rate Loans;
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<PAGE> 39
(ii) elect to convert, on the last day of the
applicable Interest Period, any Offshore Rate Loans (or any part
thereof in an aggregate amount of $500,000 or a higher integral
multiple of $100,000) into Base Rate Loans; or
(iii) elect to continue, as of the last day of the
applicable Interest Period, any Offshore Rate Loans having Interest
Periods expiring on such day (or any part thereof in an aggregate
amount of $500,000 or a higher integral multiple of $100,000);
provided that if at any time the aggregate amount of Offshore Rate Loans in
respect of any Borrowing shall have been reduced, by payment, prepayment, or
conversion of part thereof, to be less than $500,000, such Offshore Rate Loans
shall automatically convert into Base Rate Loans.
(b) The Company shall deliver a Notice of
Conversion/Continuation to be received by the Agent not later than (i) 8:30 a.m.
(San Francisco time) at least three Business Days in advance of the Conversion/
Continuation Date, if the Loans are to be converted into or continued as
Offshore Rate Loans; and (ii) not later than 8:30 a.m. (San Francisco time) on
the Conversion/Continuation Date, if the Loans are to be converted into Base
Rate Loans, specifying:
(A) the proposed Conversion/Continuation
Date;
(B) the aggregate amount of Loans to be
converted or continued;
(C) the Type of Loans resulting from the
proposed conversion or continuation; and
(D) in the case of conversions into Offshore
Rate Loans, the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable
to Offshore Rate Loans, the Company has failed to select timely a new Interest
Period to be applicable to such Offshore Rate Loans, the Company shall be deemed
to have elected to convert such Offshore Rate Loans into Base Rate Loans
effective as of the expiration date of such Interest Period.
(d) The Agent will promptly notify each Lender of its receipt
of a Notice of Conversion/Continuation or, if no timely notice is provided by
the Company, the Agent will promptly notify each Lender of the details of any
automatic conversion. All conversions and continuations shall be made ratably
according to the respective outstanding principal amounts of the Loans with
respect to which the notice was given held by each Lender.
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(e) Unless the Required Lenders otherwise agree, during the
existence of an Event of Default or Unmatured Event of Default, the Company may
not elect to have a Loan converted into or continued as an Offshore Rate Loan.
(f) After giving effect to any conversion or continuation of
Loans, there may not be more than seven different Interest Periods in effect.
2.5 Voluntary Termination or Reduction of Revolving Commitments. The
Company may, upon not less than three Business Days' prior notice to the Agent,
terminate the Revolving Commitment, or permanently reduce the Revolving
Commitment by an aggregate amount of $1,000,000 or a higher integral multiple of
$500,000; unless, after giving effect thereto and to any prepayments of Loans
made on the effective date thereof, the aggregate principal amount of all
Revolving Loans plus the Effective Amount of all L/C Obligations would exceed
the amount of the Revolving Commitment then in effect. Once reduced in
accordance with this Section, the Revolving Commitment may not be increased. Any
reduction of the Revolving Commitment shall be applied to each Lender according
to its Revolving Percentage.
2.6 Optional Prepayments.
(a) Subject to Section 4.4, (i) the Company may, from time to
time, upon irrevocable notice to the Agent (which notice must be
received by 8:30 a.m. (San Francisco time) on the requested day of
prepayment in the case of Base Rate Loans and 8:30 a.m. (San Francisco
time) three days prior to the date of prepayment in the case of Offshore
Rate Loans), ratably prepay any Borrowing of Revolving Loans in whole or
in part, in an aggregate amount of $500,000 or a higher integral
multiple of $100,000; and (ii) the Company may, from time to time, upon
not less than three Business Days' irrevocable notice to the Agent,
prepay any Borrowing of Term Loans in whole or in part, in an aggregate
amount of $1,000,000 or a higher integral multiple of $100,000.
(b) Each notice of prepayment shall specify the date and amount
of such prepayment and the Loans to be prepaid. The Agent will promptly
notify each Lender of its receipt of any such notice and of such
Lender's share of such prepayment based upon such Lender's Revolving
Percentage, in the case of a prepayment of Revolving Loans, Term A
Percentage, in the case of a prepayment of Term A Loans, or Term B
Percentage in the case of a prepayment of Term B Loans. If any such
notice is given by the Company, the Company shall make such prepayment
and the payment amount specified in such notice shall be due and payable
on the date specified therein, together with accrued interest to such
date on the amount prepaid and any amounts required pursuant to Section
4.4. Each prepayment of Revolving Loans shall be applied to each
Lender's Revolving Loans according to such Lender's Revolving
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Percentage. Each prepayment of Term Loans shall be applied pro rata to
the unpaid installments of the Term Loans; provided, that the Company
may, by giving written notice to the Agent concurrently with any notice
of prepayment, specify that any prepayment of Term Loans may be applied
pro rata to the remaining unpaid installments of the Term A Loans.
2.7 Mandatory Prepayments of Loans. So long as any Term Loan is
outstanding, the Company (or, in the case of subsection (c), if the Agent is
holding the proceeds of insurance as additional Collateral pursuant to the terms
of the Security Agreement, the Agent upon the Company's instruction) shall make
a prepayment of the Term Loans at the following times and in the following
amounts:
(a) Within 30 days after any sale, transfer or other
disposition by the Company or any Subsidiary of any asset
outside the ordinary course of its business to a Person other
than the Company or a Subsidiary, in an amount equal to 100% of
the Net Cash Proceeds of such sale, transfer or other
disposition.
(b) Within 30 days after any sale, transfer or other
disposition (including by way of merger or consolidation) by the
Company or any Subsidiary of all of the capital stock of any of
the Company's operating Subsidiaries to a Person other than the
Company or a Subsidiary, in an amount equal to 100% of the Net
Cash Proceeds of such sale.
(c) Within 30 days after the receipt of any insurance
proceeds (or other similar recoveries) by the Company or any
Subsidiary or by the Agent (to the extent the Agent is holding
the insurance proceeds as additional Collateral pursuant to
Section 6 of the Security Agreement) from any casualty loss
incurred by the Company or any Subsidiary, in an amount equal to
100% of such insurance proceeds (or other similar recoveries)
net of any collection expenses; provided that no such prepayment
shall be required to the extent such proceeds are used by the
Company for the financing of the replacement, substitution or
restoration of the assets sustaining such casualty loss.
(d) Concurrently with the receipt of any Net Cash
Proceeds from any issuance of equity securities of the Company
(including a Public Offering, but excluding the issuance of
shares of common stock of the Company pursuant to any employee
or director stock option program, benefit plan or compensation
program), in an amount equal to 50% of such Net Cash Proceeds.
(e) Concurrently with the receipt of any Net Cash
Proceeds from the issuance of any Other Debt of the
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Company or any Subsidiary (including a Public Offering), in an
amount equal to 100% of such Net Cash Proceeds.
(f) Within 90 days after the end of each fiscal year,
beginning with the 1996 fiscal year, in an amount equal to 75%
of Excess Cash Flow for (i) in the case of the 1996 fiscal year,
the period beginning on the Closing Date and ending on December
31, 1996 and (ii) in the case of any other fiscal year, such
fiscal year (rounded to the nearest, or if there is no nearest
the next highest, integral multiple of $10,000); provided that
if the Leverage Ratio as of the end of such fiscal year is less
than 3.0: 1:00, then the amount of the required prepayment shall
be 50% of Excess Cash Flow.
All prepayments of Term Loans pursuant to this Section 2.7 shall be applied to
the remaining installments thereof pro rata; provided that if the Lenders
holding 60% of the aggregate principal amount of the Term B Loans so request, by
notice to the Agent not later than five Business Days prior to the date upon
which such prepayment is due, the portion of any prepayment which would have
been applied to the Term B Loans shall be applied pro rata to the remaining
installments of the Term A Loans of all Lenders (it being understood that if the
Term A Lenders incur additional funding losses pursuant to Section 4.4 as a
result of the reallocation of such prepayment, the Company shall only be
responsible for the portion of such additional funding losses which would have
been incurred by the Term B Lenders if such payment had been applied to the Term
B Loans).
2.8 Repayment. (a) The Term A Credit. The Company shall repay the Term A
Loans in quarterly installments on the last day of each calendar quarter,
commencing on March 31, 1996 in the amount set forth opposite the period in
which such quarterly date occurs:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
March 31, 1996 through December 31, 1997 $2,000,000
January 1, 1998 through December 31, 1998 2,500,000
January 1, 1999 through December 31, 2000 3,000,000
</TABLE>
(b) The Term B Credit. The Company shall repay the Term B Loans
in quarterly installments on the last day of each calendar quarter, commencing
on March 31, 1996 in the amount set forth opposite the period in which such
quarterly date occurs:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
March 31, 1996 through December 31, 1999 $ 125,000
January 1, 2000 through December 31, 2000 250,000
January 1, 2001 through December 31, 2001 5,500,000
</TABLE>
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<PAGE> 43
(c) The Revolving Credit. The Company shall pay to the Agent,
for the account of the Lenders, on the Revolving Termination Date the aggregate
principal amount of all Revolving Loans outstanding on such date.
2.9 Interest. (a) Each Revolving Loan and Term Loan shall bear interest
on the outstanding principal amount thereof from the applicable Borrowing Date
at a rate per annum equal to the Offshore Rate or the Base Rate, as the case may
be (and subject to the Company's right to convert to the other Type of Loans
under Section 2.4), plus the Applicable Offshore Rate Margin or Applicable Base
Rate Margin, as the case may be.
(b) Interest on each Loan shall be paid in arrears on each
Interest Payment Date therefor. Interest shall also be paid on the date of any
prepayment of Loans under Section 2.6 or 2.7 for the portion of the Loans so
prepaid and upon payment (including prepayment) in full thereof.
(c) Notwithstanding subsection (a) of this Section, during the
existence of any Event of Default under subsection 9.1(a), (f) or (g), and, at
the election of the Required Lenders, during the existence of any other Event of
Default, the Company shall pay interest (after as well as before entry of
judgment thereon to the extent permitted by law) on the principal amount of all
outstanding Loans and, to the extent permitted by applicable law, on any other
amount payable hereunder or under any other Loan Document, at a rate per annum
equal to the rate otherwise applicable thereto pursuant to the terms hereof or
such other Loan Document (or, if no such rate is specified, the Base Rate plus
the Applicable Base Rate Margin then in effect for Revolving Loans) plus 2%. All
such interest shall be payable on demand.
(d) Anything herein to the contrary notwithstanding, the
obligations of the Company to any Lender hereunder shall be subject to the
limitation that payments of interest shall not be required for any period for
which interest is computed hereunder to the extent (but only to the extent) that
contracting for or receiving such payment by such Lender would be contrary to
the provisions of any law applicable to such Lender limiting the highest rate of
interest that may be lawfully contracted for, charged or received by such
Lender, and in such event the Company shall pay such Lender interest at the
highest rate permitted by applicable law.
2.10 Fees. In addition to certain fees described in Section
3.8:
(a) Arranger and Agency Fees. The Company shall pay an
arrangement fee to the Arranger for the Arranger's own account and agency fees
to the Agent for the Agent's own account, in each case as required by the letter
agreement ("Fee Letter") between the Company, the Arranger and the Agent dated
August 14, 1995.
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(b) Commitment Fees. The Company shall pay to the Agent for the
account of each Lender a commitment fee at the rate of 0.50% per annum on the
average daily unused portion of such Lender's Revolving Percentage of the
Revolving Commitment, computed on a quarterly basis in arrears on the last
Business Day of each calendar quarter based upon the daily utilization for that
quarter as calculated by the Agent. For purposes of calculating utilization
under this subsection, the Revolving Commitment shall be deemed used to the
extent of the aggregate principal amount of all Revolving Loans then outstanding
plus the Effective Amount of all L/C Obligations then outstanding. Such
commitment fee shall accrue from the Closing Date to the Revolving Termination
Date and shall be due and payable quarterly in arrears on the last Business Day
of each calendar quarter, with the final payment to be made on the Revolving
Termination Date. The commitment fees provided in this subsection shall accrue
at all times after the Closing Date, including at any time during which one or
more conditions in Article V are not met.
2.11 Computation of Fees and Interest. (a) All computations of interest
and fees shall be made on the basis of a 360-day year and actual days elapsed.
Interest and fees shall accrue during each period during which interest or such
fees are computed from the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall be
conclusive and binding on the Company and the Lenders in the absence of manifest
error. The Agent will, at the request of the Company or any Lender, deliver to
the Company or such Lender, as the case may be, a statement showing the
quotations used by the Agent in determining any interest rate and the resulting
interest rate.
2.12 Payments by the Company. (a) All payments to be made by the
Company shall be made without set-off, recoupment or counterclaim. Except as
otherwise expressly provided herein, all payments by the Company shall be made
to the Agent for the account of the Lenders at the Agent's Payment Office, and
shall be made in dollars and in immediately available funds, no later than 11:00
a.m. (San Francisco time) on the date specified herein. Except as expressly
provided herein, the Agent will promptly distribute, in like funds as received,
to each Lender its Revolving Percentage of any portion of such payment related
to the Revolving Loans, its Term A Percentage of any portion of such payment
relating to the Term Loans and its Term B Percentage of any portion of such
payment relating to the Term B Loans. Any payment received by the Agent later
than 11:00 a.m. (San Francisco time) shall be deemed to have been received on
the following Business Day and any applicable interest or fee shall continue to
accrue.
(b) Whenever any payment is due on a day other than a Business
Day, such payment shall be made on the following Business Day (unless such
following Business Day is the first
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Business Day of a calendar month, in which case such payment shall be made on
the preceding Business Day), and such extension of time shall in such case be
included in the computation of interest or fees, as the case may be.
(c) Unless the Agent receives notice from the Company prior to
the date on which any payment is due to the Lenders that the Company will not
make such payment in full as and when required, the Agent may assume that the
Company has made such payment in full to the Agent on such date in immediately
available funds and the Agent may (but shall not be so required), in reliance
upon such assumption, distribute to each Lender on such due date an amount equal
to the amount then due such Lender. If and to the extent the Company has not
made such payment in full to the Agent, each Lender shall repay to the Agent on
demand such amount distributed to such Lender, together with interest thereon at
the Federal Funds Rate for each day from the date such amount is distributed to
such Lender until the date repaid.
2.13 Payments by the Lenders to the Agent. (a) Unless the Agent receives
notice from a Lender on or prior to the Closing Date or, with respect to any
Borrowing after the Closing Date, at least one Business Day prior to the date of
such Borrowing, that such Lender will not make available as and when required
hereunder to the Agent for the account of the Company the amount of such
Lender's Revolving Percentage, Term A Percentage or Term B Percentage, as
applicable, of such Borrowing, the Agent may assume that each Lender has made
such amount available to the Agent in immediately available funds on the
Borrowing Date and the Agent may (but shall not be required), in reliance upon
such assumption, make available to the Company on such date a corresponding
amount. If and to the extent any Lender shall not have made its full amount
available to the Agent in immediately available funds and the Agent in such
circumstances has made available to the Company such amount, such Lender shall
on the Business Day following such Borrowing Date make such amount available to
the Agent, together with interest at the Federal Funds Rate for each day during
such period. A notice of the Agent submitted to any Lender with respect to
amounts owing under this subsection (a) shall be conclusive, absent manifest
error. If such amount is so made available, such payment to the Agent shall
constitute such Lender's Loan on the date of Borrowing for all purposes of this
Agreement. If such amount is not made available to the Agent on the Business Day
following the Borrowing Date, the Agent will notify the Company of such failure
to fund and, upon demand by the Agent, the Company shall pay such amount to the
Agent for the Agent's account, together with interest thereon for each day
elapsed since the date of such Borrowing, at a rate per annum equal to the
interest rate applicable at the time to the Loans comprising such Borrowing.
(b) The failure of any Lender to make any Loan on any Borrowing
Date shall not relieve any other Lender of any obligation hereunder to make a
Loan on such Borrowing Date, but
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no Lender shall be responsible for the failure of any other Lender to make the
Loan to be made by such other Lender on any Borrowing Date.
2.14 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Lender shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its ratable share of such payment
(determined in accordance with the provisions of this Agreement), such Lender
shall immediately (a) notify the Agent of such fact, and (b) purchase from the
other Lenders such participations in the Loans made by them as shall be
necessary to cause such purchasing Lender to share the excess payment pro rata
with each other Lender; provided, however, that if all or any portion of such
excess payment is thereafter recovered from the purchasing Lender, such purchase
shall to that extent be rescinded and each other Lender shall repay to the
purchasing Lender the purchase price paid therefor, together with an amount
equal to such paying Lender's ratable share (according to the proportion of (i)
the amount of such paying Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Company agrees that any Lender so purchasing a participation from another
Lender may, to the fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off, but subject to Section 11.10) with
respect to such participation as fully as if such Lender were the direct
creditor of the Company in the amount of such participation. The Agent will keep
records (which shall be conclusive and binding in the absence of manifest error)
of participations purchased under this Section and will in each case notify the
Lenders following any such purchases or repayments.
ARTICLE III
THE LETTERS OF CREDIT
3.1 The Letter of Credit Subfacility. (a) On the terms and conditions
set forth herein (i) each Issuing Lender agrees, (A) from time to time on any
Business Day during the period from the Closing Date to the Revolving
Termination Date to issue Letters of Credit for the account of the Company, and
to amend or renew Letters of Credit previously issued by it, in accordance with
subsections 3.2(c) and 3.2(d), and (B) to honor properly drawn drafts under the
Letters of Credit issued by it; and (ii) the Lenders severally agree to
participate in Letters of Credit Issued for the account of the Company; provided
that no Issuing Lender shall be obligated to Issue, and no Lender shall be
obligated to participate in, any Letter of Credit if as of the date of Issuance
of such Letter of Credit (the "Issuance Date") (1) the Effective Amount of all
L/C Obligations plus the aggregate amount of all Revolving Loans exceeds the
Revolving
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Commitment, (2) the Effective Amount of all L/C Obligations exceeds the L/C
Commitment or (3) the participation of any Lender in the Effective Amount of all
L/C Obligations plus the outstanding principal amount of the Revolving Loans of
such Lender shall exceed such Lender's Revolving Commitment. Within the
foregoing limits, and subject to the other terms and conditions hereof, the
Company's ability to obtain Letters of Credit shall be fully revolving, and,
accordingly, the Company may, during the foregoing period, obtain Letters of
Credit to replace Letters of Credit which have expired or which have been drawn
upon and reimbursed.
(b) No Issuing Lender shall be under any obligation to Issue any
Letter of Credit if:
(i) any order, judgment or decree of any Governmental
Authority or arbitrator shall by its terms purport to enjoin or restrain
such Issuing Lender from Issuing such Letter of Credit, or any
Requirement of Law applicable to such Issuing Lender or any request or
directive (whether or not having the force of law) from any Governmental
Authority with jurisdiction over such Issuing Lender shall prohibit, or
request that such Issuing Lender refrain from, the Issuance of letters
of credit generally or such Letter of Credit in particular or shall
impose upon such Issuing Lender with respect to such Letter of Credit
any restriction, reserve or capital requirement (for which such Issuing
Lender is not otherwise compensated hereunder) not in effect on the
Closing Date, or shall impose upon such Issuing Lender any unreimbursed
loss, cost or expense which was not applicable on the Closing Date and
which such Issuing Lender in good faith deems material to it;
(ii) such Issuing Lender has received written notice
from any Lender, the Agent or the Company, on or prior to the Business
Day prior to the requested date of Issuance of such Letter of Credit,
that one or more of the applicable conditions contained in Article V is
not then satisfied;
(iii) the expiry date of such Letter of Credit is after
the Revolving Termination Date, or, in the case of a Commercial Letter
of Credit, the expiry date of such Letter of Credit is less than 25 days
prior to the Revolving Termination Date, unless all of the Lenders have
approved such expiry date in writing;
(iv) such Letter of Credit does not provide for drafts,
or is not otherwise in form and substance acceptable to such Issuing
Lender, or the Issuance of such Letter of Credit shall violate any
applicable policies of such Issuing Lender; or
(v) such Letter of Credit is denominated in a
currency other than Dollars.
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3.2 Issuance, Amendment and Renewal of Letters of Credit. (a) Each
Letter of Credit shall be issued upon the irrevocable written request of the
Company received by the applicable Issuing Lender (with a copy sent by the
Company to the Agent) at least four days (or such shorter time as the applicable
Issuing Lender and the Agent may agree in a particular instance in their sole
discretion) prior to the proposed date of issuance. Each such request for
issuance of a Letter of Credit shall be by facsimile, confirmed immediately in
an original writing, in the form of an L/C Application, and shall specify in
form and detail satisfactory to the applicable Issuing Lender: (i) the face
amount of the Letter of Credit; (ii) the expiry date of the Letter of Credit;
(iii) the name and address of the beneficiary thereof; (iv) the documents to be
presented by the beneficiary of the Letter of Credit in case of any drawing
thereunder; (v) the full text of any certificate to be presented by the
beneficiary in case of any drawing thereunder; (vi) in the case of a standby
Letter of Credit, whether such letter of credit is a Financial Standby Letter of
Credit or a Non-Financial Standby Letter of Credit; and (vii) such other matters
as such Issuing Lender may require.
(b) At least two Business Days prior to the Issuance of any
Letter of Credit, the applicable Issuing Lender will confirm with the Agent (by
telephone or in writing) that the Agent has received a copy of the L/C
Application or L/C Amendment Application from the Company and, if not, such
Issuing Lender will provide the Agent with a copy thereof. Unless the applicable
Issuing Lender has received, on or before the Business Day immediately preceding
the date such Issuing Lender is to issue a requested Letter of Credit, (A)
notice from the Agent directing such Issuing Lender not to issue such Letter of
Credit because such issuance is not then permitted under subsection 3.1(a) as a
result of the limitations set forth in clause (1) or (2) thereof or (B) a notice
described in subsection 3.1(b)(ii), then, subject to the terms and conditions
hereof, such Issuing Lender shall, on the requested date, issue a Letter of
Credit for the account of the Company in accordance with such Issuing Lender's
usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding
and prior to the Revolving Termination Date, the applicable Issuing Lender will,
upon the written request of the Company received by such Issuing Lender (with a
copy sent by the Company to the Agent) at least four days (or such shorter time
as the applicable Issuing Lender and the Agent may agree in a particular
instance in their sole discretion) prior to the proposed date of amendment,
amend any Letter of Credit issued by it. Each such request for amendment of a
Letter of Credit shall be made by facsimile, confirmed immediately in an
original writing, made in the form of an L/C Amendment Application and shall
specify in form and detail satisfactory to the applicable Issuing Lender: (i)
the Letter of Credit to be amended; (ii) the proposed date of amendment of such
Letter of Credit (which shall
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be a Business Day); (iii) the nature of the proposed amendment; and (iv) such
other matters as such Issuing Lender may require. No Issuing Lender shall have
any obligation to amend any Letter of Credit if: (A) such Issuing Lender would
have no obligation at such time to issue such Letter of Credit in its amended
form under the terms of this Agreement; or (B) the beneficiary of such Letter of
Credit does not accept the proposed amendment to such Letter of Credit. The
Agent will promptly notify the Lenders of any L/C Issuance.
(d) The Issuing Lenders and the Lenders agree that, while a
Letter of Credit is outstanding and prior to the Revolving Termination Date, at
the option of the Company and upon the written request of the Company received
by the applicable Issuing Lender (with a copy sent by the Company to the Agent)
at least four days (or such shorter time as the applicable Issuing Lender and
the Agent may agree in a particular instance in their sole discretion) prior to
the proposed date of notification of renewal, the applicable Issuing Lender
shall be entitled to authorize the automatic renewal of any Letter of Credit
issued by it. Each such request for renewal of a Letter of Credit shall be made
by facsimile, confirmed immediately in an original writing, in the form of an
L/C Amendment Application, and shall specify in form and detail satisfactory to
the applicable Issuing Lender: (i) the Letter of Credit to be renewed; (ii) the
proposed date of notification of renewal of such Letter of Credit (which shall
be a Business Day); (iii) the revised expiry date of such Letter of Credit
(which, unless all Lenders otherwise consent in writing, shall be prior to the
Revolving Termination Date); and (iv) such other matters as such Issuing Lender
may require. No Issuing Lender shall be under any obligation to renew any Letter
of Credit if: (A) such Issuing Lender would have no obligation at such time to
issue or amend such Letter of Credit in its renewed form under the terms of this
Agreement; or (B) the beneficiary of such Letter of Credit does not accept the
proposed renewal of such Letter of Credit. If any outstanding Letter of Credit
shall provide that it shall be automatically renewed unless the beneficiary
thereof receives notice from the applicable Issuing Lender that such Letter of
Credit shall not be renewed, and if at the time of renewal such Issuing Lender
would be entitled to authorize the automatic renewal of such Letter of Credit in
accordance with this subsection 3.2(d) upon the request of the Company but such
Issuing Lender shall not have received any L/C Amendment Application from the
Company with respect to such renewal or other written direction by the Company
with respect thereto, such Issuing Lender shall nonetheless be permitted to
allow such Letter of Credit to renew, and the Company and the Lenders hereby
authorize such renewal, and, accordingly, such Issuing Lender shall be deemed to
have received an L/C Amendment Application from the Company requesting such
renewal.
(e) Each Issuing Lender may, at its election (or as required by
the Agent at the direction of the Required Lenders), deliver any notices of
termination or other communications to any
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Letter of Credit beneficiary or transferee, and take any other action as
necessary or appropriate, at any time and from time to time, in order to cause
the expiry date of such Letter of Credit to be a date not later than the
Revolving Termination Date.
(f) This Agreement shall control in the event of any conflict
with any L/C-Related Document (other than any Letter of Credit).
(g) Each Issuing Lender will deliver to the Agent, concurrently
or promptly following its delivery of a Letter of Credit, or amendment to or
renewal of a Letter of Credit, to an advising bank or a beneficiary, a true and
complete copy of each such Letter of Credit or amendment to or renewal of a
Letter of Credit.
3.3 Risk Participations, Drawings and Reimbursements.
(a) Immediately upon the Issuance of each Letter of Credit each
Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to,
purchase from the applicable Issuing Lender a participation in such Letter of
Credit and each drawing thereunder in an amount equal to the product of (i) such
Lender's Revolving Percentage times (ii) the maximum amount available to be
drawn under such Letter of Credit and the amount of such drawing, respectively.
(b) In the event of any request for a drawing under a Letter of
Credit by the beneficiary or transferee thereof, the applicable Issuing Lender
will promptly notify the Company and the Agent. The Company shall reimburse the
applicable Issuing Lender prior to 8:30 a.m. (San Francisco time), on each date
that any amount is paid by such Issuing Lender under any Letter of Credit (each
such date, an "Honor Date") in an amount equal to the amount so paid by such
Issuing Lender; provided, to the extent that any Issuing Lender accepts a
drawing under a Letter of Credit after 8:30 a.m. (San Francisco time), the
Company will not be obligated to reimburse the Issuing Lender until the next
Business Day and the "Honor Date" for such Letter of Credit shall be such next
Business Day. If the Company fails to reimburse an Issuing Lender for the full
amount of any drawing under any Letter of Credit by 8:30 a.m. (San Francisco
time) on the Honor Date, such Issuing Lender will promptly notify the Agent and
the Agent will promptly notify each Lender thereof, and the Company shall be
deemed to have requested that Base Rate Loans be made by the Lenders to be
disbursed on the Honor Date under such Letter of Credit, subject to the amount
of the unutilized portion of the Revolving Commitment and subject to the
conditions set forth in Section 5.3 other than Section 5.3(a). Any notice given
by an Issuing Lender or the Agent pursuant to this subsection 3.3(b) may be oral
if immediately confirmed in writing (including by facsimile); provided that the
lack of such an immediate confirmation shall not affect the conclusiveness or
binding effect of such notice.
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(c) Each Lender shall upon any notice pursuant to subsection
3.3(b) make available to the Agent for the account of the applicable Issuing
Lender an amount in Dollars and in immediately available funds equal to its
Revolving Percentage of the amount of the drawing, whereupon the participating
Lenders shall (subject to subsection 3.3(d)) each be deemed to have made a
Revolving Loan consisting of a Base Rate Loan to the Company in such amount. If
any Lender so notified fails to make available to the Agent for the account of
the applicable Issuing Lender the amount of such Lender's Revolving Percentage
of the amount of such drawing by no later than 11:00 a.m. (San Francisco time)
on the Honor Date, then interest shall accrue on such Lender's obligation to
make such payment, from the Honor Date to the date such Lender makes such
payment, at a rate per annum equal to the Federal Funds Rate in effect from time
to time during such period. The Agent will promptly give notice of the
occurrence of the Honor Date, but failure of the Agent to give any such notice
on the Honor Date or in sufficient time to enable any Lender to effect such
payment on such date shall not relieve such Lender from its obligations under
this Section 3.3.
(d) With respect to any unreimbursed drawing that is not
converted into Revolving Loans consisting of Base Rate Loans in whole or in
part, because of the Company's failure to satisfy the conditions set forth in
Section 5.3 (other than Section 5.3(a) which need not be satisfied) or for any
other reason, the Company shall be deemed to have incurred from the applicable
Issuing Lender an L/C Borrowing in the amount of such drawing, which L/C
Borrowing shall be due and payable on demand (together with interest) and shall
bear interest at a rate per annum equal to the Base Rate plus the applicable
Base Rate Margin then in effect for Revolving Loans plus 2% per annum, and each
Lender's payment to such Issuing Lender pursuant to subsection 3.3(c) shall be
deemed payment in respect of its participation in such L/C Borrowing and shall
constitute an L/C Advance from such Lender in satisfaction of its participation
obligation under this Section 3.3.
(e) Each Lender's obligation in accordance with this Agreement
to make Revolving Loans or L/C Advances, as contemplated by this Section 3.3, as
a result of a drawing under a Letter of Credit, shall be absolute and
unconditional and without recourse to any Issuing Lender and shall not be
affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against the
applicable Issuing Lender, the Company or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of an Event of Default, an
Unmatured Event of Default or a Material Adverse Effect; or (iii) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing; provided that each Lender's obligation to make Revolving Loans
under this Section 3.3 is subject to the conditions set forth in Section 5.3.
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3.4 Repayment of Participations. (a) Upon (and only upon) receipt by the
Agent for the account of an Issuing Lender of immediately available funds from
the Company (i) in reimbursement of any payment made by such Issuing Lender
under a Letter of Credit with respect to which any Lender has paid the Agent for
the account of such Issuing Lender for such Lender's participation in such
Letter of Credit pursuant to Section 3.3 or (ii) in payment of interest thereon,
the Agent will pay to each Lender, in the same funds as those received by the
Agent for the account of such Issuing Lender, the amount of such Lender's
Revolving Percentage of such funds, and such Issuing Lender shall receive the
amount of the Revolving Percentage of such funds of any Lender that did not so
pay the Agent for the account of such Issuing Lender.
(b) If the Agent or an Issuing Lender is required at any time to
return to the Company, or to a trustee, receiver, liquidator or custodian, or to
any official in any Insolvency Proceeding, any portion of any payment made by
the Company to the Agent for the account of an Issuing Lender pursuant to
subsection 3.4(a) in reimbursement of a payment made under a Letter of Credit or
interest or fee thereon, each Lender shall, on demand of the Agent, forthwith
return to the Agent or the applicable Issuing Lender the amount of its Revolving
Percentage of any amount so returned by the Agent or such Issuing Lender plus
interest thereon from the date such demand is made to the date such amount is
returned by such Lender to the Agent or such Issuing Lender, at a rate per annum
equal to the Federal Funds Rate in effect from time to time.
3.5 Role of the Issuing Lenders. (a) Each Lender and the Company agree
that, in paying any drawing under a Letter of Credit, the applicable Issuing
Lender shall not have any responsibility to obtain any document (other than any
sight draft and certificate expressly required by such Letter of Credit) or to
ascertain or inquire as to the validity or accuracy of any such document or the
authority of the Person executing or delivering any such document.
(b) No Agent-Related Person, Issuing Lender nor any of their
respective correspondents, participants or assignees shall be liable to any
Lender for: (i) any action taken or omitted in connection herewith at the
request or with the approval of the Lenders (including the Required Lenders, as
applicable); (ii) any action taken or omitted in the absence of gross negligence
or willful misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C-Related Document.
(c) The Company hereby assumes all risks of the acts or
omissions of any beneficiary or transferee with respect to its use of any Letter
of Credit; provided that this assumption is not intended to, and shall not,
preclude the Company's pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. No
Agent-Related
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Person, Issuing Lender nor any of their respective correspondents, participants
or assignees shall be liable or responsible for any of the matters described in
clauses (i) through (vii) of Section 3.6; provided that, anything in such
clauses to the contrary notwithstanding, the Company may have a claim against an
Issuing Lender, and such Issuing Lender may be liable to the Company, to the
extent, but only to the extent, of any direct, as opposed to consequential or
exemplary, damages suffered by the Company which the Company proves were caused
by such Issuing Lender's willful misconduct or gross negligence or such Issuing
Lender's willful failure to pay under any Letter of Credit after the
presentation to it by the beneficiary of a sight draft and certificate(s)
strictly complying with the terms and conditions of such Letter of Credit. In
furtherance and not in limitation of the foregoing: (i) an Issuing Lender may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) no Issuing Lender shall be responsible for
the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign a Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason (unless assuming the validity or
sufficiency of such instrument would constitute gross negligence or willful
misconduct by such Issuing Lender).
3.6 Obligations Absolute. The obligations of the Company under this
Agreement and any L/C-Related Document to reimburse the applicable Issuing
Lender for a drawing under a Letter of Credit, and to repay any L/C Borrowing
and any drawing under a Letter of Credit converted into Revolving Loans, shall
be unconditional and irrevocable, and shall be paid strictly in accordance with
the terms of this Agreement and each such other L/C-Related Document under all
circumstances, including the following:
(i) any lack of validity or enforceability of this
Agreement or any L/C-Related Document;
(ii) any change in the time, manner or place of payment
of, or in any other term of, all or any of the obligations of the
Company in respect of any Letter of Credit or any other amendment or
waiver of or any consent to departure from all or any of the L/C-Related
Documents;
(iii) the existence of any claim, set-off, defense or
other right that the Company may have at any time against any
beneficiary or any transferee of any Letter of Credit (or any Person
for whom any such beneficiary or any such transferee may be acting),
the applicable Issuing Lender or any other Person, whether in
connection with this Agreement, the transactions contemplated hereby or
by the L/C-Related Documents or any unrelated transaction;
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(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any Letter of Credit;
(v) any payment by an Issuing Lender under any Letter
of Credit against presentation of a draft or certificate that does not
strictly comply with the terms of such Letter of Credit; or any payment
made by an Issuing Lender under any Letter of Credit to any Person
purporting to be a trustee in bankruptcy, debtor-in-possession, assignee
for the benefit of creditors, liquidator, receiver or other
representative of or successor to any beneficiary or any transferee of
any Letter of Credit, including any arising in connection with any
Insolvency Proceeding; provided that the reimbursement by the Company of
the applicable Issuing Lender or the repayment of any L/C Borrowing or
any Revolving Loans related to any such Letter of Credit will not affect
the claim, if any, that the Company may have against the applicable
Issuing Lender pursuant to Section 3.5(c) for willful misconduct or
gross negligence;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any guarantee, for all or any of the obligations of the
Company in respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever,
whether or not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defense available to, or
a discharge of, the Company or a guarantor.
3.7 Cash Collateral Pledge. If any Letter of Credit remains outstanding
and partially or wholly undrawn as of the Revolving Termination Date, then the
Company shall immediately Cash Collateralize the L/C Obligations in an amount
equal to the maximum amount then available to be drawn under all Letters of
Credit.
3.8 Letter of Credit Fees. (a) The Company shall pay to the Agent for
the account of each Lender a letter of credit fee with respect to each Letter of
Credit equal to the L/C Fee Rate per annum of the average daily maximum amount
available to be drawn on such Letter of Credit, computed on a quarterly basis in
arrears on the last Business Day of each calendar quarter. Such letter of credit
fee shall be due and payable quarterly in arrears on the last Business Day of
each calendar quarter during which Letters of Credit are outstanding, commencing
on the first such quarterly date to occur after the Closing Date, through the
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Revolving Termination Date (or such later date upon which all outstanding
Letters of Credit shall expire or be fully drawn), with the final payment to be
made on the Revolving Termination Date (or such later date).
(b) The Company shall pay to each Issuing Lender a letter of
credit fronting fee for each Letter of Credit issued by such Issuing Lender
equal to 0.25% per annum of the average daily maximum amount available to be
drawn on such Letter of Credit, computed on the last Business Day of each
calendar quarter and on the Revolving Termination Date (or such later date on
which such Letter of Credit shall expire or be fully drawn).
(c) The letter of credit fees payable under subsection 3.8(a)
and the fronting fees payable under subsection 3.8(b) shall be due and payable
quarterly in arrears on the last Business Day of each calendar quarter during
which Letters of Credit are outstanding, commencing on the first such quarterly
date to occur after the Closing Date, through the Revolving Termination Date (or
such later date upon which all outstanding Letters of Credit shall expire or be
fully drawn), with the final payment to be made on the Revolving Termination
Date (or such later date). For purposes of calculating the fees payable under
subsection 3.8(a) and subsection 3.8(b), any undrawn Commercial Letters of
Credit should be considered outstanding and available to be drawn upon for 25
days after their expiry date.
(d) The Company shall pay to each Issuing Lender from time to
time on demand the normal issuance, presentation, amendment and other processing
fees, and other standard costs and charges, of such Issuing Lender relating to
letters of credit as from time to time in effect.
3.9 Uniform Customs and Practice. The Uniform Customs and Practice for
Documentary Credits as published by the International Chamber of Commerce most
recently at the time of issuance of any Letter of Credit shall (unless otherwise
expressly provided in such Letter of Credit) apply to each Letter of Credit.
ARTICLE IV
TAXES, YIELD PROTECTION AND ILLEGALITY
4.1 Taxes. (a) Any and all payments by the Company to each Lender or the
Agent under this Agreement and any other Loan Document shall be made free and
clear of, and without deduction or withholding for, any Taxes. In addition, the
Company shall pay all Other Taxes.
(b) The Company agrees to indemnify and hold harmless each
Lender and the Agent for the full amount of Taxes or Other Taxes (including any
Taxes or Other Taxes imposed by any
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jurisdiction on amounts payable under this Section) paid by the Lender or the
Agent and any liability (including penalties, interest, additions to tax and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. Payment under this
indemnification shall be made within 30 days after the date the Lender or the
Agent makes written demand therefor.
(c) If the Company shall be required by law to deduct or
withhold any Taxes or Other Taxes from or in respect of any sum payable
hereunder to any Lender or the Agent, then:
(i) the sum payable shall be increased as necessary so
that after making all required deductions and withholdings (including
deductions and withholdings applicable to additional sums payable under
this Section) such Lender or the Agent, as the case may be, receives an
amount equal to the sum it would have received had no such deductions or
withholdings been made;
(ii) the Company shall make such deductions and
withholdings; and
(iii) the Company shall pay the full amount deducted or
withheld to the relevant taxing authority or other authority in
accordance with applicable law.
(d) Within 30 days after the date of any payment by the Company
of Taxes or Other Taxes, the Company shall furnish the Agent the original or a
copy of a receipt evidencing payment thereof, or other evidence of payment
reasonably satisfactory to the Agent.
(e) The Company shall not be required to pay an additional
amount to, or indemnify, any Lender or the Agent pursuant to this Section 4.1 to
the extent that (i) the obligation to withhold or pay such amount existed on the
Initial Date (as hereinafter defined) or (ii) the obligation to withhold or pay
such amount would not have arisen but for the failure of the Agent or such
Lender to comply with the provisions of Section 10.10 of this Agreement. For
purposes of this subsection 4.1(e), "Initial Date" shall mean (a) in the case of
the Agent and any Lender that is a signatory hereto, the date of this Agreement,
(b) in the case of any Person which subsequently becomes a Lender hereunder, the
date of the applicable Assignment and Acceptance, and (c) in the case of any
Participant, the date on which it becomes a Participant.
(f) If the Company is required to pay additional amounts to any
Lender or the Agent pursuant to subsection (c) of this Section, then such Lender
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to change the jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Company which may thereafter accrue, if
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such change in the judgment of such Lender is not otherwise disadvantageous to
such Lender.
4.2 Illegality. (a) After the date hereof, if any Lender determines that
the introduction of any Requirement of Law, or any change in any Requirement of
Law, or in the interpretation or administration of any Requirement of Law, has
made it unlawful, or that any central bank or other Governmental Authority has
asserted that it is unlawful, for such Lender or its applicable Lending Office
to make Offshore Rate Loans, then, on notice thereof by the Lender to the
Company through the Agent, any obligation of such Lender to make Offshore Rate
Loans shall be suspended until such Lender notifies the Agent and the Company
that the circumstances giving rise to such determination no longer exist.
(b) After the date hereof, if a Lender determines that it is
unlawful to maintain any Offshore Rate Loan, the Company shall, upon its receipt
of notice of such fact and demand from such Lender (with a copy to the Agent),
prepay in full such Offshore Rate Loan, together with interest accrued thereon
and amounts required under Section 4.4, either on the last day of the Interest
Period thereof, if such Lender may lawfully continue to maintain such Offshore
Rate Loan to such day, or on such earlier date on which such Lender may no
longer lawfully continue to maintain such Offshore Rate Loan (as determined by
such Lender). If the Company is required to so prepay any Offshore Rate Loan,
then concurrently with such prepayment, the Company shall borrow from the
affected Lender, in the amount of such repayment, a Base Rate Loan.
(c) If the obligation of any Lender to make or maintain Offshore
Rate Loans has been terminated or suspended pursuant to subsection (a) or (b)
above, all Loans which would otherwise be made by such Lender as Offshore Rate
Loans shall be instead Base Rate Loans.
(d) Before giving any notice to the Agent under this Section,
the affected Lender shall designate a different Lending Office with respect to
its Offshore Rate Loans if such designation will avoid the need for giving such
notice or making such demand and will not, in the judgment of such Lender, be
illegal or otherwise disadvantageous to such Lender.
4.3 Increased Costs and Reduction of Return. (a) After the date hereof,
if any Lender determines that, due to either (i) the introduction of or any
change (other than any change by way of imposition of or increase in reserve
requirements included in the calculation of the Offshore Rate) in or in the
interpretation of any law or regulation or (ii) compliance by such Lender with
any guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to such Lender of agreeing to make or making, funding or maintaining any
Offshore Rate Loan or
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participating in Letters of Credit or, in the case of any Issuing Lender, any
increase in the cost to such Issuing Lender of agreeing to issue, issuing or
maintaining any Letter of Credit or of agreeing to make or making, funding or
maintaining any unpaid drawing under any Letter of Credit, then the Company
shall be liable for, and shall from time to time, upon demand (with a copy of
such demand to be sent to the Agent), pay to the Agent for the account of such
Lender, additional amounts as are sufficient to compensate such Lender for such
increased costs.
(b) After the date hereof, if any Lender shall have determined
that (i) the introduction of any Capital Adequacy Regulation, (ii) any change in
any Capital Adequacy Regulation, (iii) any change in the interpretation or
administration of any Capital Adequacy Regulation by any central bank or other
Governmental Authority charged with the interpretation or administration
thereof, or (iv) compliance by such Lender (or its Lending Office) or any
corporation controlling such Lender with any Capital Adequacy Regulation,
affects or would affect the amount of capital required or expected to be
maintained by such Lender or any corporation controlling such Lender and (taking
into consideration such Lender's or such corporation's policies with respect to
capital adequacy) determines that the amount of such capital is increased as a
consequence of any of its Commitments, loans, credits or obligations under this
Agreement, then, upon demand of such Lender to the Company through the Agent,
the Company shall pay to such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender for such
increase.
(c) This Section 4.3 shall not require the Company to reimburse
the Agent or any Lender for any Taxes which are otherwise covered by the
indemnity set forth in Section 4.1.
4.4 Funding Losses. The Company shall reimburse each Lender and hold
each Lender harmless from any loss or expense which such Lender may sustain or
incur as a consequence of:
(a) the failure of the Company to make on a timely basis any
payment of principal of any Offshore Rate Loan;
(b) the failure of the Company to borrow, continue or convert a
Loan after the Company has given (or is deemed to have given) a Notice of
Borrowing or a Notice of Conversion/ Continuation;
(c) the failure of the Company to make any prepayment in
accordance with any notice delivered under Section 2.6;
(d) the prepayment (including pursuant to Section 2.7 but
subject to the parenthetical at the end of such Section) or other payment
(including after acceleration thereof) of an Offshore Rate Loan on a day that is
not the last day of the relevant Interest Period; or
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(e) the automatic conversion under subsection 2.4(a) of any
Offshore Rate Loan to a Base Rate Loan on a day that is not the last day of the
relevant Interest Period;
including any such loss or expense arising from the liquidation or reemployment
of funds obtained by it to maintain its Offshore Rate Loans or from fees payable
to terminate the deposits from which such funds were obtained. For purposes of
calculating amounts payable by the Company to the Lenders under this Section and
under subsection 4.3(a), each Offshore Rate Loan made by a Lender (and each
related reserve, special deposit or similar requirement) shall be conclusively
deemed to have been funded at the IBOR used in determining the Offshore Rate for
such Offshore Rate Loan by a matching deposit or other borrowing in the
interbank eurodollar market for a comparable amount and for a comparable period,
whether or not such Offshore Rate Loan is in fact so funded.
4.5 Inability to Determine Rates. If the Agent determines that for any
reason adequate and reasonable means do not exist for determining the Offshore
Rate for any requested Interest Period with respect to a proposed Offshore Rate
Loan, or the Required Lenders determine (and notify the Agent) that the Offshore
Rate applicable pursuant to subsection 2.9(a) for any requested Interest Period
with respect to a proposed Offshore Rate Loan does not adequately and fairly
reflect the cost to such Lenders of funding such Loan, the Agent will promptly
so notify the Company and each Lender. Thereafter, the obligation of the Lenders
to make or maintain Offshore Rate Loans hereunder shall be suspended until the
Agent, with the consent of the Required Lenders, revokes such notice in writing.
Upon receipt of such notice, the Company may revoke any Notice of Borrowing or
Notice of Conversion/Continuation then submitted by it. If the Company does not
revoke such Notice, the Lenders shall make, convert or continue the Loans, as
proposed by the Company, in the amount specified in the applicable notice
submitted by the Company, but such Loans shall be made, converted or continued
as Base Rate Loans instead of Offshore Rate Loan.
4.6 Certificates of Lenders. Any Lender claiming reimbursement or
compensation under this Article IV shall deliver to the Company (with a copy to
the Agent) a certificate setting forth in reasonable detail the basis for such
claim and a calculation of the amount payable to such Lender and such
certificate shall be conclusive and binding on the Company in the absence of
manifest error.
4.7 Substitution of Lenders. Upon the receipt by the Company from any
Lender (an "Affected Lender") of a claim for compensation under Section 4.1 or
4.3 or a notice of the type described in subsection 4.2(a) or (b), the Company
may: (i) request the Affected Lender to use its best efforts to obtain a
replacement bank or financial institution satisfactory to the Company and the
Agent to acquire and assume all or a ratable part
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of all of such Affected Lender's Loans and Revolving Commitment (a "Replacement
Lender"); (ii) request one or more of the other Lenders to acquire and assume
all or part of such Affected Lender's Loans and Revolving Commitment; or (iii)
designate a Replacement Lender. Any such designation of a Replacement Lender
under clause (i) or (iii) shall be subject to the prior written consent of the
Agent and each Issuing Lender.
4.8 Survival. The agreements and obligations of the Company in this
Article IV shall survive the payment of all other Obligations.
ARTICLE V
CONDITIONS PRECEDENT
5.1 Documentary Conditions of Initial Credit Extensions. The obligation
of each Lender to make its initial Credit Extension is subject to the condition
(in addition to the conditions set forth in Sections 5.2 and 5.3) that the Agent
shall have received on or before October 6, 1995 all of the following, in form
and substance satisfactory to the Agent and each Lender, and in sufficient
copies for the Agent and each Lender:
(a) Credit Agreement and Notes. This Agreement and the
Notes (if any) executed by each party thereto.
(b) Resolutions and Incumbency of Company.
(i) Copies of resolutions of the board of directors of
the Company authorizing the transactions contemplated hereby, certified
as of the Closing Date by the Secretary or an Assistant Secretary of the
Company; and
(ii) A certificate of the Secretary or an Assistant
Secretary of the Company certifying the names and true signatures of the
officers of the Company authorized to execute, deliver and perform this
Agreement and all other Loan Documents to be delivered by it hereunder.
(c) Resolutions and Incumbency of Parent.
(i) Copies of resolutions of the board of directors of
the Parent authorizing the execution, delivery and performance of each
Loan Document to which it is a party certified as of the Closing Date by
the Secretary or an Assistant Secretary of the Parent; and
(ii) A certificate of the Secretary or an Assistant
Secretary of the Parent certifying the names and true signatures of the
officers of the Parent authorized to
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execute, deliver and perform the Loan Documents to be delivered by it
hereunder.
(d) Organization Documents; Good Standing. Each of the
following documents:
(i) for the Company and the Parent, the articles or
certificate of incorporation and the bylaws of the Company or the
Parent, as the case may be, as in effect on the Closing Date, certified
by the Secretary or an Assistant Secretary of the Company or the Parent,
as the case may be, as of the Closing Date; and
(ii) a good standing and tax good standing certificate
for the Company and the Parent from the Secretaries of State (or
similar, applicable Governmental Authority) of Delaware and, in the case
of the Company, California.
(e) Legal Opinions.
(i) An opinion of Cahill Gordon & Reindel, counsel
to the Company and the Parent, substantially in the form of
Exhibit L,
(ii) Opinions of local counsel to the Company in
Minnesota, Pennsylvania, Arizona, California and Texas, substantially in
the forms of Exhibits M-1, M-2, M-3, M-4 and M-5 hereto, respectively.
(iii) An opinion of Mayer, Brown & Platt, special
counsel to the Agent, substantially in the form of Exhibit O,
(f) Solvency Opinion. An opinion of Houlihan, Lokey,
Howard & Zurkin, Inc. substantially in the form of Exhibit P.
(g) Payment of Fees. Evidence of payment by the Company of
all accrued and unpaid fees, costs and expenses to the extent then due and
payable on the Closing Date, together with Attorney Costs of the Agent and the
Arranger to the extent invoiced prior to or on the Closing Date, plus such
additional amounts of Attorney Costs as shall constitute the Agent's reasonable
estimate of Attorney Costs incurred or to be incurred by it or the Arranger
through the closing proceedings (provided that such estimate shall not
thereafter preclude final settling of accounts between the Company and the
Agent, including any such costs, fees and expenses arising under or referenced
in Section 2.10 or 11.4.
(h) Certificate. A certificate signed by a Responsible
Officer, dated as of the Closing Date, stating that:
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(i) the representations and warranties contained
in Article VI are true and correct on and as of such date, as
though made on and as of such date;
(ii) no Event of Default or Unmatured Event of
Default exists or will result from the Credit Extension; and
(iii) no event or circumstance has occurred since
December 26, 1994 that has resulted, or would reasonably be expected to
result in a material adverse change in, or a material adverse effect
upon, the operations, business, properties, condition (financial or
otherwise) or prospects of, the Acquired Businesses.
(i) Security Agreement, etc. A security agreement, substantially
in the form of Exhibit E (the "Security Agreement"), issued by the Company and
the Parent, together with (a) evidence, satisfactory to the Agent, that all
filings and recordings necessary to perfect the Lien granted to the Agent (for
the benefit of itself and the Lenders) on any collateral granted under the
Security Agreement have been duly made (or will be duly made contemporaneously
with the initial Credit Extension on the Closing Date) and are in full force and
effect (subject to such exceptions as the Agent and the Required Lenders may
approve); (b) a trademark security agreement, substantially in the form of
Exhibit F (each a "Trademark Security Agreement"), issued by the Company and the
Parent, in each case to the extent applicable; and (c) a patent security
agreement, substantially in the form of Exhibit R (each a "Patent Security
Agreement"), issued by the Company and the Parent, in each case to the extent
applicable.
(j) Guaranty. The Guaranty executed by the Parent.
(k) Pledge Agreements. A pledge agreement, substantially in the
form of Exhibit H, issued by the Company (the "Company Pledge Agreement"), and a
pledge agreement, substantially in the form of Exhibit I, issued by Parent (the
"Parent Pledge Agreement"), together with, in the case of each Pledge Agreement,
the stock certificates to be pledged thereunder and stock powers executed in
blank.
(l) Real Property. With respect to each parcel of real property
owned by the Company or any Subsidiary (excluding Foreign Subsidiaries) or
leased by the Company in Tempe, Arizona, a duly executed Mortgage providing for
a fully perfected Lien, in favor of the Agent for the benefit of the Agent and
the Lenders, in all right, title and interest of the Company to the real
property subject to such Mortgage, superior in right to any Lien (other than
Permitted Liens), existing or future, which the Company or any Subsidiary or any
creditors thereof or purchasers therefrom, or any other Person, may have against
such real property, together with:
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(i) an ALTA Form B (or other form acceptable to the Agent and
the Required Lenders) mortgagee policy of title insurance or a binder
issued by a title insurance company satisfactory to the Agent and the
Required Lenders insuring (or undertaking to insure, in the case of a
binder) that the Mortgage creates and constitutes a valid first mortgage
Lien against such real property in favor of the Agent, subject only to
exceptions acceptable to the Agent and the Required Lenders, with such
endorsements and affirmative insurance as the Agent or the Required
Lenders may reasonably request;
(ii) copies of all documents of record concerning such parcel as
shown on the commitment for the ALTA Loan Title Insurance Policy
referred to above;
(iii) original or certified copies of all insurance policies
required to be maintained with respect to such real property by this
Agreement, any Mortgage or any other Loan Document; and
(iv) a survey certified to the Agent as complying with the 1992
ALTA/ACSM requirements for an urban survey and containing items 1, 2, 3,
4, 7, 8, 9, 10, 11, and 13 from Table A and such other matters as the
Agent may reasonably request.
(m) Landlord's Consents. With respect to the parcel of real
property leased by the Company in Tempe, Arizona, a duly executed Landlord's
Consent.
(n) Purchase Agreement Assignment. The Purchase Agreement
Assignment.
(o) Purchase Agreements, and Other Documents. A copy, certified
as true and correct by the Secretary or an Assistant Secretary of the Company,
of each of (a) the Purchase Agreements (including all exhibits and schedules
thereto), (b) the Securities Purchase Agreement (including all exhibits and
schedules thereto), (c) the Shareholder Agreement, (d) the Transition Services
Agreement and (e) the Tax Sharing Agreement.
(p) Other Documents. Such other approvals, opinions, documents
or materials as the Agent or any Lender may request.
5.2 Other Conditions to Initial Loan or Letter of Credit. The obligation
of each Lender to make its initial Credit Extension is, in addition to the
conditions precedent specified in Sections 5.1 and 5.3, subject to the following
conditions precedent:
(a) Capitalization of the Company. The Agent shall have received
evidence, reasonably satisfactory to the Agent, the Required Lenders and the
Arranger, that the Company has received
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common equity investments from the Parent of not less than $35,000,000, on terms
and conditions satisfactory to the Agent.
(b) Capitalization of the Parent. The Agent shall have received
evidence, reasonably satisfactory to the Agent, the Required Lenders and the
Arranger, that the Parent has received investments from the Initial Parent
Stockholders of not less than $35,000,000, which investment shall be in cash and
shall be evidenced by at least $5,000,000 in common stock and $30,000,000 of
Subordinated Notes.
(c) Subordinated Notes. The Parent shall have issued the
Subordinated Notes on terms and conditions satisfactory to the Agent.
(d) Purchase. The Agent shall have received evidence, reasonably
satisfactory to the Agent, that (i) the Purchase has been completed and (ii) the
purchase price with respect thereto did not exceed $115,000,000 (subject to
working capital adjustments set forth in Section 2.3 of the U.S. Purchase
Agreement and Section 2.9 of the German Purchase Agreement) and (iii)
transaction expenses with respect to Purchase (including the transaction costs
associated with the financing contemplated hereby will not exceed $10,500,000).
5.3 Conditions to All Credit Extensions. The obligation of each Lender
to make any Loan to be made by it and the obligation of each Issuing Lender to
Issue any Letter of Credit is subject to the satisfaction of the following
conditions precedent on the relevant Borrowing Date or Issuance Date:
(a) Notice, Application. In the case of any Loan, the Agent
shall have received a Notice of Borrowing; and in the case of any Issuance of
any Letter of Credit, the applicable Issuing Lender and the Agent shall have
received an L/C Application or L/C Amendment Application, as required under
Section 3.2.
(b) Continuation of Representations and Warranties. The
representations and warranties in Article VI shall be true and correct on and as
of such Borrowing Date or Issuance Date with the same effect as if made on and
as of such Borrowing Date or Issuance Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which case
they shall be true and correct as of such earlier date).
(c) No Existing Default. No Event of Default or Unmatured Event
of Default shall exist or shall result from such Borrowing or Issuance.
Each Notice of Borrowing and L/C Application or L/C Amendment Application
submitted by the Company hereunder shall constitute a representation and
warranty by the Company hereunder, as of the date of such notice and as of the
applicable Borrowing Date or
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Issuance Date, that the conditions in this Section 5.3 are satisfied.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and each Lender that:
6.1 Corporate Existence and Power. The Company and each of its
Subsidiaries:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
(b) has the power and authority and all governmental licenses,
authorizations, consents and approvals (i) to own its assets and to carry on its
business and (ii) to execute, deliver and perform its obligations under the Loan
Documents;
(c) is duly qualified as a foreign corporation and is licensed and
in good standing under the laws of each jurisdiction where its ownership, lease
or operation of property or the conduct of its business requires such
qualification or license; and
(d) is in compliance with all Requirements of Law;
except, in each case referred to in clause (b)(i), (c) or (d), to the extent
that the failure to do so would not reasonably be expected to have a Material
Adverse Effect.
6.2 Corporate Authorization; No Contravention. The execution and
delivery by the Company of this Agreement and each other Loan Document to which
it is a party, the Borrowings hereunder, the execution and delivery by each
Guarantor of the Guaranty and each other Loan Document to which it is a party
and the performance by each of the Company and each Guarantor of its obligations
under each Loan Document to which it is a party (i) are within the corporate
powers of the Company and each Guarantor, as applicable, (ii) have been duly
authorized by all necessary corporate action on the part of the Company and each
Guarantor (including any necessary shareholder action), and (iii) do not and
will not:
(a) contravene the terms of any of the Organization Documents of
the Company or any Guarantor;
(b) conflict with or result in a breach or contravention of, or
the creation of any Lien under, any document evidencing any Contractual
Obligation to which the Company, or
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any Guarantor is a party or any order, injunction, writ or decree of any
Governmental Authority to which the Company, any Guarantor or any of their
properties are subject; or
(c) violate any Requirement of Law.
6.3 Governmental Authorization. No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, (i) the Company
of this Agreement or any other Loan Document to which it is a party or (ii) any
Guarantor with respect to the Guaranty or any other Loan Document to which it is
a party.
6.4 Binding Effect. This Agreement and each other Loan Document to
which the Company is a party constitute the legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability; and with
respect to each Guarantor, the Guaranty and each other Loan Document to which
such Guarantor is a party constitute the legal, valid and binding obligation of
such Guarantor, enforceable against such Guarantor in accordance with their
respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally and by equitable principles relating to enforceability.
6.5 Litigation. Except as specifically disclosed in Schedule 6.5,
there are no actions, suits, proceedings, claims or disputes pending, or to the
best knowledge of the Company, threatened or contemplated, at law, in equity, in
arbitration or before any Governmental Authority, against the Company or any
Subsidiary or any of their respective properties which: (a) purport to affect or
pertain to this Agreement or any other Loan Document, or any of the transactions
contemplated hereby or thereby; or (b) would reasonably be expected to have a
Material Adverse Effect. No injunction, writ, temporary restraining order or
other order of any nature has been issued by any court or other Governmental
Authority purporting to enjoin or restrain the execution, delivery or
performance of this Agreement or any other Loan Document, or directing that the
transactions provided for herein or therein not be consummated as herein or
therein provided.
6.6 No Default. No Event of Default or Unmatured Event of Default
exists or would result from the incurring of any Obligations by the Company. As
of the Closing Date, neither the Company nor any Subsidiary is in default under
or with respect to any Contractual Obligation in any respect which, individually
or together with all such defaults, would reasonably be expected to
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have a Material Adverse Effect, or that would, if such default had occurred
after the Closing Date, create an Event of Default under subsection 9.1(e).
6.7 ERISA Compliance.
(a) Each Plan (other than a Multi-Employer Plan) is in
compliance in all material respects with the applicable provisions of ERISA, the
Code and other federal or state law. The Company and each ERISA Affiliate has
made all required contributions to any Plan subject to Section 412 of the Code,
and no application for a funding waiver or an extension of any amortization
period pursuant to Section 412 of the Code has been made with respect to any
Plan.
(b) There are no pending or, to the best knowledge of the
Company, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or would reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction or violation of the fiduciary responsibility rules with respect to
any Plan which has resulted or would reasonably be expected to result in a
Material Adverse Effect.
(c) (i) Unfunded Pension Liabilities for all Pension Plans
(other than Multi-Employer Plans) do not exceed the aggregate amount of
$7,000,000 ; (ii) No ERISA Event has occurred or is reasonably expected to occur
that has resulted or would reasonably be expected to result in an outstanding
payment obligation of the Company in an aggregate amount in excess of $2,000,000
at any time; (iii) no contribution failure has occurred with respect to a
Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA;
(iv) neither the Company nor any ERISA Affiliate has incurred and remains liable
for, or reasonably expects to incur, any liability under Section 4243 of ERISA
with respect to a Multi-Employer Plan in an aggregate amount in excess of
$2,000,000; and (v) neither the Company nor any ERISA Affiliate has engaged in
one or more transactions that could reasonably be subject to Section 4069 or
4212(c) or ERISA and result in an outstanding liability in excess of $2,000,000
at any time.
6.8 Use of Proceeds; Margin Regulations. The proceeds of the Loans
are to be used solely for the purposes set forth in and permitted by Sections
7.13 and 8.7. Neither the Company nor any Subsidiary is generally engaged in the
business of purchasing or selling Margin Stock or extending credit for the
purpose of purchasing or carrying Margin Stock.
6.9 Title to Properties. Each of the Company and each Subsidiary
has good record and marketable title in fee simple to, or a valid leasehold
interest in, all real property reasonably necessary or used in the ordinary
conduct of its businesses, except for such defects in title as would not,
individually or in
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the aggregate, have a Material Adverse Effect. As of the Closing Date, the
property of the Company and its Subsidiaries is subject to no Liens, other than
Permitted Liens.
6.10 Taxes. The Company and its Subsidiaries have filed all
Federal and other material tax returns and reports required to be filed, and
have paid all Federal and other material taxes, assessments, fees and other
governmental charges levied or imposed upon them or their properties, income or
assets otherwise due and payable, except those which are being contested in good
faith by appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax assessment against
the Company or any Subsidiary that would, if made, have a Material Adverse
Effect.
6.11 Financial Condition. (a) The audited consolidated financial
statements of the Acquired Businesses dated December 25 1994, and the unaudited
consolidated financial statements of the Acquired Businesses dated August 31,
1995, and the related consolidated statements of income or operations,
shareholders' equity and cash flows for the fiscal periods ended on such dates:
(i) were, in the case of the audited statements of ICI
Composites, Inc., prepared in accordance with GAAP consistently applied
throughout the periods covered thereby, except as otherwise expressly
noted therein;
(ii) were, in the case of the audited statements of
Fiberite Europe GmbH, prepared in accordance with generally accepted
accounting principles in Germany consistently applied throughout the
periods covered thereby, except as otherwise expressly noted therein;
(iii) were, in the case of the unaudited statements of
each Acquired Business, prepared in accordance with the Sellers'
internal policies consistently applied throughout the periods covered
thereby;
(iv) fairly present the financial condition of the
Acquired Businesses as of the dates thereof and results of operations
for the periods covered thereby; and
(v) except as specifically disclosed in Schedule 6.11,
show all material indebtedness and other liabilities, direct or
contingent, of the Acquired Businesses as of the date thereof, including
liabilities for taxes, material commitments and Contingent Obligations.
(b) The pro forma consolidated statements of income (i) for the
year ended December 31, 1994 and (ii) for the eight months ended August 31,
1995, and a pro forma consolidated balance sheet at August 31, 1995, of the
Company and its Subsidiaries (including the German operations), derived from the
historical financial statements of the Acquired Businesses which
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(i) for the year ended December 31, 1994 were audited by KPMG Peat Marwick LLP
and (ii) for the eight months ended August 31, 1995 have been based upon the
unaudited financial statements of the Acquired Businesses delivered to the
Company by the Sellers, together with a report by Arthur Andersen LLP indicating
that firm's performance of certain procedures to the pro forma consolidated
financial statements.
(c) The forecasted financial statements set forth in the
Confidential Information Memorandum dated September 1995, which were delivered
to each Lender, have been prepared by the Company and its Subsidiaries and
represent, as of the date of this Agreement, the good faith estimate of the
Company and its senior management of the most probable course of the business of
the Company and its Subsidiaries. Such forecasted financial statements were
prepared in good faith on the basis of information and assumptions that the
Company and its senior management believed to be reasonable as of the date of
the Confidential Information Memorandum, and such assumptions are reasonable as
of the Closing Date (it being understood that projections are subject to
significant uncertainties and contingencies, many of which are beyond the
Company's control, and that no assurance can be given that the projections will
be realized).
(d) During the period from December 26, 1994 through the Closing
Date, there has been no material adverse change in, or a material adverse effect
upon, the operations, business, properties, conditions (financial or otherwise)
or prospects of, the Acquired Businesses and since the Closing Date there has
been no Material Adverse Effect.
6.12 Environmental Matters. Except as specifically disclosed in Schedule
6.12, neither any non-compliance with any Environmental Laws, nor any liability
under any Environmental Laws, nor all Environmental Claims, in each case as in
effect on or prior to the Closing Date, on or with respect to the business,
operations and properties of the Company would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
6.13 Regulated Entities. None of the Company, any Person controlling the
Company, or any Subsidiary is an "Investment Company" within the meaning of the
Investment Company Act of 1940. The Company is not subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, the
Interstate Commerce Act, any state public utilities code, or any other Federal
or state statute or regulation limiting its ability to incur Indebtedness.
6.14 No Burdensome Restrictions. Neither the Company nor any Subsidiary
is a party to or bound by any Contractual Obligation, or subject to any
restriction in any Organization
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Document, or any Requirement of Law, which would reasonably be expected to have
a Material Adverse Effect.
6.15 Copyrights, Patents, Trademarks and Licenses, etc. The Company and
its Subsidiaries own or are licensed or otherwise have the right to use all of
the patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other rights that are reasonably necessary for
the operation of their respective businesses, without conflict with the rights
of any other Person. To the best knowledge of the Company, no slogan or other
advertising device, product, process, method, substance, part or other material
now employed, or now contemplated to be employed, by the Company or any
Subsidiary infringes upon any rights held by any other Person. Except as
specifically disclosed in Schedule 6.5, no claim or litigation regarding any of
the foregoing is pending or threatened, and no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard or code
is pending or, to the knowledge of the Company, proposed, which, in either case,
would reasonably be expected to have a Material Adverse Effect.
6.16 Subsidiaries. As of the Closing Date, the Company has no
Subsidiaries other than those specifically disclosed in part (a) of Schedule
6.16 hereto and has no equity investments in any other corporation or entity
other than those specifically disclosed in part (b) of Schedule 6.16.
6.17 Insurance. Except as specifically disclosed in Schedule 6.17, the
properties of the Company and its Subsidiaries are insured with financially
sound and reputable insurance companies not Affiliates of the Company, in such
amounts, with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar properties
in localities where the Company or such Subsidiary operates.
6.18 Solvency, etc. On the Closing Date (or, in the case of any Person
which becomes a Guarantor after the Closing Date, on the date such Person
becomes a Guarantor), and immediately prior to and after giving effect to the
Issuance of each Letter of Credit and each Borrowing hereunder and the use of
the proceeds thereof, (a) each of the Company's and each Guarantor's assets will
exceed its liabilities and (b) each of the Company and each Guarantor will be
solvent, will be able to pay its debts as they mature, will own property with
fair saleable value greater than the amount required to pay its debts and will
have capital sufficient to carry on its business as then constituted.
6.19 Purchase, etc.
(a) Concurrent with the initial Credit Extension, the Purchase
has been consummated in accordance with the terms of the Purchase
Agreements.
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(b) The Purchase complied in all material respects with all
applicable legal requirements, and all necessary governmental,
regulatory, shareholder and other consents and approvals required for
the consummation of the Purchase were, prior to the consummation
thereof, duly obtained and in full force and effect.
(c) The execution and delivery of the Purchase Agreements, and
the consummation of the Purchase did not violate any material statute or
regulation of the United States or of any state or other applicable
jurisdiction, or any material order, judgment or decree of any court or
governmental body, or result in a breach of, or constitute a default
under, any material agreement, indenture, order or decree affecting the
Company or any of its respective Subsidiaries (including entities which
will be Subsidiaries after giving effect to the Purchase.
(d) All of the representations and warranties of the Company
and, to the best of the Company's knowledge, Sellers contained in the
Purchase Agreements are true and correct as of the date hereof.
(e) All of the representations and warranties of the
Company set forth in the Securities Purchase Agreement are
true and correct as of the date hereof.
6.20 Real Property. Set forth on Schedule 6.20 is a complete and
accurate list, as of the date of this Agreement and after giving effect to the
Purchase, of the address and legal description of any real property owned or
leased by the Company or any Subsidiary, together with, in the case of leased
property, the name and mailing address of the lessor of such property.
6.21 Swap Obligations. Neither the Company nor any of its Subsidiaries
has incurred any outstanding obligations under any Swap Contracts, other than
Permitted Swap Obligations. The Company has undertaken its own independent
assessment of its consolidated assets, liabilities and commitments and has
considered appropriate means of mitigating and managing risks associated with
such matters and has not relied on any swap counterparty or any Affiliate of any
swap counterparty in determining whether to enter into any Swap Contract.
6.22 Full Disclosure. None of the representations or warranties made by
the Company or any Subsidiary in the Loan Documents as of the date such
representations and warranties are made or deemed made and none of the written
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of the Company or any Subsidiary in connection with the Loan
Documents, considering each of the foregoing in the context in which it was made
and together with all other representations, warranties and written statements
theretofore furnished by the Company and its Subsidiaries to the Agent and the
Lenders in
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connection with the Loan Documents, contains any untrue statement of
a material fact or omits any material fact required to be stated therein or
necessary to make such representation, warranty or written statement, in light
of the circumstances under which it is made, not misleading as of the time when
made or delivered; provided that the Company's representation and warranty as to
any forecast, projection or other statement regarding future performance, future
financial results or other future development is limited to the fact that such
forecast, projection or statement was prepared in good faith on the basis of
information and assumptions that the Company believed to be reasonable as of
the date such material was provided (it being understood that projections are
subject to significant uncertainties and contingencies, many of which are beyond
the Company's control, and that no assurance can be given that the projections
will be realized).
ARTICLE VII
AFFIRMATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Required Lenders waive compliance in
writing:
7.1 Financial Statements. The Company shall deliver to the Agent and
each Lender, in form and detail satisfactory to the Required Lenders:
(a) as soon as available, but not later than 90 days after the end
of each fiscal year, a copy of the audited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year and the related
consolidated statements of income or operations, shareholders' equity and cash
flows for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, and accompanied by the opinion of Arthur Andersen
LLP or another nationally-recognized independent public accounting firm
("Independent Auditor"), which report (x) shall state that such consolidated
financial statements present fairly the consolidated financial position of the
Company and its Subsidiaries for the periods indicated in conformity with GAAP
applied on a basis consistent with prior years and (y) shall not be qualified or
limited because of a restricted or limited examination by the Independent
Auditor of any material portion of the Company's or any Subsidiary's records;
(b) Promptly when available and in any event within 45 days after
the end of each month, (i) balance sheets of the Company and each Subsidiary as
of the end of such month, and the related statements of income, shareholders'
equity and cash flow for such month and for the period beginning with the first
day of
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the applicable fiscal year and ending on the last day of such month, including a
comparison with the corresponding month and period of the previous fiscal year
and a comparison with the budget for such month and for such period of the
current fiscal year, together with a certificate of the chief executive officer,
the chief financial officer or the comptroller of the Company that such
statement fairly presents the financial condition and results of operations of
the Company and its Subsidiaries (subject to normal year end adjustments and,
during the period from the Closing Date through December 31, 1995, the effects
of purchase accounting adjustments) and have been prepared in accordance with
the management policies consistently applied and (ii) if such month is the end
of a fiscal quarter, a copy of the unaudited consolidated balance sheet of the
Company and its Subsidiaries as of the end of such quarter and the related
consolidated statements of income, shareholders' equity and cash flows for the
period commencing on the first day and ending on the last day of such quarter,
together with a certificate of the chief executive officer, the chief financial
officer or the Comptroller of the Company that such statement fairly presents
the financial condition and results of operations (subject to normal year end
adjustments) of the Company and its Subsidiaries and have been prepared in
accordance with GAAP consistently applied; and
(c) As soon as available but not later than December 31, 1995 the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
the Closing Date (giving effect to the Purchase and other transactions
contemplated to occur on such date) prepared by the Company in accordance with
GAAP.
7.2 Certificates; Other Information. The Company shall furnish to each
Lender:
(a) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a), a certificate of the Independent Auditor
stating that in making the examination necessary therefor no knowledge was
obtained of any Event of Default or Unmatured Event of Default, except as
specified in such certificate;
(b) concurrently with the delivery of the financial statements
referred to in subsection 7.1(a) and each set of quarterly statements referred
to in subsection 7.1(b)(ii), a Compliance Certificate executed by a Responsible
Officer;
(c) promptly, copies of all financial statements and reports that
the Company sends to its shareholders, and copies of all financial statements
and regular, periodic or special reports (including Forms 10K, 10Q and 8K) that
the Company or any Subsidiary may make to, or file with, the SEC; and
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(d) promptly, such additional information regarding the business,
financial or corporate affairs of the Company or any Subsidiary as the Agent, at
the request of any Lender, may from time to time reasonably request.
7.3 Notices. Promptly upon a Responsible Officer obtaining knowledge
thereof, the Company shall notify the Agent (and the Agent will promptly
distribute such notice to the Lenders) of:
(a) the occurrence of any Event of Default or Unmatured Event of
Default;
(b) any matter that has resulted or would reasonably be expected to
result in a Material Adverse Effect, including (i) any breach or non-performance
of, or any default under, a Contractual Obligation of the Company or any
Subsidiary; (ii) any dispute, litigation, investigation, proceeding or
suspension between the Company or any Subsidiary and any Governmental Authority;
or (iii) the commencement of, or any material development in, any litigation or
proceeding affecting the Company or any Subsidiary, including pursuant to any
applicable Environmental Laws;
(c) the occurrence of any of the following events affecting the
Company or any ERISA Affiliate (but in no event more than 30 days after such
event, provided that the Company shall notify the Agent and each Lender not less
than ten days before the occurrence of any event described in clause (ii)
below), and deliver to the Agent and each Lender a copy of any notice with
respect to such event that is filed with a Governmental Authority and any notice
delivered by a Governmental Authority to the Company or any ERISA Affiliate with
respect to such event:
(i) an ERISA Event which has resulted or could reasonably be
expected to result in liability of the Company in an aggregate amount
in excess of $500,000;
(ii) a contribution failure with respect to a Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA;
(iii) an increase in the Unfunded Pension Liability in an
aggregate amount of $2,000,000 or more of one or more Pension Plans
(other than Multiemployer Plans) for a reason other than market
fluctuation;
(iv) the adoption of, or the commencement of contributions to,
any Plan subject to Section 412 of the Code by the Company or any ERISA
Affiliate; or
(v) the adoption of any amendment to a Plan (other than a
Multiemployer Plan) subject to Section 412 of the
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Code, if such amendment results in a material increase in contributions
or Unfunded Pension Liability;
(d) any material change in accounting policies or financial
reporting practices by the Company or any of its consolidated Subsidiaries; or
(e) any event which will give rise to a prepayment pursuant to
Section 2.7.
(f) upon the request from time to time of the Agent, the Swap
Termination Values, together with a description of the method by which such
values were determined, relating to any then-outstanding Swap Contracts to which
the Company or any of its Subsidiaries is party.
Each notice under this Section shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action the Company or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under subsection 7.3(a) shall describe with particularity any and all clauses or
provisions of this Agreement or any other Loan Document that have been breached
or violated.
7.4 Preservation of Corporate Existence, Etc. The Company shall, and
shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation except a subsidiary need not be in compliance with the foregoing
to the extent such subsidiary is sold pursuant to Section 8.2 or merged or
consolidated unto another Person pursuant to Section 8.3;
(b) preserve and maintain in full force and effect all material
governmental rights, privileges, qualifications, permits, licenses and
franchises necessary or desirable in the normal conduct of its business except
in connection with transactions permitted by Section 8.3(ii) and assets
permitted by Section 8.2;
(c) use reasonable efforts, in the ordinary course of business, to
preserve its business organization and goodwill; and
(d) preserve or renew all of its registered patents, trademarks,
trade names and service marks, the non-preservation of which would reasonably be
expected to have a Material Adverse Effect.
7.5 Maintenance of Property. The Company shall, and shall cause each
Subsidiary to, maintain and preserve all its property which is used or useful in
its business in good working order and
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condition, ordinary wear and tear excepted, other than obsolete, worn out or
surplus equipment.
7.6 Insurance. The Company shall, and shall cause each Subsidiary to,
maintain, with financially sound and reputable independent insurers, insurance
with respect to its properties and business against loss or damage of the kinds
customarily insured against by Persons engaged in the same or similar business,
of such types and in such amounts as are customarily carried under similar
circumstances by such other Persons.
7.7 Payment of Obligations. The Company shall, and shall cause each
Subsidiary to, pay and discharge as the same shall become due and payable, all
their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets; and
(b) all lawful claims which, if unpaid, would by law become a Lien
upon its property;
unless, in each case, the same are being contested in good faith by appropriate
proceedings and adequate reserves in accordance with GAAP are being maintained
by the Company or such Subsidiary.
7.8 Compliance with Laws. The Company shall, and shall cause each
Subsidiary to, comply in all material respects with all Requirements of Law of
any Governmental Authority having jurisdiction over it or its business
(including the Federal Fair Labor Standards Act), except such as may be
contested in good faith or as to which a bona fide dispute may exist.
7.9 Compliance with ERISA. The Company shall, and shall cause each of
its Subsidiaries to maintain each Plan (other than a Multiemployer Plan) in
compliance in all material respects with the applicable provisions of ERISA, the
Code and other federal or state law, including, without limitation, the making
of contributions thereunder.
7.10 Inspection of Property and Books and Records. The Company shall,
and shall cause each Subsidiary to, maintain proper books of record and account,
in which full, true and correct entries in conformity with GAAP consistently
applied shall be made of all financial transactions and matters involving the
assets and business of the Company and such Subsidiary. Subject to the Defense
Agreement, the Company shall permit, and shall cause each Subsidiary to permit,
representatives and independent contractors of the Agent or any Lender (a) to
visit and inspect any of their respective properties, to examine their
respective corporate, financial and operating records, and to make copies
thereof or abstracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective directors, officers, and independent
public accountants and (b)
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to inspect any of their inventory and equipment, to perform appraisals of any of
their equipment, and to inspect, audit, check and make copies and/or extracts
from the books, records, computer data and records, computer programs, journals,
orders, receipts, correspondence and other data relating to inventory, accounts
receivable, contract rights, general intangibles, equipment and any other
collateral, or relating to any other transactions between the parties hereto; at
such reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to the Company; provided,
however, that when an Event of Default exists, the Agent or any Lender may do
any of the foregoing without advance notice. If an Event of Default exists any
such inspection shall be at the Company's expense, otherwise only one such
inspection per year (which the Agent or the Required Lenders shall designate as
the inspection for which they will be reimbursed) will be at the Company's
expense.
7.11 Environmental Laws. The Company shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
material compliance with all Environmental Laws.
7.12 Interest Rate Protection. The Company shall, not later than 180
days after the Closing Date, enter into one or more Permitted Swap Obligations,
each with a term of at least two years, on an ISDA standard form with one or
more Lenders or with counterparties reasonably acceptable to the Required
Lenders which will ensure that the effective rate of interest (assuming no
reductions in the Applicable Offshore Rate Margin or Applicable Base Rate
Margin) payable by the Company with respect to not less than $37,500,000 of the
principal amount of the Loans will not at any time during the duration of such
Swap Obligations exceed 11% per annum.
7.13 Use of Proceeds. The Company shall use the proceeds of the
Loans (i) to finance the Purchase and (ii) for working capital and other general
corporate purposes not in contravention of any Requirement of Law or of any Loan
Document.
7.14 Further Assurances. Promptly upon the request of the Agent, or
the Required Lenders, the Company shall, and shall cause each Subsidiary to,
execute, acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all such further acts, deeds, conveyances, security
agreement, mortgages, assignments, estoppel certificates, financing statements
and continuations thereof, termination statements, notices of assignment,
transfers, certificates, assurances and other instruments the Agent or the
Required Lenders as the case may be, may reasonably request from time to time in
order (a) to ensure that (i) the obligations of the Company hereunder and under
the other Loan Documents are secured by substantially all assets of the Company
(provided, that unless otherwise reasonably required by the Required Lenders,
the pledge of the common stock of a Foreign Subsidiary shall be limited to 65%
of the
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outstanding common stock of such Subsidiary) and guaranteed, pursuant to the
Guaranty, by the Parent and all Subsidiaries (including, promptly upon the
acquisition or creation thereof, any Subsidiary created or acquired after the
date hereof) other than Foreign Subsidiaries unless otherwise reasonably
required by the Required Lenders, (ii) the obligations of each Subsidiary under
a Guaranty are secured by substantially all of the assets of such Subsidiary and
(iii) all of the capital stock of the Company is pledged to the Agent, for the
benefit of itself and Lenders, by the Parent as security for the obligations of
the Company hereunder and under the other Loan Documents, (b) to perfect and
maintain the validity, effectiveness and priority of any of the Collateral
Documents and the Liens intended to be created thereby, and (c) to better
assure, convey, grant, assign, transfer, preserve, protect and confirm to the
Agent and the Lenders the rights granted or now or hereafter intended to be
granted to the Agent and the Lenders under any Loan Documents or under any other
document executed in connection therewith. Contemporaneously with the execution
and delivery of any document referred to above, the Company shall, and shall
cause each Subsidiary to, deliver all resolutions, opinions and corporate
documents as the Agent or the Required Lenders may reasonably request to confirm
the enforceability of such document and the perfection of the security interest
created thereby, if applicable.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any Lender shall have any Commitment hereunder, or any Loan
or other Obligation shall remain unpaid or unsatisfied, or any Letter of Credit
shall remain outstanding, unless the Required Lenders waive compliance in
writing:
8.1 Limitation on Liens. The Company shall not, and shall not permit any
Subsidiary to, directly or indirectly, make, create, incur, assume or suffer to
exist any Lien upon or with respect to any part of its property, whether now
owned or hereafter acquired, other than the following ("Permitted Liens"):
(a) any Lien existing on property of the Company or any Subsidiary
on the Closing Date and set forth in Schedule 8.1 securing Indebtedness
outstanding on such date;
(b) any Lien created under any Loan Document;
(c) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or to the extent
that non-payment thereof is permitted by Section 7.7, provided that no notice of
lien has been filed or recorded under the Code;
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(d) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business which are not delinquent or remain payable without penalty or which
are being contested in good faith and by appropriate proceedings, which
proceedings have the effect of preventing the forfeiture or sale of the property
subject thereto;
(e) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(f) Liens on property of the Company or any Subsidiary securing (i)
the non-delinquent performance of bids, trade contracts (other than for borrowed
money), leases, statutory obligations, (ii) contingent obligations on surety and
appeal bonds, and (iii) other non-delinquent obligations of a like nature, in
each case, incurred in the ordinary course of business; provided that all such
Liens in the aggregate would not (even if enforced) cause a Material Adverse
Effect;
(g) Liens consisting of judgment or judicial attachment Liens,
provided that the enforcement of such Liens is effectively stayed and all such
Liens in the aggregate at any time outstanding for the Company and its
Subsidiaries do not exceed $1,000,000 (excluding the amount of any Lien relating
to judgments covered by insurance maintained with responsible insurance
companies);
(h) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the businesses of the Company and its Subsidiaries;
(i) purchase money security interests on any property acquired by
the Company or any Subsidiary in the ordinary course of business, securing
Indebtedness incurred or assumed for the purpose of financing all or any part of
the cost of acquiring such property; provided that (i) any such Lien attaches to
such property concurrently with or within 20 days after the acquisition thereof,
(ii) such Lien attaches solely to the property so acquired in such transaction,
(iii) the principal amount of the Indebtedness secured thereby does not exceed
100% of the cost of such property, and (iv) the principal amount of the
Indebtedness secured by all such purchase money security interests shall not at
any time exceed $1,000,000;
(j) Liens securing obligations in respect of capital leases on
assets subject to such leases, provided that such capital leases are otherwise
permitted hereunder; and
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(k) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Company in excess of those set forth by regulations promulgated by
the FRB, (ii) such deposit account is not intended by the Company or any
Subsidiary to provide collateral to the depository institution and (iii) the
aggregate amount of all such deposits with all depository institutions which are
not Lenders will not at any time exceed $100,000.
8.2 Disposition of Assets. The Company shall not, and shall not permit
any Subsidiary to, directly or indirectly, sell, assign, lease, convey, transfer
or otherwise dispose of (whether in one or a series of transactions) any
property (including accounts and notes receivable, with or without recourse) or
enter into any agreement to do any of the foregoing, except:
(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
(b) the sale of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are reasonably promptly applied to the
purchase price of such replacement equipment; and
(c) dispositions not otherwise permitted hereunder (including the
disposition of all of the capital stock of any operating Subsidiary) which are
made for fair market value; provided that (i) at the time of any disposition, no
Event of Default or Unmatured Event of Default shall exist or will result from
such disposition, and (ii) the proceeds thereof are applied as provided in
Section 2.7.
8.3 Consolidations and Mergers. The Company shall not, and shall not
permit any Subsidiary to, merge or consolidate with or into any other Person,
except that (i) any Subsidiary may merge with the Company, provided that the
Company shall be the continuing or surviving corporation, or with any one or
more Subsidiaries, provided that if any transaction shall be between a
Subsidiary and a Wholly-Owned Subsidiary, the Wholly-Owned Subsidiary shall be
the continuing or surviving corporation and (ii) any operating Subsidiary may
merge or consolidate with any other Person; provided that at the time of any
such merger or consolidation (A) no Event of Default or Unmatured Event of
Default shall exist or result from such merger or consolidation and (B) the
proceeds thereof are applied as provided in Section 2.7.
8.4 Loans and Investments. The Company shall not, and shall not permit
any Subsidiary to, purchase or acquire, or make any
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commitment therefor, any capital stock, equity interest, or other obligations or
securities of, or any interest in, any other Person, or make or commit to make
any Acquisition, or make or commit to make any advance, loan, extension of
credit or capital contribution to or any other investment in, any other Person,
except for:
(a) investments in Cash Equivalent Investments;
(b) extensions of credit in the nature of accounts receivable or
notes receivable arising from the sale or lease of goods or services in the
ordinary course of business;
(c) investments by the Company in its Subsidiaries or by any
Subsidiary in any other Subsidiary, in the form of contributions to capital or
loans or advances; provided that, immediately before and after giving effect to
such investment, no Event of Default or Unmatured Event of Default shall have
occurred and be continuing and the aggregate amount invested in Foreign
Subsidiaries after the Closing Date shall not exceed $3,000,000;
(d) loans or advances made by any Subsidiary to the Company;
(e) loans and advances to employees in the ordinary course of
business (such as travel advances) in an aggregate amount not at any time
exceeding $500,000;
(f) investments by the Company and its Subsidiaries in Joint
Ventures in the form of contributions of capital, loans, advances or Contingent
Obligations; provided, that, immediately before and giving effect to such
investment, no Event of Default or Unmatured Event of Default shall have
occurred and be continuing, including, without limitation pursuant to Section
8.9;
(g) investments constituting Permitted Swap Obligations or payments
or advances under Swap Contracts relating to Permitted Swap Obligations; and
(h) other investments in an aggregate amount not exceeding $500,000
during the term of this Agreement; provided, however, that for purposes of
determining the aggregate amount of investments hereunder, (x) any payment of
interest, return of principal or return of equity received in cash on any
investment made hereunder and (y) the fair market value of any other property
received in exchange for any investment made hereunder, shall be deducted and;
provided, further, no such investment shall be made in a Foreign Subsidiary.
8.5 Limitation on Indebtedness. The Company shall not, and shall not
permit any Subsidiary to, create, incur, assume, suffer
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to exist, or otherwise become or remain directly or indirectly liable with
respect to, any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement;
(b) Indebtedness consisting of Contingent Obligations permitted
pursuant to Section 8.8;
(c) Indebtedness existing on the Closing Date and set forth in
Schedule 8.5;
(d) Indebtedness of Subsidiaries to the Company or other
Subsidiaries; provided, that the aggregate amount of all such Indebtedness of
Foreign Subsidiaries and other investments by the Company and its Subsidiaries
in Foreign Subsidiaries shall not exceed $3,000,000;
(e) Indebtedness secured by Liens permitted by subsection 8.1(i);
(f) Indebtedness incurred in connection with leases permitted
pursuant to Section 8.10;
(g) Indebtedness of Fiberite Europe GmbH for working capital
purposes, in an aggregate amount not at any time exceeding $5,000,000; and
(h) other Indebtedness in an aggregate amount not at any time
exceeding $1,000,000; provided, that such Indebtedness shall not be incurred by
a Foreign Subsidiary.
It is understood that any Indebtedness borrowed in a foreign currency shall
continue to be permitted under this Section, notwithstanding any fluctuation in
the Dollar Amount of such Indebtedness, as long as the outstanding principal
balance of such Indebtedness (denominated in its original currency) does not
exceed the maximum amount of such Indebtedness (denominated in such currency)
permitted to be outstanding on the date such Indebtedness was incurred.
8.6 Transactions with Affiliates. The Company shall not, and shall not
permit any Subsidiary to, enter into any transaction with any Affiliate of the
Company (other than a Subsidiary), except upon fair and reasonable terms no less
favorable to the Company or such Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an Affiliate of the
Company; provided that so long as no Event of Default or Unmatured Event of
Default exists or would result therefrom, the Company (i) may make regularly
scheduled payments of management fees pursuant to the Shareholder Agreement as
in effect on the date hereof, (ii) may make any payments permitted by Section
8.16 and (iii) may pay DLJMB for investment banking services as contemplated by
Section 7.4 of the Shareholder Agreement.
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8.7 Use of Proceeds. The Company shall not, and shall not permit any
Subsidiary to, use any portion of the Loan proceeds or any Letter of Credit,
directly or indirectly, (i) to purchase or carry Margin Stock, (ii) to repay or
otherwise refinance indebtedness of the Company or others incurred to purchase
or carry Margin Stock, or (iii) to extend credit for the purpose of purchasing
or carrying any Margin Stock.
8.8 Contingent Obligations. The Company shall not, and shall not permit
any Subsidiary to, create, incur, assume or suffer to exist any Contingent
Obligation except:
(a) endorsements for collection or deposit in the ordinary course of
business;
(b) Permitted Swap Obligations;
(c) Contingent Obligations of the Company and its Subsidiaries
existing as of the Closing Date and listed in Schedule 8.8;
(d) Contingent Obligations arising under the Loan Documents; and
(e) Contingent Obligations with respect to Joint Ventures to the
extent permitted by Section 8.9.
8.9 Joint Ventures. The Company shall not, and shall not permit any
Subsidiary to, enter into any Joint Venture, except that the Company or any
Subsidiary may enter into any Joint Venture so long as the aggregate amount
invested by the Company and its Subsidiaries in all Joint Ventures in any form
(including without limitation by capital contribution, incurrence of
Indebtedness by any such Joint Venture to the Company or any Subsidiary or the
incurrence of Contingent Obligations by the Company or any Subsidiary with
respect to any such Joint Venture), during the term of this Agreement does not
exceed $5,000,000; provided, however, that for purposes of determining the
aggregate amount invested in Joint Ventures hereunder, (x) any return of
principal or equity received in cash on any amount invested hereunder and (y)
the fair market value of any other property received in exchange for any amount
invested hereunder, shall be deducted.
8.10 Lease Obligations. The Company shall not, and shall not permit any
Subsidiary to, create or suffer to exist any obligations for the payment of rent
for any property under lease or agreement to lease, except for:
(a) leases of the Company and its Subsidiaries in existence on the
Closing Date and any renewal, extension or refinancing thereof;
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(b) operating leases entered into by the Company or any Subsidiary
after the Closing Date in the ordinary course of business; and
(c) capital leases entered into by the Company to finance the
acquisition of equipment; provided that no Event of Default or Unmatured Event
of Default has occurred and is continuing or will result from the incurrence of
the obligations of the Company contemplated thereby.
8.11 Minimum Fixed Charge Coverage. The Company will not permit the
Fixed Charge Coverage Ratio for any Computation Period to be less than the ratio
set forth below opposite the period in which such Computation Period ends:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
March 31, 1996 through September 30, 1997 1.00 to 1
December 31, 1997 through September 30, 1998 1.05 to 1
December 31, 1998 through September 30, 1999 1.10 to 1
Thereafter 1.15 to 1
</TABLE>
8.12 Minimum Interest Coverage. The Company will not permit the
Interest Coverage Ratio for any Computation Period to be less than the ratio set
forth below opposite the period in which such Computation Period ends:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
March 31, 1996 and June 30, 1996 2.25 to 1
September 30, 1996 and December 31, 1996 2.50 to 1
March 31, 1997 through September 30, 1997 2.75 to 1
December 31, 1997 through September 30, 1998 3.00 to 1
December 31, 1998 through September 30, 1999 3.50 to 1
Thereafter 4.00 to 1
</TABLE>
8.13 Maximum Leverage. The Company will not permit the Leverage Ratio
at any time to exceed the following ratios during the following periods:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
June 30, 1996 through December 30, 1996 4.00 to 1
December 31, 1996 through March 30, 1997 3.75 to 1
March 31, 1997 through September 30, 1997 3.50 to 1
December 31, 1997 through September 30, 1998 3.25 to 1
December 31, 1998 through September 30, 1999 2.75 to 1
December 31, 1999 through September 30, 2000 2.25 to 1
Thereafter 2.00 to 1
</TABLE>
8.14 Minimum Net Worth. The Company will not permit its Net Worth at
any time to be less than the following amounts during the following periods:
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<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
January 1, 1996 through December 31, 1996 $30,000,000
January 1, 1997 through December 31, 1997 $35,000,000
January 1, 1998 through December 31, 1998 $40,000,000
January 1, 1999 through December 31, 1999 $45,000,000
January 1, 2000 through December 31, 2000 $50,000,000
January 1, 2001 through December 31, 2001 $60,000,000
</TABLE>
8.15 Maximum Capital Expenditures. The Company will not permit the
aggregate amount of all Capital Expenditures (other than MIS Expenditures) made
by the Company and its Subsidiaries for any fiscal year, to exceed the amount
set forth below opposite such fiscal year:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1996 $5,000,000
1997 $5,000,000
1998 $6,000,000
1999 $6,000,000
2000 $6,000,000
2001 $6,000,000
</TABLE>
8.16 Restricted Payments. The Company shall not, and shall not permit
any Subsidiary to, declare or make any dividend payment or other distribution of
assets, properties, cash, rights, obligations or securities on account of any
shares of any class of its capital stock, or purchase, redeem or otherwise
acquire for value any shares of its capital stock or any warrants, rights or
options to acquire such shares, now or hereafter outstanding, except that:
(a) any Subsidiary may declare and pay dividends to the Company;
(b) the Company may declare and make dividend payments or other
distributions payable in its common stock;
(c) so long as no Event of Default or Unmatured Event of Default
has occurred and is continuing or will result therefrom, the Company may make
payments to the Parent to enable Parent to repurchase or redeem common stock
pursuant to Article 4 of the Shareholder Agreement in effect on the date hereof;
(d) so long as no Event of Default or Unmatured Event of Default
has occurred and is continuing or will result therefrom, the Company may make
payments to the Parent to the extent of reasonable out-of-pocket expenses
incurred by the Parent specifically related to the Company or the Parent's
ownership of the Company (including, without limitation, accounting fees
relating to the financial statements of the Company or the Parent, directors
fees, and legal expenses relating to the ownership of the Company); and
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(e) so long as no Event of Default has occurred and is continuing
or will result therefrom, the Company may make payments to the Parent as
contemplated by the Tax Sharing Agreement.
8.17 ERISA. The Company shall not, and shall not permit any of its
Subsidiaries to: (a) engage in prohibited transactions or violations of the
fiduciary responsibility rules with respect to one or more Plans which have
resulted or would reasonably be expected to result in liability of the Company
in an aggregate amount in excess of $2,000,000 at any time; or (b) engage in
transactions that could be subject to Section 4069 or 4212(c) of ERISA and which
has resulted or would reasonably be expected to result in an outstanding
liability of the Company in an aggregate amount in excess of $2,000,000 at any
time.
8.18 Change in Business. The Company shall not, and shall not permit any
Subsidiary to, engage in any material line of business substantially different
from those lines of business carried on by the Company and its Subsidiaries on
the date hereof.
8.19 Amendments to Certain Documents. The Company shall not make or
agree to any amendment to or modification of, or waive any of its rights under,
any of the terms of (a) the Purchase Agreements, (b) the Shareholder Agreement
or (c) the Transition Services Agreements in a manner materially adverse to the
Lenders.
8.20 Accounting Changes. The Company shall not, and shall not permit any
Subsidiary to, make any significant change in accounting treatment or reporting
practices, except as required by GAAP, or change the fiscal year of the Company
or of any Subsidiary.
ARTICLE IX
EVENTS OF DEFAULT
9.1 Event of Default. Any of the following shall constitute an "Event
of Default":
(a) Non-Payment. The Company fails to pay (i) when and as required
to be paid herein, any amount of principal of any Loan or of any L/C Obligation,
or, (ii) within one Business Day after the same becomes due, any amount of
interest or (iii) within five Business Days after the same becomes due, any fees
or other amounts payable hereunder or under any other Loan Document.
(b) Representation or Warranty. Any representation or warranty by
the Company, the Parent or any Subsidiary made or deemed made herein or in any
other Loan Document, or which is contained in any certificate, document or
financial or other
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statement by the Company, the Parent, any Subsidiary or any Responsible Officer
furnished at any time under this Agreement or any other Loan Document, is
incorrect in any material respect on or as of the date made or deemed made.
(c) Specific Defaults. The Company fails to perform or observe any
term, covenant or agreement contained in any of Section 7.3 or Article VIII.
(d) Other Defaults. The Company or any Subsidiary party thereto
fails to perform or observe any other term or covenant contained in this
Agreement or any other Loan Document, and such default shall continue unremedied
for a period of 30 days after the earlier of (i) the date upon which a
Responsible Officer knew or reasonably should have known of such failure or (ii)
the date upon which written notice thereof is given to the Company by the Agent
or any Lender.
(e) Cross-Default. (i) The Company or any Subsidiary (A) fails to
make any payment in respect of any Indebtedness or Contingent Obligation (other
than in respect of Swap Contracts) having an aggregate principal amount
(including amounts owing to all creditors under any combined or syndicated
credit arrangement) of more than $1,000,000 when due (whether by scheduled
maturity, required prepayment, acceleration, demand, or otherwise but subject to
any applicable grace period); or (B) fails to perform or observe any other
condition or covenant, or any other event shall occur or condition shall exist,
under any agreement or instrument relating to any such Indebtedness or
Contingent Obligation, if the effect of such failure, event or condition is to
cause, or to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause, such Indebtedness
to be declared to be due and payable prior to its stated maturity, or such
Contingent Obligation to become payable, or cash collateral in respect thereof
to be demanded or (ii) there occurs under any Swap Contract an Early Termination
Date (as defined in such Swap Contract) resulting from (A) any event of default
under such Swap Contract as to which the Company or any Subsidiary is the
Defaulting Party (as defined in such Swap Contract) or (B) any Termination Event
(as so defined) as to which the Company or any Subsidiary is an Affected Party
(as so defined), and, in either event, the Swap Termination Value owed by the
Company or such Subsidiary as a result thereof is greater than $1,000,000.
(f) Insolvency; Voluntary Proceedings. The Company, the Parent or
any Subsidiary (i) ceases or fails to be solvent, or generally fails to pay, or
admits in writing its inability to pay, its debts as they become due; (ii)
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing.
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(g) Involuntary Proceedings. (i) Any involuntary Insolvency
Proceeding is commenced or filed against the Company, the Parent or any
Subsidiary, or any writ, judgment, warrant of attachment, warrant of execution
or similar process is issued or levied against a substantial part of the
Company's or any Subsidiary's properties, and such proceeding or petition shall
not be dismissed, or such writ, judgment, warrant of attachment, warrant of
execution or similar process shall not be released, vacated or fully bonded
within 60 days after commencement, filing or levy; (ii) the Company, the Parent
or any Subsidiary admits the material allegations of a petition against it in
any Insolvency Proceeding, or an order for relief (or similar order under
non-U.S. law) is ordered in any Insolvency Proceeding; or (iii) the Company, the
Parent or any Subsidiary acquiesces in the appointment of a receiver, trustee,
custodian, conservator, liquidator, mortgagee in possession (or agent therefor)
or other similar Person for itself or a substantial portion of its property or
business.
(h) ERISA. (i) one or more ERISA Events shall occur with respect to
a Pension Plan or Multiemployer Plan which has resulted or could reasonably be
expected to result in an outstanding liability of the Company under Title IV of
ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount
in excess of $2,000,000 at any time; (ii) a contribution failure shall have
occurred with respect to a Pension Plan sufficient to give rise to a Lien under
Section 302(f) of ERISA; or (iii) the Company or any ERISA Affiliate shall fail
to pay when due, after the expiration of any applicable grace period, one or
more installment payments with respect to its withdrawal liability under Section
4201 of ERISA under a Multiemployer Plan which results in an aggregate
withdrawal liability in excess of $2,000,000 at any time.
(i) Monetary Judgments. One or more non-interlocutory judgments,
non-interlocutory orders, decrees or arbitration awards is entered against the
Company or any Subsidiary involving in the aggregate a liability (to the extent
not covered by independent third-party insurance as to which the insurer does
not dispute coverage), as to any single or related series of transactions,
incidents or conditions, of $250,000 or more, and the same shall remain
undischarged, unvacated and unstayed pending appeal for a period of 30 days
after the entry thereof.
(j) Non-Monetary Judgments. Any non-monetary judgment, order or
decree is entered against the Company or any Subsidiary which has or would
reasonably be expected to have a Material Adverse Effect, and there shall be any
period of 30 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect.
(k) Change of Control. Any Change of Control occurs.
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(l) Guarantor Defaults. The Guaranty shall cease to be in full force
and effect with respect to any Guarantor (other than as expressly permitted
hereunder), any Guarantor shall fail (subject to any applicable grace period) to
comply with or to perform any applicable provision of the Guaranty, or any
Guarantor (or any Person by, through or on behalf of such Guarantor) shall
contest in any manner the validity, binding nature or enforceability of the
Guaranty with respect to such Guarantor.
(m) Collateral Documents, etc. Any Collateral Document shall cease
to be in full force and effect with respect to the Company or any Guarantor
(other than as expressly permitted hereunder), the Company or any Guarantor
shall fail (subject to any applicable grace period) to comply with or to perform
any applicable provision of any Collateral Document, or the Company or any
Guarantor (or any Person by, through or on behalf of the Company or any
Guarantor) shall contest in any manner the validity, binding nature or
enforceability of any Collateral Document.
9.2 Remedies. If any Event of Default occurs, the Agent shall, at the
request of, or may, with the consent of, the Required Lenders do any or all of
the following:
(a) declare the commitment of each Lender to make Loans and any
obligation of each Issuing Lender to Issue Letters of Credit to be terminated,
whereupon such commitments and obligations shall be terminated;
(b) declare an amount equal to the maximum aggregate amount that is
or at any time thereafter may become available for drawing under any outstanding
Letter of Credit (whether or not any beneficiary shall have presented, or shall
be entitled at such time to present, the drafts or other documents required to
draw under such Letter of Credit) to be immediately due and payable, and declare
the unpaid principal amount of all outstanding Loans, all interest accrued and
unpaid thereon, and all other amounts owing or payable hereunder or under any
other Loan Document to be immediately due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby expressly
waived by the Company; and
(c) exercise on behalf of itself and the Lenders all rights and
remedies available to it and the Lenders under the Loan Documents or applicable
law;
provided, however, that upon the occurrence of any Event of Default specified in
subsection 9.1(f) or (g), the obligation of each Lender to make Loans and the
obligation of each Issuing Lender to Issue Letters of Credit shall automatically
terminate and the unpaid principal amount of all outstanding Loans and all
interest and other amounts as aforesaid shall automatically
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become due and payable without further act of the Agent, any Issuing Lender or
any other Lender.
9.3 Rights Not Exclusive. The rights provided for in this Agreement and
the other Loan Documents are cumulative and are not exclusive of any other
rights, powers, privileges or remedies provided by law or in equity, or under
any other instrument, document or agreement now existing or hereafter arising.
ARTICLE X
THE AGENT
10.1 Appointment and Authorization. (a) Each Lender hereby irrevocably
(subject to Section 10.9) appoints, designates and authorizes the Agent to take
such action on its behalf under the provisions of this Agreement and each other
Loan Document and to exercise such powers and perform such duties as are
expressly delegated to it by the terms of this Agreement or any other Loan
Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the Agent
have or be deemed to have any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against the Agent.
(b) Each Issuing Lender shall act on behalf of the Lenders with
respect to any Letters of Credit Issued by it and the documents associated
therewith until such time and except for so long as the Agent may agree at the
request of the Required Lenders to act for such Issuing Lender with respect
thereto; provided, however, that each Issuing Lender shall have all of the
benefits and immunities (i) provided to the Agent in this Article X with respect
to any acts taken or omissions suffered by such Issuing Lender in connection
with Letters of Credit Issued by it or proposed to be Issued by it and the
applications and agreements for letters of credit pertaining to the Letters of
Credit as fully as if the term "Agent", as used in this Article X, included such
Issuing Lender with respect to such acts or omissions, and (ii) as additionally
provided in this Agreement with respect to such Issuing Lender.
10.2 Delegation of Duties. The Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
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10.3 Liability of Agent. None of the Agent-Related Persons shall (a) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (b) be responsible in any manner to any of the Lenders for any recital,
statement, representation or warranty made by the Company or any Subsidiary or
Affiliate of the Company, or any officer thereof, contained in this Agreement or
in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of the Company or any other party to
any Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of the Company or any of the Company's
Subsidiaries or Affiliates.
10.4 Reliance by Agent. (a) The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any writing, resolution, notice,
consent, certificate, affidavit, letter, telegram, facsimile, telex or telephone
message, statement or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons, and upon advice and statements of legal counsel (including counsel
to the Company), independent accountants and other experts selected by the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement or any other Loan Document in accordance with a
request or consent of the Required Lenders and such request and any action taken
or failure to act pursuant thereto shall be binding upon all of the Lenders.
(b) For purposes of determining compliance with the conditions
specified in Sections 5.1 and 5.2, each Lender that has executed this Agreement
shall be deemed to have consented to, approved or accepted, or to be satisfied
with, each document or other matter either sent by the Agent to such Lender for
consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to such Lender.
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10.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Event of Default or Unmatured Event
of Default, except with respect to defaults in the payment of principal,
interest and fees required to be paid to the Agent for the account of the
Lenders, unless the Agent shall have received written notice from a Lender or
the Company referring to this Agreement, describing such Event of Default or
Unmatured Event of Default and stating that such notice is a "notice of
default". The Agent will notify the Lenders of its receipt of any such notice.
The Agent shall take such action with respect to such Event of Default or
Unmatured Event of Default as may be requested by the Required Lenders in
accordance with Article IX; provided, however, that unless and until the Agent
has received any such request, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such Event
of Default or Unmatured Event of Default as it shall deem advisable or in the
best interest of the Lenders.
10.6 Credit Decision. Each Lender acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by any Agent-Related Person to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of the
Company and its Subsidiaries, and all applicable bank regulatory laws relating
to the transactions contemplated hereby, and made its own decision to enter into
this Agreement and to extend credit to the Company hereunder. Each Lender also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and creditworthiness of the Company. Except for notices,
reports and other documents expressly herein required to be furnished to the
Lenders by the Agent, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or
creditworthiness of the Company which may come into the possession of any of the
Agent-Related Persons.
10.7 Indemnification of Agent. Whether or not the transactions
contemplated hereby are consummated, the Lenders shall indemnify upon demand the
Agent-Related Persons (to the
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extent not reimbursed by or on behalf of the Company and without limiting the
obligation of the Company to do so), pro rata, from and against any and all
Indemnified Liabilities; provided, however, that no Lender shall be liable for
the payment to any Agent-Related Person of any portion of the Indemnified
Liabilities resulting solely from such Person's gross negligence or willful
misconduct. Without limitation of the foregoing, each Lender shall reimburse the
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement,
any other Loan Document, or any document contemplated by or referred to herein,
to the extent that the Agent is not reimbursed for such expenses by or on behalf
of the Company. The undertaking in this Section shall survive the payment of all
Obligations hereunder and the resignation or replacement of the Agent.
10.8 Agent in Individual Capacity. BofA and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Company and its
Subsidiaries and Affiliates as though BofA were not the Agent hereunder and
without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, BofA or its Affiliates may receive information
regarding the Company or its Affiliates (including information that may be
subject to confidentiality obligations in favor of the Company or such
Subsidiary) and acknowledge that the Agent shall be under no obligation to
provide such information to them. With respect to its Loans, BofA and any
Affiliate thereof shall have the same rights and powers under this Agreement as
any other Lender and may exercise the same as though BofA were not the Agent.
10.9 Successor Agent. The Agent may, and at the request of the
Required Lenders shall, resign as Agent upon 30 days' notice to the Lenders. If
the Agent resigns under this Agreement, the Required Lenders shall appoint, with
the consent of the Company which shall not be unreasonably withheld, from among
the Lenders a successor agent for the Lenders. If no successor agent is
appointed prior to the effective date of the resignation of the Agent, the Agent
may appoint, after consulting with the Lenders and the Company, a successor
agent from among the Lenders. Upon the acceptance of its appointment as
successor agent hereunder, such successor agent shall succeed to all the rights,
powers and duties of the retiring Agent and the term "Agent" shall mean such
successor agent and the retiring Agent's appointment, powers and duties as Agent
shall be terminated. After any retiring Agent's resignation hereunder as Agent,
the provisions of this Article X and Sections 11.4 and 11.5 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
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under this Agreement. If no successor agent has accepted appointment as Agent by
the date which is 30 days following a retiring Agent's notice of resignation,
the retiring Agent's resignation shall nevertheless thereupon become effective
and the Lenders shall perform all of the duties of the Agent hereunder until
such time, if any, as the Required Lenders appoint a successor agent as provided
for above. Notwithstanding the foregoing, however, BofA may not be removed as
the Agent at the request of the Required Lenders unless BofA and any Affiliate
thereof acting as an Issuing Lender hereunder shall also simultaneously be
replaced as an Issuing Lender pursuant to documentation in form and substance
reasonably satisfactory to BofA (and, if applicable, such Affiliate).
10.10 Withholding Tax. (a) If any Lender is a "foreign corporation,
partnership or trust" within the meaning of the Code and such Lender claims
exemption from, or a reduction of, U.S. withholding tax under Section 1441 or
1442 of the Code, such Lender shall deliver to the Agent and the Company:
(i) if such Lender claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly
completed IRS Forms 1001 and W-8 before the payment of any interest in
the first calendar year and before the payment of any interest in each
third succeeding calendar year during which interest may be paid under
this Agreement;
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is
effectively connected with a United States trade or business of such
Lender, two properly completed and executed copies of IRS Form 4224
before the payment of any interest is due in the first taxable year of
such Lender and in each succeeding taxable year of such Lender during
which interest may be paid under this Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under the
Code or other laws of the United States as a condition to exemption
from, or reduction of, United States withholding tax.
Each such Lender agrees to promptly notify the Agent and the Company of any
change in circumstances which would modify or render invalid any claimed
exemption or reduction.
(b) If any Lender claims exemption from, or reduction of,
withholding tax under a United States tax treaty by providing IRS Form 1001 and
such Lender sells, assigns, grants a participation in, or otherwise transfers
all or part of the Obligations of the Company to such Lender, such Lender agrees
to notify the Agent and the Company of the percentage amount in which it is no
longer the beneficial owner of Obligations of the Company to such Lender. To the
extent of such percentage amount,
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the Agent and the Company will treat such Lender's IRS Form 1001 as no longer
valid.
(c) If any Lender claiming exemption from United States withholding
tax by filing IRS Form 4224 with the Agent and the Company sells, assigns,
grants a participation in, or otherwise transfers all or part of the Obligations
of the Company to such Lender, such Lender agrees to undertake sole
responsibility for complying with the withholding tax requirements imposed by
Sections 1441 and 1442 of the Code.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, the Agent or the Company may withhold from any interest payment
to such Lender an amount equivalent to the applicable withholding tax after
taking into account such reduction. If the forms or other documentation required
by subsection (a) of this Section are not timely delivered to the Agent and the
Company, then the Agent or the Company may withhold from any interest payment to
such Lender not providing such forms or other documentation an amount equivalent
to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent or the Company did
not properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered or was not properly executed, or
because such Lender failed to notify the Agent of a change in circumstances
which rendered the exemption from, or reduction of, withholding tax ineffective,
or for any other reason) such Lender shall indemnify the Agent and the Company
fully for all amounts paid, directly or indirectly, by the Agent or the Company
as Tax or otherwise, including penalties and interest, and including any Taxes
imposed by any jurisdiction on the amounts payable to the Agent or the Company
under this Section, together with all costs and expenses (including Attorney
Costs). The obligation of the Lenders under this subsection shall survive the
payment of all Obligations and the resignation or replacement of the Agent.
10.11 Collateral Matters.
(a) The Agent is authorized on behalf of all the Lenders; without
the necessity of any notice to or further consent from the Lenders, from time to
time to take any action with respect to any collateral or the Collateral
Documents which may be necessary to perfect and maintain perfected the security
interest in and Liens upon the collateral granted pursuant to the Collateral
Documents.
(b) The Lenders irrevocably authorize the Agent, at its option and
in its discretion, to release any Lien granted to or held by the Agent upon any
collateral (i) upon termination of the Commitments and payment in full of all
Loans and all other obligations known to the Agent and payable under this
Agreement
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or any other Loan Document; (ii) constituting property sold or to be
sold or disposed of as part of or in connection with any disposition permitted
hereunder; (iii) constituting property in which the Company or any Subsidiary
owned no interest at the time the Lien was granted or at any time thereafter;
(iv) constituting property leased to the Company or any Subsidiary under a lease
which has expired or been terminated in a transaction permitted under this
Agreement or is about to expire and which has not been, and is not intended by
the Company or such Subsidiary to be, renewed or extended; (v) consisting of an
instrument evidencing Indebtedness or other debt instrument, if the indebtedness
thereby has been paid in full; or (vi) if approved, authorized or ratified in
writing by the Required Lenders or all the Lenders. Upon request by the Agent at
any time, the Lenders will confirm in writing the Agent's authority to release
particular types or items of Collateral pursuant to this subsection 10.11(b).
(c) Each Lender agrees with and in favor of each other (which
agreement shall not be for the benefit of the Company or any Subsidiary) that
any security interest in real property collateral received by a Lender in
connection with the extension of any loan or financial commitment between such
Lender and the Company or any of its Affiliates and not related to the
transactions contemplated hereby shall not constitute collateral for the
Company's obligations under this Agreement or any other Loan Document.
ARTICLE XI
MISCELLANEOUS
11.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Company therefrom, shall be effective unless the same shall be
in writing and signed by the Required Lenders and the Company and acknowledged
by the Agent, and then any such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided that:
(a) no such waiver, amendment or consent shall, unless in writing
and signed by all Lenders and the Company and acknowledged by the Agent, do any
of the following:
(i) increase or extend any Commitment of any Lender (or
reinstate any Commitment terminated pursuant to Section 9.2);
(ii) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal (including any
mandatory prepayment to Section 2.7), interest, fees or other amounts
due to the Lenders (or any of them) hereunder or under any other Loan
Document;
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(iii) reduce the principal of, or the rate of interest
specified herein on, any Loan or (subject to clause (e) below) reduce
any fees payable hereunder or under any other Loan Document;
(iv) change the aggregate percentage of the Total Percentage
which is required for the Lenders or any of them to take any action
hereunder; or
(v) amend this Section, or Section 2.14, or any provision
herein providing for consent or other action by all Lenders;
(b) after the making of the Term Loans, Section 2.3, 2.4, 2.5, 2.6
(as it relates to an optional prepayment of Revolving Loans), 2.8(c) or Article
III may be amended, or the rights or privileges thereunder waived, with the
written consent of the Required Revolving Lenders, the Company and the
acknowledgment of the Agent;
(c) no amendment, waiver or consent shall, unless in writing and
signed by the applicable Issuing Lender in addition to the Required Lenders or
all Lenders, as the case may be, affect the rights or duties of any Issuing
Lender under this Agreement or any L/C-Related Document relating to any Letter
of Credit Issued or to be Issued by it;
(d) no amendment, waiver or consent shall, unless in writing and
signed by the Agent in addition to the Required Lenders or all Lenders, as the
case may be, affect the rights or duties of the Agent under this Agreement or
any other Loan Document; and
(e) the Fee Letter may be amended, or rights or privileges
thereunder waived, in writing executed by the parties thereto.
11.2 Notices. (a) All notices, requests and other communications
hereunder shall be in writing (including, unless the context expressly otherwise
provides, by facsimile transmission, provided that any matter transmitted by the
Company by facsimile (i) shall be immediately confirmed by a telephone call to
the recipient at the number specified on Schedule 11.2, and (ii) shall be
followed promptly by delivery of a hard copy original thereof) and mailed, faxed
or delivered to the address or facsimile number specified for notices on
Schedule 11.2; or, as directed to the Company or the Agent, to such other
address as shall be designated by such party in a written notice to the other
parties, and as directed to any other party, at such other address as shall be
designated by such party in a written notice to the Company and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be
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effective when delivered, or transmitted in legible form by facsimile machine,
respectively, or if mailed, upon the third Business Day after the date deposited
into the U.S. mail; except that notices to the Agent pursuant to Article II, III
or X shall not be effective until actually received by the Agent, and notices
pursuant to Article III to any Issuing Lender shall not be effective until
actually received by such Issuing Lender at the address specified for such
"Issuing Lender" on Schedule 11.2.
(c) Any agreement of the Agent and the Lenders herein to receive
certain notices by telephone or facsimile is solely for the convenience and at
the request of the Company. The Agent and the Lenders shall be entitled to rely
on the authority of any Person purporting to be a Person authorized by the
Company to give such notice and the Agent and the Lenders shall not have any
liability to the Company or other Person on account of any action taken or not
taken by the Agent or the Lenders in reliance upon such telephonic or facsimile
notice. The obligation of the Company to repay the Loans and L/C Obligations
shall not be affected in any way or to any extent by any failure of the Agent
and the Lenders to receive written confirmation of any telephonic or facsimile
notice or the receipt by the Agent and the Lenders of a confirmation which is at
variance with the terms understood by the Agent and the Lenders to be contained
in the telephonic or facsimile notice.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
in exercising, on the part of the Agent or any Lender, any right, remedy, power
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.
11.4 Costs and Expenses. The Company shall:
(a) whether or not the transactions contemplated hereby are
consummated, pay or reimburse the Agent and the Arranger within five Business
Days after demand (subject to subsection 5.1(g)) for all costs and expenses
incurred by the Agent and the Arranger in connection with the development,
preparation, delivery, administration and execution of, and any amendment,
supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Loan Document and any other document prepared
in connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including Attorney Costs incurred by the Agent
and the Arranger with respect thereto; and
(b) pay or reimburse the Agent and each Lender within five Business
Days after demand (subject to subsection 5.1(g)) for all costs and expenses
(including Attorney Costs) incurred by them in connection with the enforcement,
attempted enforcement, or preservation of any right or remedy under this
Agreement or
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any other Loan Document during the existence of an Event of Default or after
acceleration of the Loans (including in connection with any "workout" or
restructuring regarding the Loans, and including in any Insolvency Proceeding or
appellate proceeding).
11.5 Company Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Company shall indemnify and hold the
Agent-Related Persons and each Lender and each of their respective officers,
directors, employees, counsel, agents and attorneys-in-fact (each an
"Indemnified Person") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses and disbursements (including Attorney Costs) of any kind or
nature whatsoever which may at any time (including, at any time following
repayment of the Loans, the termination of the Letters of Credit and the
termination, resignation or replacement of the Agent or replacement of any
Lender) be imposed on, incurred by or asserted against any such Person in any
way relating to or arising out of this Agreement or any document contemplated by
or referred to herein, or the transactions contemplated hereby or thereby, or
any action taken or omitted by any such Person under or in connection with any
of the foregoing, including with respect to any investigation, litigation or
proceeding (including any Insolvency Proceeding or appellate proceeding) related
to or arising out of this Agreement or the Loans or Letters of Credit or the use
of the proceeds thereof, whether or not any Indemnified Person is a party
thereto (all the foregoing, collectively, the "Indemnified Liabilities");
provided that the Company shall have no obligation hereunder to any Indemnified
Person with respect to Indemnified Liabilities resulting solely from the gross
negligence or willful misconduct of such Indemnified Person. The agreements in
this Section shall survive payment of all other Obligations.
11.6 Payments Set Aside. To the extent that the Company makes a
payment to the Agent or the Lenders, or the Agent or the Lenders exercise their
right of set-off, and such payment or the proceeds of such set-off or any part
thereof is subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by the
Agent or such Lender in its discretion) to be repaid to a trustee or receiver,
or any other party, in connection with any Insolvency Proceeding or otherwise,
then (a) to the extent of such recovery, the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full force
and effect as if such payment had not been made or such set-off had not occurred
and (b) each Lender severally agrees to pay to the Agent upon demand its pro
rata share of any amount so recovered from or repaid by the Agent.
11.7 Successors and Assigns. The provisions of this Agreement shall
be binding upon and inure to the benefit of the
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parties hereto and their respective successors and assigns, except that the
Company may not assign or transfer any of its rights or obligations under this
Agreement without the prior written consent of the Agent and each Lender.
11.8 Assignments, Participations, etc. (a) Any Lender may, with the
written consent of the Company at all times other than during the existence of
an Event of Default and the Agent and each Issuing Lender, which consent of the
Company shall not be unreasonably withheld, at any time assign and delegate to
one or more Eligible Assignees (provided that no written consent of the Company,
the Agent or any Issuing Lender shall be required in connection with any
assignment and delegation by a Lender to an Eligible Assignee that is an
Affiliate of such Lender) (each an "Assignee") all, or any part of all, of the
Loans, the Revolving Commitment, the L/C Obligations and the other rights and
obligations of such Lender hereunder, in a minimum amount of $5,000,000 (or, if
less, all of such Lender's remaining rights and obligations hereunder);
provided, however, that the Company, the Agent and the Issuing Lenders may
continue to deal solely and directly with such Lender in connection with the
interest so assigned to an Assignee until (i) written notice of such assignment,
together with payment instructions, addresses and related information with
respect to the Assignee shall have been given to the Company and the Agent by
such Lender and the Assignee; (ii) such Lender and the Assignee shall have
delivered to the Company and the Agent an Assignment and Acceptance in the form
of Exhibit Q ("Assignment and Acceptance") together with any Note or Notes
subject to such assignment and (iii) the assignor Lender or the Assignee has
paid to the Agent a processing fee in the amount of $3,500.
(b) From and after the date that the Agent notifies the assignor
Lender that it has provided its consent, and received the consents of the
Issuing Lenders and (if applicable) the Company, with respect to an executed
Assignment and Acceptance and payment of the above-referenced processing fee,
(i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Lender
under the Loan Documents, and (ii) the assignor Lender shall, to the extent that
rights and obligations hereunder and under the other Loan Documents have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
and be released from its obligations under the Loan Documents.
(c) Any Lender may at any time sell to one or more commercial banks
or other Persons not Affiliates of the Company (a "Participant") participating
interests in any Loan, the Revolving Commitment of such Lender and the other
interests of such Lender (the "originating Lender") hereunder and under the
other Loan Documents; provided, however, that (i) the originating Lender's
obligations under this Agreement shall remain unchanged,
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(ii) the originating Lender shall remain solely responsible for the performance
of such obligations, (iii) the Company, the Issuing Lenders and the Agent shall
continue to deal solely and directly with the originating Lender in connection
with the originating Lender's rights and obligations under this Agreement and
the other Loan Documents, and (iv) no Lender shall transfer or grant any
participating interest under which the Participant has rights to approve any
amendment to, or any consent or waiver with respect to, this Agreement or any
other Loan Document, except to the extent such amendment, consent or waiver
would require unanimous consent of the Lenders as described in the first proviso
to Section 11.1. In the case of any such participation, the Participant shall be
entitled to the benefit of Sections 4.1, 4.3 and 11.5 as though it were also a
Lender hereunder (provided, with respect to Sections 4.1 and 4.3, the Company
shall not be required to pay any amount which it would not have been required to
pay if no participating interest had been sold), and if amounts outstanding
under this Agreement are due and unpaid, or shall have been declared or shall
have become due and payable upon the occurrence of an Event of Default, the
Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement.
(d) Notwithstanding any other provision in this Agreement, any
Lender may at any time create a security interest in, or pledge all or any
portion of its rights under and interest in this Agreement and any Note held by
it in favor of any Federal Reserve Bank in accordance with Regulation A of the
FRB or U.S. Treasury Regulation 31 CFR Section203.14, and such Federal Reserve
Bank may enforce such pledge or security interest in any manner permitted under
applicable law.
11.9 Confidentiality. Each Lender agrees to take, and to cause its
Affiliates to take, normal and reasonable precautions and exercise due care to
maintain the confidentiality of all information identified as "confidential" or
"secret" by the Company and provided to it by the Company or any Subsidiary, or
by the Agent on the Company's or any Subsidiary's behalf, under this Agreement
or any other Loan Document, and neither such Lender nor any of its Affiliates
shall use any such information other than in connection with or in enforcement
of this Agreement and the other Loan Documents or in connection with other
business now or hereafter existing or contemplated with the Company or any
Subsidiary; except to the extent such information (i) was or becomes generally
available to the public other than as a result of disclosure by such Lender, or
(ii) was or becomes available on a non-confidential basis from a source other
than the Company, provided that such source is not bound by a confidentiality
agreement with the Company or any Subsidiary known to such Lender; provided,
however, that any Lender may disclose such information (A) at the request or
pursuant to any requirement of
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any Governmental Authority to which such Lender is subject or in connection with
an examination of such Lender by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the Agent or
any Lender or any of their respective Affiliates may be party; (E) to the extent
reasonably required in connection with the exercise of any remedy hereunder or
under any other Loan Document; (F) to such Lender's independent auditors and
other professional advisors; (G) to any Participant or Assignee, actual or
potential, provided that such Person agrees in writing to keep such information
confidential to the same extent required of the Lenders hereunder; (H) as to any
Lender or its Affiliate, as expressly permitted under the terms of any other
document or agreement regarding confidentiality to which the Company or any
Subsidiary is party or is deemed party with such Lender or such Affiliate; and
(I) to its Affiliates.
11.10 Set-off. In addition to any right or remedy of the Lenders
provided by law, if an Event of Default exists, or the Loans have been
accelerated, each Lender is authorized at any time and from time to time,
without prior notice to the Company, any such notice being waived by the Company
to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held by, and other indebtedness at any time owing by, such Lender to or for the
credit or the account of the Company against any and all Obligations owing to
such Lender, now or hereafter existing, irrespective of whether or not the Agent
or such Lender shall have made demand under this Agreement or any other Loan
Document and although such Obligations may be contingent or unmatured. Each
Lender agrees promptly to notify the Company and the Agent after any such
set-off and application made by such Lender; provided that the failure to give
such notice shall not affect the validity of such set-off and application.
11.11 Automatic Debits of Fees. With respect to any commitment fee,
arrangement fee, agency fee, letter of credit fee or other fee, or any other
cost or expense (including Attorney Costs) due and payable to the Agent or any
Issuing Lender under the Loan Documents, the Company hereby irrevocably
authorizes BofA (and, if requested by BofA, BAI) to debit any deposit account of
the Company with BofA or BAI in an amount such that the aggregate amount debited
from all such deposit accounts does not exceed such fee or other cost or
expense; provided that the Company may issue instructions that override such
authorization on a per transaction basis and that with respect to any fee, cost
or expense (other than a commitment fee, arrangement fee, agency fee or letter
of credit fee) the Agent or any Issuing Lender shall not debit any deposit
account of the Company for such fee, cost or expense unless the Agent or Issuing
Lender has given the Company prior notice of its intention to so debit such
deposit account. If there are insufficient funds in such deposit
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accounts to cover the amount of the fee or other cost or expense then due, such
debits will be reversed (in whole or in part, in BofA's sole discretion) and
such amount not debited shall be deemed to be unpaid. No such debit under this
Section shall be deemed a set-off.
11.12 Notification of Addresses, Lending Offices, Etc. Each Lender
shall notify the Agent in writing of any change in the address to which notices
to such Lender should be directed, of addresses of any Lending Office, of
payment instructions in respect of all payments to be made to it hereunder and
of such other administrative information as the Agent shall reasonably request.
11.13 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of which taken together shall constitute but one and the same
instrument.
11.14 Severability. The illegality or unenforceability of any
provision of this Agreement or any instrument or agreement required hereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Agreement or such instrument or agreement.
11.15 No Third Parties Benefited. This Agreement is made and entered
into for the sole protection and legal benefit of the Company, the Lenders, the
Agent and the Agent-Related Persons, and their permitted successors and assigns,
and no other Person shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with, this
Agreement or any other Loan Document.
11.16 Governing Law and Jurisdiction. (a) THIS AGREEMENT AND ANY
NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK; PROVIDED THAT THE AGENT AND THE LENDERS SHALL RETAIN ALL
RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE
OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY, THE AGENT AND
THE LENDERS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURTS. EACH OF THE COMPANY, THE AGENT AND THE
LENDERS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING
OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION
IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. THE COMPANY, THE
AGENT AND THE LENDERS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
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11.17 Waiver of Jury Trial. THE COMPANY, THE LENDERS AND THE AGENT
EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE COMPANY, THE
LENDERS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENT, RENEWAL, SUPPLEMENT OR
MODIFICATION TO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
11.18 Subsidiary References. The provisions of this Agreement
relating to Subsidiaries of the Company shall apply only at such times as the
Company has one or more Subsidiaries; and the provisions of this Agreement
regarding consolidated financial statements and covenants shall apply only at
such times as the Company has one or more consolidated Subsidiaries.
11.19 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Company,
the Lenders and the Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Chicago, Illinois by their proper and duly
authorized officers as of the day and year first above written.
FIBERITE, INC.
By: /s/ David L. Canedo
-------------------------------------
Title: Chief Financial Officer
----------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
By: /s/ Mary-Claire Carter
-------------------------------------
Title: Vice President
----------------------------------
BANK OF AMERICA ILLINOIS, as an
Issuing Lender
By: /s/ John A. Orecchio
-------------------------------------
Title: Vice President
----------------------------------
BANK OF AMERICA ILLINOIS, as a
Lender
By: /s/ John A. Orecchio
-------------------------------------
Title: Vice President
----------------------------------
DRESDNER BANK AG, LOS ANGELES AGENCY
AND GRAND CAYMAN BRANCH
By: /s/ Jon M. Bland
-------------------------------------
Title: Senior Vice President
----------------------------------
By: /s/ Dennis G. Blank
-------------------------------------
Title: Vice President
----------------------------------
THE BANK OF NOVA SCOTIA
By: /s/ John A. Quick
-------------------------------------
Title: Senior Relationship Manager
----------------------------------
BANQUE PARIBAS
By: /s/ Albert A. Young, Jr.
-------------------------------------
Title: Senior Credit Officer
----------------------------------
By: /s/ Gerald E. O'Keefe
-------------------------------------
Title: Vice President
----------------------------------
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By: /s/ J. Tracy Mehr
-------------------------------------
Title: Vice President
----------------------------------
By: /s/ Robert M. Wood, Jr.
-------------------------------------
Title: Vice President
----------------------------------
THE NIPPON CREDIT BANK, LTD., LOS
ANGELES AGENCY
By: /s/ Shinsuke Baba
-------------------------------------
Title: Deputy General Manager
----------------------------------
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By: /s/ Jeffrey S. Garner
-------------------------------------
Title: Vice President
----------------------------------
PILGRIM PRIME RATE TRUST
By: /s/ Kathleen Lenarcic
-------------------------------------
Title: Assistant Portfolio Manager
----------------------------------
VAN KAMPEN MERRIT PRIME RATE INCOME
TRUST
By: /s/ Jeffrey W. Maillet
-------------------------------------
Title: Senior Vice President
----------------------------------
<PAGE> 106
FIRST AMENDMENT
THIS FIRST AMENDMENT dated as of October 30, 1995 (this "Amendment") is
to the Credit Agreement (the "Credit Agreement") dated as of October 6, 1995
among FIBERITE, INC. (the "Company"), various financial institutions and BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent (the "Agent").
Unless otherwise defined herein as defined in the Credit Agreement.
WHEREAS, the Company, the Agent and Bank of America Illinois have
entered into the Credit Agreement; and
WHEREAS, the parties hereto desire to amend the Credit Agreement to (a)
add The Bank of Nova Scotia, Banque Paribas, Deutsche Bank AG, New York and/or
Cayman Islands Branches, Dresdner Bank AG, Los Angeles Agency and Grand Cayman
Branch, The Nippon Credit Bank Ltd., Los Angeles Agency, Pilgrim Prime Rate
Trust, Senior Debt Portfolio and Van Kampen Merritt Prime Rate Income Trust
(collectively the "New Lenders") as "Lenders" thereunder and (b) make certain
other changes as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION 1 AMENDMENT. Effective on (and subject to the occurrence of)
the First Amendment Effective Date (as defined below), the Credit Agreement
shall be amended in accordance with Sections 1.1 through 1.17 below.
1.1 Eligible Assignee. The definition of "Eligible Assignee" set
forth in Section 1.1 is amended by (a) deleting the word "and" immediately
prior to clause (iii) thereof; and (b) adding a semi-colon and the following
language before the period at the end thereof: "and (iv) an insurance company,
pension fund, mutual fund, commercial finance company or similar financial
institution having a net worth of at least $50,000,000."
1.2 Excess Cash Flow. Subsection (b) of the definition of "Excess
Cash Flow" is amended by (a) deleting the language "Section 2.7 or" in the
second line of clause (i) thereof; and (b) deleting the words "Capital
Expenditures for such period" in clause (iii) thereof and substituting the
following words therefor: "Cash payments made in such period with respect to
Capital Expenditures".
<PAGE> 107
1.3 Security Agreement. The definition of "Security Agreement" is
amended by deleting the term "5.1(g)" therein and substituting the term
"5.1(i)" therefor.
1.4 Section 2.1(a). Section 2.1(a) is amended by deleting the amount
"$50,000,000" therein and substituting the amount "$40,000,000" therefor.
1.5 Section 2.1(b). Section 2.1(b) is amended by deleting the amount
"$25,000,000" therein and substituting the amount "$35,000,000" therefor.
1.6 Section 2.7. Section 2.7 is amended by deleting the last
paragraph of such Section in its entirety and inserting in lieu thereof the
following:
"All prepayments of Term Loans pursuant to this Section 2.7 shall be
applied to the remaining installments thereof pro rata; provided that if
any Lender holding Term B Loans so requests, by notice to the Agent not
later than five Business Days prior to the date upon which such
prepayment is due, the portion of any prepayment which would have been
applied to such Lender's Term B Loans shall be applied pro rata to the
remaining installments of the Term A Loans of all Lenders (it being
understood that if the Term A Lenders incur additional funding losses
pursuant to Section 4.4 as a result of the reallocation of such
prepayment, the Company shall only be responsible for the portion of
such additional funding losses which would have been incurred by such
Term B Lender if such payment had been applied to such Lender's Term B
Loans)."
1.7 Section 2.8(a). The amortization schedule set forth in Section
2.8(a) is amended to read as follows:
Period Amount
------ ------
March 31, 1996 through December 31, 1997 $1,600,000
January 1, 1998 through December 31, 1998 2,000,000
January 1, 1999 through December 31, 2000 2,400,000
1.8 Section 2.8(b). The amortization schedule set forth in Section
2.8(b) is amended to read as follows:
Period Amount
------ ------
March 31, 1996 through December 31, 1999 $ 125,000
January 1, 2000 through December 31, 2000 250,000
January 1, 2001 through December 31, 2001 8,000,000
-2-
<PAGE> 108
1.9 Section 4.7. Section 4.7 is amended by deleting the words "its
best" in the fifth line thereof and substituting the word "reasonable" therefor.
1.10 Section 5.1(k). Section 5.1(k) is amended by deleting the word
"each" in the fifth line thereof and substituting the words "the Parent"
therefor.
1.11 Section 8.19. Section 8.19 is amended by (a) substituting a comma
for the word "or" after the words "the Shareholder Agreement" in the fourth
line thereof; and (b) adding the following language after the words "Services
Agreements" in the fifth line thereof: "or (d) the Tax Sharing Agreement".
1.12 Section 10.11(b). Section 10.11(b) is amended by adding the
language ", if required by Section 11.1(a)(v)," immediately after the words
"Lenders or" in clause (vi) thereof.
1.13 Section 11.1(a). Section 11.1(a) is amended by (a) deleting the
word "or" immediately after clause (iv) thereof; and (b) deleting clause (v)
thereof and substituting the following therefor:
(v) release the Guaranty or release all or a substantial part
of the Collateral; or
(vi) amend or waive any provision of this Section, Section 2.7
or Section 2.14, or any other provision herein providing for consent or other
action by all Lenders.
1.14 Section 11.1(b). Section 11.1(b) is amended by (a) adding the
following parenthetical after the reference to Section 2.4 on the second line
thereof: "(as it relates to conversions and continuations of Revolving Loans)";
(b) deleting the comma after the language "Revolving Loans)" in the third line
thereof and substituting the word "or" therefor; and (c) inserting the
following parenthetical after the words "Required Revolving Lenders" on the
fifth line thereof: "(or, in the case of Section 2.8(c), all of the Revolving
Lenders)".
1.15 Section 11.8(a). Section 11.8(a) is amended by (a) adding the
words "with the written consents of" after the word "and" (and before the words
"the Agent") in the third line thereof; and (b) deleting the language "an
Eligible Assignee that is an Affiliate of such Lender)" in the eighth and ninth
lines thereof and substituting the following language therefor: "a Person
described in clause (iii) of the definition of Eligible Assignee)".
1.16 Schedule 1.1. Schedule 1.1 is amended in its entirety by
substituting the Schedule 1.1 attached hereto therefor.
-3-
<PAGE> 109
1.17 Schedule 11.2. Schedule 11.2 is amended in its entirety by
substituting the Schedule 11.2 attached hereto therefor.
SECTION 2 REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Agent and the Lenders that (a) the representations and
warranties made in Article VI of the Credit Agreement are true and correct on
and as of the First Amendment Effective Date with the same effect as if made on
and as of the First Amendment Effective Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which
case they were true and correct as of such earlier date); (b) no Event of
Default or Unmatured Event of Default exists or will result from the execution
of this Amendment; (c) no event or circumstance has occurred since the Closing
Date that has resulted, or would reasonably be expected to result, in a
Material Adverse Effect; (d) the execution and delivery by the Company of
this Amendment and the New Notes (as defined below) and the performance by the
Company of its obligations under the Credit Agreement as amended hereby (as so
amended, the "Amended Credit Agreement") and the New Notes (i) are within the
corporate powers of the Company, (ii) have been duly authorized by all
necessary corporate action, (iii) have received all necessary governmental
approval and (iv) do not and will not contravene or conflict with any provision
of law or of the charter or by-laws of the Company or of any indenture, loan
agreement or other contract, order or decree which is binding upon the Company;
and (e) each of the Amended Credit Agreement and each New Note is the legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited to by
applicable bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles relating to
enforceability.
SECTION 3 EFFECTIVENESS. The amendments set forth in Section 1 above
shall become effective, as of the day and year first above written, on such
date (the "First Amendment Effective Date") when the Agent shall have received,
(a) a counterpart of this Amendment executed by each of the parties hereto
(or, in the case of any party other than the Company from which the Agent has
not received a counterpart hereof, facsimile confirmation of the execution of a
counterpart hereof by such party) and (b) each of the following documents, each
in form and substance satisfactory to the Agent:
3.1 Notes. New Notes, substantially in the form of Exhibit D to the
Credit Agreement, payable to the order of each of the Lenders (collectively,
the "New Notes").
3.2 Confirmation. A confirmation from the Parent, substantially in
the form of Exhibit A hereto.
-4-
<PAGE> 110
3.3 Opinion. An opinion of Cahill, Gordon & Reindel, substantially
in the form of Exhibit B hereto.
3.4 Other Documents. Such other documents as the Agent or any Lender
may reasonably request in connection with the Company's authorization,
execution and delivery of this Amendment and the New Notes.
SECTION 4 ADDITION OF LENDERS. On the First Amendment Effective Date,
each New Lender shall become a "Lender" under and for all purposes of the Credit
Agreement, shall be bound by the Credit Agreement, and shall be entitled to the
benefits of the Credit Agreement and each other Loan Document, and each Lender
(including Bank of America Illinois) shall have a Total Percentage, a Revolving
Commitment, a Revolving Percentage, a Term A Loan, a Term A Percentage, a Term B
Loan and a Term B Percentage in the respective amounts and percentages set forth
on Schedule 1.1 hereto. To facilitate the foregoing, each New Lender agrees that
on the First Amendment Effective Date and after giving effect to the changes
contemplated herein, it will remit to the Agent funds in an amount equal to its
Revolving Percentage of all outstanding Revolving Loans plus its Term A
Percentage of all outstanding Term A Loans plus its Term B Percentage of all
outstanding Term B Loans, and the Agent agrees to immediately remit all of such
funds received from each New Lender to Bank of America Illinois. Each New Lender
agrees that all interest and fees accrued under the Credit Agreement prior to
the First Amendment Effective Date are the property of Bank of America Illinois.
By their signatures below (a) the Company confirms that the amounts of the
Revolving Commitment, the Term A Loans and the Term B Loans set forth on
Schedule 1.1 are true and correct and (b) Bank of America Illinois confirms that
it has not sold or otherwise encumbered its rights under the Credit Agreement or
its interest in any Loans prior to the syndication thereof pursuant to this
Amendment.
SECTION 5 MISCELLANEOUS.
5.1 Continuing Effectiveness, etc. As herein amended, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. After the First Amendment Effective Date, all
references in the Credit Agreement, the Notes, each other Loan Document and any
similar document to the "Credit Agreement" or similar terms shall refer to the
Amended Credit Agreement.
5.2 Counterparts. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Amendment.
-5-
<PAGE> 111
5.3 Expenses. The Company agrees to pay the reasonable costs and
expenses of the Agent (including Attorney Costs) in connection with the
preparation, execution and delivery of this Amendment.
5.4 Governing Law. This Amendment shall be a contract made under and
governed by the internal laws of the State of New York.
5.5 Successors and Assigns. This Amendment shall be binding upon the
Company, the Lenders and the Agent and their respective successors and assigns,
and shall inure to the benefit of the Company, the Lenders and the Agent and
the successors and assigns of the Lenders and the Agent.
-6-
<PAGE> 112
Delivered at New York, New York, as of the day and year first above
written.
FIBERITE, INC.
By /s/ James E. Ashton
-------------------------------------
Title Chief Executive Officer
--------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By /s/
-------------------------------------
Title Vice President
--------------------------------
BANK OF AMERICA ILLINOIS
By /s/
-------------------------------------
Title Vice President
--------------------------------
DRESDNER BANK AG, LOS ANGELES AGENCY
AND GRAND CAYMAN BRANCH
By /s/ Jon M. Bland
-------------------------------------
Title Senior Vice President
--------------------------------
By /s/ Dennis G. Blank
-------------------------------------
Title Vice President
--------------------------------
-7-
<PAGE> 113
THE BANK OF NOVA SCOTIA
By /s/
------------------------------------
Title
------------------------------
BANQUE PARIBAS
By /s/
------------------------------------
Title Senior Credit Officer
------------------------------
By /s/
------------------------------------
Title
------------------------------
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By /s/ J. Tracy Mehr
-----------------------------------
J. Tracy Mehr
Title Vice President
-----------------------------
By /s/ Robert M. Wood, Jr.
------------------------------------
Robert M. Wood, Jr.
Title Vice President
------------------------------
-8-
<PAGE> 114
THE NIPPON CREDIT BANK, LTD., LOS
ANGELES AGENCY
By /s/
---------------------------------------
Title
----------------------------------
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By /s/
---------------------------------------
Title Vice President
----------------------------------
PILGRIM PRIME RATE TRUST
By /s/
---------------------------------------
Title Assistant Portfolio Manager
----------------------------------
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
By Jeffrey W. Maillet
---------------------------------------
Title Sr. Vice Pres.-Portfolio Manager
----------------------------------
-9-
<PAGE> 115
SCHEDULE 1.1
COMMITMENTS AND PERCENTAGES
<TABLE>
<CAPTION>
Total Revolving Revolving Term A Term A Term B Term B
Name of Lender Percentage Commitment Percentage Loan Percentage Loan Percentage
- -------------- ---------- ---------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Bank of America 20.00000000% $ 5,769,230.76 23.07692304% $ 9,230,769.24 23.07692310% $ 5,000,000.00 14.28571429%
Illinois
Deutsche Bank AG, 10.00000000% $ 3,846,153.85 15.38461540% $ 6,153,846.15 15.38461538% $ 0.00 0.00000000%
New York and/or
Cayman Islands
Branchas
The Bank of Nova 10.00000000% $ 3,846,153.85 15.38461540% $ 6,153,846.15 15.38461538% $ 0.00 0.00000000%
Scotia
Banque Paribas 10.00000000% $ 2,884,615.38 11.53846152% $ 4,615,384.62 11.53846155% $ 2,500,000.00 7.14285714%
Dresdner Bank AG, Los 12.50000000% $ 4,807,692.31 19.23076924% $ 7,692,307.69 19.23076923% $ 0.00 0.00000000%
Angeles Agency and
Grand Cayman Branch
The Nippon Credit 10.00000000% $ 3,846,153.85 15.38461540% $ 6,153,846.15 15.38461538% $ 0.00 0.00000000%
Bank, Ltd., Los
Angeles Agency
Senior Debt 9.50000000% $ 0.00 0.00000000% $ 0.00 0.00000000% $ 9,500,000.00 27.14285714%
Portfolio
Pilgrim Prime Rate 9.00000000% $ 0.00 0.00000000% $ 0.00 0.00000000% $ 9,000,000.00 25.71428571%
Trust
Van Kampen Merritt 9.00000000% $ 0.00 0.00000000% $ 0.00 0.00000000% $ 9,000,000.00 25.71428571%
Prime Rate Income
Trust
- -----------------------------------------------------------------------------------------------------------------------------------
TOTALS 100.00000000% $25,000,000.00 100.00000000% $40,000,000.00 100,00000000% $35,000,000.00 100,00000000%
</TABLE>
<PAGE> 116
SCHEDULE 11.2
OFFSHORE AND DOMESTIC LENDING OFFICES,
ADDRESSES FOR NOTICES
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent
Bank of America National Trust
and Savings Association
Agency Management Services #5596
1455 Market Street, 12th Floor
San Francisco, California 94103
Attention: Mary-Claire Carter
Telephone: (415) 622-4956
Facsimile: (415) 622-4894
BANK OF AMERICA ILLINOIS,
as a Lender
Domestic and Offshore Lending Office:
Chicago, Illinois 60697
Notices (other than Borrowing notices and Notices of
Conversion/Continuation):
Bank of America Illinois
231 South LaSalle Street
Chicago, Illinois 60697
Attention: John Orecchio
Telephone: (312) 828-9055
Facsimile: (312) 828-3864
BANK OF AMERICA, ILLINOIS,
as Issuing Lender
Address for Notices:
231 South LaSalle Street
Chicago, Illinois 60697
<PAGE> 117
DRESDNER BANK AG, LOS ANGELES AGENCY AND GRAND CAYMAN BRANCH,
as a Lender
Dresdner Bank
725 South Figueroa
Suite 3950
Los Angeles, CA 90017
Attention: Sid Jordan
Telephone: (213) 489-5820
Facsimile: (213) 627-3819
THE BANK OF NOVA SCOTIA,
as a Lender
The Bank of Nova Scotia
101 California Street
48th Floor
San Francisco, CA 94111
Attention: John Quick
Telephone: (415) 986-1100
Facsimile: (415) 397-0791
BANQUE PARIBAS,
as a Lender
Banque Paribas
227 West Monroe Street
Suite 3300
Chicago, IL 60606
Attention: Jerry O'Keefe
Telephone: (312) 853-6007
Facsimile: (312) 853-6020
DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES,
as a Lender
Deutsche Bank AG, New York Branch
31 W. 52nd Street
24th Floor
New York, NY 10019
Attention: Mr. J. Tracy Mehr
Telephone: (212) 474-8216
Facsimile: (212) 474-8212
-2-
<PAGE> 118
THE NIPPON CREDIT BANK, LTD., LOS ANGELES AGENCY,
as a Lender
The Nippon Credit Bank, Ltd., Los Angeles Agency
550 S. Hope Street
Suite 2500
Los Angeles, CA 90071
Attention: Robert P. Combs
Telephone: (213) 243-5702
Facsimile: (213) 892-0111
SENIOR DEBT PORTFOLIO,
as a Lender
Senior Debt Portfolio
c/o Boston Management and Research
24 Federal Street
6th Floor
Boston, MA 02110
Attention: Jane Nelson
Telephone: (617) 654-8404
Facsimile: (617) 695-9594
PILGRIM PRIME RATE TRUST,
as a Lender
Pilgrim America
Two Renaissance Square
40 N. Central Avenue
Suite 1200
Phoenix, AZ 85004-4424
Attention: Kathleen Lenarcic
Telephone: (602) 417-8254
Facsimile: (602) 417-8327
VAN KAMPEN MERRITT PRIME RATE INCOME TRUST,
as a Lender
Van Kampen American Capital
One Parkview Plaza
Oakbrook Terrace, IL 60181
Attention: Jeffrey Maillet
Telephone: (708) 684-6438
Facsimile: (708) 684-6740
-3-
<PAGE> 119
FIBERITE, INC.
Fiberite, Inc.
2055 East Technology Circle
Tempe, Arizona 85284
Attention: Chief Financial Officer
Telephone: (602) 730-2000
Facsimile: (602) 730-2097
with a copy to:
Fiberite Holdings, Inc.
c/o DLJ Merchant Banking, Inc.
140 Broadway
New York, New York 10005
Attention: Thomas Dean
Telephone: (212) 504-4460
Facsimile: (602) 504-2779
-4-
<PAGE> 120
EXHIBIT A
CONFIRMATION
Dated as of October , 1995
To: Bank of America National Trust and Savings Association, as Agent, and
the other financial institutions party to the Credit Agreement referred
to below
Please refer to (a) the Credit Agreement dated as of October 6, 1995
among Fiberite, Inc., various financial institutions (the "Lenders") and Bank
of America National Trust and Savings Association, as Agent (the "Agent"); (b)
the First Amendment dated as of October 30, 1995 to the Credit Agreement (the
"First Amendment"); and (c) the Guaranty (the "Guaranty") dated as of October
6, 1995, executed by Fiberite Holdings, Inc. in favor of the Agent and the
Lenders.
The undersigned hereby confirms to the Agent and the Lenders that,
after giving effect to the First Amendment and the transactions contemplated
thereby, the Guaranty and each other Loan Document (as defined in the Credit
Agreement) to which the undersigned is a party continues in full force and
effect and is the legal, valid and binding obligation of the undersigned,
enforceable against the undersigned in accordance with its terms.
FIBERITE HOLDINGS, INC.
By: _________________________________
Title: ______________________________
<PAGE> 121
SECOND AMENDMENT AND WAIVER
THIS SECOND AMENDMENT AND WAIVER dated as of March 29, 1996 (this
"Amendment") is among FIBERITE, INC. (the "Company"), various financial
institutions set forth on the signature pages hereto (the "Lenders") and BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent (the "Agent").
WHEREAS, the Company, the Lenders, and the Agent have entered into a
Credit Agreement dated as of October 6, 1995 (as amended by the First Amendment
dated as of October 30, 1995, the "Credit Agreement"). Unless otherwise defined
herein, terms defined in the Credit Agreement are used herein as defined in the
Credit Agreement.
WHEREAS, the parties hereto desire to waive certain Sections of the
Credit Agreement and to amend the Credit Agreement to make certain changes as
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION 1 AMENDMENT. Effective on (and subject to the occurrence of)
the Second Amendment Effective Date (as defined below), the Credit Agreement
shall be amended in accordance with Sections 1.1 through 1.4 below.
1.1 Section 1.1. The definition of "Funded Debt" is hereby amended by
adding the phrase ", without duplication," after the word "means" on the first
line thereof.
1.2 Section 8.1. Section 8.1 is hereby amended by (i) deleting the
"and" at the end of clause (j) thereof, (ii) deleting the "." at the end of
clause (k) thereof and inserting in lieu thereof "; and" and (iii) inserting an
additional clause which shall read as follows:
"(1) Liens on the assets of Fiberite Europe Gmbh securing Indebtedness
permitted by Section 8.5(g)."
1.3 Section 8.4 is hereby amended by inserting the words "or
Contingent Obligations" after the word "advances" on the third line of clause
(c) thereof.
1.4 Section 8.8 is hereby amended by (i) deleting the "and" at the end
of clause (d) thereof; (ii) deleting the "." at the end of clause (e) thereof
and inserting in lieu thereof "; and" and inserting a clause (f) which shall
read as follows:
<PAGE> 122
"(f) Contingent Obligations with respect to Indebtedness permitted by
Section 8.5(g) so long as the amount of such Contingent Obligations, together
with other investments in Foreign Subsidiaries does not exceed the amount
permitted by Section 8.4(c)."
SECTION 2 ACKNOWLEDGMENT. The Lenders acknowledge that the intent of
the parties was for the Company to have the capital structure of Fiberite
Europe GmbH ("Fiberite Europe") in place as of the Closing Date. Pursuant to a
letter dated February 21, 1996, the Company informed Bank of America Illinois
that the capital structure of Fiberite Europe is as follows:
Registered Equity of 50,000DM,
Shareholder Contribution fo 3,450,000DM; and
Shareholder Loan of 6,500,000DM.
Since the intent of the parties was to have the capital structure in
place as of the Closing Date, the Lenders acknowledge that the Shareholder Loan
shall be deemed to be permitted Indebtedness pursuant to Section 8.5(c) and
shall not be included in the $3,000,000 of Indebtedness permitted by Section
8.5(d) and the Borrower's investment in Fiberite Europe shall be deemed to be
permitted under Section 8.4(c) and shall not be included in the $3,000,000 of
investments permitted by Section 8.4(c).
SECTION 3 EXTENSION OF WAIVER. Pursuant to a letter agreement (the
"Letter Agreement") dated October 6, 1995, among the Company, the Agent and the
Lenders, the Agent agreed not to record the Minnesota Mortgage (as defined in
the Letter Agreement) until the earlier of March 31, 1996 and the occurrence of
an Event of Default. The Company has requested that the parties hereto extend
such date to the earlier of May 31, 1996 and the occurrence of an Event of
Default. The Lenders and the Agent hereby agree to such extension and, as a
consequence, the Agent will not record the Minnesota Mortgage until the earlier
of May 31, 1996 and the occurrence of an Event of Default. The parties hereto
acknowledge that, other than as set forth herein, the Letter Agreement shall
remain in full force and effect and is hereby ratified and confirmed in all
respects, including, without limitation, the obligations of the Company with
respect to the Minnesota Property set forth in the third paragraph thereof.
SECTION 4 WAIVER OF CERTAIN SECTIONS. The Company's Independent
Auditor has notified the Company that the Independent Auditor cannot issue the
Company's audited financial statements without a qualification with respect to
the Company's post-retirement plans because of the failure of the Sellers to
furnish information to the Independent Auditor. The Company has requested that
the Lenders and the Agent waive Section 7.1(a)(y)
-2-
<PAGE> 123
with respect to such qualification until May 31, 1996. In addition, because of
the Company's plans to increase the facilities in the near future, the Company
has requested that the Lenders and the Agent waive Section 7.12 (requiring the
Company to enter into Permitted Swap Obligations within 180 days of the Closing
Date) until June 30, 1996. The Lenders and the Agent hereby waive Sections
7.1(a)(y) and 7.12 to the extent specified above.
SECTION 5 REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Agent and the Lenders that (a) the representations and
warranties made in Article VI of the Credit Agreement are true and correct on
and as of the Second Amendment Effective Date with the same effect as if made
on and as of the Second Amendment Effective Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which case
they were true and correct as of such earlier date); (b) no Event of Default or
Unmatured Event of Default exists or will result from the execution of this
Amendment; (c) no event or circumstance has occurred since the Closing Date
that has resulted, or would reasonably be expected to result, in a Material
Adverse Effect; (d) the execution and delivery by the Company of this Amendment
and the performance by the Company of its obligations under the Credit Agreement
as amended hereby (as so amended, the "Amended Credit Agreement") (i) are
within the corporate powers of the Company, (ii) have been duly authorized by
all necessary corporate action, (iii) have received all necessary governmental
approval and (iv) do not and will not contravene or conflict with any provision
of law or of the charter or by-laws of the Company or of any indenture, loan
agreement or other contract, order or decree which is binding upon the Company;
and (e) the Amended Credit Agreement is the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
or similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
SECTION 6 EFFECTIVENESS. The amendments set forth in Section 1 above
shall become effective, as of the day and year first above written, on such date
(the "Second Amendment Effective Date") when the Agent shall have received, (a)
a counterpart of this Amendment executed by each of the Required Lenders (or,
in the case of any party other than the Company from which the Agent has not
received a counterpart hereof, facsimile confirmation of the execution of a
counterpart hereof by such party) and (b) each of the following documents, each
in form and substance satisfactory to the Agent:
-3-
<PAGE> 124
6.1 Confirmation. A confirmation from the Parent, substantially in
the form of Exhibit A hereto.
6.2 Other Documents. Such other documents as the Agent or any Lender
may reasonably request in connection with the Company's authorization,
execution and delivery of this Amendment.
SECTION 7 MISCELLANEOUS.
7.1 Continuing Effectiveness, etc. As herein amended, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. After the Second Amendment Effective Date, all
references in the Credit Agreement, the Notes, each other Loan Document and any
similar document to the "Credit Agreement" or similar terms shall refer to the
Amended Credit Agreement.
7.2 Counterparts. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Amendment.
7.3 Expenses. The Company agrees to pay the reasonable costs and
expenses of the Agent (including Attorney Costs) in connection with the
preparation, execution and delivery of this Amendment.
7.4 Governing Law. This Amendment shall be a contract made under and
governed by the internal laws of the State of New York.
7.5 Successors and Assigns. This Amendment shall be binding upon the
Company, the Lenders and the Agent and their respective successors and assigns,
and shall inure to the benefit of the Company, the Lenders and the Agent and
the successors and assigns of the Lenders and the Agent.
-4-
<PAGE> 125
Delivered at New York, New York, as of the day and year first above
written.
FIBERITE, INC.
By /s/
---------------------------------------
Title CEO
----------------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By /s/
---------------------------------------
Title Vice President
----------------------------------
BANK OF AMERICA ILLINOIS
By /s/
---------------------------------------
Title Vice President
----------------------------------
DRESDNER BANK AG, LOS ANGELES AGENCY
AND GRAND CAYMAN BRANCH
By /s/
---------------------------------------
Title Vice President
----------------------------------
By /s/ Jon M. Bland
---------------------------------------
Title Senior Vice President
----------------------------------
-5-
<PAGE> 126
THE BANK OF NOVA SCOTIA
By /s/
____________________________________
Title________________________________
BANQUE PARIBAS
By_____________________________________
Title________________________________
By_____________________________________
Title________________________________
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By /s/ James Fox
___________________________________
James Fox
_______________________________
Title Assistant Vice President
By /s/ Robert M. Wood, Jr.
___________________________________
Robert M. Wood, Jr.
_______________________________
Title Vice President
INDOSUEZ CAPITAL FUNDING II, LTD.
By /s/
__________________________________
Title Vice President
_____________________________
-6-
<PAGE> 127
THE NIPPON CREDIT BANK, LTD., LOS
ANGELES AGENCY
By /s/ Shinsuke Baba
----------------------------------
Title Deputy General Manager
Name: Shinsuke Baba
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By /s/
----------------------------------
Title Assistant Treasurer
PILGRIM PRIME RATE TRUST
By /s/ Michael J. Bacevich
----------------------------------
Michael J. Bacevich
Title Vice President
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
By /s/ Jeffrey W. Maillet
----------------------------------
Jeffrey W. Maillet
Title Sen Vice Pres
Portfolio Manager
-7-
<PAGE> 128
EXHIBIT A
CONFIRMATION
Dated as of March 29, 1996
To: Bank of America National Trust and Savings Association, as Agent, and
the other financial institutions party to the Credit Agreement referred
to below
Please refer to (a) the Credit Agreement dated as of October 6, 1995
among Fiberite, Inc., various financial institutions (the "Lenders") and Bank
of America National Trust and Savings Association, as Agent (the "Agent"); (b)
the Second Amendment and Waiver dated as of March 29, 1996 to the Credit
Agreement (the "Second Amendment"); and (c) the Guaranty (the "Guaranty") dated
as of October 6, 1995, executed by Fiberite Holdings, Inc. in favor of the
Agent and the Lenders.
The undersigned hereby confirms to the Agent and the Lenders that,
after giving effect to the Second Amendment and the transactions contemplated
thereby, the Guaranty and each other Loan Document (as defined in the Credit
Agreement) to which the undersigned is a party continues in full force and
effect and is the legal, valid and binding obligation of the undersigned,
enforceable against the undersigned in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
FIBERITE HOLDINGS, INC.
By: /s/ Reid S. Perper
Title: Senior Vice President
<PAGE> 129
THIRD AMENDMENT
THIS THIRD AMENDMENT dated as of May 17, 1996 (this "Amendment") is
among FIBERITE, INC. (the "Company"), various financial institutions (the
"Lenders") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent
(the "Agent").
WHEREAS, the Company, the Lenders and the Agent have entered into a
Credit Agreement dated as of October 6, 1995 (as amended by the First Amendment
dated as of October 30, 1995 and the Second Amendment and Waiver dated as of
March 29, 1996, the "Credit Agreement"; unless otherwise defined herein, terms
defined in the Credit Agreement are used herein as defined in the Credit
Agreement);
WHEREAS, the Company has entered into an agreement to acquire the
equipment, formulations and other specific assets of Simmaco SARL, a company
located in Corcelles-Les-Lens, France, from SOFREMI SARL and will create a
wholly-owned Foreign Subsidiary organized under the laws of France, Fiberite
France SARL, through which it will acquire certain of such assets;
WHEREAS, the Company will invest sufficient amounts in Fiberite France
SARL in order to enable Fiberite France SARL to complete such acquisition;
WHEREAS, Fiberite France SARL will pay approximately $1,950,000 for
such assets, of which $1,350,000 will be deferred and will constitute
Indebtedness under the Credit Agreement; and
WHEREAS, the parties hereto desire to amend the Credit Agreement to
make certain changes as hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION 1 AMENDMENT. Effective on (and subject to the occurrence of)
the Third Amendment Effective Date (as defined below), the Credit Agreement
shall be amended in accordance with Sections 1.1 through 1.3 below.
1.1 Section 8.4(c). Section 8.4(c) is hereby amended by (i) deleting
the amount "$3,000,000" therein and substituting the amount "$4,000,000"
therefor and (ii) adding the following phrase after the words "Closing Date"
therein: "(excluding up to $1,950,000 of the Company's initial investment in
Fiberite France SARL, to the extent such investment is used to acquire the
assets of Simmaco SARL from SOFREMI SARL)".
<PAGE> 130
1.2 Section 8.4(h). Section 8.4(h) is hereby amended by deleting the
amount "$500,000" therein and substituting the amount "$3,000,000" therefor.
1.3 Section 8.5(h). Section 8.5(h) is hereby amended by (i) deleting
the amount "$1,000,000" therein and substituting the amount "$2,000,000"
therefor and (ii) adding the following phrase after the words "Foreign
Subsidiary" at the end thereof: "(excluding Fiberite France SARL, to the
extent of any deferred acquisition payment incurred in connection with purchase
of the assets of Simmaco SARL from SOFREMI SARL)."
SECTION 2 REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Agent and the Lenders that (a) the representations and
warranties made in Article VI of the Credit Agreement are true and correct on
and as of the Third Amendment Effective Date with the same effect as if made on
and as of the Third Amendment Effective Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which case
they were true and correct as of such earlier date); (b) no Event of Default or
Unmatured Event of Default exists or will result from the execution of this
Amendment; (c) no event or circumstance has occurred since the Closing Date that
has resulted, or would reasonably be expected to result, in a Material Adverse
Effect; (d) the execution and delivery by the Company of this Amendment and the
performance by the Company of its obligations under the Credit Agreement as
amended hereby (as so amended, the "Amended Credit Agreement") (i) are within
the corporate powers of the Company, (ii) have been duly authorized by all
necessary corporate action, (iii) have received all necessary governmental
approval and (iv) do not and will not contravene or conflict with any provision
of law or of the charter or by-laws of the Company or of any indenture, loan
agreement or other contract, order or decree which is binding upon the Company;
and (e) the Amended Credit Agreement is the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
SECTION 3 EFFECTIVENESS. The amendments set forth in Section 1 above
shall become effective, as of the day and year first above written, on such
date (the "Third Amendment Effective Date") when the Agent shall have received,
(a counterpart of this Amendment executed by each of the Required Lenders
(or, in the case of any party other than the Company from which the Agent has
not received a counterpart hereof, facsimile confirmation of the execution of
a counterpart hereof by such party) and (b) each
-2-
<PAGE> 131
of the following documents, each in form and substance satisfactory to the
Agent:
3.1 Confirmation. A confirmation from the Parent, substantially in the
form of Exhibit A hereto.
3.2 Other Documents. Such other documents as the Agent or any Lender
may reasonably request in connection with the Company's authorization,
execution and delivery of this Amendment.
SECTION 4 MISCELLANEOUS.
4.1 Pledge Agreement. The Company agrees to promptly (and in any event
not later than June 30, 1996) (i) provide a pledge agreement (or its functional
equivalent under the law of France) executed by the Company pledging 65% of the
outstanding common stock of Fiberite France SARL to the Agent, for the benefit
of the Agent and the Lenders, in form and substance reasonably satisfactory to
the Agent and its counsel and (ii) take such other actions as may be necessary
or as the Agent or any Lender may reasonably request to cause such pledge to be
perfected under applicable law.
4.2 Continuing Effectiveness, etc. As herein amended, the Credit
Agreement shall remain in full force and effect and is hereby ratified and
confirmed in all respects. After the Third Amendment Effective Date, all
references in the Credit Agreement, the Notes, each other Loan Document and any
similar document to the "Credit Agreement" or similar terms shall refer to the
Amended Credit Agreement.
4.3 Counterparts. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original but all such counterparts
shall together constitute one and the same Amendment.
4.4 Expenses. The Company agrees to pay the reasonable costs and
expenses of the Agent (including Attorney Costs) in connection with the
preparation, execution and delivery of this Amendment.
4.5 Governing Law. This Amendment shall be a contract made under and
governed by the internal laws of the State of New York.
4.6 Successors and Assigns. This Amendment shall be binding upon the
Company, the Lenders and the Agent and their respective successors and assigns,
and shall inure to the benefit of the Company, the Lenders and the Agent and
the successors and assigns of the Lenders and the Agent.
-3-
<PAGE> 132
Delivered at New York, New York, as of the day and year first above
written.
FIBERITE, INC.
By /s/
--------------------------------
Title CFO
--------------------------
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By /s/
--------------------------------
Title Vice President
--------------------------
BANK OF AMERICA ILLINOIS
By /s/
--------------------------------
Title Vice President
--------------------------
DRESDNER BANK AG, LOS ANGELES AGENCY
AND GRAND CAYMAN BRANCH
By /s/ Jon M. Bland
--------------------------------
Jon M. Bland
Title Sen. Vice Pres.
--------------------------
By /s/ Vitol Wiacek
--------------------------------
Vitol Wiacek
Title Asst. Vice Pres.
--------------------------
-4-
<PAGE> 133
THE BANK OF NOVA SCOTIA
By /s/
--------------------------------
Title Senior Relationship Manager
---------------------------
BANQUE PARIBAS
By /s/
--------------------------------
Title Vice President
--------------
By /s/ Mark A. Radzik
--------------------------------
Mark A. Radzik
Title Vice President
--------------
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By /s/ Ross A. Howard
--------------------------------
Ross A. Howard
Title Director
--------
By /s/
--------------------------------
Title Associate
---------
INDOSUEZ CAPITAL FUNDING II, LTD.
By: Indosuez Capital, as
Portfolio Advisor
By /s/
--------------------------------
Title V.P.
----
-5-
<PAGE> 134
THE NIPPON CREDIT BANK, LTD.,
LOS ANGELES AGENCY
By /s/
------------------------------------
Title Vice President & Senior Manager
-------------------------------
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as
Investment Advisor
By /s/
------------------------------------
Title Vice President
------------------------------
PILGRIM PRIME RATE TRUST
By /s/ Michael J. Bacevich
------------------------------------
Title Michael J. Bacevich
------------------------------
Vice President
VAN KAMPEN AMERICAN CAPITAL PRIME RATE
INCOME TRUST
By /s/ Jeffrey W. Maillet
------------------------------------
Title Jeffrey W. Maillet
------------------------------
Sr. Vice Pres.-Portfolio Mgr.
-6-
<PAGE> 135
EXHIBIT A
CONFIRMATION
Dated as of May 17, 1996
To: Bank of America National Trust and Savings Association, as Agent, and
the other financial institutions party to the Credit Agreement referred
to below
Please refer to (a) the Credit Agreement dated as of October 6, 1995
among Fiberite, Inc., various financial institutions (the "Lenders") and Bank
of America National Trust and Savings Association, as Agent (the "Agent"); (b)
the Third Amendment dated as of May 17, 1996 to the Credit Agreement (the
"Third Amendment"); and (c) the Guaranty (the "Guaranty") dated as of October
6, 1995, executed by Fiberite Holdings, Inc. in favor of the Agent and the
Lenders.
The undersigned hereby confirms to the Agent and the Lenders that,
after giving effect to the Third Amendment and the transactions contemplated
thereby, the Guaranty and each other Loan Document (as defined in the Credit
Agreement) to which the undersigned is a party continues in full force and
effect and is the legal, valid and binding obligation of the undersigned,
enforceable against the undersigned in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
FIBERITE HOLDINGS, INC.
By: /s/ Reid S. Perper
---------------------
Title: Senior Vice President
---------------------
<PAGE> 136
FOURTH AMENDMENT AND WAIVER
THIS FOURTH AMENDMENT AND WAIVER dated as of January 29, 1997 (this
"Amendment") is among FIBERITE, INC. (the "Company"), various financial
institutions (the "Lenders") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Agent (the "Agent").
WHEREAS, the Company, the Lenders and the Agent have entered into a
Credit Agreement dated as of October 6, 1995 (as heretofore amended, the
"Credit Agreement"; unless otherwise defined herein, terms defined in the
Credit Agreement are used herein as defined in the Credit Agreement);
WHEREAS, the Company has entered into an agreement to acquire the
assets of the Composites Materials and Engineering Services Division of E.I.
duPont de Nemours and Company for approximately $13.5 million on or about
January 31, 1997 (the "DuPont Acquisition");
WHEREAS, the Parent desires to make an initial Public Offering of its
common stock (the "Parent IPO") and to use certain of the net cash proceeds
thereof to prepay the Subordinated Notes and to contribute to the Company the
portion of the net cash proceeds thereof in excess of the amount required to
prepay the Subordinated Notes for the Company to use to prepay Loans; and
WHEREAS, the parties hereto desire to amend the Credit Agreement and to
waive certain provisions of the Credit Agreement, in each case as hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration (the receipt and sufficiency of which are hereby
acknowledged), the parties hereto agree as follows:
SECTION 1 AMENDMENTS. Effective on (and subject to the occurrence of)
the Fourth Amendment Effective Date (as defined below), (a) the definition of
"Net Worth" in Section 1.1 of the Credit Agreement shall be amended in its
entirety to read as follows:
Net Worth means the Company's consolidated stockholders' equity
plus all non-cash or non-recurring charges after the Closing Date
related to but not limited to the adoption of new accounting policies
and plant consolidations or restructurings and non-cash charges taken in
anticipation of the Parent IPO (as defined in the Fourth Amendment and
Waiver hereto dated as of January 29, 1997),
<PAGE> 137
to the extent such charges were deducted in determining such
consolidated stockholders' equity.
and (b) Section 8.15 of the Credit Agreement shall be amended by adding the
following after the table therein:
; provided, however, that Capital Expenditures consisting of the
purchase price paid for the assets acquired pursuant to the DuPont
Acquisition (as defined in the Fourth Amendment and Waiver hereto dated
as of January 29, 1997) and closing costs and expenses in connection
with the DuPont Acquisition shall not be counted towards any limitation
on Capital Expenditures during any fiscal year pursuant to this Section
8.15 (it being understood that the maximum aggregate amount of Capital
Expenditures that may be so not counted under this proviso shall in no
event exceed $15,000,000).
SECTION 2 WAIVERS. Effective on (and subject to the occurrence of) the
Fourth Amendment Effective Date, the Lenders waive (a) any non-compliance with
Sections 7.13 and 8.4 of the Credit Agreement caused by the DuPont Acquisition
to the extent necessary to permit the DuPont Acquisition (including the use of
proceeds of Loans to finance the DuPont Acquisition) and (b) so long as the
DuPont Acquisition is consummated prior to the 90th day following the Company's
1996 fiscal year, the Company's obligation to prepay the Term Loans under
Section 2.7(f) of the Credit Agreement with respect to Excess Cash Flow from the
Company's 1996 fiscal year.
SECTION 3 REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Agent and the Lenders that: (a) the representations and
warranties made in Article VI of the Credit Agreement are true and correct on
and as of the Fourth Amendment Effective Date with the same effect as if made on
and as of the Fourth Amendment Effective Date (except to the extent such
representations and warranties expressly refer to an earlier date, in which case
they were true and correct as of such earlier date); (b) no Event of Default or
Unmatured Event of Default exists or will result from the execution of this
Amendment; (c) no event or circumstance has occurred since the Closing Date that
has resulted, or would reasonably be expected to result, in a Material Adverse
Effect; (d) the execution and delivery by the Company of this Amendment and the
performance by the Company of its obligations under the Credit Agreement as
amended hereby (as so amended, the "Amended Credit Agreement") (i) are within
the corporate powers of the Company, (ii) have been duly authorized by all
necessary corporate action, (iii) have received all necessary governmental
approval and (iv) do not and will not contravene or conflict with any provision
of law or of the charter or by-laws of the Company or of any indenture, loan
agreement or other contract, order or decree which is binding
-2-
<PAGE> 138
upon the Company; and (a) the Amended Credit Agreement is the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms -- except -- as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
SECTION 4 EFFECTIVENESS. The amendments set forth in Section 1 above and
the waivers set forth in Section 3 above shall become effective on such date
(the "Fourth Amendment Effective Date") when the Agent shall have received (a) a
counterpart of this Amendment executed by each of the Lenders (or, in the case
of any party other than the Company from which the Agent has not received a
counterpart hereof, facsimile confirmation of the execution of a counterpart
hereof by such party), (b) with respect to each Lender that has executed a
counterpart hereof prior to 5:00 p.m. (New York time) on January 29, 1997, the
amendment fee separately agreed to between the Company and such Lender and (c)
each of the following documents, each in form and substance satisfactory to the
Agent:
4.1 Confirmation. A conformation from the Parent, substantially in the
form of Exhibit A hereto the "Confirmation").
4.2 Opinion of Counsel. An opinion of Gray, Cary, Ware & Freidenrich,
counsel to the Company and Parent, in Loan and substance satisfactory to the
Agent, as to the enforceability of this Amendment and the Confirmation against
the Company and Parent.
4.3 Other Documents. Such other documents as the Agent or any Lender may
reasonably request in connection with the Company's authorization, execution and
delivery of this Amendment.
SECTION 5 MISCELLANEOUS.
5.1 Continuing Effectiveness, etc. As herein amended, the Credit Agreement
shall remain in full force and effect and is hereby ratified and confirmed in
all respects. After the Fourth Amendment Effective Date, all references in the
Credit Agreement, the Notes, each other Loan Document and any similar document
to the "Credit Agreement," or similar terms shall refer to the Amended Credit
Agreement.
5.2 Counterparts. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an
-3-
<PAGE> 139
original but all such counterparts shall together constitute one and the same
Amendment.
5.3 Expenses. The Company agrees to pay the reasonable costs and
expenses of the Agent (including Attorney Costs) in connection with the
preparation, execution and delivery of this Amendment.
5.4 Governing Law. This Amendment shall be a contract made under and
governed by the internal laws of the State of New York.
5.5 Successors and Assigns. This Amendment shall be binding upon the
Company, the Lenders and the Agent and their respective successors and assigns,
and shall inure to the benefit of the Company, the Lenders and the Agent and
the successors and assigns of the Lenders and the Agent.
5.6 Parent IPO Proceeds. The Company agrees to give the Agent and the
Lenders ten Business Days' notice of the planned closing of the Parent IPO and
to prepay, within three Business Days of the closing of the Parent IPO, Loans in
an aggregate amount equal to the aggregate cash proceeds received by the Parent
in the Parent IPO net of the direct costs of such issuance (including, without
limitation, sales and underwriter's commissions and legal, accounting and
investment banking fees) ("Net Cash Proceeds") and, so long as no Event of
Default has occurred and is continuing, less the amount required for Parent to
prepay the Subordinated Notes. The aggregate amount of the prepayment of the
Loans under this Section 5.6 shall be at least $8,000,000 less, if the Parent
IPO closes after March 31, 1997, any increase in the accreted value of the
Subordinated Notes (as determined under the terms of the Subordinated Notes)
occurring after such date; provided, however, that in no event will the amount
of the prepayment under this Section 5.6 be less than $7,000,000. 50% of such
prepayment shall be applied to the Revolving Loans and 50% of such prepayment
shall be applied to the Term Loans and to the remaining installments thereof pro
rata; provided that if any Lender holding Term B Loans so requests, by notice to
the Agent not later than five Business Days prior to the date on which such
prepayment is due, the portion of such prepayment that would have been applied
to such Lender's Term B Loans shall be applied pro rata to the remaining
installments of the Term A Loans of all Lenders. The prepayment made pursuant to
this Section 5.6 shall be governed by the Credit Agreement in all respects. The
Lenders consent to the application of proceeds of the Parent IPO to prepay Loans
as set forth in this Section 5.6 and, so long as no Event of Default has
occurred and is continuing, to prepay the Subordinated Notes as set forth in the
recitals of this Amendment.
-4-
<PAGE> 140
Delivered at New York, New York, as of the day and year first above
written.
FIBERITE, INC.
By /s/ R. M. Miller
--------------------------------------
Title Chief Financial Officer/Secretary
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Agent
By /s/
--------------------------------------
Title Vice President
BANK OF AMERICA ILLINOIS
By /s/
--------------------------------------
Title Vice President
DRESDNER BANK AG, LOS ANGELES AGENCY
AND GRAND CAYMAN BRANCH
By /s/
--------------------------------------
Title Vice President
By /s/
--------------------------------------
Title
THE BANK OF NOVA SCOTIA
By /s/
--------------------------------------
Title
-5-
<PAGE> 141
BANQUE PARIBAS
By /s/ Gerald E. O'Keefe
------------------------------------
GERALD E. O'KEEFE
Title Vice President
By /s/ Clark C. King, III
------------------------------------
CLARK C. KING, III
Title Vice President
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By /s/ Angela Bozorgmir
------------------------------------
Title Assistant Vice President
By /s/ Robert M. Wood, Jr.
------------------------------------
Title Vice President
INDOSUEZ CAPITAL FUNDING II, LTD.
By: Indosuez Capital, as
Portfolio Advisor
By /s/ Francoise Berthelot
-------------------------------------
Title Vice President
THE NIPPON CREDIT BANK, LTD.,
LOS ANGELES AGENCY
By /s/ Bernardo E. Correa
---------------------------------------
Title Vice President
-6-
<PAGE> 142
SENIOR DEBT PORTFOLIO
By: Boston Management and
Research, as Investment
Advisor
By /s/ Barbara Campbell
-----------------------------
Title Assistant Treasurer
--------------------------
PILGRIM PRIME RATE TRUST
By /s/ Michael J. Bacevich
-----------------------------
Title Vice President
--------------------------
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By /s/ Jeffrey W. Maillet
-----------------------------
Title SR. Vice President
--------------------------
- 7 -
<PAGE> 143
EXHIBIT A
CONFIRMATION
Dated as of January 29, 1997
To: Bank of America National Trust and Savings Association, as Agent, and the
other financial institutions party to the Credit Agreement referred to below
Please refer to: (a) the Credit Agreement dated as of October 6, 1995
among Fiberite, Inc. (the "Company"), various financial institutions (the
"Lenders") and Bank of America National Trust and Savings Association, as Agent
(the "Agent"); (b) the Fourth Amendment and Waiver dated as of January 29, 1997
to the Credit Agreement (the "Fourth Amendment"); and (c) the Guaranty (the
"Guaranty") dated as of October 6, 1995, executed by Fiberite Holdings, Inc. in
favor of the Agent and the Lenders.
The undersigned hereby confirms to the Agent and the Lenders that,
after giving effect to the Fourth Amendment and the transactions contemplated
thereby, the Guaranty and each other Loan Document (as defined in the Credit
Agreement) to which the undersigned is a party continues in full force and
effect and is the legal, valid and binding obligation of the undersigned,
enforceable against the undersigned in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability.
The undersigned agrees that, upon the closing of the Parent IPO (as
defined in the Fourth Amendment), it will contribute to the Company the Net
Cash Proceeds (as defined in the Fourth Amendment) thereof less, if no Event of
Default has occurred and is continuing, the amounts required for the
undersigned to prepay the Subordinated Notes (as defined in the Credit
Agreement) and to cause the Company to use such contribution to prepay Loans
(as defined in the Credit Agreement) as provided in Section 5.6 of the Fourth
Amendment.
FIBERITE HOLDINGS, INC.
By: /s/ Ron Miller
--------------------------
Chief Financial Officer
Vice President
<PAGE> 1
Exhibit 10.11
------------
HEINRICH VON METTENHEIM
CERTIFIED COPY
Deed No. 328/1995
BUSINESS PURCHASE AGREEMENT
between
"DALIA" VERWALTUNGSGESELLSCHAFT mbH,
FIBERITE HOLDINGS, INC.
and
FIBERITE EUROPE GmbH,
DEUTSCHE ICI GmbH
DATED OCTOBER 6, 1995
<PAGE> 2
No. 328 of the Roll of Deeds for 1995 yM
DONE
in Frankfurt am Main on October 6, 1995
Before me the undersigned Notary
in the area of the Oberlandesgericht Frankfurt am Main
HEINRICH VON METTENHEIM
with my offices in Freiherr-vom-Stein-Strasse 24-26
D-60323, Frankfurt am Main
appeared today
(1) Dr. Cornelius Goetze, with his business address at Bockenheimer
Landstrasse 51-53, 60325 Frankfurt am Main, identified by his personal
identity card, acting according to his declaration not in his own
name and on his own behalf but on behalf of:
a) Fiberite Europe GmbH, Ostringen,
b) Deutsche ICI GmbH, Frankfurt am Main,
c) ICI Lacke Farben GmbH, Hilden,
on presentation of powers of attorney attached hereto;
(2) Mr. Paul Scesniak, with his business address at Niedenau 68, 60325
Frankfurt am Main, identified by his German driving license, acting,
according to his declaration, not in his own name and on his own behalf
but on behalf of
a) Fiberite Holdings, Inc., co DLJ Merchant Banking Inc., 1040
Broadway, New York, N.Y. 10005 USA,
<PAGE> 3
b) "DALIA" Verwaltungsgesellschaft mbH. Frankfurt am Main. (in future
named: Fiberite Europe GmbH with place of business in Monchengladbach)
on presentation of telefax copies of powers of attorney attached hereto,
promising to deliver original powers of attorney subsequently.
The persons appearing requested that their declarations be made in the English
language. The officiating notary, who has a good command of the English
language, confirmed that the persons appearing have a good command of the
English language. The persons appearing waived their right to have an
interpreter present after having been informed of such right by the officiating
notary.
This having been done, the persons appearing declared, requesting that it be
notarised:
<PAGE> 4
BUSINESS PURCHASE AGREEMENT
BETWEEN
DALIA VERWALTUNGSGESELLSCHAFT mbH
FIBERITE HOLDINGS, INC.
AND
FIBERITE EUROPE GMBH
DEUTSCHE ICI GmbH
Dated October 6, 1995
<PAGE> 5
- 2 -
BUSINESS PURCHASE AGREEMENT
BUSINESS PURCHASE AGREEMENT dated as of October 6, 1995, between Fiberite
Europe GmbH, registered in the commercial register of the Local Court Bruchsal
sub HR B 1075 ("Seller") and Deutsche ICI GmbH, registered in the commercial
register of the Local Court Frankfurt am Main sub HR B 36790 ("Seller's
Guarantor") on the one hand, and Dalia Verwallungsgesellschaft mbH, registered
in the commercial register of the Local Court Frankfurt am Main sub HR B 40230
("Purchaser") and Fiberite Holdings, Inc. ("Purchaser's Guarantor"), a Delaware
corporation, on the other hand.
WHEREAS, Purchaser desires to acquire from Seller, and Seller desires to sell
to Purchaser, the entire business currently conducted by Seller as a going
concern on the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual agreements
and covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common
control with such Person. A Person shall not be deemed to be an
Affiliate of any other person solely as a result of being a director or
officer of such other Person.
"Ancillary Agreements" means the Transition Services Agreement and the
Real Property Transfer Agreement.
"Aviation Product" means "Aviation Product" as defined in Schedule
3.24.
"Balance Sheet" means the balance sheet set forth in the audited
financial statements of Seller dated December 31, 1994.
<PAGE> 6
- 3 -
"Balance Sheet Date" means December 31, 1994.
"Business" means the business of the design, manufacture, sale (including the
sale of products manufactured by Seller and of products purchased by Seller
from ICI Composites Inc.), servicing and support of advanced composite
materials as currently conducted by Seller.
"Business Day" means a day of the year on which banks are not required or
authorized to be closed in Frankfurt am Main.
"Closing" means the closing of the purchase and sale of the Business.
"Closing Date" means the date of this Agreement.
"Current Assets" means to the extent transferred to Purchaser accounts
receivable (including intercompany receivables with ICI Composites Inc.),
inventory (including raw materials, work in process, finished goods and
supplies), prepaid expenses ("Rechnungsabgrenzungsposten" -- including without
limitation annual bonuses such as the "Maigeld"), less related reserves, in
each case if and to the extent such assets are not part of the Excluded Assets.
"Current Liabilities" means to the extent transferred to Purchaser accounts
payable (including intercompany payables with ICI Composites Inc.), employee
accruals and other accrued expenses excluding income taxes; for the avoidance
of doubt, accounts payable in respect of which the Seller has issued cheques
prior to the Closing Date which are not presented for payment as of the Closing
Date shall be deemed to be accounts payable.
"Employee Plan" means any material compensation or benefit, plan, policy or
arrangement currently maintained or contributed to by Seller for its current or
former employees.
"GAAP" means German generally accepted accounting principles.
"ICI" means Imperial Chemical Industries PLC, a corporation organized under the
laws of England.
<PAGE> 7
- 4 -
"ICI Company" means ICI or any Affiliate of ICI (excluding Seller and ICI
Composites Inc).
"Included ICI Assets" means all assets owned by Deutsche ICI GmbH or any other
ICI Company and used by Deutsche ICI GmbH or any ICI Company exclusively or
principally for the provision of services to Seller (excluding all corporate
credit, telephone and similar cards held by Seller Employees where such cards
have been provided to Seller Employees in connection with any ICI Company and
excluding all computer and information technology rights and systems owned or
operated by Deutsche ICI GmbH or any other ICI Company for the benefit of
Seller and excluding any assets owned by Deutsche ICI-GmbH or any ICI Company
and utilized in the performance of the Ancillary Agreements) in the operation
of the Business as presently conducted, other than the Excluded Assets.
"Income Taxes" means any liability for taxes that arises in relation to a Tax
that is based upon, measured by, or calculated with respect to income, profits
or gross receipts (other than value added tax).
"Indemnifiable Taxes" means Taxes due and payable by Seller pertaining to any
taxable period (or portion thereof) ending on or prior to the Closing Date,
including any Tax resulting from any transaction pursuant to which the Excluded
Assets remain or become the property of the Seller or any Affiliate of the
Seller. With respect to a taxable period that begins before the Closing Date
and ends after the Closing Date, the portion of any Taxes attributable to such
period that will be treated as Taxes of a Pre-Closing Tax Period will be deemed
to be: (i) in the case of any Other Tax, the amount of such Other Tax for the
entire period multiplied by a fraction, the numerator of which is the number of
days in the period ending on the Closing Date and the denominator of which is
the number of days in the entire period and (ii) in the case of any Income
Taxes, the Income Tax for the entire taxable period, multiplied by a fraction,
the numerator of which is the hypothetical Income Tax for the Pre-Closing Tax
Period (determined on the basis of an interim closing of the books, without
annualisation) and the denominator of which is the sum of such numerator plus
the hypothetical Income Tax for the balance of the taxable period (determined
on the basis of such interim closing, without annualisation) The hypothetical
Tax for any period shall be zero (in case where no Tax is due) or a positive
amount. In-
<PAGE> 8
-5-
demnifiable Taxes shall in no event include any interest, any penalties or any
additions to Tax, or any interest on penalties or additions to Tax resulting
from any action or failure to act, following the Closing, on the part of
Purchaser except to the extent resulting from any act or omission of Seller. No
Tax shall be included in Indemnifiable Taxes to the extent the liability for
such Tax is reflected in the Financial Statements or in the Statement of
Working Capital.
"Intellectual Property" means inventions, patents and patent applications;
trademarks, trademark registrations and applications therefor; trade names,
symbols and logos; copyrights; service marks; service mark registrations and
applications therefor; know-how; and trade secrets.
"Manufacturing Facilities" means the manufacturing and office facilities owned
or leased by Seller located at Ostringen and Monchengladbach.
"Material Adverse Effect" means a material adverse effect on the financial
condition, business, assets or net worth or results of operations of Seller
taken as a whole.
"Occurrence" means "Occurrence" as defined in Schedule 3.24.
"Other Taxes" means any liability for Taxes that arises in relation to Taxes
that are not Income Taxes.
"Person" means an individual, corporation, partnership, association, trust or
other entity or organization, including a government or political subdivision or
an agency or instrumentality thereof.
"Post-Closing Tax Period" means any period (or portion thereof) ending after
the Closing Date.
"Pre-Closing Tax Period" means any period (or portion thereof) ending on or
before the Closing Date.
"Seller Employee Plan" means Employee Plan sponsored or maintained by Seller or
any ICI Company for the benefit of current or former employees of Seller.
<PAGE> 9
-6-
"Tax" or "Taxes" means (i) all federal, state, local, foreign and other taxes
and similar governmental charges or assessments (including without limitation
income tax, trade tax, property tax, transfer and sales tax imposed by any
governmental authority responsible for the imposition of any such tax, whether
attributable to statutory or non-statutory rules and including interest,
penalties, additions to tax, and interest on penalties or additions to Tax;
(ii) any liability of Seller for the payment of any amounts described in clause
(i) as a result of being a member of an affiliated group of corporations filing
a consolidated tax return for federal, state or local tax purposes, for periods
prior to the Closing Date, and (iii) any liability of Seller for amounts
described in clause (i) under any Tax sharing or Tax allocation agreement
entered into prior to the date hereof.
"Transition Services Agreement" means the transition services agreement dated
as of the Closing Date between ICI Lacke Farben GmbH, Hilden and Purchaser.
"Working Capital" means Current Assets less Current Liabilities.
(b) Each of the following terms is defined in the Section set forth opposite
such term:
Term Section
- ---- -------
Arbitrated Amount 2.9(d)
Audited Financial Statements 3.12
Authorizations 3.9(a)
Claim Costs 7.3
Collective Bargaining Agreement 3.16(a)
Contracts 2.1(a)(iii)
Cost Effective Cleanup 7.9(g)
Designated Representatives 7.9(e)
Environmental Law 3.9(1)
Excluded Assets 2.2
Files 5.11(a)
Financial Statements 3.12
Government Bid 3.11(a)(vi)
Government Contract 3.11(a)(vi)
Hazardous Materials 3.9(e)
ICI Letters 5.2(a)
Indemnified Party 7.4(a)
Indemnifying Party 7.4(a)
Independent Accounting Firm 2.9(d)
Material Agreement 3.11(a)(v)
<PAGE> 10
- 7 -
Necessity Test 7.9(i)(ii)
Liens 3.7(a)
On-Site Cleanup 7.9(b)
Off-Site Remediation Liabilities 7.9(a)
On-Site Remediation Liabilities 7.9(a)
Permits 3.5(a)
Permitted Liens 3.7(a)
Purchase Price 2.8
Purchaser's Amount 2.9(d)
Purchaser Indemnitees 7.3
Real Property 7.9(a)
Relevant Factors 7.9(i)(ii)
Retained Seller Information 5.7
Retained Business Information 5.8
Seller Employee 6.1
Seller Indemnitees 7.2
Seller's Accountants 2.9(a)
Seller's Amount 2.9(d)
Statement of Working Capital 2.9(a)
Tax Returns 3.14
Testing 7.9(i)
Third Party Claim 7.4(b)
Warranties 3.20
ARTICLE II
PURCHASE AND SALE; TRANSFER
2.1 Purchase and Sale; Transfer
(a) As hereinafter provided Seller hereby sells and transfers to
Purchaser as a going concern, with economic effect as of the Closing Date, the
Business including all assets - owned by the Seller on the date hereof - and
liabilities attributable thereto, other than Excluded Assets. The sale and
transfer shall include, without limitation, all right, title and interest of
Seller in, to and under:
(i) all tangible fixed assets used exclusively or
principally in the Business including, without limitation, (x)
all real property and leases of real property owned by Seller,
in each case together with all buildings, fixtures and
improvements erected thereon, including without
<PAGE> 11
- 8 -
limitation the items listed on Schedule 2.1(a)(i), and (y) all machinery,
equipment, furniture, office equipment, communication equipment, vehicles,
storage tanks and other tangible fixed assets used exclusively or principally
in the Business, including without limitation the items listed on Schedule
2.1(a)(i);
(ii) all Current Assets, namely (y) all accounts receivable (see Schedule
2.1(a)(ii)), and (z) all inventory and prepaid expenses, including without
limitation the items listed on Schedule 2.1(a)(ii);
(iii) all rights and obligations under all contracts, agreements (except for
the profit and loss sharing agreement between Seller and Deutsche ICI GmbH and
except as set forth in Schedule 2.1(a)(iii)), leases, licenses, commitments,
sales and purchase orders and other instruments, including without limitation
the items listed on Schedule 2.1(a)(iii) (collectively, the "Contracts");
(iv) all of Seller's rights and claims against third parties relating to the
business now and previously conducted by Seller, including, without limitation,
unliquidated rights under manufacturers' and vendors' warranties;
(v) all of Seller's rights to Intellectual Property owned by Seller or used
exclusively or principally in the Business;
(vi) all licences, permits or other governmental authorization affecting, or
relating in any way to, the Business, including without limitation the items
listed on Schedule 2.1(a)(vi) except for the items listed in Schedule 2.2(iv);
(vii) all books, records, files and papers or portions thereof relating
exclusively or principally to the Business;
(viii) all of Seller's rights to computer software, programs and data owned by
Seller or used exclusively or principally in the Business;
<PAGE> 12
- 9 -
(ix) the firm name "Fiberite Europe" and all other good-will
attributable exclusively or principally to the Business
in each case without the Excluded Assets;
(b) Seller and Purchaser hereby make all declarations and carry out
all acts which are necessary to effectuate the transactions
contemplated in Section 2.1(a) hereof. The transfer of the
Business shall thereby become effective as of the Closing Date.
To the extent that the following Sections 2.4 - 2.6 of this
Agreement provide for specific declarations and acts with regard
to specific assets, this shall serve only the purpose of
emphasis and clarity.
2.2 Excluded Assets
---------------
Purchaser expressly understands and agrees that the following assets and
properties of Seller (the "Excluded Assets") shall be excluded from the
sale and transfer of the Business:
(i) all of Seller's cash and cash equivalents;
(ii) all intercompany balances between Deutsche ICI GmbH and Seller
in favour of Seller existing on or prior to the Closing Date;
(iii) Seller's loss compensation claim for the losses occurred in the
current fiscal year against Deutsche ICI GmbH under the profit and loss
sharing agreement;
(iv) all assets listed on Schedule 2.2(iv);
(v) all of Seller's bank accounts.
2.3 Included ICI Assets
-------------------
The parties acknowledge and will ensure that the Included ICI Assets
will with effect from the Closing become the property of Purchaser without
additional consideration. As regards the assets attributable exclusively or
principally to the services rendered by the foreign employees referred to in
Section 6.5 and 6.6 and owned by an ICI Company, Seller shall ensure that such
assets become the property of Purchaser without additional consideration. Lease
agreements
<PAGE> 13
-10-
and other agreements attributable exclusively or principally to the services of
such foreign employees shall transfer to Purchaser to the extent possible. The
parties agree to cooperate with each other and to take any action which is
reasonably necessary after the Closing in order to give effect to this Section.
For the avoidance of doubt, all assets owned or used by Deutsche ICI GmbH or
any ICI Company in the provision of services to Seller (including, without
limitation, all corporate credit, telephone and similar cards held by Seller
Employees where such cards have been provided to Seller Employees in connection
with any ICI Company and including all computer and Information technology
rights and systems owned or operated by Deutsche ICI GmbH or any ICI Company
for the benefit of Seller) other than Included ICI Assets shall not become the
property of Purchaser. Seller shall be responsible for any Taxes relating to
any transfers of assets pursuant to this Section.
2.4 Personal Property
(a) Seller and Purchaser agree that the title to all of the
personal property which shall be transferred pursuant to
Section 2.1(a) of this Agreement owned by Seller, shall pass
to Purchaser at the Closing Date.
(b) To the extent that the personal property referred to in Section
2.1(a) hereof is at Closing Date in the direct possession of
seller, the transfer of possession is replaced by the agreement
that Seller shall hold such assets in custody for Purchaser
(Section 930 German Civil Code), free of costs for Purchaser,
and that Purchaser shall be entitled to take direct possession
thereon at any time. If and to the extent Seller has only
indirect possession of such assets, Seller hereby assigns to
Purchaser its claim for repossession against such persons who
have direct possession (Section 931 German Civil Code).
2.5 Contracts
(a) Seller and Purchaser agree that the Contracts (except as set
forth in Schedule 2.1(a)(iii)) are transferred to Purchaser as
of the Closing Date.
(b) If any consent is required for any such transfer, and to the
extent such consent has not been
<PAGE> 14
obtained prior to the Closing, Seller and Purchaser will use all
reasonable efforts to obtain the consent of the other parties. If such
consent is not obtained, Seller and Purchaser will treat each other
internally as if the consent had been obtained. This includes Seller's
obligation to fulfill all rights and duties under the respective
Contract in its own name but for the account of Purchaser.
2.6 Real Property
As regards the declaration of transfer of the real property
(Auflassungserklarung), Seller and Purchaser shall enter into a separate
agreement before a German notary which shall form a part of this notarial
deed.
2.7 Assumption of Liabilities
(a) Unless expressly provided otherwise in this Agreement, Purchaser
hereby assumes all liabilities of Seller existing at the Closing Date
and/or thereafter and attributable to the Business including without
limitation all liabilities resulting from agreements entered into by
Seller for the Business.
(b) Recurrent payment obligations (salaries, lease payments and similar)
attributable to the period until the Closing Date shall be discharged
by Seller. As from the Closing Date the Purchaser shall assume such
obligations.
2.8 Purchase Price
(a) Subject to any adjustment as provided in Section 2.9., the aggregate
Purchase Price (the "Purchase Price") for the Business shall be DM 10
(ten) million.
(b) At the Closing Date Purchaser shall deliver (or cause to be delivered)
to Seller DM 10 (ten) million immediately available funds by wire
transfer to a bank account designated by Seller by notice delivered
to Purchaser not later than two Business Days prior to the Closing
Date.
<PAGE> 15
-12-
2.9 Preparation of Statement of Working Capital
(a) Statement of Working Capital. As soon as practicable,
but in any event within forty-five Business Days following the
Closing Date, Seller shall deliver to Purchaser a statement of
the Working Capital (the "Statement of Working Capital") as
of the close of business on the Closing Date, together with a
report thereon of KPMG, independent accountants for Seller
("Seller's Accountants"), to the effect that the amounts
reflected therein have, except as set forth in Schedule 2.9(a),
been prepared in accordance with the policies and procedures
used to prepare the 1994 Audited Financial Statements as
described in Section 3.12.
(b) Cooperation. Purchaser shall provide Seller and Seller's
Accountants full access to the books, records, facilities and
employees of Purchaser (which employees shall assist Seller's
Accountants in carrying out procedures necessary in preparing
the Statement of Working Capital) and shall cooperate fully
with Seller and Seller's Accountants, in each case to the
extent required by Seller and Seller's Accountants in order to
prepare the Statement of Working Capital and to investigate any
disputes or other matters relating thereto; provided, that any
such investigation shall be conducted in such a manner as not
to interfere unreasonably with the operation of Purchaser.
(c) [omitted].
(d) Disputes. Subject to this Section 2.9(d), the Statement of
Working Capital delivered by Seller to Purchaser shall be final,
binding and conclusive on the parties hereto. Within twenty
Business Days of Purchaser's receipt of the Statement of
Working Capital, Purchaser may dispute any amounts reflected
on the Statement of Working Capital by notifying Seller in
writing of each disputed item, specifying the amount thereof in
dispute and setting forth, in detail, the basis for such
dispute. During such twenty Business Day period, an independent
accounting firm to be nominated by Purchaser shall have
reasonable access to all working papers, supporting analyses,
computations, accounting records and general ledger reports
used by Seller or Seller's Accountants to prepare the
<PAGE> 16
-13-
Statement of Working Capital. Purchaser's notice shall also set forth
the amount it believes was the Working Capital of Seller as of the close
of business on the Business Day preceding the Closing Date ("Purchaser's
Amount"). In the event of such a dispute, Purchaser and Seller shall
attempt to reconcile their differences and any resolution by them as to
any disputed amounts shall be final, binding and conclusive on the
parties. If Purchaser and Seller are unable to reach a resolution within
twenty Business Days of Purchaser's written notice of dispute to Seller,
Purchaser and Seller shall submit the items remaining in dispute for
resolution to an independent accounting firm of national reputation
mutually appointed by Seller and Purchaser (the "Independent Accounting
Firm"), which shall, within twenty Business Days of such submission,
determine and report to Seller and Purchaser upon such remaining
disputed items and on the amount of Working Capital of Seller as of the
close of business on the Business Day preceding the Closing Date (the
"Arbitrated Amount"), which amount shall in no event be less than
Purchaser's Amount or greater than the amount of Working Capital set
forth on the statement of Working Capital delivered by Seller ("Seller's
Amount"). The report of the Independent Accounting Firm shall be final,
binding and conclusive on Seller and Purchaser. The fees and
disbursements of the Independent Accounting Firm shall be paid by
Purchaser and Seller in the following percentages: (i) in the case of
Seller, A divided by C, and (ii) in the case of Purchaser, B divided by
C, where (x) A equals the difference between Seller's Amount and the
Arbitrated Amount, (y) B equals the difference between the Arbitrated
Amount and Purchaser's Amount and (z) C equals the difference between
Seller's Amount and Purchaser's Amount.
(e) [omitted].
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants as of the Closing Date as follows:
<PAGE> 17
-14-
3.1 Organization and Authority of Seller.
(a) Seller is a corporation duly organized and validly existing
under the laws of Germany and has all necessary corporate power
and authority to enter into and perform this Agreement and to
consummate the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by Seller and
constitutes a legal, valid and binding obligation of Seller,
enforceable against it in accordance with its terms.
(b) Seller has all requisite corporate power and authority to own
its properties and assets and to carry on the Business.
(c) Seller is duly qualified to transact business and is in good
standing (where the concept of good standing applies) in each
state or jurisdiction in which it owns material assets or
transacts a material part of its business, except where the
failure to so qualify would not reasonably be expected to have a
Material Adverse Effect.
(d) Except as set forth in Schedule 3.1(d), Seller has made
available to Purchaser complete and correct copies of (i) the
Articles of Incorporation of Seller, as amended to the Closing
Date, certified by the commercial registry; (ii) [omitted] (iii)
[omitted] and (iv) [omitted]. Except as set forth in Schedule
3.1(d), such copies are true, correct and complete in all
material respects and, except as set forth in Schedule 3.1(d),
contain all amendments through the date of this Agreement.
(e) Seller is not the legal or beneficial owner of any equity
securities or other ownership interests of any corporation,
partnership, joint venture, trust, business association or other
legal entity.
3.2 No Conflict; Consents and Approvals.
(a) Except as set forth in Schedule 3.2(a), the execution, delivery
and performance of this Agreement by Seller does not (i)
conflict with or violate any law, rule, regulation, order,
judgment, injunction, decree, determination or award applicable
to Seller, (ii) conflict with or violate any law,
<PAGE> 18
-15-
rule, regulation, order, judgment, injunction, decree, determination or
award applicable to Seller, (iii) conflict with or violate the Articles of
Incorporation or by-laws of Seller, or (iv) require any material
pre-Closing consent, notice, authorization or approval under, result in any
breach of, or constitute a default (or event which with notice or lapse of
time, or both, would become a default) under, or result in a creation of
any lien or other encumbrance on any of the properties or assets of
Purchaser pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument to which
Seller or any of its Affiliates is a party or by which any of them or any
of their respective properties is bound or affected, except in the case of
Sections 3.2(a)(i) and (ii), for such conflicts, violations, breaches and
defaults, and for such consents and approvals the failure of which to
obtain, would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. Except as set forth in Schedule 3.2(a),
there are no other agreements to which Seller and Guarantor or any other
ICI Company is a party or by which Seller Guarantor or any other ICI
Company is bound, regarding the transfer of any assets of the Business or
prohibiting such transfer outside the ordinary course of business.
(b) The execution and delivery of this Agreement by Seller do not, and the
performance of this Agreement by Seller does not require any consent,
approval, authorization or other action by, or filing with or notification
to, any domestic or foreign governmental or regulatory authority or any
other person except for the filing with the Federal Cartel Authority which
has been made and approved as contemplated by Section 8.13 hereof and,
except where failure to obtain such consents, approvals, authorizations or
actions, or to make such filings or notifications, would not (i) prevent
Seller from performing any of its obligations under this Agreement or (ii)
otherwise prevent the consummation of the transactions contemplated herein
by Seller.
3.3 Litigation. Except as set forth in Schedule 3.3, there are no claims,
actions, suits or proceedings pending, or to the knowledge of each of Seller
and Guarantor
<PAGE> 19
-16-
threatened, nor to the knowledge of each of Seller and Guarantor
are there any investigations pending or threatened, against or
specifically affecting Seller or to which its respective properties
or assets are subject, before any court, arbitrator, or administrative,
governmental or regulatory authority or body, domestic or foreign,
that (i) challenge or otherwise put in issue the authority of Seller
to enter into or perform this Agreement, (ii) challenge or otherwise
put in issue the validity of this Agreement or any of the transactions
contemplated hereby or (iii) if adversely decided, would materially
adversely affect the ability of Seller to consummate the transactions
contemplated hereby or (iv) if adversely decided, would reasonably
be expected to have a Material Adverse Effect (other than with respect
to those matters described in Sections 3.3(i), (ii) and (iii)), and,
to the knowledge of each of Seller and Guarantor, there is no factual
basis upon which any such claim, action, suit or proceeding would
reasonably be likely to be asserted or commenced. Seller is not subject
to any order, judgment, injunction, decree, determination or award
which has or would reasonably be expected to have a Material Adverse
Effect.
3.4 [omitted].
3.5 Licences, Permits and Qualifications.
(a) Except as set forth in Schedule 3.5(a), Seller possess and,
upon consummation of the transaction contemplated herein,
Purchaser will possess all permits, licenses, orders and
approvals of foreign, federal, state or local governmental
or regulatory bodies that are required in order to permit
Seller to carry on the Business, except for those permits,
licenses, orders and approvals the failure of which to obtain
would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect (hereinafter referred
to as the "Permits"). Except as set forth in Schedule 3.5(a),
the Permits are in full force and effect and, to the knowledge
of each of Seller and Guarantor, no suspension or cancellation
of the Permits is threatened.
(b) To the knowledge of Seller, all products sold by Seller pursuant
to qualification requirements established by Seller's customers
were produced in a manner consistent with the requirements of
such
<PAGE> 20
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qualification where the failure to do so, individually or in the
aggregate, would reasonably be expected to have a Material
Adverse Effect. To its knowledge, Seller held all necessary
qualifications for its products from its customers pursuant to
which sales were made to such customers during the periods
covered by the Financial Statements. Except as set forth in
Schedule 3.5(b), Seller has not, since July 1, 1990, received
any notification that any material qualifications for Seller's
commercially manufactured products as established by Seller's
customers have been revoked or terminated, and to the knowledge
of each of Seller and Guarantor, no such notification,
revocation or termination is threatened or contemplated.
3.6 Compliance with Laws. Seller is not in violation of any foreign,
federal, state or local law, statute, ordinance or regulation in effect
on or prior to the Closing Date, except for laws, statutes, ordinances
or regulations dealing with environmental, tax, employee benefits, and
labor and employment matters (which matters are exclusively the subject
of Sections 3.9, 3.14, 3.15 and 3.16, respectively) and except for such
violations which individually or in the aggregate would not reasonably
be expected to have a Material Adverse Effect.
3.7 Properties.
(a) Except for property (other than real property) and assets sold
since the Balance Sheet Date in the ordinary course of business
which, other than finished goods in inventory, did not in the
aggregate exceed property and assets having a fair market value
in excess of DM 75,000, and, except in the case of Intellectual
Property, which is exclusively the Subject of 3.10, and for
property acquired under retention of title clauses in the
ordinary course of business, Seller has good and valid title to
or rights in, or in the case of leased property has valid
leasehold interests in, all material personal property and
assets (whether tangible or intangible) reflected on the Balance
Sheet or acquired after the Balance Sheet Date. Seller has, and
upon consummation of the transaction contemplated herein and,
where necessary, registration, Purchaser will have good and
marketable, indefeasible, title to, or in the case of
<PAGE> 21
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leased real property has valid leasehold interests in, all real property
reflected on the Balance Sheet or acquired after the Balance Sheet Date.
None of such property or assets (whether real or personal) is subject to
any liens, security interests, claims or other charges ("Liens"), except
(i) Liens for Taxes not yet due, (ii) mechanic's, materialman's and
landlord's and other statutory Liens of vendors not perfected or
recorded under law, (iii) Liens that do not materially detract from the
value or materially interfere with the present use of the assets to
which they apply and (iv) Liens disclosed in Schedule 3.7(a)
(collectively, "Permitted Liens").
(b) Schedule 3.7(b) sets forth (i) all real property owned by Seller, (ii)
all real property leased by Seller (and the annual rental for such
property), (iii) all personal property leased by Seller requiring annual
payments in excess of DM 25,000 (and the annual rental for such
property), and (iv) all personal property owned by the Seller with a
book value of DM 25,000 or more. Except as set forth in Schedule 3.7(b),
the property listed in Schedule 3.7(b) and all other personal property
owned or leased by Seller (all of which, in each case, is being
transferred to Purchaser) is all that is used to carry on the Business
as currently conducted. Seller currently conducts reasonable maintenance
in the ordinary course of business consistent with past practice with
respect to all machinery and equipment presently being utilized by it
in the manufacture of its products.
(c) Except as set forth in Schedule 3.7(c), the leases of real and personal
property described in Sec. 3.7(b) are in full force and effect, all
rentals or other payments due and payable thereunder prior to the date
hereof have been duly paid or adequate accruals therefor have been made
and are accurately reflected in the Financial Statements, and Seller is
in compliance with all material provisions of each such lease. To the
knowledge of each of Seller and Guarantor, no default or event of
default exists and no event which, with notice or lapse of time, or
both, would constitute a default or event of default has occurred and is
continuing, under the terms or provisions, express or implied, of any
<PAGE> 22
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of such leases, nor has Seller received notice of any claim of such
default or event of default.
(d) There are no eminent domain proceedings pending or, to the knowledge
of each of Seller and Guarantor, threatened, against any property
owned by Seller or any material portion thereof which proceedings (if
resulting in a taking) would reasonably be expected to have a Material
Adverse Effect on the use of such property as currently used in the
operation of the Business.
(e) [omitted].
(f) Since July 1, 1990 Seller has not received any notice or has knowledge
of violations of any local zoning or land use or other similar
regulations in respect of the real property listed on Schedule 3.7(b)
which are in effect or remain unresolved.
3.8 Bank Accounts. [omitted].
3.9 Environmental Protection. Except as would not reasonably be expected to
have a Materially Adverse Effect or as referred to in Schedule 3.9 hereto:
(a) Seller has obtained all permits, licences and other authorizations
(hereinafter collectively referred to as "Authorizations") which are
required with respect to the current operation of the Business, it
assets and the use, ownership and operation of the Business, its
assets and the use, ownership and operation of the Manufacturing
Facilities and any real property under any Environmental Law and each
such Authorization is in full force and effect.
(b) Seller is in compliance with all terms and conditions of the
Authorizations specified in sub-section 3.9(a) above, and is also in
compliance with, and not subject to liability under, any Environmental
law (including, without limitation, compliance with standards,
schedules and time-tables therein having the force of law).
(c) There is no civil, criminal or administrative action, suit, demand,
claim, hearing, notice of violation, proceeding, notice or demand
letter or request for information pending or, to the knowledge of each
of Seller and Guarantor, threatened, nor to the knowledge of Seller or
Guarantor is there any
<PAGE> 23
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investigation pending or threatened, under any Environmental Law
against Seller or against any person or entity whose liability
for any such matter Seller has retained or assumed either by
agreement or by operation of law.
(d) [omitted]
(e) Since July 1, 1990, Seller has not received any notification
that any hazardous substances or any pollutant or contaminant or
any toxic substances, hazardous waste, hazardous constituents,
asbestos or asbestos containing material, petroleum, including
crude oil and any fractions thereof, or other waste, chemicals,
substances or materials subject to regulation under any
Environmental Law (collectively "Hazardous Materials") that
Seller has used, generated, stored, treated, handled,
transported or disposed of or arranged for transport for
disposal or treatment of, or arranged for disposal or treatment
of, has been found at any site at which any governmental agency
or private party is, to the knowledge of each of Seller and
Guarantor, conducting or planning to conduct an investigation or
other action pursuant to any Environmental Law.
(f) Since July 1, 1985, and except as may have occurred in
compliance with applicable law, there have been no releases
(i.e., any releasing, spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping) of Hazardous Materials by Seller on, at,
upon, into or from any of the real properties owned, leased,
operated or used by Seller or facilities thereon.
(g) There is no asbestos in, on, or at any real property or
facility or equipment owned, leased or operated by Seller.
(h) [omitted]
(i) No notice or other filing, or consent or approval is required
under any Environmental Law in connection with or as a result of
the transactions contemplated by this Agreement.
<PAGE> 24
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(j) There are no underground storage tanks or related piping located
at, on or under any real properties owned, leased or operated by
Seller.
(k) Seller has delivered or otherwise made available for inspection
to Purchaser or its agents true, complete and correct copies of
any reports, studies, assessments, analyses, evaluations, test
or monitoring results in each case prepared by third parties
since July 1, 1990, possessed, available to or initiated by or
on behalf of Seller pertaining to Hazardous Materials in, on
beneath or adjacent to any of the Manufacturing Facilities or
real properties owned, leased, operated or used by Seller or
reading Seller's compliance with or liability under any
Environmental Law.
(l) For purposes of this Agreement, "Environmental Law" means any
applicable foreign, federal, state and local laws or
regulations, codes, ordinances, rules, orders, decrees or
judgments in effect on or prior to the Closing Date relating to
pollution or protection of public or employee health or the
environment, including without limitation, those relating to (i)
any releases or threats of releases of Hazardous Materials into
the environment (including, without limitation, ambient air,
indoor air, surface water, ground water, land surface or
subsurface) and (ii) underground or above ground storage tanks,
and related piping, and releases or threatened releases
therefrom.
3.10 INTELLECTUAL PROPERTY.
(a) Schedule 3.10(a) accurately sets forth or describes all domestic
and foreign patents, patent applications, patent licenses,
written know-how licenses, trade names, material secrecy
agreements, registered trademarks, registered copyrights,
registered service marks, trademarks and service mark
applications currently used or held for use in the Business.
(b) To Seller's knowledge, Seller owns and upon consummation of the
transactions contemplated herein Purchaser will own, all
licenses or has rights to use all Intellectual Property to the
extent used or held for use in connection with the Business and
transferable hereunder.
<PAGE> 25
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(c) Except as set forth in Schedule 3.10 (c), in the last 7 years,
no claim has been asserted against Seller, and Seller and
Guarantor have no knowledge, that the conduct of the Business as
now operated conflicts with valid patents, patent rights,
licenses, trademarks, service marks, trademark rights, trade
names, trade name rights or copyrights of others in any way that
would reasonably be expected to have a Material Adverse Effect.
(d) Except as set forth in Schedule 3.10(d), to the knowledge of
each of Seller and Guarantor, no other entity's use of any
Intellectual Property infringes any rights in Intellectual
Property held by Seller.
3.11 Material Agreements and Bids; Breaches.
(a) Except as set forth in Schedule 3.11:
(i) Schedule 3.11(a)(i) hereto sets forth a complete and
correct list of all Material Agreements in effect on the date
hereof. All Material Agreements are valid and binding on the
parties thereto in accordance with their terms and are in full
force and effect in all material respects.
(ii) No show-cause notices, stop work orders, cure notices,
default terminations, written notices of default (claimed or
actual) or similar notices or negative determinations of
responsibility are in effect or remain unresolved against Seller
with respect to any Material Agreement.
(iii) With respect to all Government Contracts and Government
Bids (if any), there are no pending and to the knowledge of each
of Seller and Guarantor, there are no contemplated or threatened
(A) civil fraud or criminal investigations by any government
investigative agency, (B) suspension or debarment proceedings
(or equivalent proceedings) against Seller, (C) requests by a
government for a contract price adjustment based on a claim for
defective pricing in excess of DM 50,000 individually or DM
250,000 in the aggregate, (D) [omitted], or (E) claims against
any government or any third party in excess of DM 50,000
individually or DM 200,000 in the aggregate.
<PAGE> 26
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(iv) [omitted]
(v) For purposes of this Agreement, "Material Agreement"
means any agreement (including, without limitation, any legally
binding purchase orders) or Government Contract which (A) has a
stated value, including options, greater than DM 150,000, (B) is
a contractual obligation of Seller greater than DM 150,000, or
(C) is a material lease.
(vi) For purposes of this Agreement, "Government Contract"
means any prime contract, subcontract, basic ordering agreement,
letter contract, purchase order or delivery order of any kind in
writing, including all amendments, modifications, and options
thereunder or relating thereto, in existence as of the date
hereof, between Seller and (A) any Government, (B) any prime
contractor of the respective Government, or (C) any
subcontractor to any contract described in clauses (A) or (B)
above. The term "Government Bid" shall mean any written
quotation, bid or proposal outstanding as of the date hereof
made by Seller that, if accepted or awarded, would lead to a
contract with (A) any Government, (B) any prime contractor of
the respective Government, or (C) any subcontractor to any
contract described in clauses (A) or (B) above.
(vii) With respect to any Government Contract which expired,
or was terminated, or for which final payment was made within
three (3) years prior to the date hereof, and except as set
forth in Schedule 3.11(a)(vii) hereto, to the knowledge of
Seller and Guarantor, there are no requests by the German
Government for a contract price adjustment based upon a claim of
defective pricing in excess of DM 150,000.
(viii) [omitted].
(b) Breaches. Except as set forth in Schedule 3.11(b)(l), Seller is
not in violation of its Articles of Incorporation or in default
in the performance or observance of any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit,
franchise, or of any provision of any judgment, decree, order,
statute, rule (including cost accounting standards), or
regulation applicable to or binding upon Seller which
individually, or in
<PAGE> 27
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the aggregate, would reasonably be expected to have a Material
Adverse Effect. Except as set forth in Schedule 3.11(b)(2), no
notice of any alleged failure on Seller's part to perform any
obligation under any Material Agreement or of the proposed
termination or nonrenewal of any Material Agreement is in effect
or remains unresolved by reason of (i) alleged deficiencies in
products manufactured and/or sold by Seller, or (ii) Seller's
alleged failure to perform its contractual obligations on a
timely basis. There is no other actual or, to the knowledge of
each of Guarantor and Seller, alleged breach by Seller or, to
the knowledge of each of Seller and Guarantor, by any other
party thereto which would warrant termination or nonrenewal of a
Material Agreement.
3.12 Financial Statements. Attached hereto as Schedule 3.12 is a copy of the
balance sheet and profit and loss statement as contained in Exhibit 1
and 2 to the audited financial statements of the Seller for the period
ending on December 31, 1994. Furthermore, Purchaser has received copies
of the audited financial statements of Seller for the periods ending
December 31, 1993 and December 31, 1994 (the "Audited Financial
Statements") and a copy of the unaudited management accounts of Seller
for the period January 1995 through August 1995 (said Audited Financial
Statements and said management accounts collectively referred to as the
"Financial Statements"). The Audited Financial Statements present
fairly the financial positions of Seller as described therein and the
results of operations of Seller for the periods stated therein,
including, without limitation, the Working Capital, as of the dates
therein referred to, and in each case are presented in accordance with
Seller's normal accounting practices, which are in accordance with GAAP,
except as disclosed in Schedule 3.12(a) and the notes to the Financial
Statements, consistently applied throughout the periods of the Financial
Statements involved. Said management accounts have been prepared in
accordance with the policies and procedures consistently applied in the
preparation of the management accounts of Seller since 1991. Such
financial positions and results of operations are the same as those of
the Business.
3.13 Absence of Certain Changes or Events. Except as set forth in Schedule
3.13, since the Balance Sheet Date, the Business has been conducted in
the ordinary course
<PAGE> 28
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consistent with past practice and there has been no event or series of events
that, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect. Except as set forth in Schedule 3.13, since the
Balance Sheet Date, Seller has not:
(a) incurred any obligation, commitment or liability (fixed or
contingent), except trade or business obligations incurred in
the ordinary course of business, which trade or business
obligations individually or in the aggregate would not
reasonably be expected to have a Material Adverse Effect;
(b) transferred or granted any material rights under or with
respect to any Intellectual Property;
(c) (i) made or granted any general wage or salary increase (other
than in the ordinary course and consistent with past practice),
(ii) engaged any new officer or employee at an annual rate of
compensation in excess of DM 75,000 per annum, or (iii) entered
into, or increased the annual rate of compensation paid by
Seller pursuant to, any employment agreement or other
arrangement with any person which provides for an annual rate
of compensation or other payments which, together with all
other payments and benefits, would provide aggregate annual
compensation in excess of DM 75,000 and which may not be
terminated by Seller without any payment, other than pursuant
to the social plan ("Sozialplan-(KBV)") referred to in the list
of Employee Plans referred to in Schedule 3.15 (b), except by
notice of at least 30 days;
(d) increased the benefits in an existing Seller Employee Plan or
any commitment to adopt any additional Seller Employee Plan,
terminated or made any arrangement to terminate any Seller
Employee Plan; [rest omitted]
(e) made or entered into any contract or commitment to make capital
expenditures in excess of DM 75,000 individually or DM 500,000
in the aggregate; or
(f) made any transfer of property other than in the ordinary course
and consistent with past practice (other than cash, Excluded
Assets, and those items included in Schedule 3.13(f)), or
incurred or guaranteed any indebtedness, to or for the benefit
<PAGE> 29
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of Deutsche ICI GmbH, Frankfurt am Main, or any other of
its Affiliates.
(g) suffered any Material Adverse Effect from damage,
destruction or casualty loss to any property of Seller.
3.14 Tax Matters.
(a) Seller or an ICI Company, has filed or Seller, to the
extent responsible for filing under Section 5.10 hereof,
will file or cause to be filed in a timely manner with
the applicable taxing authorities of Germany, German
states, localities, foreign countries and political
subdivisions of foreign countries all of Seller's Tax
returns, reports and other filings (other than those
returns, reports or other filings as they relate to
employee benefit plans) which are required to be filed
on or before the Closing Date (the "Tax Returns"). All
Taxes shown on the Tax Returns to be due and payable
have been paid by Seller or will, to the extent the
Purchaser assumes the relevant liability, be accrued as
a liability in the Statement of Working Capital.
(b) To the knowledge of each of Seller and Guarantor, except
as set forth in Schedule 3.14, with respect to Taxes (i)
Seller is not a party, directly or through a tax sharing
arrangement, to any pending action or proceeding by any
domestic or foreign governmental authority for
assessment or collection of Taxes and (ii) there is no
(A) current audit, or (B) administrative or court
proceeding currently pending with regard to any Tax or
Tax Returns of Seller by any taxing authority.
(c) [omitted]
(d) [omitted]
(e) Except as set forth in Schedule 3.14(e), Seller is not a
party to any agreement relating to the allocation or
sharing of Taxes under which Purchaser would have any
liability.
(f) [omitted].
3.15 Employee Benefits.
<PAGE> 30
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(a) (i) Except as otherwise set forth in Schedule 3.15, all
material and legally binding obligations for salaries, vacation
pay and bonuses which were due and payable to the employees
(including the managing director, Mr. J. Huber) of Seller on or
before the Closing Date have been paid or adequate accruals
therefor have been provided.
(ii) Schedule 3.15 sets forth, as of the date specified in
said Schedule, a materially correct and complete list of the
names of the employees of Seller and their salary or wage rates.
(b) Set forth in Schedule 3.15 is a correct and complete list of
each Seller Employee Plan. Except as set forth in Schedule 3.15,
Seller provided or made available to Purchaser the most recent
copy of each such Seller Employee Plan. To the extent any such
Seller Employee Plan is not in writing, a short summary of the
plan has been set forth in Schedule 3.15.
(c) [omitted]
(d) Except as set forth in Schedule 3.15, Seller previously has
provided to Purchaser the most recent summary plan description
of each Seller Employee Plan disseminated to employees of
Seller; [rest omitted].
(e) Except as set forth in Schedule 3.15, there is no obligation or
liability to provide post retirement welfare benefits to current
or future retirees of Seller.
(f) [omitted].
(g) Except as set forth in Schedule 3.15, with respect to any Seller
Employee Plan, there are:
(i) [omitted];
(ii) no pending or, to the knowledge of Seller, threatened
suits, claims, investigations or proceedings against a Seller
Employee Plan by a Seller Employee or former employee of Seller
(other than routine claims for benefits); and
<PAGE> 31
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(iii) no claims or other matters currently pending, nor to the
knowledge of Seller are there any investigations or claims
threatened or pending, by, with or before any federal
governmental agency or labour court.
(h) All contributions, premiums and other payments required to be
paid (if any) prior to the Closing Date in relation to Seller
Employee Plans (including Seller's pension plan - "Versorgungs-
ordnung") under applicable law or the terms of such plans,
have been paid.
(i) Except as required by this Agreement or disclosed in Schedule
3.15, the execution, delivery and performance of this Agreement
will not result in any increase in the compensation or benefits
payable by Purchaser or otherwise payable to a Seller Employee
or the acceleration of the time of payment or vesting of any
such compensation or benefits.
(j) [omitted].
(k) [omitted].
(l) [omitted].
3.16 Labor and Employment Matters.
(a) Except as set forth in Schedule 3.16, Seller is not a party to
any collective bargaining agreement or other labor union
contract applicable to persons employed by it in connection with
the operation of the Business ("Collective Bargaining
Agreement"). Except as set forth in Schedule 3.16, there are no
strikes, slowdowns, work stoppages or lockouts, by or with
respect to any employees of Seller in connection with the
operation of the Business and, to the knowledge of each of
Seller and Guarantor, no such actions are threatened.
(b) Except as set forth in Schedule 3.16, Seller is in material
compliance with all federal and state laws respecting employment
and employment practices, terms and conditions of employment and
wages and hours and is not engaged in any unfair labor practice.
[Rest omitted]
<PAGE> 32
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(c) No grievance which would reasonably be expected to have a
Material Adverse Effect nor any material arbitration proceeding
arising out of or under a Collective Bargaining Agreement is
pending.
(d) Except as set forth in Schedule 3.16(d), to the knowledge of
each of Seller and Guarantor, there are no trade union
organizing efforts currently under way at any facility.
(e) [omitted]
(f) Except as set forth in Schedule 3.16(e), there are no existing
material written labor settlement agreements (other than the
Collective Bargaining Agreements) or court orders which by
their terms affect all the members of a collective bargaining
unit.
3.17 INSURANCE. Immediately prior to the Closing Date, Seller, or an ICI
Company for the benefit of Seller, maintained policies of fire,
casualty, liability and other forms of insurance, a list of such
policies is provided as set forth in Schedule 3.17. No such policies and
other forms of insurance will be in place on or after the Closing Date.
3.18 MAINTENANCE OF BUSINESS WITH CUSTOMERS. Except as set forth in Schedule
3.18, and excluding change orders and contract modifications and
terminations having a value not exceeding DM 50,000 in any individual
case, since the Balance Sheet Date, there has been no termination,
cancellation or material limitation of, or any material modification or
change in, the business relationship of Seller with any customer or
group of customers whose purchases individually or in the aggregate
provided more than 7% of the gross revenues of the Business, or of any
supplier or group of suppliers whose provision of inventory or services
individually or in the aggregate constituted more than DM 125,000.
3.19 RELATED PARTY TRANSACTIONS. Except as set forth in Schedule 3.19, after
Closing, Purchaser will have no liabilities or obligations to Deutsche
ICI GmbH, Frankfurt am Main, or any other ICI Company, except as
otherwise contemplated by this Agreement and the Ancillary Agreements.
<PAGE> 33
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3.20 Disclosure Schedules. Information fairly disclosed in a Schedule shall,
where the context permits, be an exception to, and a qualification of,
all of the representations and warranties made in this Article III (the
"Warranties"), whether or not the Schedule is identified as being an
exception to any of the Warranties in question and whether or not any of
the Warranties identifies a different Schedule as containing exceptions
to any of the Warranties in question.
3.21 No Other Representations. Except as expressly provided in this
Agreement all warranties and representations on the part of Seller, ICI
Composites, Inc. or any ICI Company whether express or implied,
statutory or otherwise are, to the extent permitted by law, hereby
expressly excluded and Purchaser hereby acknowledges to Seller that it
has not relied on any warranties, representations, statements as to
fact, undertakings or disclosures other than those expressly set out in
this Agreement (including the Schedules) and that no other warranties,
representations, undertakings or indemnities have been given by or on
behalf of Seller or any ICI Company.
3.22 Finder's Fees. Neither Seller nor any other ICI Company has retained
any finder, broker or financial advisor in connection with the
transactions contemplated by this Agreement. Seller hereby agrees to
indemnify and hold harmless Purchaser from and against any liability for
commissions or compensation in the nature of a finder's fee to any
broker or other person or firm (as well as the costs and expenses of
defending against such liability or asserted liability) for which Seller
or any of its employees or representatives may be responsible by reason
of this Agreement or the transactions contemplated hereby.
3.23 [omitted].
3.24 Aviation Legal Liability Insurance. Prior to the Closing (but not
earlier than July 1, 1985), Seller was covered under a policy or
policies of aviation legal liability insurance having policy wording
substantially identical to that described in the Sedgwick Cover Note
dated 26 June 1995 and the Sedgwick 1994/95 policy wording dated 2
October 1995 set forth in Schedule 3.24 and which provided for sums
insured of at least $150,000,000.
<PAGE> 34
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants as of the Closing Date as follows:
4.1 Organization and Authority of Purchaser. Purchaser is a corporation
duly organized and validly existing under the laws of Germany and has
all necessary corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by Purchaser and
constitutes a legal, valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms.
4.2 No Conflict. The execution, delivery and performance of this Agreement
by Purchaser do not and will not (i) conflict with or violate any
material law, rule, regulation, order, judgement, injunction, decree,
determination or award applicable to Purchaser (ii) violate or conflict
with the Articles of Incorporation or by-laws of Purchaser, or (iii)
require any material pre-Closing consent, notice, authorization or
approval under, result in any material breach of, or constitute a
material default (or event which with notice or lapse of time or both
would become a material default) under, or result in the creation of any
material lien or other encumbrance on any of the properties or assets of
Purchaser pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument to
which Purchaser or any of its Affiliates is a party or by which any of
them, any of its or their respective properties is bound or affected,
which might have a material adverse effect on the consummation of the
transactions contemplated hereby.
4.3 Absence of Litigation. No claim, action, suit or proceeding is pending
or, to the knowledge of Purchaser, threatened, and to the knowledge of
Purchaser, no investigation is pending or threatened, which seeks to
delay or prevent the consummation of the transactions contemplated
hereby.
4.4 Consents and Approvals. The execution and delivery of this Agreement by
Purchaser do not, and the performance
<PAGE> 35
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of this Agreement by Purchaser does not require any consent,
approval, authorization or other action by, or filing with or
notification to, any domestic or foreign governmental or
regulatory authority (excluding the notification with the
Federal Cartel Office), except where failure to obtain such
consents, approvals, authorizations or actions, or to make such
filings or notifications, would not (i) prevent Purchaser from
performing any of its material obligations under this Agreement,
or (ii) otherwise prevent the consummation of the transactions
contemplated therein by Purchaser.
4.5 Due Diligence Investigation. Purchaser acknowledges that it has
had the opportunity to review the due diligence materials
supplied or made available by Seller, including, without
limitation, the types of information described in Schedule 4.5.
4.6 Finder's Fees. Neither Purchaser nor any Affiliate of Purchaser
has retained any finder or broker other than Valufinder Group,
Inc. in connection with the transactions contemplated by this
Agreement. Purchaser hereby agrees to indemnify and hold
harmless Seller from and against any liability for commissions
or compensation in the nature of a finder's fee to any broker or
other person or firm including Valufinder Group, Inc. (as well
as the costs and expenses of defending against such liability or
asserted liability) for which Purchaser or any of its employees
or representatives may be responsible by reason of this
Agreement or the transactions contemplated hereby.
ARTICLE V
COVENANTS
5.1 Noncompetition.
(a) For a period commencing on the Closing Date and
continuing thereafter for five (5) years, Seller, ICI or
any ICI Company (excluding any ICI Company in Australia
or New Zealand with respect to polyester resins) shall
not use the trade name of Fiberite, and shall not engage
in the manufacture, sale, marketing or distribution of
any products manufactured, sold, marketed or distributed
by Seller on the Closing Date in any territory where
Seller has manufactured, sold, marketed or distrib-
<PAGE> 36
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uted such products in the 12 month period immediately preceding
and including the Closing Date. The parties agree that if a
court of competent jurisdiction shall hold the foregoing
restriction on competition to be unreasonable, then such
restriction shall be construed to refer only to such period of
time or such geographical area as such court shall deem
reasonable.
(b) Nothing in Section 5.1(a) or in this Agreement shall prevent
Seller or any ICI Company from purchasing any corporation or
business a part of which has an interest in any products subject
to Section 5.1(a) unless more than 15% of the turnover of such
corporation or business in its last accounting year was
generated by its interest in such products. In the event that
Seller or any ICI Company purchases any corporation or business
which does have such interest in such products but such interest
did not account for 15% of its turnover (as calculated above)
then as soon as practicable after such purchase taking place,
Seller or the relevant ICI Company that has acquired such
corporation or business shall, if not prohibited by applicable
law, offer for sale to Purchaser the interest relating to any
such products as aforesaid and Seller (or the relevant ICI
Company) shall, if requested to do so by Purchaser, enter into
good faith exclusive negotiations with Purchaser for the sale of
such interest. In the event that Purchaser does not purchase
such interest from Seller (or the relevant ICI Company) then
Seller (or the relevant ICI Company) shall be free to keep the
said interest with the consent of Purchaser (such consent not to
be unreasonably withheld or delayed provided the negotiations
referred to above were conducted in good faith (including with
respect to price and other material terms)). In the
circumstances that such consent is reasonably withheld, then
Seller (or the relevant ICI Company) shall use reasonable
efforts to divest the said interest within 12 months of such
consent having been withheld. Prior to the consummation of any
sale of said interest to a third party at a price together with
other material terms in the aggregate more favorable than
offered to Purchaser pursuant hereto, Seller (or the relevant
ICI Company) shall make an irrevocable offer to Purchaser (which
may be accepted by the Purchaser within 60 days
<PAGE> 37
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following such offer) to sell such interest to Purchaser or one
of its Affiliates on substantially identical terms. In the event
Purchaser fails to accept such offer within sixty days, or if so
accepted, the sale to Purchaser is not completed within sixty
days of such acceptance and Seller has negotiated in good faith
with Purchaser, Seller (or the relevant ICI Company) shall have
no further obligation to Purchaser hereunder.
(c) For the avoidance of doubt, nothing in this Section 5.1 shall be
deemed to apply to any ICI Company in Australia or New Zealand
with respect to polyester resins.
5.2 Use of ICI Name, Use of Fiberite Name.
(a) Purchaser acknowledges and agrees that ICI shall retain all
rights to use the letters "ICI" and all trademarks, trade names
and service marks that include the letters "ICI" (including
without limitations the ICI roundel) (collectively the "ICI
Letters"). Except as otherwise provided in this Section 5.2,
after the Closing neither Purchaser nor any of its Affiliates
will have any ownership interest in or use any trademark, trade
name or service mark that includes the ICI Letters.
(b) After the Closing, Purchaser shall have the right to sell
existing inventory and to use existing stocks of packaging,
labelling, containers, supplies, advertising materials,
technical data sheets and any similar materials bearing the ICI
Letters until the earlier of (i) the date existing stocks are
exhausted or (ii) six (6) months following the Closing Date.
After six (6) months following the Closing Date, Purchaser shall
relabel any such remaining inventory and stocks. The
obliteration of the ICI Letters shall be deemed compliance with
the covenant. For a period not to exceed six (6) months after
the Closing Date, Purchaser shall have the right to use the ICI
Letters in advertising that cannot be changed by its using
reasonable efforts.
(c) Purchaser shall use reasonable efforts to cease using the ICI
Letters on buildings, cars, trucks and other fixed assets as
soon as practicable but in no event shall Purchaser use, nor
shall Seller permit
<PAGE> 38
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Purchaser to use, the ICI Letters later than three months after
the Closing Date.
(d) Within one month after the Closing Date Seller shall take
adequate action to ensure that its firm name shall no longer
include the words "Fiberite Europe", so as to enable Purchaser
to change its firm name to Fiberite Europe GmbH or any other
firm name containing the word "Fiberite". Seller shall notify
such action to the commercial register without undue delay.
5.3 Post-Closing Access to Tax and Other Records.
(a) Seller and Purchaser will provide each other with such
cooperation and information as either of them reasonably may
request of the other in filing any Tax Return, amended return or
claim for refund, determining a liability for Taxes or a right
to a refund of Taxes, or in conducting any audit or other
proceeding in respect of Taxes. Such cooperation and
information, however, shall not include providing copies of
income tax returns or portions thereof. Each party shall make
its employees available on a mutually convenient basis to
provide explanation of any documents or information provided
hereunder. Each party will retain all returns, schedules and
work papers and all material records or other documents in its
possession relating to Tax matters of Seller for the taxable
year ending after the Closing Date and for all previous years,
until the expiration of the statute of limitations of the
taxable years to which such returns and other documents relate
(and, to the extent notified by the other party in writing, any
extensions thereof).
(b) Each party will afford or cause to be afforded to the other
party and its agents reasonable access to the properties, books,
records (including but not limited to Tax (subject to Section
5.3(a) above) and environmental matters and in connection with
the assertion of claims respecting cancelled Government
Contracts), employees and auditors of such party to the extent
necessary to permit the other party to determine any matter
relating to the Business or its rights and obligations
hereunder. Purchaser shall through its employees provide to
Seller reasonable assistance in relation to the
<PAGE> 39
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preparation of a merger balance sheet as of a date prior to the
Closing Date.
(c) Each party will hold, and will cause its officers, directors,
employees, accountants, counsel, consultants, professional
representatives, advisors (including without limitation, any
lenders and/or financial advisors to or shareholders of the
Purchaser) and agents to hold, in conference, unless compelled
to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information
concerning the other party's business provided to it pursuant to
this Section.
(d) Notwithstanding anything to the contrary in this Agreement,
Seller shall use its reasonable efforts to require that Seller's
Accountants deliver to Purchaser, and permit the use by
Purchaser of, reports and opinions of Seller's Accountants
relating to the Financial Statements and, if Seller's
Accountants refuse, Seller shall allow reasonably necessary
access to the books, records and workpapers required to enable
Purchaser's Accountants to audit the financial statements of
Seller for the three full fiscal years prior to the Closing
Date.
5.4 Sales and Transfer Taxes. Purchaser and Seller shall share equally all
sales, transfer and other Taxes incurred as a result of the consummation
of the transactions contemplated by this Agreement including without
limitation land transfer tax except for Taxes relating to the
transactions described in Section 2.3 hereof, which shall be payable by
the Seller.
5.5 Further Assurance. Each of the parties hereto shall execute, or cause
to be executed, such documents and other papers and take, or cause to be
taken, such further actions as may be reasonably required to carry out
the provisions hereof and the transactions contemplated hereby. Upon
the terms and subject to the conditions hereof, each of the parties
hereto shall use its reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all other things necessary,
proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement and to
obtain in a timely
<PAGE> 40
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manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings.
5.6 [omitted]
5.7 Retained Seller Information. Purchaser acknowledges that, on and after
the Closing, there may be information at the Manufacturing Facilities
which does not relate to the Business ("Retained Seller Information").
Purchaser agrees to allow Seller all reasonable access (upon the Seller
giving reasonable notice to the Purchaser) to the Retained Seller
Information. Furthermore, Purchaser agrees to maintain in confidence
and not to use any Retained Seller Information. To the extent that
Retained Seller Information is contained in books and records, Purchaser
agrees not to dispose of or destroy such books and records for a period
of at least four (4) years following the Closing Date unless it shall
have first notified Seller at least sixty (60) days before such
disposition or destruction and given Seller the opportunity (at the
expense of Seller) to remove and retain the books and records proposed
to be disposed of or destroyed. Nothing in this section shall require
Purchaser to maintain in confidence, or not to use, any information (a)
that is now publicly available, (b) that subsequently becomes publicly
available other than by action of the Purchaser, but only after it has
become publicly available, (c) that Purchaser obtains from a third party
not under any obligation to Seller or an Affiliate of Seller respecting
such information, but only after Purchaser so obtains such information,
or (d) that Purchaser, prior to the Closing Date, already has in its
possession.
5.8 Retained Business Information. Seller acknowledges that, on and after
the Closing, there may be information at the facilities of Deutsche ICI
GmbH and other ICI Companies which relates exclusively or principally to
the Business and which is material to the day to day operations of the
Business ("Retained Business Information"). Seller agrees to allow
Purchaser all reasonable access (upon the Purchaser giving reasonable
notice to the Seller) to the Retained Business Information.
Furthermore, Seller agrees to maintain in confidence and does not use
any Retained Business Information other than in relation to its other
businesses. To the extent that Retained Business Information is
contained in books and records, Seller agrees not to dispose of or
destroy such books and records for a period of at least four (4)
<PAGE> 41
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years following the Closing Date or such longer period as is required by a
Material Agreement, a Government Contract or by law unless it shall have
first notified Purchaser at least sixty (60) days before such disposition
or destruction and given Purchaser the opportunity (at the expense of
Purchaser) to remove and retain the books and records proposed to be
disposed of or destroyed. Nothing in this section shall require Seller or
any ICI Company to maintain in confidence, or not to use, any information
(a) that is now publicly available, (b) that subsequently becomes publicly
available other than by action of Seller or any ICI Company, but only
after it has become publicly available or (c) that Seller or any ICI
Company obtains from a third party not under any obligation to Purchaser
or an Affiliate of Purchaser respecting such information, but only after
Seller or any ICI Company so obtains such information.
5.9 REFUNDS. Any refunds of Indemnifiable Taxes received by Purchaser shall be
paid over to Seller immediately upon receipt. Any Claim for a refund of an
Indemnifiable Tax shall be subject to Section 7.4(b).
5.10 FILING OF RETURNS. [omitted]
5.11 PROSECUTION, MAINTENANCE AND TURNOVER OF INTELLECTUAL PROPERTY FILES.
(a) Within two months after the Closing Date, or earlier if requested by
Purchaser, Seller will deliver to Purchaser the files relating to the
patents, patent applications, patent licenses, trademarks and
trademark applications, service marks and service mark applications
set forth in Schedule 5.11(a) (the "Files"). Purchaser will notify
Seller of a location for delivery of the Files as soon as reasonably
practicable after the Closing Date but in any event no later than one
month after the Closing Date, failing which, the Files will be
delivered to Purchaser at the address specified in Section 8.5
hereof. Prior to delivery of the Files, Seller will, to the extent
reasonably practicable, provide information contained in the Files as
requested by Purchaser for the purpose of enabling Purchaser to
docket maintenance fees, office actions and other items.
(b) After the Closing Date and until such time as Seller delivers the
Files to Purchaser or unless
<PAGE> 42
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and to the extent Purchaser requests Seller not to take certain
actions or not to pay certain fees, Seller will use its
reasonable efforts to take any actions and pay any fees in order
to avoid lapse of the patents, trademarks and service marks. All
annuity fees and other fees paid by the Seller under this
Section after the Closing Date, shall be billed to and payable
by Purchaser, regardless of the portion of the lifetime of the
Intellectual Property rights for which such payments are made.
(c) Purchaser agrees that neither Seller nor ICI or any ICI Company,
including any of their employees and agents, shall be liable to
Purchaser or any of its Affiliates in connection with the
performance of any actions as contemplated by Section 5.11(b)
and Section 5.11(d) to the extent such actions did not involve
gross negligence or wilful misconduct on the part of any ICI
Company or employee thereof. Purchaser waives any claim (whether
in contract, tort, or other) that it may have against Seller and
each ICI Company as a result of Seller's actions as contemplated
by Section 5.11(b) and Section 5.11(d) other than claims based
on gross negligence or wilful misconduct. Purchaser shall
indemnify and hold Seller and each ICI Company harmless from any
costs, expenses, losses or liabilities, including reasonable
attorneys' fees, suffered or incurred by Seller and each ICI
Company as a result of Seller taking any actions as contemplated
by Section 5.11(b) and Section 5.11(d), other than as set forth
in the Transition Service Agreements.
(d) [omitted]
<PAGE> 43
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ARTICLE VI
EMPLOYEE MATTERS
6.1 TRANSFER OF EMPLOYEES. Except as otherwise provided in this Article VI,
all employees of Seller listed in Schedule 6.1 (hereafter "Seller
Employee") will transfer and become employees of Purchaser as of the
Closing Date by operation of law pursuant to Section 613a German Civil
Code. Seller and purchaser will use all reasonable efforts to avoid
objection by any of the Seller Employees to the transfer of their
employments. All liabilities under the employment contracts of Seller
Employees who nevertheless object to the transfer of their employment
contracts shall be borne by Seller.
6.2 As of the Closing Date, Mr. Jorg Huber, the sole managing director of
Seller, shall resign as managing director of Seller and be appointed new
managing director of Purchaser. Accordingly, as of the Closing Date Mr.
Huber's service contract, pension arrangements and all other
arrangements with Seller shall transfer with the consent of Mr. Huber to
Purchaser.
6.3 [omitted]
6.4 The Seller Employees Mr. Stephen Spooner and Mr. Nick Tiffin are
currently via a company Stahl (GB) Limited members of a pension fund in
the U.K. Seller and Purchaser agree that these two employees shall
transfer to Purchaser pursuant to Section 6.1. Seller and Purchaser
shall agree on a mutually acceptable procedure to ensure that such
employees' pension rights acquired under such membership will in
substance continue to be available to them also in case their membership
in such pension fund cannot be maintained.
6.5 Purchaser shall indemnify Seller against any and all claims raised by
Seller Employees attributable to the Business and relating to the period
commencing on the Closing Date.
6.5 NO THIRD-PARTY BENEFICIARIES. No provision of this Article VI shall
create any third-party beneficiary rights in any person or organization,
including, without limitation, employees or former employees (including
any
<PAGE> 44
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beneficiary or dependent thereof) of Seller, Purchaser or any of their
respective Affiliates or other representatives of such employees or
former employees, or trustees, administrators, participants or
beneficiaries of any employee benefit plan.
ARTICLE VII
INDEMNIFICATION
7.1 SURVIVAL. The covenants, agreements, representations and warranties of
the parties hereto contained in this Agreement or in any certificate or
other writing delivered pursuant hereto or in connection herewith shall
survive the Closing until eighteen (18) months after the Closing Date;
provided that (i) the covenants and agreements contained in Section 5.1
shall survive for the period set forth therein, (ii) the representations
and warranties contained in Section 3.1 and Section 3.4, and the
representations, warranties, covenants and agreements contained in
Section 5.2 through 5.12 inclusive, Article VI, Article VII and Article
VIII shall survive indefinitely, or, as the case may be, for any lesser
period set forth therein, (iii) the representations and warranties
contained in Section 3.9 shall survive until the fifth anniversary of
the Closing Date, and (iv) the representations and warranties contained
in Section 3.14 shall survive through the 90th day following the last
day of the applicable statute of limitations without regard to any
extension or waiver executed by Purchaser after the Closing Date. Except
with respect to claims based on fraud, no claims for indemnification
with respect to a covenant, agreement, representation or warranty may be
made after the expiration of the relevant survival period referred to
herein. Notwithstanding the preceding sentences, any covenant,
agreement, representation or warranty in respect of which indemnity may
be sought under this Agreement shall survive the time at which it would
otherwise terminate pursuant to the preceding sentence, if notice of the
inaccuracy or breach thereof giving rise to such right of indemnity
shall have been given in accordance with this Agreement to the party
against whom such indemnity may be sought prior to such time.
<PAGE> 45
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7.2 INDEMNIFICATION BY PURCHASER. Purchaser agrees, subject to the other terms
and conditions of this Agreement, to indemnify and defend Seller and each
other ICI Company and their respective officers, directors, employees,
agents and permitted successors and permitted assigns (collectively
"Seller Indemnitees") against, and hold each of them harmless from, all
claims, demands, judgments, damages, penalties, fines, losses, liabilities
and expenses (including reasonable attorneys' and experts' fees and
expenses and all other necessary and reasonable costs of investigation and
defense of third party claims, but excluding internal expenses) incurred
by or asserted against any of said Seller Indemnitees arising out of or
resulting by reason of:
(a) the breach of any representation, warranty, covenant or agreement of
Purchaser herein,
(b) any liabilities of Seller or any of the Seller Indemnitees relating
to the Business for which Seller is not obligated to indemnify
Purchaser pursuant to Section 7.3.
(c) [omitted].
7.3 INDEMNIFICATION BY SELLER. Seller agrees, subject to the other terms and
conditions of this Agreement, including, without limitation the time
periods set forth in Section 7.1, to indemnify and defend Purchaser and
each Affiliate of Purchaser and their respective officers, directors,
employees, agents and permitted successors and permitted assigns
(collectively "Purchaser Indemnitees") against, and hold each of them
harmless from, all claims, demands, judgments, damages, penalties, fines,
losses, liabilities and expenses (including reasonable attorneys' and
experts' fees and expenses and all other necessary and reasonable costs of
investigation and defense of third party claims, but excluding internal
expenses) (collectively "Claim Costs") incurred by or asserted against any
of said Purchaser Indemnitees arising out of or resulting by reason of:
(a) the breach of any representation, warranty, covenant or agreement of
Seller herein,
(b) any Indemnifiable Tax,
(c) [omitted].
<PAGE> 46
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(d) [omitted],
(e) any Tax liability resulting from any transaction pursuant to
Section 2.3 by which the Included ICI Assets become the property
of Purchaser,
(f) [omitted],
(g) (i) any claim asserted against any of the Purchaser Indemnitees by
a third party prior to the fifth anniversary of the Closing Date
pursuant to any Environmental Law to the extent any such claim is
attributable to an event, circumstance or condition relating to
the Manufacturing Facilities or any operations of Seller or any of
its predecessors-in-interest or any real property, facility, site
or assets owned, leased, operated or used by Seller or any of its
predecessors-in-interest at any time on or prior to the Closing
Date, or to any acts or omissions of Seller or any of its
predecessors-in-interest, including, without limitation, disposal
or arranging for disposal of Hazardous Materials at a third party
site, occurring or existing on or prior to the Closing Date, or
(ii) requirements of any Environmental Law (including, without
limitation, any failure to take reasonable steps to achieve
compliance with those requirements of Environmental Law which
exist on or prior to the Closing Date and which require compliance
on or prior to June 30, 1997) to the extent (x) any Claim Costs
are attributable to an event, circumstance or condition relating
to the Manufacturing Facilities or any operations of Seller or any
of its predecessors-in-interest or any real property, facility,
site or assets owned, leased, operated or used by Seller or any of
its predecessors-in-interest at any time on or prior to the
Closing Date, or to any acts or omissions of Sellers or any of its
predecessors-in-interest, and (y) Claim Costs in connection
therewith are incurred or asserted prior to the fifth anniversary
of the Closing Date.
(h) any liability resulting from any government action for defective
pricing under any Government Contract or adjustments to contract
pricing for differences in allowable and for allocable costs
resulting in net aggregate contract price adjustments in excess
<PAGE> 47
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of DM 50,000 for all Government Contracts under which work was
performed prior to the Closing,
(i) [omitted].
(j) [omitted].
(k) [omitted].
(l) [omitted].
(m) [omitted].
(n) any claim asserted by a third party against any of the Purchaser
Indemnitees to the extent any such claim is attributable to an
Occurrence occurring prior to the Closing Date and since, but
not earlier than, July 1, 1985, and for which Seller carried
insurance, but only to the extent such insurance actually
provides coverage therefor, prior to the Closing Date, and
since, but not earlier than, July 1, 1985.
(o) [omitted].
(p) [omitted].
provided that (i) Seller shall not be liable under this Section
7.3 unless the aggregate amount of Claim Costs with respect to
all matters referred to in this Section 7.3 exceeds DM 54,000
and then only to the extent of such excess and (ii) Seller's
maximum liability under this Section 7.3 shall not exceed DM
5,100,000. If the amount of Claim Costs arising in respect of
any individual matter referred to in this Section 7.3 is less
than DM 2,000, then that amount shall not be included for the
purpose of calculating the aggregate amount referred to in
subparagraph (i) of this provision. Notwithstanding the
foregoing, Seller shall have no obligation to indemnify
Purchaser under this Section 7.3 (x) to the extent that any
Claim Costs are incurred or increased as a result of any law,
statute, ordinance, or regulation not in effect on or prior to
the Closing Date, or as a result of any change therein
thereafter, (y) to the extent that the facts, matters or
circumstances giving rise to such Claim Costs arise pursuant to
Section 7.3(a) and have been fairly disclosed in the Schedules
or in any document listed or specifically referred to therein,
or
<PAGE> 48
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(z) to the extent any such Claim Costs are reflected in the Financial
Statements or in the Statement of Working Capital. Notwithstanding
anything to the contrary contained in this Agreement, no provision of
Section 7.3 following Section 7.3(p) hereof shall apply to (i) Section
7.3(b) (other than subparagraph (z)), Section 7.3(e) and Section 7.3(n)
hereof, and (ii) the failure of a party hereto to observe any of its
obligations under any covenant or agreement in this Agreement (other
than, with respect to this clause (ii), the provision that Seller's
maximum liability under this Section 7.3 shall not exceed DM 5,100,000).
For the avoidance of doubt, the inclusion of any facts, matters or
circumstances on any Schedule hereto shall not relieve Seller of its
obligations under Section 7.3(g) hereof and Section 7.3(p).
7.4 Procedures.
(a) Any party seeking indemnification under this Article VII (the
"Indemnified Party") shall promptly upon becoming aware of the
circumstances giving rise to the claim for indemnification,
notify the party against whom a claim for indemnification is
sought hereunder (the "Indemnifying Party") in writing, which
notice shall specify, in reasonable detail, the nature and
estimated amount, if determinable, of the claim. Such
notification shall be a condition precedent to any liability on
the part of the Indemnifying Party. Except as otherwise
provided herein, Purchaser and Seller shall appoint Seller or
one of Seller's Affiliates, selected by Seller, as attorney in
fact with exclusive authority to collect, settle, or pay any
amount due to or owed by Seller with respect to an Indemnifiable
Tax or for filing any return due or a claim for refund for an
Indemnifiable Tax. Such appointment of Seller or its Affiliate
as attorney in fact shall be pursuant to a power of attorney in
the form set forth in Schedule 7.4(a). Any audit, claim,
investigation, administrative proceeding, suit or other action
by a third party relating to any Indemnifiable Tax shall be
governed by this Section 7.4.
(b) If any third party shall assert a claim against the Indemnified
Party with respect to any matter (a "Third Party Claim") for
which the Indemnified
<PAGE> 49
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Party intends to seek indemnification against the Indemnifying Party
under this Article VII, then the Indemnified Party shall promptly (and
in any case within ten (10) days of such claim having been asserted)
notify the Indemnifying Party thereof in writing (to include a
description thereof in reasonable detail), which notification shall be a
condition precedent to any obligation on the part of the Indemnifying
Party to indemnify the Indemnified Party under this Article VII;
provided, that no notice shall be required to be given with respect to
any proceedings pertaining to an Indemnifiable Tax which has been
assessed or, to Seller's knowledge, is the subject matter of a current
audit examination by a taxing authority. The following provisions shall
apply with respect to any such Third Party Claim:
(i) The Indemnifying Party shall have the right to assume the
defense of the third party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party (it being understood that if in
the Indemnified party's reasonable judgment a conflict of interest is
likely to exist between such Indemnified Party or the Indemnifying Party
or any of their respective Affiliates with respect to such counsel, such
Indemnified Party shall be entitled to require the Indemnifying Party to
select other counsel pursuant to this Section 7.4) at any time within 60
days after the Indemnified Party has given notice of the third Party
Claim; provided, however, that (A) the Indemnifying Party shall conduct
the defense of the Third Party Claim actively and diligently thereafter
in order to preserve its rights in this regard; (B) the Indemnified
Party shall have (w) the right to participate fully in the defense of
the Third Party Claim, including through separate counsel of its own
choosing at its sole cost and expense, (x) the right to receive
reasonable advance notice from the Indemnifying Party of any hearings or
proceedings, (y) the right, if possible, to review in advance and
comment on any pleadings, briefs or other documents to be filed and (z)
the opportunity to participate in any meetings concerning the strategy
to be adopted in opposing the Third Party Claim or any efforts to settle
the same; and (C) the Indemnified Party shall have the right at any time
to assume the sole right to defend or settle any Third Party Claim
<PAGE> 50
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upon written waiver of its right to indemnity hereunder (in form and
substance reasonably satisfactory to the Indemnifying Party) with
respect to such Third Party Claim.
(ii) So long as the Indemnifying Party has assumed and is conducting
the defense of the Third Party Claim in accordance with Section
7.4(b)(i) above, (A) the Indemnifying Party shall not consent to the
entry of any judgment or enter into any settlement with respect to the
third Party Claim without the prior written consent of the Indemnified
Party (not to be unreasonably withheld or delayed) unless (x) the
judgment or proposed settlement involves only the payment of money
damages by the Indemnifying Party and does not impose an injunction or
other equitable relief upon the Indemnified Party, and includes the
giving by the claimant or the plaintiff to the Indemnified party of a
release from those liabilities which are the subject of the claim for
indemnification hereunder in form and substance reasonably satisfactory
to the Indemnified Party, or (y) in a matter relating to an
Indemnifiable Tax subject to this section 7(4)(b)(ii), is not reasonably
likely to materially adversely affect Seller's or Purchaser's liability
for Taxes in a Post-closing Tax Period, and (B) the Indemnified Party
shall not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party. With respect to any proposed
settlement for an Indemnifiable Tax subject to this Section 7(4)(b)(ii)
to which the Purchaser Indemnitee does not consent, Seller may pay the
amount of any such proposed settlement to the Purchaser Indemnitee and
upon such payment be released from any and all liability to Purchaser
Indemnitee with respect to such Indemnifiable Tax.
(iii) In the event the Indemnifying Party does not assume and conduct
the defense of the Third Party Claim in accordance with Section 7.4(b)
(i) above, however, (A) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with
respect to, the third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain
any consent from, the
<PAGE> 51
- 49 -
Indemnifying Party in connection therewith) and (B) the
Indemnifying Party shall remain obligated to indemnify the
Indemnified Party to the extent provided pursuant to this
Article VII.
(iv) The Indemnified Party will use all reasonable efforts to
make available to the Indemnifying Party those employees whose
assistance, testimony or presence is necessary to assist the
Indemnifying Party in evaluating and defending any such claim;
provided that the Indemnifying Party shall be responsible for
any out-of-pocket expenses (excluding wages, benefits, and other
direct or indirect costs of employment) associated with any
employees made available hereunder. The Indemnified Party, at
its expense, shall also make available to the Indemnifying Party
or its representatives on a timely basis all documents, records
and other materials in the possession of the Indemnified Party
reasonably required by the Indemnifying Party for its use in
defending any claim, and shall otherwise cooperate on a timely
basis with the Indemnifying Party in the defense of such claim.
(c) Notwithstanding anything herein to the contrary, the failure of
an Indemnified Party to notify the Indemnifying Party of any
claim of indemnification as required pursuant to Section 7.4(a)
or 7.4(b) shall not affect the indemnification obligations of
any party hereto, unless and only to the extent that the
Indemnifying Party is prejudiced thereby.
7.5 Third Party Reimbursement; Aviation Liability Insurance is (a) The
indemnities provided by this Article VII shall apply only to damages,
losses, liabilities and expenses for which the party seeking
indemnification cannot obtain reimbursement from third parties (other
than third party insurers), provided that the Indemnified Party shall
not be obligated to assert a claim against any such third party unless
the Indemnifying Party shall have agreed in form and substance
reasonably satisfactory to the Indemnified Party to reimburse the
Indemnified Party for all reasonable out-of-pocket costs, fees and
expenses incurred in connection therewith.
(b) Seller will ensure that no ICI Company will take any action or fail
to take any action, in each case, which would prohibit claims by such
ICI Company under the policies providing coverage of the type described
in
<PAGE> 52
- 50 -
Section 3.24 hereof which would impair its rights under such policies.
As soon as there is any indication that a claim relating to Seller under
any such policy could reasonably be expected to exceed the limits of
liability of any such policy or if any underwriter of such policy or
claims adjustor or party affiliated with any such underwriter or claims
adjustor indicates that coverage might not be afforded under a policy
relating to Seller, representatives of Seller and/or Purchaser shall be
notified immediately and shall be entitled to fully participate in any
and all further matters relating to such claim. Seller will ensure that
the relevant ICI Company will act in good faith with respect to seeking
coverage under such policies.
7.6 Mitigation. Each party will use reasonable efforts to mitigate any
liabilities and damages for which it may claim indemnification under
this Article VII. To the extent that the operations of Purchaser after
the Closing Date contribute to or aggravate any liabilities or damages
as to which indemnification is available under Section 7.3, Seller's
indemnification obligation will be reduced by the value of such
contribution or aggravation.
7.7 Limitation on Damages. Notwithstanding any other provision in this
Agreement, the liability of any party to another party arising with
respect to the matters addressed herein, regardless of the form of the
claim or cause of action (whether based in contract, infringement,
negligence, strict liability, other tort or otherwise), shall be limited
to actual damages, which shall in no event include any indirect,
consequential, incidental or punitive damages, whether arising under
contract, in tort, at law, or under other legal concepts, of such other
party; provided that, for purposes of this Agreement, actual damages
suffered by an Indemnified Party, shall include, only if and to the
extent arising from or related to a Third Party Claim, any such
indirect, consequential, incidental or punitive damages and Party is
liable to a third party. "Indirect" and "consequential" damages shall
include, but not be limited to, loss of anticipated profits, loss of
use, loss of revenue, cost of capital and loss or damage of property or
equipment.
<PAGE> 53
- 51 -
7.8 Purchase Price Adjustment. Any payments made as indemnification pursuant
to Section 7.2 or 7.3 shall be treated as an adjustment to the Purchase
Price.
7.9 Remediation Procedures.
(a) For purposes of this Section 7.9, "On-Site Remediation
Liabilities" means liabilities and obligations imposed under any
Environmental Law for the clean-up or remediation of conditions
existing at the Real Property prior to the Closing Date and for
which Seller is obligated to indemnify Purchaser pursuant to
Section 7.3 hereof; "Off-Site Remediation Liabilities" means
liabilities and obligations of Seller imposed under any
Environmental Law for the clean-up or remediation of conditions
existing at real property other than the Real Property prior to
the Closing Date and for which Seller is obligated to indemnify
Purchaser pursuant to Section 7.3 hereof; and "Real Property"
means the real property owned by Seller and included within the
Manufacturing Facilities.
(b) Purchaser shall, to the extent Purchaser has the legal right to
do so, make all reasonable efforts to:
(i) consult with Seller (x) prior (A) to entering into any
agreement with any third party, including but not limited to any
governmental entity, or (B) nature of and schedule for any
cleanup or remediation for which Purchaser has sought
indemnification respecting an On-Site Remediation Liability
under Section 7.3 of this Agreement ("On-Site Cleanup"), and (y)
prior to submitting to any third party any work plan or material
report for any On-Site Cleanup:
(ii) provide drafts to Seller for review and comment of material
documents for any On-Site Cleanup, including without limitation,
any work plan, testing results, compliance schedule, compliance
or consent order or agreement;
(iii) consult with Seller in due time period before notice of a
release of a hazardous substance is
<PAGE> 54
- 52 -
required or reasonably believed to be required by any
Environmental Law or governmental authority; and
(iv) provide prior notice to Seller of any reportable release of
any Hazardous Materials resulting from any On-Site Cleanup.
(c) Purchaser shall promptly and at its own expense provide Seller
with final copies of all reports, workplans and other documents
received from or provided to any third party, including but not
limited to, any governmental authority.
(d) Any hazardous substances or any other materials removed in
connection with an On-Site Cleanup shall be deemed to have been
generated by Purchaser and Purchaser shall have responsibility
for ensuring that such hazardous substances and any other
materials are managed and disposed of in accordance with all
applicable federal, state and local laws, statutes, ordinances
and regulations and Seller shall have no liability arising
directly or indirectly from Purchaser's failure to do so or as a
result of the particular way in which Purchaser managed or
disposed of such hazardous substances and other materials unless
the method by which the hazardous substances or other materials
were managed or disposed of was required or insisted upon by
Seller.
(e) As promptly as possible following Seller's receipt of a notice
from Purchaser pursuant to Section 7.4 regarding a claim made by
or threatened against Purchaser by a third party, including but
not limited to any governmental authority for On-Site Cleanup,
Seller and Purchaser shall each designate one or more
representatives ("Designated Representatives") to represent them
in their dealings with each other respecting On-Site Cleanup
activities and notify each other of the name, title, address,
and telephone and facsimile numbers for each such Designated
Representative.
(f) If a legal proceeding, claim or demand shall be made or
threatened against Purchaser by a third party, including but not
limited to any governmental authority, which seeks both damages
and On-Site
<PAGE> 55
- 53 -
Cleanup, Seller shall manage and control such legal proceeding,
claim or demand and Purchaser shall, subject to the provisions
of this Section 7.9, manage and control any On-Site Cleanup
resulting therefrom.
(g) Purchaser shall conduct any On-Site Cleanup in accordance in all
material respects with any applicable Environmental Law and
governmental order, mandate or directive. Unless otherwise
agreed to by the Purchaser and Seller, and to the extent
permitted under such Environmental Law, order, mandate or
directive, Purchaser shall propose to and advocate to
governmental entities and conduct any On-Site Cleanup, with the
objective of accomplishing an On-Site Cleanup in a cost
effective manner which complies with applicable Environmental
Law taking into account the cost of commercially available
alternative cleanup technologies, the likelihood of success of
the chosen technology and whether the chosen technology will
accomplish cleanup in a reasonable period of time (hereinafter
referred to as the "Cost Effective Cleanup").
(h) Were notice of a release of a hazardous substance is required by
any applicable Environmental Law or any governmental authority
or where Purchaser has reasonable grounds to believe that such
notice is required by such Environmental Law or any governmental
authority, Purchaser shall make all reasonable efforts to
consult with Seller in the time period before the notice is
required or reasonably believed to be required by such
Environmental Law or governmental authority.
(i) In the event Purchaser proposes On-Site Cleanup, including but
not limited to soil or groundwater or other intrusive testing
("Testing"), resulting or arising from any claim or demand made
or threatened against Purchaser by any third party, including
but not limited to any governmental authority, then:
(i) Purchaser shall not perform Testing at the Real Property
unless required by such Environmental Law or unless Purchaser
has a reasonable basis to believe that there is soil or
groundwater contamination on any parcel of Real Property. In
the event that Purchaser desires to perform Testing, Purchaser
shall (unless a shorter time period is re-
<PAGE> 56
- 54 -
quired for Purchaser to comply with applicable Environmental
Laws) furnish Seller not less than ten (10) days prior written
notice of its election to do so and Purchaser and Seller agree
to confer with each other in good faith in regard to whether
Purchaser should perform such Testing. If the parties cannot
reach agreement on the issue of whether Purchaser should perform
Testing, either party may invoke the dispute resolution
procedures set forth in Section 7.9(k).
(ii) In the event that Purchaser proposes On-Site Cleanup under
this Section 7.9(i) and Seller believes that such cleanup (A)
would not be mandated by the applicable governmental authority
if the underlying environmental problems with respect to which
the On-Site Cleanup was proposed were disclosed to such
governmental authority (the "Necessity Test") based on cleanup
required by such governmental authority at similar sites, where
possible in the same jurisdiction, with contamination of similar
type, concentration and media and taking into account the
relevant site specific conditions at the parcel of Real Property
involved (the "Relevant Factors") or (B) is not a Cost Effective
Cleanup which would be acceptable to the applicable government
authority if it were to exercise jurisdiction over the parcel of
Real Property in question and were to take into account the
Relevant Factors, Seller or Purchaser may initiate the dispute
resolution procedures contained in Section 7.9(k).
(j) Purchaser shall not make any admission of liability with
respect to On-Site Remediation Liabilities or Off-Site
Remediation Liabilities or third party claims which would
reasonably be expected to give rise to damages indemnifiable by
the Seller without prior consultation with Seller. Disclosure of
facts in response to a governmental authority demand or request
for information under any Environmental Law shall not constitute
an admission of liability for the purposes of this Section
7.9(j). Notification of contamination or disclosure of acts in
response to a factual inquiry from a governmental authority or
private party and responses to discovery requests in court or
administrative proceedings shall not constitute an admission of
liability for purposes of this Section 7.9(j).
<PAGE> 57
- 55 -
(k) In the event of a dispute (excluding any dispute as to the
construction or interpretation of this Section 7.9 or to the
liability of the parties under this Agreement) respecting the
On-Site Cleanup arises among the Purchaser's and Seller's
Designated Representatives which cannot be resolved by such
Designated Representatives after timely (but not more than ten
(10) business days) diligent and good faith efforts, Purchaser
and Seller shall each submit the dispute for consideration and
resolution to their respective Managing Directors (or their
designees). In the event that the dispute remains unresolved
after timely (but not more than thirty (30) business days)
diligent and good faith efforts by such Managing Directors, the
Purchaser's decision shall control, provided, however, that any
such decision by the Purchaser shall be without prejudice to
any claim by the Seller that any amounts relating to such
dispute are not subject to indemnification by the Seller under
Section 7.3.
(l) Seller and Seller's Designated Representatives shall have the
right upon reasonable prior notice to enter the Real Property
during normal business hours and at other agreed upon times for
the purposes of (i) observing any On-Site Cleanup conducted by
Purchaser, and (ii) obtaining at Seller's sole cost and
expense, split or duplicate samples of Testing conducted for
any On-Site Cleanup. This subsection shall not limit
Purchaser's and Seller's obligations pursuant to Section 7.4.
(m) Nothing contained in this Section 7.9 shall restrict Purchaser
from taking any action where required by any Environmental Law,
or, without prejudice to any claim by Seller that any such
action is not subject to indemnification by Seller under
Section 7.3, where the failure to take such action would
reasonably be expected to result in a violation of any
Environmental Law.
(n) No failure by Purchaser to comply with the requirements of this
Section 7.9 shall limit or relieve Seller's indemnity
obligations hereunder except to the extent Seller is materially
prejudiced thereby.
<PAGE> 58
- 56 -
7.10 Exclusive Remedy. The indemnification obligations of Seller under this
Article VII shall be the sole and exclusive remedy for any claims by
Purchaser against Seller or any ICI Company arising out of or relating
to the purchase of the Business by Purchaser pursuant to this Agreement
and the transactions contemplated hereby (other than those contemplated
in the Ancillary Agreements) and the Purchaser hereby waives any and all
other rights or remedies (including without limitation any right of
rescission) in connection therewith.
ARTICLE VIII
MISCELLANEOUS
8.1 Amendment. This Agreement may not be amended or modified except by an
instrument in writing signed by Seller and Purchaser.
8.2 Waiver of Compliance; Consents. Except as otherwise provided in this
Agreement, any failure of any of the parties to comply with any
obligation, covenant, agreement or condition herein may be waived by the
party or parties entitled to the benefits thereof only by a written
instrument signed by the party granting such waiver, but such waiver or
failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party
hereto, such consent shall be given in writing in a manner consistent
with the requirements for a waiver of compliance as set forth in this
Section 8.2.
8.3 Attorneys' Fees. In any action, suit or proceeding to enforce the
obligations of any party hereto, the prevailing party shall be entitled
(in addition to all other relief to which it may be entitled) to recover
all attorneys' fees and related expenses reasonably incurred by it in
the prosecution or defense of such action, suit or proceeding.
8.4 Expenses. Unless otherwise agreed between the parties, all costs and
expenses, including, without limitation, fees and disbursements of
counsel, financial advisors
<PAGE> 59
- 57 -
and accountants, incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses, whether or not the Closing
shall have occurred. Notarization Costs shall be shared equally
by the parties.
8.5 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have
been duly given or made as of the date delivered or mailed if
delivered personally or by facsimile transmission or mailed by
registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like
notice, except that notices of changes of address shall be
effective only upon receipt thereof):
(a) if to Seller and/or Seller's Guarantor:
Deutsche ICI GmbH
Emil-von-Behring-Strasse 2
60439 Frankfurt am Main 50
Facsimile: 069 5870 297
Attn.: Geschaftsfuhrung
with a copy to:
President and General Counsel
ICI Americas Inc.
3411 Silverside Road
Wilmington, Delaware 19850
Facsimile: +++ 302 887 8542
(b) if to Purchaser and/or to Purchaser's Guarantor:
Dalia Verwaltungsgesellschaft mbH
Industriestrasse 1
76684 Ostringen
Facsimile: 07253 91899
Attn.: Geschaftsfuhrung
Fiberite Holdings, Inc.
2055 E. Technology Circle
Tempe, Arizona 85248
Facsimile: 001 602 730 2390
<PAGE> 60
- 58 -
with a copy to:
Fiberite Holdings, Inc.
c/o DLJ Merchant Banking, Inc.
1040 Broadway
New York, N.Y. 10005
Attn.: Thompson Dean
and
John Schuster
Cahill Gordon & Reindel
80 Fine Street
New York, New York, 10005
Facsimile: 001 212 269 5420
8.6 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.7 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or
public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is
not affected in any manner adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of
being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties
as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
8.8 Entire Agreement. This Agreement and the Ancillary Agreement constitute
the entire agreement and supersede all prior agreements and
undertakings, both written and oral, between Seller and Purchaser with
respect to the subject matter hereof and, except as otherwise expressly
provided herein, are not intended to confer upon any other person any
rights or remedies hereunder.
8.9 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided that no party may
assign, dele-
<PAGE> 61
gate or otherwise transfer any of its rights, interests or obligations
under this Agreement without the consent of the other party hereto, such
consent not to be unreasonably withheld or delayed; provided further
that no such consent shall be required if (a) as a result of any and all
such assignments, only a single assignee would be entitled to
indemnification pursuant to Article VII, (b) such assignment would not
relieve the assigning party of its obligations under this Agreement and
the Ancillary Agreements, (c) the assignee agrees with the assigning
party to assume the assigning party's obligations under this Agreement
and the Ancillary Agreements, and (d) the assigning party notifies the
Seller prior to any such assignment, which notification shall include
the identity of the assignee, a description of terms of such assignment
and a certification by an officer of the Purchaser that the conditions
set forth in subparagraphs 8.9(a) and (b) have been satisfied.
Notwithstanding the foregoing, the Purchaser shall be entitled to assign
a security interest in its rights hereunder in connection with a
collateral assignment to one Person acting on behalf of one or more of
Purchaser's lenders.
8.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of Germany, without regard to its conflicts of
law rules.
8.11 Counterparts. [omitted]
8.12 Guaranty.
(a) Purchaser's Guarantor hereby agrees to pay, perform and discharge all of
the covenants, agreements, obligations and liabilities of Purchaser
under this Agreement and the Ancillary Agreements to the extent such
covenants, agreements, obligations and liabilities are not paid,
performed or discharged by Purchaser in accordance with the terms hereof
and thereof.
(b) Seller's Guarantor hereby agrees to pay, perform and discharge all of
the covenants, agreements, obligations and liabilities of Seller and
other ICI Companies under this Agreement and the Ancillary Agreements to
the extent such covenants, agreements, obligations and liabilities are
not paid, performed or discharged by Seller in accordance with the terms
hereof and thereof.
<PAGE> 62
8.13 Federal Cartel Office Clearance. The Federal Cartel Office, Berlin, has
cleared the transaction contemplated herein by letter of September 20,
1995.
8.14 Venue. Exclusive place of jurisdiction shall be Frankfurt am Main.
<PAGE> 1
*CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT
HAVE BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.
Exhibit 10.12
AGREEMENT
This Agreement (the "Agreement") is entered and if effective as of the 1st day
of January 1994 between Imperial Chemical Industries PLC whose registered office
is situated at Imperial Chemical House, Millbank, London SW1P 3JF (hereinafter
"ICI") and ICI Composites Inc., of 2055 East Technology Circle, Tempe, Arizona
85284 (hereinafter "COMPOSITES").
WHEREAS, ICI has facilities and personnel capable of carrying out research and
development work in the Field as hereinafter defined, and
WHEREAS, COMPOSITES wishes to retain ICI to conduct research and development
work in the Field.
NOW THEREFORE, in consideration of good and valuable consideration and of the
mutual covenants herein contained and intending to be legally bound, ICI and
COMPOSITES agree as follows:
1. DEFINITIONS.
As used herein, the following terms shall have the following meanings:
1.1 "Field" means the development, analysis and testing of polymers, resins
and reinforced composite materials and basic and specialised research
regarding the same.
1.2 "Intellectual Property" means invention, patents and patent applications,
trade secrets, copyrights, maskworks, designs, know-how, proprietary tools,
methodologies, processes, materials, documentation and other intellectual
property rights.
1.3 "Composites IP" means all Intellectual property arising from work done
hereunder.
1.4 "Service Provider" means relevant personnel of the Characterization
Analytical & Polymer Science ("CAPS") Group within the Wilton Centre of ICI
as presently constituted or as restructured during the term of this
Agreement.
2. RESEARCH AND DEVELOPMENT SERVICES.
2.1 On the terms and subject to the conditions of this Agreement, ICI agrees to
provide to COMPOSITES, and COMPOSITES agrees to utilise the services of the
Service Provider (the "Services") in the Field for projects agreed in
writing between ICI and COMPOSITES from time to time but at a minimum as
described in paragraph 2.2 below.
2.2 ICI and COMPOSITES shall agree at least 3 months prior to the beginning of
each calendar year during the term of this Agreement on (a) the level of
effort (in terms of manpower) for which Services will be utilized during
the following calendar year and (b) the estimated cost (based on the
expected actual costs including full overhead recovery) of the Services for
such level of effort, provided however that COMPOSITES shall not be
obligated to pay more than [ * ] of the estimated cost of the Services
without its express written agreement. In the event that agreement under
this Section 2.2 cannot be reached,
*CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION
<PAGE> 2
the level of effort shall remain at the level of effort of the then
current calendar year.
2.3 ICI shall provide COMPOSITES with such reports and progress updates
regarding Services provided hereunder as COMPOSITES shall reasonably
request. In addition, within thirty (30) days following the end of each
calendar year during the term of this Agreement, ICI shall provide
COMPOSITES with a summary of topics and areas of study, research and
development to which it has devoted attention on behalf of COMPOSITES
during such year together with a statement of ICI's progress toward
established goals and summary of ICI's finding in conjunction therewith.
This report shall be cross referenced with individual project reports and
numbers as applicable.
3. PAYMENTS.
3.1 COMPOSITES shall pay the following charges for the Services: [ * ] of the
actual costs attributable to providing the Services as detailed in the
estimate provided for under paragraph 2.2 above.
3.2 ICI shall invoice COMPOSITES quarterly, within sixty (60) days of the end
of each calendar quarter.
3.3 COMPOSITES shall pay the amount of each invoice within thirty (30) days of
the date of the invoice.
4. INTELLECTUAL PROPERTY.
4.1 COMPOSITES IP shall be the exclusive property of COMPOSITES.
4.2 The decision to apply for patents on any of COMPOSITES IP shall be solely
at the discretion of COMPOSITES. Should COMPOSITES decide to seek patent
protection, ICI, at the expense of COMPOSITES, agrees to execute or cause
to be executed any assignment and/or other document as may be required to
obtain such patent protection and to vest title thereto in COMPOSITES.
5. CONFIDENTIALITY.
5.1 ICI will take all reasonable steps to ensure that the information acquired
from COMPOSITES hereunder and COMPOSITES IP is not for a period of ten (10)
years following the date hereof disclosed to any third party either by ICI
or by those of its employees to whom the same must necessarily be
communicated in the course of their duties PROVIDED THAT ICI shall not be
obligated to maintain secrecy in respect of any information which was
already known to it at the date of receipt or development hereunder without
obligation of secrecy or which subsequently comes into the public domain
from sources other than ICI or which ICI lawfully acquires from a third
party with the right to disclose the same.
*CONFIDENTIAL MATERIAL REDACTED AND FILED
SEPARATELY WITH THE COMMISSION
-2-
<PAGE> 3
6. TERM AND TERMINATION.
6.1 This Agreement shall be for an initial term of two years (i.e., until
December 31, 1995) and thereafter shall be automatically renewed for
additional one year periods (which shall correspond to calendar years)
unless earlier terminated by either party in accordance with Section 6.2.
6.2 Either party may terminate this Agreement at any time by providing written
notice to the other party at lest twelve (12) months prior to the effective
date of such termination.
6.3 In the event that notice of termination is given pursuant to Section 6.2
and the effective date of such termination is after the end of the then
current term (calendar year) of the Agreement (the period between the end
of the current term (calendar year) of the Agreement and the effective date
of termination of the Agreement is hereinafter called the "Concluding
Partial Term"), then in such event the parties shall mutually agree within
thirty (30) days following receipt of such termination notice on the scope
of Services, the corresponding level of effort and the estimated cost
thereof to be provided by ICI to COMPOSITES during the Concluding Partial
Term; provided, however, that , in the absence of agreement and not
withstanding the provisions of Section 2.2, the level of effort in the
provision of Services by ICI during the Concluding Partial Term shall be
that level of effort the cost of which is at least equal to seventy-five
percent (75%) of the cost of Services provided by ICI during the last full
term (calendar year) of the Agreement on a pro rata basis.
6.4 Termination of this Agreement shall not relieve ICI of its obligations
hereunder with respect to Confidentiality or COMPOSITES IP.
6.5 Immediately following termination of this Agreement, ICI shall deliver to
COMPOSITES, at COMPOSITES' expense, such documentation as may exist at
ICI's facilities or within ICI's control which represents, embodies or
contains COMPOSITES IP, provided, however, that ICI may redact therefrom
information which does not constitute COMPOSITES IP and may retain a copy
thereof.
7. EXCLUSION OF LIABILITY.
7.1 ICI shall not be liable to COMPOSITES for any loss, expense, claim or
damage arising out of or allegedly arising out of use by COMPOSITES of any
COMPOSITES IP. All Services provided hereunder shall be on a best efforts
basis only without warranty of any kind.
7.2 COMPOSITES shall not be liable to ICI for any loss, expense, claim or
damages arising out of or allegedly arising out of the performance of
Services by ICI at ICI's facilities.
7.3 ICI does not warrant that the use of any of COMPOSITES IP does not
constitute infringement of patents of persons not party hereto and further
ICI does not assume any responsibility for any such infringement; provided,
however, that, at COMPOSITES'
-3-
<PAGE> 4
specific request and expense, ICI shall use reasonable efforts to
investigate whether COMPOSITES IP infringes patents of such other persons
and shall notify COMPOSITES of the results of such investigations.
7.4 No license, right or immunity is granted by implication or otherwise with
respect to any Intellectual Property of ICI except as specifically set
forth in this Agreement.
8. MISCELLANEOUS.
8.1 This Agreement shall be binding upon and inure to the benefit of the
parties hereto, their respective heirs, executors, successors and assigns.
8.2 This Agreement shall be construed and interpreted in accordance with the
laws of Delaware, USA.
9. NOTICES.
9.1 Any notice, or payment provided for in this Agreement shall be deemed
sufficiently given when sent by certified or registered mail addressed to
the other party at its address appearing on the first page hereof or to
such other addresses as the parties shall have specified to each other for
this purpose from time to time.
10. IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed in duplicate originals by its duly authorised representatives as
of the date and year first above written.
1. IMPERIAL CHEMICAL INDUSTRIES
PLC
2. By: /s/
3. Title: Wilton Research Support Group Manager
4. ICI COMPOSITES INC.
5. By: /s/ Carl W. Smith
6. Title: President
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Exhibit 10.13
________________________________________________________________________________
SPECIAL SECURITY AGREEMENT
________________________________________________________________________________
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SPECIAL SECURITY AGREEMENT
This Agreement (the "Agreement") is made this ____ day of
March, 1996 by and between AXA, a French Corporation; The Equitable Companies
Incorporated, a Delaware Corporation; Donaldson, Lufkin & Jenrette, Inc., a
Delaware Corporation, DLJ Capital Investors, Inc., a Delaware Corporation; DLJ
Merchant Banking, Inc., a Delaware Corporation; Fiberite Holdings, Inc., a
Delaware Corporation (the "Parent Corporation"); Fiberite Inc., a Delaware
Corporation (the "Corporation"); and the United States Department of Defense
("DoD"), all of the above collectively "the Parties".
* RECITALS
WHEREAS, the Corporation is duly organized and existing under
the laws of the State of Delaware, and has an authorized capital of 1,000
shares, all of which are common voting shares, par value $.01 per share, and of
which 1,000 are issued and outstanding (the "Shares"); and
WHEREAS, AXA owns approximately 60.6% of the outstanding
voting shares of The Equitable Companies Incorporated; and
WHEREAS, The Equitable Companies Incorporated directly or
indirectly owns 80.2% of the outstanding voting shares of Donaldson, Lufkin &
Jenrette, Inc.; and
WHEREAS, Donaldson, Lufkin & Jenrette, Inc. owns all the
outstanding voting shares of DLJ Capital Investors, Inc.; and
WHEREAS, DLJ Capital Investors, Inc. owns all the outstanding
voting shares of DLJ Merchant Banking, Inc.; and
WHEREAS, DLJ Merchant Banking, Inc. is a general partner of
DLJ Merchant Banking Partners, L.P., DLJ International Partners, C.V. and DLJ
Offshore Partners, C.V., which in the aggregate own approximately 61.3% of the
outstanding voting shares of the Parent Corporation(1); and
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(1) Of the remaining approximately 28.4% of the outstanding voting shares
of the Parent Corporation owned by investors affiliated with Donaldson,
Lufkin & Jenrette, Inc. ("DLJ"), approximately 17.8% is owned by DLJ
Merchant Banking Funding, Inc., an indirect wholly-owned subsidiary of
DLJ and approximately 9.7% is owned by DLJ First ESC L.L.C., an
employee securities corporation which is managed by an indirect
wholly-owned subsidiary of DLJ.
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WHEREAS, the Parent Corporation owns all of the Shares of the
Corporation; and
WHEREAS, the Corporation's business consists of the research,
design, development and manufacture of defense and defense-related items for
various User Agencies(2) of the United States Government, including, without
limitation, the DoD; and
WHEREAS, the offices and plants of the Corporation require
facility security clearances(3) issued under the DoD Industrial Security Program
("DISP") to conduct its business and the DISP requires that a corporation
maintaining a facility security clearance be effectively insulated from foreign
ownership, control or influence ("FOCI"); and
WHEREAS, the Assistant Secretary of Defense for Command,
Control, Communications and Intelligence ("C(3)I") has determined that the
provisions of the Agreement are necessary to enable the United States to protect
itself against the unauthorized disclosure of information relating to the
national security; and
WHEREAS, the DoD has agreed to grant or continue the
Corporation's facility security clearance from and after the effective date of
the Agreement in consideration for, inter alia, the Parties' execution and
compliance with the provisions of the Agreement, the purpose of which is to
reasonably and effectively insulate the Parent Corporation and its parent
corporations and all entities which the aforementioned companies control, all of
the above (other than the Corporation) collectively the "Affiliates," from
unauthorized access to classified(4) and controlled
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(2) The Office of the Secretary of Defense (including all boards, councils,
staffs, and commands), DoD agencies, and the Department of Army, Navy,
and Air Force (including all of their activities); the Departments of
State, Commerce, Treasury, Transportation, Interior, Agriculture,
Labor, and Justice; National Aeronautics and Space Administration;
General Services Administration; Small Business Administration;
National Science Foundation; Environmental Protection Agency; United
States Arms Control and Disarmament Agency; Federal Emergency
Management Agency; Federal Reserve System; United States Information
Agency; International Trade Commission; United States Trade
Representative; and the General Accounting Office (the "User
Agencies").
(3) An administrative determination that a facility is eligible for access
to classified information of a certain category.
(4) Any information that has been determined pursuant to Executive Order
12356 or any predecessor order to require protection against
unauthorized disclosure and is so designated. The classifications TOP
SECRET, SECRET, and CONFIDENTIAL are used to designate such
information.
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unclassified information(5) and influence over the Corporation's business or
management in a manner which could result in the compromise of classified
information or could adversely affect the performance of classified contracts;
and
WHEREAS, the Corporation has agreed to establish a formal
organizational structure to ensure the protection of classified information and
controlled unclassified information entrusted to it and to place the
responsibility therefor with a committee of its Board of Directors to be known
as the Defense Security Committee, all as hereinafter provided; and
WHEREAS, the Parties agree that control of the Corporation
should be vested in the Board of Directors of the Corporation; and
WHEREAS, a company under FOCI is not normally authorized to
have access to the following classified information:
1. TOP SECRET information;
2. RESTRICTED DATA as defined in the United States Atomic
Energy Act of 1954, as amended;
3. Communications Security ("COMSEC") information, except
classified keys used to operate secure telephone units (STU III's);
4. Special Access Program Information; and
5. Sensitive Compartmented Information.
WHEREAS, in order to comply fully with the policies of DoD
that require a corporation maintaining a facility security clearance to be
insulated effectively from undue foreign ownership, control or influence, all
parties hereto have agreed that management control of the defense and technology
security affairs and classified contracts of the Corporation should be vested in
resident citizens of the United States who have DoD personnel security
clearances;(6) and
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(5) Unclassified information, the export of which is controlled by the
International Traffic in Arms Regulations ("ITAR") and/or the Export
Administration Regulations ("EAR"). The export of technical data which
is inherently military in nature is controlled by the ITAR. The export
of technical data which has both military and commercial uses is
controlled by the EAR.
(6)
An administrative determination that an individual is eligible for
access to classified information of a certain category.
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WHEREAS, the Parent Corporation, by its authorized
representatives, hereby affirms on behalf of itself and its Affiliates that
a. they will not seek access to or accept DoD classified
information or controlled unclassified information entrusted to the Corporation,
except as permissible under the DISP and applicable United States Government
laws and regulations, and
b. they will not attempt to control or influence the
Corporation's performance of classified contracts and participation in
classified programs; and
c. except as expressly authorized by the Agreement, their
involvement (individually and collectively) in the business affairs of the
Corporation shall be limited to participation in the deliberations and decisions
of the Corporation's Board of Directors and authorized committees thereof; and
WHEREAS, in order to meet DoD's national security objectives
in the matter of the Corporation's facility security clearance and to further
the Corporation's business objectives, the Parties intend to be bound by the
provisions of the Agreement;
NOW THEREFORE, it is expressly agreed by and between the
Parties that the Agreement is hereby created and established, subject to the
following terms and conditions, to which all of the Parties expressly assent and
agree:
* ORGANIZATION
ARTICLE I
Management of the Corporation's Business
1.1 Composition of the Corporation Board of Directors.
The Board of Directors of the Corporation (the "Corporation
Board") shall be appointed by the Parent Corporation, and shall be composed of:
(i) at least two individuals who have had no prior relationship with the
Corporation or the Affiliates (the "Outside Directors"), except as otherwise
allowed by DoD; (ii) at least two representatives of the Parent Corporation (the
"Inside Directors"); and (iii) at least one cleared officer of the Corporation
(the "Officer/Director"). The total number of the Outside Directors and
Officer/Directors shall be greater than the number of the Inside Directors.
Except as specifically provided herein, each member of the Corporation Board,
however characterized by this Section 1.1, shall have all of the rights, powers,
and responsibilities conferred or imposed upon directors of the company by
applicable statutes and regulations, and by the Corporation's charter and
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bylaws. The Chairman of the Corporation Board, as well as its principal
officers,(7) must be resident citizens of the United States who have or who are
eligible to possess DoD personnel security clearances at the level of the
Corporation's facility security clearance. In addition, the Chairman of the
Corporation Board shall not be an Inside Director. All directors of the
Corporation shall satisfy the pertinent requirements established in Section 3.__
below. The Outside Directors may not be removed without prior notice to, and
approval by, the Defense Investigative Service ("DIS"). Appointments of new or
replacement directors, other than Inside Directors, shall not become final until
approved by DIS.
1.2 Actions by the Corporation Board.
a. No action may be taken by the Corporation Board, or any
committee thereof, in the absence of a quorum as defined below.
b. A majority of the Corporation Board, including at least
one Inside Director and one Outside Director, shall be necessary to constitute a
quorum. With respect to the Defense Security Committee (see Section 7.1 below),
a majority of the Committee shall be necessary to constitute a quorum. With
respect to all other standing committees of the Corporation Board, including the
Compensation Committee (see "Article VIII below), a majority of such committee,
including at least one Outside Director and one Inside Director, shall be
necessary to constitute a quorum.
ARTICLE II
Limitations on the Corporation Board
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(7) For purposes of the Agreement, "principal officers" shall have the
meaning ascribed to it under the DoD Industrial Security Manual,
Appendix D, page 9, viz.:
. . . those persons occupying positions normally identified
as president, senior vice president, secretary, treasurer and
those persons occupying similar positions. In unusual
cases, the determination of principal officer status may
require a careful analysis of an individual's assigned
duties, responsibilities, and authority as officially recorded
by the organization. Excluded from this definition are:
(i) assistant vice presidents who have no management
responsibilities related to performance on classified
contracts, (ii) assistant secretaries, and (iii) assistant
treasurers.
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2.1 The Corporation Board shall not be authorized to take or agree to
take any of the actions specified in subsections 2.1 a. through 2.1i. below,
unless it shall have received, with respect to each such action, the prior
written approval of the Parent Corporation.
a. The sale, lease or other disposition of any of the
property, assets or business of the Corporation, or the purchase of any property
or assets by the Corporation that is other than in the ordinary course of
business;
b. The declaration or payment, directly or indirectly, of any
dividends or distributions in cash, property, or securities upon any of its
equity securities other than cash dividends out of current or retained earnings;
c. The direct or indirect redemption, purchase or other
acquisition of any equity security of the Corporation (or any non-wholly owned
subsidiary of the Corporation);
d. The grant or issuance of any stock option or stock purchase
right convertible into common stock of the Corporation to any employee of the
Corporation or its subsidiaries;
e. The entry of any employment or consulting agreements with
officers or affiliates of the Corporation;
f. The issuance or sale of any common stock or other capital
stock of the Corporation or rights to acquire its capital stock or any
securities or notes convertible into or exchangeable for its capital stock;
g. The merger, consolidation, reorganization, dissolution or
liquidation of the Corporation;
h. The filing or making of any petition under the Federal
Bankruptcy Code or any applicable bankruptcy law or other acts of similar
character; and
i. The initiation of action to terminate the Agreement, except
as provided for in Section 16.1 below.
ARTICLE III
Qualifications, Appointment, and
Removal of Directors; Board Vacancies
3.1 During the period that the Agreement is in force, the
Corporation Board shall be composed as provided in Section 1.1 hereof, and its
members shall meet the following additional requirements:
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a. Officer/Directors and Outside Directors shall be resident
citizens of the United States and have or be eligible to have DoD personnel
security clearances at the level of the Corporation's facility security
clearance.
b. Outside Directors shall have been approved by DIS as
satisfying the appropriate DoD personnel security requirements and the
applicable provisions of the Agreement.
c. Inside Directors shall not have DoD personnel security
clearances, regardless of citizenship, and they shall be formally excluded from
access to classified information by resolution of the Corporation Board.
3.2 The Parent Corporation, as the sole stockholder of the
Corporation, may remove any member of the Corporation Board for any reason
permitted by the provisions of applicable state law or the Corporation's
Certificate of Incorporation or by-laws, provided that:
a. the removal of an Outside Director shall not become
effective until that director, the Corporation, and DIS have been notified, DIS
has approved the removal, and a successor who is qualified to become an Outside
Director within the terms of the Agreement has been approved by DIS;
b. the removal of an Officer/Director shall not become
effective until that director, the Corporation, and DIS have each been notified;
c. notification to DIS of the removal of a director, when
required, shall be the responsibility of the Parent Corporation, and, except as
noted in subsection 3.2d. below, must be given at least twenty days prior to the
proposed removal date; and
d. anything foregoing to the contrary notwithstanding, if
immediate removal of any director is deemed necessary to prevent actual or
possible violation of any statute or regulation, or actual or possible damage to
the Corporation, the director may be removed at once, although DIS shall be
notified prior to or concurrently with such removal.
3.3 In the event of any vacancy on the Corporation Board however
occurring, the Corporation shall give prompt notice of such vacancy to the
Parent Corporation and DIS, and such vacancy shall be filled promptly by the
Parent Corporation. Such vacancy shall not exist for a period of more than 90
days after a director's resignation, death, disability or removal unless
expressly approved by DIS.
3.4 Except as provided by this paragraph, the obligation of a
director to abide by and enforce the Agreement shall terminate when the director
leaves office, but nothing herein shall relieve the departing director of any
responsibility that the director may have, pursuant to the laws and regulations
of the United States, not to
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disclose classified information or controlled unclassified information obtained
during the course of the director's service on the Corporation Board, and such
responsibility shall not terminate by virtue of the director leaving office. The
Corporation shall advise the departing director of such responsibility when the
director leaves office, but the failure of the Corporation to so advise the
director shall not relieve the director of any such responsibility.
ARTICLE IV
Indemnification and
Compensation of Outside Directors
4.1 The Outside Directors in their capacity as directors of
the Corporation shall vote and act on all matters in accordance with their best
efforts.(8)
4.2 The Corporation and the Parent Corporation jointly and
severally shall indemnify and hold harmless each Outside Director from any and
all claims arising from, or in any way connected to, his performance as a
director of the Corporation under the Agreement except for his own individual
gross negligence or willful misconduct. The Corporation and the Parent
Corporation shall advance fees and costs incurred in connection with the defense
of any such claim. The Parent Corporation or the Corporation may purchase
insurance to cover this indemnification.
ARTICLE V
Restrictions Binding on
Subsidiaries of the Corporation
5.1 The parties hereto agree that the provisions of the
Agreement restricting unauthorized access to classified information and
controlled unclassified information entrusted to the Corporation by entities
under FOCI, and all provisions of the Visitation Policy established in Article
XI below, shall apply to, and shall be made to be binding upon, all present and
future subsidiaries(9) of, and all companies
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(8) For purposes of the Agreement, the term "best efforts," signifies
performance of duties reasonably and in good faith, in the manner
believed to be in the best interests of the Corporation but consistent
with the national security concerns of the United States, and with such
care, including reasonable inquiry, as an ordinarily prudent person in
a like position would use under similar circumstances.
(9) The term "subsidiaries of the Corporation" shall, for the purposes of
the Agreement, include companies wholly owned by the Corporation or in
which the Corporation owns a controlling interest, either directly or
through the Corporation's ownership interest in intermediate companies.
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controlled by, the Corporation. The Corporation hereby agrees to undertake any
and all measures, and provide such authorizations, as may be necessary to
effectuate this requirement. The sale of, or termination of the Corporation's
control over, any such subsidiary or controlled company shall terminate the
applicability to it of the provisions of the Agreement.
5.2 If the Corporation proposes to form a new subsidiary, or
to acquire ownership or control of another company, it shall give notice of such
proposed action to DIS and shall advise DIS immediately upon consummation of
such formation or acquisition.
5.3 It shall be a condition of each such formation or
acquisition that all provisions of the Visitation Policy established in Article
XI, below and all of the above-described restrictive provisions of the Agreement
shall apply to each such company immediately upon consummation of such formation
or acquisition, and that the Corporation and the subsidiary or controlled
company shall execute a document agreeing that such company shall be bound
thereby; and a copy of the executed document shall be forwarded to DIS.
5.4 A document such as described in subsection 5.3 above,
shall also be executed and submitted with respect to each present subsidiary of
the Corporation, and with respect to any other company which the Corporation
presently controls.
5.5 Compliance with this Article V shall not be interpreted as
conferring the benefits of the Agreement on those companies. These companies
shall not be entitled to receive a facility security clearance, nor shall they
be entitled to access classified information, to perform classified contracts or
to participate in classified programs pursuant to the Agreement, solely by
virtue of their legal relationship with the Corporation and their execution of
the documents referred to in subsections 5.3 and 5.4 above.
* OPERATION
ARTICLE VI
Operation of the Agreement
6.1 The Corporation shall at all times maintain policies and
practices to ensure the safeguarding of classified information and controlled
unclassified information entrusted to it and the performance of classified
contracts and participation in classified programs for the User Agencies in
accordance with the DoD Security Agreement (DD Form 441), the Agreement,
appropriate contract provisions regarding security, United States export control
laws, and the DISP.
a. The following additional protections shall be
established in the by-laws and/or resolutions of the governing boards, as
appropriate, of the
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Corporation, AXA, The Equitable Companies Incorporated, Donaldson, Lufkin &
Jenrette, Inc., DLJ Capital Investors, Inc., DLJ Merchant Banking, Inc. and the
Parent Corporation, acknowledged as provided in subsections 6.1b through 6.1d
below, and shall control the actions of the parties hereto during the terms of
the Agreement;
b. Pursuant to a resolution of the Corporation Board, which
shall not be repealed or amended without approval of DIS, the Corporation shall
exclude the Affiliates and all members of the Boards of Directors and all
officers, employees, agents and other representatives of each of them, from
access to classified information and controlled unclassified information
entrusted to the Corporation. The above exclusions shall not, however, preclude
the exchange of classified information or controlled unclassified information
between the Corporation and any Affiliates when such exchange is permissible
under the DISP and applicable United States laws and regulations;
c. Pursuant to a resolution of the Parent Corporation's Board
of Directors, which shall not be repealed or amended without approval of DIS,
the Parent Corporation shall formally acknowledge and approve the Corporation's
resolution referred to in subsection 6.1b, above, and shall additionally
resolve:
(i) to exclude itself and all Affiliates and all members
of the Boards of Directors and all officers, employees, agents and other
representatives of all of the foregoing, from access to classified information
and controlled unclassified information entrusted to the Corporation, except as
expressly permissible pursuant to subsection 6.1b above, and shall additionally
resolve:
(ii) to grant the Corporation the independence to
safeguard classified information and controlled unclassified information
entrusted to it; and
(iii) to refrain from taking any action to control or
influence the performance of the Corporation's classified contracts or the
Corporation's participation in classified programs.
d. AXA shall formally acknowledge and approve the Corporation
resolution referenced in 6.1b above, and the Parent Corporation resolutions
referenced in 6.1c above.
ARTICLE VII
Defense Security Committee
7.1 There shall be established a permanent committee of the
Corporation Board, to be known as the Defense Security Committee ("DSC"),
consisting of all Outside Directors and Officer/Directors to ensure that the
Corporation maintains policies and procedures to safeguard classified
information and controlled unclassified information in the possession of the
Corporation and to ensure that the
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Corporation complies with the DoD Security Agreement (DD Form 441), the
Agreement, appropriate contract provision regarding security, United States
Government export control laws and the DISP.
7.2 The DSC shall designate one of the Outside Directors to
serve as Chairman of the DSC.
7.3 The members of the DSC shall exercise their best efforts
to ensure the implementation within the Corporation of all procedures,
organizational matters and other aspects pertaining to the security and
safeguarding of classified and controlled unclassified information called for by
the Agreement, including the exercise of appropriate oversight and monitoring of
the Corporation's operations to ensure that the protective measures contained in
the Agreement are effectively maintained and implemented throughout its
duration.
7.4 The Chairman of the DSC shall designate an
Officer/Director to be Secretary of the DSC. The Secretary's responsibility
shall include ensuring that all records, journals and minutes of DSC meetings
and other documents sent to or received by the DSC are prepared and retained for
inspection by DIS.
7.5 A Facility Security Officer ("FSO") shall be appointed by
the Corporation and shall be the principal advisor to the DSC concerning the
safeguarding of classified information. The FSO's responsibility includes the
operational oversight of the Corporation's compliance with the requirements of
DISP.
7.6 The members of the DSC shall exercise their best effort to
ensure that the Corporation develops and implements a Technology Control Plan
("TCP"), which shall be subject to inspection by DIS. The DSC shall have
authority to establish the policy for the Corporation's TCP. The TCP shall
prescribe measures to prevent unauthorized disclosure or export of controlled
unclassified information consistent with applicable United States laws.
7.7 A Technology Control Officer ("TCO") shall be appointed by
the Corporation and shall be the principal advisor to the DSC concerning the
protection of controlled unclassified information and other proprietary
technology and data. The TCO's responsibilities shall include the establishment
and administration of all intracompany procedures, including employee training
programs, to prevent the unauthorized disclosure or export of controlled
unclassified information and to ensure that the Corporation otherwise complies
with the requirements of United States Government export control laws.
7.8 Discussions of classified and controlled unclassified
information by the DSC shall be held in closed sessions and accurate minutes of
such meetings shall be kept and shall be made available only to such authorized
individuals as are so designated by the DSC.
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7.9 Upon taking office, the DSC members, the FSO, and the TCO
shall be briefed by a DIS representative on their responsibilities under the
DISP, United States Government export control laws, and the Agreement.
7.10 Each member of the DSC shall exercise their best efforts
to ensure that all provisions of the Agreement are carried out; that the
Corporation's directors, officers, and employees comply with the provisions of
the Agreement; and that DIS is advised of any known violation of, or known
attempt to violate, any provisions of the Agreement, appropriate contract
provisions regarding security, United States Government export control laws, and
the DISP.
7.11 Each member of the DSC shall execute, for delivery to
DIS, upon accepting his appointment and thereafter at each annual meeting of the
Corporation with DIS as established by the Agreement, a certificate
acknowledging the protective security measures taken by the Corporation to
implement the Agreement. Each member of the DSC shall further acknowledge his
agreement to be bound by, and to accept his responsibilities under the Agreement
and acknowledge that the United States Government has placed its reliance on him
as a United States citizen and as the holder of a personnel security clearance
to exercise his best efforts to ensure compliance with the terms of the
Agreement and the DISP.
7.12 Obligations and Certification of Cleared Officers.
a. Each officer of the Corporation with a personnel
security clearance shall exercise his best efforts to ensure that the terms and
conditions of the Agreement are complied with by the parties hereto.
b. Upon effective date of the Agreement and annually
thereafter, each such officer shall execute, for delivery to DIS a certificate
(i) acknowledging the protective security measures taken by the Corporation to
implement the Agreement; and (ii) acknowledging that the United States
Government has placed its reliance on him as resident citizen of the United
States, and as a holder of a personnel security clearance, to exercise his best
efforts to ensure compliance with the terms and conditions of the Agreement by
the parties hereto.
7.13 Obligations and Certification of Inside Directors
a. Inside Directors shall:
(i) not have access to classified information and
controlled unclassified information entrusted to the Corporation except as
permissible under the DISP and applicable United States Government laws and
regulations;
(ii) refrain from taking any action to control or
influence the Corporation's classified contracts, its participation in
classified programs, or its
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corporate policies concerning the security of classified information and
controlled unclassified information;
(iii) neither seek nor accept classified
information or controlled unclassified information entrusted to the Corporation,
except as permissible under the DISP and applicable United States Government
laws and regulations; and
(iv) advise the DSC promptly upon becoming aware of
(1) any violation or attempted violation of the Agreement or contract provisions
regarding industrial security, export control, or (2) actions inconsistent with
the DISP or applicable United States Government laws or regulations.
b. Upon accepting appointment and annually thereafter,
each Inside Director shall execute, for deliver to DIS, a certificate affirming
such Inside Director's agreement to be bound by, and acceptance of the
responsibilities imposed by, the Agreement, and further acknowledging and
affirming the obligations set forth in 7.13a above.
ARTICLE VIII
Compensation Committee
8.1 The Corporation Board shall establish a permanent
committee of the Board, consisting of at least one Outside Director and one
Inside Director, to be known as the Compensation Committee. The Compensation
Committee shall be responsible for reviewing and approving the Corporation Board
recommendations for the annual compensation of the Corporation's principal
officers, as defined herein.
ARTICLE IX
Annual Review and Certification
9.1 Representatives of DIS, the Corporation Board, the
Corporation's Chief Executive Officer, the Corporation's Chief Financial
Officer, and the FSO shall meet annually to review the purpose and effectiveness
of the Agreement and to establish a common understanding of the operating
requirements and how they will be implemented. These meetings shall include a
discussion of the following:
a. whether the Agreement is working in a satisfactory
manner;
b. compliance or acts of noncompliance with the
Agreement, DISP rules, or other applicable laws and regulations;
c. necessary guidance or assistance regarding problems
or impediments associated with the practical application or utility of the
Agreement; and
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d. whether security controls, practices or procedures
warrant adjustment.
9.2 The Chief Executive Officer of the Corporation and the
Chairman of the DSC shall jointly submit to DIS one year from the effective date
of the Agreement and annually thereafter an implementation and compliance
report. Such reports shall include the following information:
a. a detailed description of the manner in which the
Corporation is carrying out its obligation under the Agreement;
b. a detailed description of changes to security
procedures, implemented or proposed, and the reasons for those changes;
c. a detailed description of any acts of noncompliance,
whether inadvertent or intentional, with a discussion of what steps were taken
to prevent such acts from occurring in the future;
d. a description of any changes, or impending changes,
to any of the Corporation's top management including reasons for such changes;
e. a statement, as appropriate, that a review of the
records concerning all visits and communications between representatives of the
Corporation and the Affiliates have been accomplished and the records are in
order;
f. a detailed chronological summary of all transfers of
classified or controlled unclassified information, if any, from the Corporation
to the Affiliates, complete with an explanation of the United States
Governmental authorization relied upon to effect such transfers. Copies of
approved export licenses covering the reporting period shall be appended to the
report; and
g. a discussion of any other issues that could have a
bearing on the effectiveness or implementation of the Agreement.
ARTICLE X
Duty to Report Violations of the Agreement
10.1 The Parties to the Agreement, except DoD, agree to report
promptly to DIS all instances in which the terms and obligations of the
Agreement may have been violated.
* CONTACTS AND VISITS
ARTICLE XI
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Visitation Policy
11.1 The Chairman of the DSC shall designate an Outside
Director who shall have authority to review, approve, and disapprove requests
for visits(10) to the Corporation by all personnel who represent the Affiliates,
including all of the directors, officers, employees, representatives, and agents
of each, and proposed visits to any Affiliate by all personnel who represent the
Corporation, (including all of its directors, employees, officers,
representatives, and agents, except for the Inside Directors), as well as visits
between or among such personnel at other locations (hereinafter "visit" or
"visits"). A record of all visit requests, including the decisions to approve or
disapprove, and information regarding consummated visits, such as date, place,
personnel involved and summary of material discussion or communication, shall be
maintained by the designated Outside Director and shall be periodically reviewed
by the DSC.
11.2 Except for certain Routine Business Visits, as defined in
Section 11.5 below, all visits must be approved in advance by the Outside
Director designated by the Chairman of the DSC. All requests for visits shall be
submitted or communicated to the FSO for routing to the designated Outside
Director. Although strictly social visits at other locations between the
Corporation personnel and personnel representing the Affiliates are not
prohibited, written reports of such visits must be submitted after the fact to
the FSO for filing with, and review by, the designated Outside Director and the
DSC.
11.3 A written request for approval of a visit must be
submitted to the FSO no less than seven (7) calendar days prior to the date of
the proposed visit. If a written request cannot be accomplished because of an
unforeseen exigency, the request may be communicated via telephone to the FSO
and immediately confirmed in writing; however, the FSO may refuse to accept any
request submitted less than seven (7) calendar days prior to the date of the
proposed visit if the FSO determines that there is insufficient time to consider
the request. The exact purpose and justification for the visit must be set forth
in detail sufficient to enable the designated Outside Director to make an
informed decision concerning the proposed visit, and the FSO may refuse to
accept any request that the FSO believes lacks sufficient information. Each
proposed visit must be individually justified and a separate approval request
must be submitted for each.
11.4 The FSO shall advise the designated Outside Director of a
request for approval of a visit (other than a Routine Business Visit) as soon as
practicable after
- --------
(10) As used in the Agreement, the term "visits" includes meetings at any
location within or outside the United States, including but not limited
to any facility owned or operated by the Corporation or any Affiliates,
whether occurring in person or via electronic means, including but not
limited to telephone conversations, teleconferences, video conferences,
or electronic mail.
-15-
<PAGE> 17
receipt of the written request. The designated Outside Director shall evaluate
the request as soon as practicable after receiving it. The Outside Director may
approve or disapprove the request, or disapprove the request pending submittal
of additional information by the requester. The Outside Director's decision
shall be communicated to the requestor by any means and it shall be confirmed in
writing, when practicable, at least one day prior to the date of the proposed
visit, but in no event later than six calendar days after its receipt by the
FSO. A chronological file of all documentation associated with meetings,
visitations, and communications (contact reports), together with records of
approvals and disapprovals, shall be maintained by the FSO for inspection by the
DIS. At the time of each DSC meeting, the Outside Directors of the Corporation
shall review such documentation filed since the last meeting to ensure adherence
to approved procedures by the requesters and the designated Outside Director to
verify that sufficient and proper justification has been furnished for approved
visits.
11.5 Routine Business Visits
a. Routine Business Visits, as defined in 11.5b below,
may be approved by the FSO, in the FSO s discretion, without advance approval by
the designated Outside Director. Requests for Routine Business Visits must be
submitted in advance, and in writing, to the FSO, and shall state the basis upon
which the requester deems the visit to be a Routine Business Visit. Such
requests must include sufficientt information to enable the FSO to make an
informed decision concerning the proposed visit. The FSO, in the FSO's
discretion, may refuse to accept any request that the FSO believes lacks
sufficient information and may refer any request to the designated Outside
Director for evaluation, notwithstanding its designation as a Routine Business
Request. Any request that the FSO believes is not properly characterized as a
Routine Business Visit shall be referred to the designated Outside Director, who
shall evaluate the request in accordance with the terms of the Agreement.
b. Routine Business Visits are in general those that
are made in connection with the regular day-to-day business operations of the
Corporation, do not involve the transfer or receipt of classified information or
controlled unclassified information and pertain only to the commercial aspects
of the Corporation's business. Routine Business Visits include:
(i) Visits for the purpose of discussing or
reviewing such commercial subjects as the following: company performance versus
plans or budgets; inventory, accounts receivable, accounting and financial
controls; business plans and implementation of business plans; and
implementation of technical development programs;
(ii) Visits of the kind made by commercial
suppliers in general regarding the solicitation of orders, the quotation of
prices, or the provision of products and services on a commercial basis;
-16-
<PAGE> 18
(iii) Visits concerning fiscal, financial, or
legal matters involving compliance with the requirements of any foreign or
domestic governmental authority responsible for regulating or administering the
public issuing of or transactions involving stock and securities; and
(iv) Visits concerning marketing and technical
activities relating to the import or export of products requiring compliance
with regulations of United States departments or agencies, including but not
limited to the Departments of Defense, Commerce, State, and Treasury.
11.6 Special Provision Concerning Subsidiaries
Anything to the contrary notwithstanding, the notice and
approval of visitation restrictions contemplated in the Agreement shall not
apply to visits between the Corporation and its subsidiaries. However, visits
between the Corporation's subsidiaries and any Affiliate shall be subject to the
visitation approval procedures set forth herein.
11.7 Discretion to Alter Notice or Approval Requirements
Anything foregoing to the contrary notwithstanding, the
DSC, in its reasonable business discretion and consistent with its obligations
to safeguard classified information and controlled unclassified information in
the Corporation's possession may, with the approval of DIS:
a. designate specific categories of visit requests
other than those enumerated above as "Routine Business Visits" not requiring the
advance approval of the designated Outside Director; or
b. determine that, due to extraordinary circumstances
involving the security of classified information and/or controlled unclassified
information, certain specific types of visits which that might otherwise be
considered "Routine Business Visits" under the terms of the Agreement are to be
allowed only if the approval of the designated Outside Director is obtained in
advance.
-17-
<PAGE> 19
11.8 Maintenance of Records for DIS Review
A chronological file of all visit requests, reports of
visits, and contact reports, together with appropriate approvals or disapprovals
pursuant to the Agreement shall be maintained by the DSC for review by DIS.
* REMEDIES
ARTICLE XII
DoD Remedies
12.1 DoD reserves the right to impose any security safeguard
not expressly contained in the Agreement that it believes is necessary to ensure
that the Affiliates are denied unauthorized access to classified and controlled
unclassified information.
12.2 Nothing contained in the Agreement shall limit or affect
the authority of the head of a United States Government agency(11) to deny,
limit or revoke the Corporation's access to classified and controlled
unclassified information under its jurisdiction if the national security
requires such action.
12.3 The Parties hereby assent and agree that the United
States Government has the right, obligation and authority to impose any or all
of the following remedies in the event of a material breach of any term of the
Agreement:
a. The novation of the Corporation's classified
contracts to another contractor. The costs of which shall be borne by the
Corporation;
b. The termination of any classified contracts being
performed by the Corporation and the denial of new classified contracts for the
Corporation;
c. The revocation of the Corporation's facility
security clearance;
d. The suspension or restriction of any or all
visitation privileges; and
e. The suspension and debarment of the Corporation
from participation in all Federal government contracts, in accordance with the
provisions of the Federal Acquisition Regulations.
12.4 Nothing in the Agreement limits the right of the United
States Government to pursue criminal sanctions against the Corporation, or any
Affiliates, or any director, officer, employee, representative, or agent of any
of these companies, for violations of the criminal laws of the United States in
connection with their
- --------
(11) The term "agency" has the meaning provided at 5 United States Code
552(f).
-18-
<PAGE> 20
performance of any of the obligations imposed by this Agreement, including but
not limited to any violations of the False Statements Act 18 U.S.C. 1001, or the
False Claims Act 18 U.S.C. 287.
* ADMINISTRATION
ARTICLE XIII
Notices
13.1 All notices required or permitted to be given to the
Parties to the Agreement shall be given by mailing the same in a sealed postpaid
envelope, via registered or certified mail, or sending the same by courier or
facsimile, addressed to the addresses shown below, or to such other addresses as
the Parties may designate from time to time pursuant to this Section:
For the Corporation: Fiberite, Inc.
2055 E. Technology Circle
Tempe, Arizona 85284
For the Parent Corporation: Fiberite Holdings, Inc.
c/o DLJ Merchant Banking, Inc.
140 Broadway
New York, New York 10005
For DIS: Defense Investigative Service
Department of Defense
1340 Braddock Place
Alexandria, Virginia 22314-1651
For AXA: AXA
23 Avenue Matignon
75008 Paris, France
ATTN; Veronique Ranc, Central
Legal Department
For the Equitable Companies
Incorporated: The Equitable Companies Incorporated
787 Seventh Avenue
New York, New York 10019
ATTN: Kathryn Schneider
-19-
<PAGE> 21
For Donaldson, Lufkin &
Jenrette, Inc.: Donaldson, Lufkin & Jenrette, Inc.
140 Broadway
New York, New York 10005
ATTN: Tom Seigler
For DLJ Capital Investors, Inc.: DLJ Capital Investors, Inc.
140 Broadway
New York, New York 10005
ATTN: Tom Seigler
For DLJ Merchant Banking, Inc.: DLJ Merchant Banking, Inc.
140 Broadway
New York, New York 10005
ATTN: Reid S. Perper
ARTICLE XIV
Inconsistencies with Other Documents
14.1 In the event that any resolution, regulation or bylaw of
any of the Parties to the Agreement is found to be inconsistent with any
provision hereof, the terms of the Agreement shall control.
ARTICLE XV
Government Law; Construction
15.1 The Agreement shall be implemented so as to comply with
all applicable United States laws and regulations. To the extent consistent with
the right of the United States hereunder, the laws of the State of Delaware
shall apply to questions concerning the rights, powers, and duties of the
Corporation and the Parent Corporation under, or by virtue of, the Agreement.
15.2 In all instances consistent with the context, nouns and
pronouns of any gender shall be construed to include the other gender.
-20-
<PAGE> 22
* TERMINATION
ARTICLE XVI
Termination, Amendment and
Interpretations of the Agreement
16.1 The Agreement may only be terminated by DIS as follows:
a. in the event of a sale of the business or all the
Shares to a company or person not under FOCI;
b. when DIS determines that existence of the Agreement
is no longer necessary to maintain a facility security clearance for the
Corporation;
c. when DIS determines that continuation of a facility
security clearance for the Corporation is no longer necessary;
d. when DoD determines that there has been a breach of
the Agreement that requires it to be terminated or when DoD otherwise determines
that termination is in the national interest;
e. ten (10) years from the effective date of the
Agreement if, at least ninety (90) days before that date, the Parent Corporation
and the Corporation petition DIS to terminate the Agreement;
f. when the Parent Corporation and the Corporation for
any reason and at any time petition DIS to terminate the Agreement. However, DIS
has the right to receive full disclosure of the reason or reasons therefor, and
has the right to determine, in its sole discretion, whether such petition should
be granted.
16.2 If DoD determines that the Agreement should be terminated
for any reason, DIS shall provide the Corporation and the Parent Corporation
with thirty (30) days written advance notice of its intent and the reasons
therefor.
16.3 The DoD is expressly prohibited from causing a
continuation or discontinuation of the Agreement for any reason other than the
national security of the United States.
16.4 The Agreement may be amended by an agreement in writing
executed by all the Parties.
16.5 The Parties agree that with respect to any questions
concerning interpretations of the Agreement, or whether a proposed activity is
permitted under the Agreement, shall be referred to DIS and the DoD shall serve
as final arbiter/interpreter of such matters.
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<PAGE> 23
ARTICLE XVII
Place of Filing
17.1 Until the termination of the Agreement, one original counterpart
shall be filed at the principal office of the Corporation, located in Tempe,
Arizona, and such counterpart shall be open to the inspection of the Parent
Corporation during normal business hours.
* EXECUTION
The Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, and all of such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the Parties hereto have duly executed the Agreement
which shall not become effective until duly executed by the DoD.
AXA
/s/ By /s/
_________________________________ _____________________________________
Signature of Witness Name: Claude Bebear
Title: Chairman & Chief
Executive Officer
The Equitable Companies Incorporated
/s/ By /s/ Joanne T. Marren
_________________________________ _____________________________________
Signature of Witness Name: Joanne T. Marren
Title: Senior Vice President
and Deputy Council
Donaldson, Lufkin & Jenrette, Inc.
/s/ By /s/
_________________________________ _____________________________________
Signature of Witness Name:
Title:
DLJ Capital Investors, Inc.
/s/ By /s/
_________________________________ _____________________________________
Signature of Witness Name:
Title:
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<PAGE> 24
DLJ Merchant Banking,Inc.
/s/ By /s/
_____________________________________ _____________________________________
Signature of Witness Name:
Title:
Fiberite, Inc.
/s/ By /s/ David Caredo
_____________________________________ _____________________________________
Signature of Witness Name:
Title:
Fiberite Holdings, Inc.
/s/ By /s/ Reid S. Perper
_____________________________________ _____________________________________
Signature of Witness Name:
Title:
THE DEPARTMENT OF DEFENSE
By /s/
_____________________________________ _____________________________________
Signature of Witness Name:
Title:
Effective Date 4/9/96
------------------------
(Date of DoD signature)
-23-
<PAGE> 1
Exhibit 21.1
Subsidiaries of the Registrant
Fiberite, Inc., a corporation formed in the jurisdiction of Delaware, doing
business under the name of Fiberite, Inc.
Fiberite Europe GmbH, a corporation formed in the jurisdiction of Germany,
doing business under the name of Fiberite Europe GmbH.
Fiberite France SARL, a corporation formed in the jurisdiction of France, doing
business under the name of Fiberite France SARL.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 755
<SECURITIES> 0
<RECEIVABLES> 27,664
<ALLOWANCES> 0
<INVENTORY> 24,402
<CURRENT-ASSETS> 55,739
<PP&E> 88,526
<DEPRECIATION> 0
<TOTAL-ASSETS> 161,188
<CURRENT-LIABILITIES> 37,975
<BONDS> 105,702
0
0
<COMMON> 111
<OTHER-SE> (2,198)
<TOTAL-LIABILITY-AND-EQUITY> 161,188
<SALES> 218,827
<TOTAL-REVENUES> 218,827
<CGS> 176,088
<TOTAL-COSTS> 176,088
<OTHER-EXPENSES> 41,942
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,775
<INCOME-PRETAX> (9,978)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,978)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,978)
<EPS-PRIMARY> (.90)
<EPS-DILUTED> (.90)
</TABLE>
